About the Authors ix About the Business Professors xi Welcome to Business Environment and Concepts xiii Enterprise Risk Management, Internal Controls, and Business Processes 1 Internal Control Frameworks 2 Introduction to COSO, Internal Control, and the COSO Cube 2 17 Principles of Internal Control 7 Types and Limitations of Accounting Controls 11 Internal Control Roles and Responsibilities 14 Internal Control Monitoring--Purpose and Terminology 17 Internal Control Monitoring and Change Control Processes 21 Enterprise Risk Management Frameworks 27 Introduction to COSO Enterprise Risk Management: Strategy and Risk 27 ERM Components, Principles, and Terms 34 ERM Governance and Culture 37 ERM Strategy and Objective Setting 42 ERM and Performance 52 ERM Monitoring, Review, and Revision 62 ERM Communication and Reporting 66 Practical Steps for Starting an Enterprise Risk Management Initiative 72 Fraud Risk Management 77 Other Regulatory Frameworks and Provisions 84 Economics 89 Introduction to Economic Concepts 90 Microeconomics 94 Introduction and Free-Market Model 94 Demand 96 Supply 99 Market Equilibrium 102 Elasticity 105 Consumer Demand and Utility Theory 111 Inputs and the Cost of Production 113 Market Structure and Firm Strategy 117 Introduction to Market Structure 117 Perfect Competition 119 Perfect Monopoly 122 Monopolistic Competition 124 Oligopoly 126 Summary of Market Structure 128 Macroeconomics 129 Introduction to Macroeconomics 129 Aggregate Demand 131 Aggregate Supply 138 Aggregate (Economy) Equilibrium 140 Gross Measures--Economic Activity 142 Gross Measures--Employment/Unemployment 146 Business Cycles and Indicators 149 Price Levels and Inflation/Deflation 153 Money, Banking, and Monetary/Fiscal Policy 157 International Economics 164 Introduction and Reasons for International Activity 164 Issues at the National Level 167 Role of Exchange Rates 170 Issues at Entity Level 174 Currency Exchange Rate Issue 174 International Transfer Price Issue 179 Globalization 183 Introduction to Globalization 183 Globalization of Trade 186 Globalization of Production 190 Globalization of Capital Markets 192 Globalization and Power Shifts 196 Becoming Global 200 Business Strategy and Market Analysis 205 Introduction to Business Strategy and Market Analysis 205 Macro-Environmental Analysis 208 Industry Analysis 210 Entity/Environment Relationship Analysis 213 Generic Strategies 215 Summary and Extensions 219 Financial Management 223 Introduction to Financial Management 224 Concepts and Tools 225 Cost Concepts 225 Time Value of Money Tools 230 Interest Rate Concepts and Calculations 239 Financial Valuation 247 Introduction to Financial Valuation 247 Valuation Techniques--General 250 Valuation Techniques--CAPM 252 Valuation Techniques--Option Pricing 256 Valuation Techniques--Business Entity 259 Hedging and Derivatives 267 Capital Budgeting 275 Introduction and Project Risk 275 Evaluation Techniques 278 Introduction and the Payback Period Approach 278 Discounted Payback Period Approach 281 Accounting Rate of Return Approach 283 Net Present Value Approach 286 Internal Rate of Return Approach 289 Project Ranking 293 Capital Project Ranking Decisions 296 Financing Options 299 Introduction and Financial/Capital Structure 299 Short-Term (Working Capital) Financing 300 Introduction to Short-Term Financing 300 Payables 301 Standby Credit and Commercial Paper 304 Receivables and Inventory 306 Long-Term (Capital) Financing 309 Introduction to Long-Term Financing 309 Long-Term Notes and Financial Leases 310 Bonds 313 Preferred Stock 318 Common Stock 321 Cost of Capital and Financing Strategies 325 Working Capital Management 328 Introduction to Working Capital Management 328 Cash Management 330 Short-Term Securities Management 336 Accounts Receivable Management 340 Inventory Management 344 Current Liabilities Management 348 Ratios and Measures for Working Capital Management 349 Introduction to Ratio Analysis 349 Liquidity Measures 351 Operational Activity Measures 354 Financial Management Risk Concepts--Summary 357 Information Technology 361 Information Technology Governance 362 Risks and Controls in Computer-Based Accounting-Information Systems 362 The COBIT Model of IT Governance and Management 365 Introduction to Enterprise-Wide and Cloud-Based Systems 368 IT Functions and Controls Related to People 371 Data Governance and Data Management 375 Data, Metadata, and Data Integrity 385 Role of Information Technology in Business 391 IT and Business Strategy 391 Spreadsheet Design, Controls, and Abuse 393 Databases and Data Structures 397 Transaction Processing 401 Information Systems Hardware 405 Software, Data Warehouses, and Decision Support 407 Introduction to E-Business and E-Commerce 410 E-Commerce Applications 412 ERM for Cloud Computing 415 Mobile Device, End-User, and Small Business Computing 417 Emerging Technologies 420 Emerging Technologies in AIS 420 Data Analytics 424 Data Analytics 424 Big Data 430 Data Visualization 433 Statistics in Business Analytics 445 Simple Linear Regression in Business Analytics 453 Bitcoin and Blockchain 457 Artificial Intelligence and Machine Learning 462 Information Security/Availability Protection of Information 466 IT Security Principles 466 Managing Cyber Risk: Part I--Applying COSO Principles to Cyber Risk 469 Managing Cyber Risk: Part II--A Framework for Cybersecurity 472 IT Policies 478 Multi-Location System Structure 480 Computer Networks and Data Communication 482 The Internet--Structure and Protocols 486 Service Organizations--Service Auditors 488 Logical and Physical Access Controls 491 Logical Access Controls 491 Physical Access Controls 494 Encryption and Secure Exchanges 496 System Disruption/Resolution 500 Organizational Continuity Planning and Disaster Recovery 500 Backup and Restoration 503 Computer Crime, Attack Methods, and Cyber-Incident Response 506 Processing Integrity (Input/Processing/Output Controls) 510 Program Library, Documentation, and Record Management 510 Input and Origination Controls 512 Processing, File, and Output Controls 515 Accounting System Cycles 517 The Accounting System Cycle: Introduction 517 Revenue Cycle 520 Expenditure Cycle 524 Production Cycle 527 HR and Payroll Cycle 530 General Ledger, Reporting, and Financing Cycle 534 Systems Development and Maintenance 537 System Development and Implementation 537 Operations Management 541 Financial and Non-Financial Measures of Performance 542 Quality Management 542 Benchmarking, Best Practices, and the Balanced Scorecard 546 Competitive Analysis 551 Ratio Analysis 556 Risk Management 561 Performance Improvement Tools 564 Cost Accounting 569 Manufacturing Costs 569 Inventory Flow, Cost, Spoilage, and Scrap 573 Cost Behavior Patterns 578 Cost-Volume-Profit Analysis 582 Absorption and Direct Costing 592 Job Costing 599 Process Costing 604 Joint and By-Product Costing 611 Sales and Direct Cost Variance Analysis 614 Overhead Variance Analysis 621 Process Management 626 Non-Routine Decisions: Relevant Costs 626 Non-Routine Decisions: Special Decisions 632 Transfer Pricing 637 Activity-Based Costing and Process Management 641 Planning Techniques 647 Budgeting 647 Forecasting Techniques 652 Index 657.