Analysing the change in the role of the management accountant

This work is focused on critically measuring the doggedness of the alteration in the function of the direction comptroller from traditional accounting maps to that of a strategic contriver and concern spouse.

The work of Johnson and Kaplan ( 1987 ) , titled “ Relevance doomed ” has prompted a drill-down on this research country. Though most of the research workers agree to the altering function of the direction comptroller ( Burns and Baldvinsdottir, 2005 ; Cooper and Dart 2009 ; Allot 2000 ; Chenhall and Langfield-Smith2007 ; Siegel1999 ; Kerby and Romine 2005 ; Vaivio1999 ; Ittner and Lacker2001 ; Ax and Bjornenak 2007 ; Bhimani 2006 ; Roslender and Hart 2002 ) . The importance the traditional function still remains critical to others, and should function to complement the new techniques or the alteration. ( Bromwich and Bhimani 1998 ; Burns et Al. 1999 ) . Others are of the position that history is still a relevant portion of the hereafter or the altering tendency. ( Fleischman and Funnell 2006 ; Luft 1997 ; Beaman and Richardson2007 ) .The type of organisation every bit good as the direction may besides find the nature of alteration. Yazdifar and Tsamenyi ( 2005 ) . This alteration does non take the same signifier in organisations, but differs in form. Sulaiman and Mitchell ( 2005 ) . With the present economic miasma, some research workers are even recommending a return to the old ways: the traditional function, ( Baldvinsdottir et al ( 2009 ) .

The first subdivision of this work will therefore reexamine these positions presented and seek to pull a comparing between these positions to see if the function of the direction comptroller has really changed and to what extent. This will be done pulling support from literatures. It will instantly be followed with some of the new roles the direction comptroller is taking up in organisations.

Thereafter the place of traditional accounting pattern in this new tendency of events will be discussed. This will enable us to cognize where to put the traditional accounting function, whether it has lost its utility and should be wholly cast-off or should function to congratulate the new functions.

Following to that, some of the new techniques in direction accounting that organisations are following, the factors that are driving the alteration in function every bit good as their significance to the new function will be discussed. Decisions will so be drawn as to the direction comptroller ‘s functions change.

The altering function of the direction comptroller.

Johnson and Kaplan ( 1987 ) are deemed to hold set the canvas in this statement with their book titled “ Relevance lost: the rise and autumn of direction accounting. ” These strong footings used by them has prompted or necessitated a batch of research work in this way. They argue that the bing signifier of direction accounting lacked the know-how to run into up with the dynamic concern environment. Their statement was supported by mentioning technological promotions, information engineering, every bit good as planetary and domestic competition as grounds doing the bing patterns inadequate.

Harmonizing to an article published in the Journal of Accountancy ( Most Companies Want Their Certified public accountant to Be Business Strategists, Survey Says, 1996 ) , much more is now being demanded of the direction comptrollers within organisations. Their occupations are traveling beyond the readying of fiscal statements as accounts and reading are now required of them of the information they provide. The direction comptroller is consequently a “ high-ranking determination support specializer ” .

Kerby and Romine ( 2005 ) argue that for direction comptrollers to stay a relevant portion of their organisations, there must be a alteration in accent from the traditional accounting patterns which involves the numeration, analysis, reading and presentation of fiscal information. They advocate that the direction comptroller should be versed with cognition about alterations impacting the concern of his organisation and imbibe qualities that would enable them map as fully fledged concern spouses.

Smith ( 2007 ) opined that the focal point of the direction comptroller within organisations is now switching to the external environment. That the direction comptroller is no more uniformed of what happens externally to his organisation, He now looks both inwards and outwards.

Cooper and Dart ( 2009 ) , give support to this position that, direction comptrollers are traveling from being information suppliers to back uping the determination devising. Siegel ( 1999 ) , noted that direction comptrollers were earlier now non involved in the existent decision-making procedure, but acted in support of the determination shapers and subsequently got informed of facts. But the function of the direction comptroller had changed and greater portion of their clip was being spent as internal advisers or concern analyst within their companies.

Like most of the other authors he attributes this altering function to the promotion in engineering which he states has freed the direction comptroller from what he describes as “ mechanical accounting ” . He stated that the new function of the direction comptroller now involves a batch of direct contacts with people throughout their organisations, and that they are more involved in determination devising and cross-functional squads. This he termed development from functioning internal clients to being concern spouses.

The direction comptroller as strategic contriver and concern spouse.

The cardinal message of this work has been on the direction comptroller presuming the function of strategic contriver and concern spouse as opposed to the traditional function of corporate bull and bean counter. The direction comptroller ‘s function has evolved and is determining up into a strategic fiscal contriver and director of information. The direction comptroller is said to be holding less to make with the everyday accounting pattern. ( Siegel 2000, Cooper and Dart, 2009, Latshaw, A. and Choi, Y. , 2000 ) .

New countries of focal point of the direction accountant include the development of fiscal programs, information engineering systems direction, assisting in the formation of concern aims every bit good as monitoring consequences and maintaining up with selling aims. Others are direction and organisation of work force, playing consultative function in operational determinations, programmes and undertakings. ( Feeney and Pierce, 2007 ) .

For the direction comptroller to work efficaciously as concern spouse, certain accomplishments must be acquired. This will include the quality of analysing and treating unwritten and numeral informations into meaningful information. This should be buttressed by the ability to work efficaciously in a squad. ( Curruth, 2004 )

As concern spouse, the direction comptroller combines both the traditional function of protecting the assets of the concern with a new function of analysis and engagement in determination devising in the concern disposal. ( Kennedy and Sorensen, 2006 ) .

Caron ( 2006 ) , defined stairss that should be taken for the direction comptroller to presume the place of a concern spouse. They include:

Acting as operation and cognition expert.

He/she should be able to supply best pattern information and strategic accomplishments.

Should be able to set to pattern the cognition acquired in developing strategic direction programs.

He/she should be able to mobilise the human resources at his disposal.

He/she should be able to circulate accounting information efficaciously.

Management accounting the place of the traditional function.

Although Johnson and Kaplan ( 1987 ) opined that the traditional accounting function of the direction comptroller had lost its value and have argued that it is no more relevant to the dynamism of today ‘s universe, non everyone believe their sentiment is best for direction accounting, and have therefore expressed their reserves. ( Bromich and Bhimani 1989 ; Burns et Al 1999 ; Yazdifar and Tsamenyi 2005 ) .

Baldvinsdottir et Al. ( 2009 ) are of the sentiment that a return to the traditional or “ mechanical ” accounting methods is of great importance particularly at this period of economic down-turn. They argue that although the ballyhoo about the altering function of the direction comptroller, a batch of the traditional accounting function has comparatively remained the same over several decennaries.

Luft ( 1997 ) is of the position that history serves as a platform for understanding the present ; that the oversights of the nowadays could really be alleviated by mentioning back to history.

Fleischman and Funnell ( 2006 ) , while holding with Johnson and Kaplan, that it is of import that direction accounting studies provide direction with information that will help them in minimising cost and improved productiveness, argue that although these activities are frontward looking, they have to be based on what they described as “ intimate dependance between the past and future ” .

They insist this is necessary because of the uncertainnesss and instabilities associated with commercial environments, coupled with the intricatsies of direction. That, direction comptrollers in the class of seeking to do the information they provide more utile to their organisations should bear in head that this should be done in observation of necessary ethical issues.

Beaman and Richardson ( 2007 ) found out in their research that accounting patterns within organisations are being confined to the traditional function, alternatively of the expected function of determination support and job resolution.

There has been the recognition of the broad usage of traditional accounting techniques in most organisations as opposed to the supposed outlook of radically new advanced accounting techniques being adopted by these organisations. ( Burns and Scapens, 2000 ) .

Emerging techniques in direction accounting.

Some comparatively new trends/techniques have emerged with the purpose of undertaking the insufficiencies of the traditional accounting methods. Some of them have been lauded as the new title-holders of direction accounting solution suppliers in organisations. ( Cooper and Kaplan, 1991 ) . Although these techniques are extremely praised, their acceptance and execution may non hold been as widely accepted as the ballyhoo associated with them. ( Collier and Gregory, 1995 ; Roslender and Hart, 2003 ) .

These techniques include:

Activity based costing ( ABC ) ; The coming of ABC has changed the pattern of cost allotment necessitating that direction accountants develop more analytical accomplishment to undertake the complexnesss of apportioning operating expenses to different cost objects utilizing cost drivers. ( Burns and Yazdifar, 2001 ; Byrne and Pierce, 2007 ; Anderson, 1995 ) . ABC made the direction comptroller an indispensable portion of the determination doing procedure by concentrating on pertinent information needed to better steadfast public presentation financially and market wise. ( Kennedy and Affleck-Graves, 2001 ) . Kaplan and Anderson ( 2004 ) nevertheless noted that organisations have abandoned ABC because of its failure to capture the complex nature of their operations, the holds of execution and the cost consequence which are normally excessively expensive.

Balanced scorecard ( BSC ) : The balanced scorecard enables the direction comptroller to strategically mensurate public presentation and develop a model for the strategic measuring and direction systems ( Kaplan and Norton, 2007 ) . It changes accent from fiscal facet to encompassing client, internal and every bit good as acquisition and growing factors of organisations. ( Kaplan and Norton, 1996 ) . This has altered the function of the direction accountant puting him strategically as a determination support specializer. ( Latshaw and Choi, 2002 ) . BSCs are adopted by houses for strategic public presentation measuring, but the result of these steps is normally developed to encompass operational scheme, nevertheless it was noted that organisations frequently fail in seeking to set BCS into a peculiar usage ( Wiersma, 2009 ) . Atkinson ( 2006 ) noted that the BSC has been found deficient from empirical consequences of its benefits.

Strategic direction accounting:

Strategic direction accounting ( SMA ) : SMA shifts the focal point of direction comptroller to non-financial factors external to the organisation. ( Simmonds,1981 ) . It demands that the direction comptroller be knowing in subjects like public presentation indexs development, value concatenation analysis every bit good as capacity cost direction. It broadens the range of the direction accountant beyond the house to strategizing for competitory market and chances. ( Whiteley, 1995 ) . SMA requires the direction comptroller as a member of the cross functional squad which his function now embraces to convey to bear relevant information and expertness that will help determination devising. ( Roslender and Hart, 2001 ) . The direction comptroller now addresses the impact of other non-financial activities, the cost place of rivals, and rating of rival merchandises and services. These activities have placed the direction comptroller in the important function of strategic contriver and concern spouse. ( Whiteley, 1995 ; Langfield-Smith, 2008 ) .

However, Roslender and Hart ( 2003 ) , noted that what constitutes strategic direction accounting is still non clearly defined. Collier and Gregory, ( 1995 ) opined that the degree of execution of strategic direction accounting may postpone in different economic systems. That is, the economic system determines the scheme and functionality of the direction comptrollers.

Enterprise resource planning ( ERP ) : ERP requires the direction comptroller to hold sound cognition that will enable him to supply information that will technically run into the demands of the house. It besides demands that the MA be versed with cognition of concern maps related to production, selling and information engineering. For the direction comptroller to acquire traveling with all these maps, he needs to construct a sound inter-personal and societal accomplishments. ( Barton, 2009 ; Pierce and O’Dea, 2003 ) . It may nevertheless cut down occupations, making unemployment.

Enterprise resource planning ( ERP ) : enables the direction comptroller to track “ production by occupation, work centre, and activity ” ( Zimmerman, 2009:720 ) . However, respondents to research carried out by Knnerley and Neely ( 2001 ) were non certain the debut of ERP to their organisations had made any noticeable impact.

Factors driving the alteration in the function of direction accounting.

The utility of direction accounting has come under examination following factors like: mechanization of mill procedures and processs, information engineering, competition, and globalisation, complexness of concern among others. Some of these factors and their significance will be discussed briefly.

Information Technology: ( Carruth, 2004 ; Beaman and Richardson, 2007 ) , noted that information engineering has enabled direction comptrollers to take more responsible functions in their organisations. The direction comptroller is now able to salvage clip in his analysis and reading of information. The direction comptroller helps in showing informations in a signifier that makes them relevant and utile for managerial intent. This involves strategizing and being involved in the determination devising procedure. Granlund, M. and Malmi, T. ( 2002 ) It has changed the nature of information and placed determination doing on information provided by the direction comptroller. ( Atkinson et al. 1999 ) .

Automation ; requires the direction comptroller to develop more analytical accomplishments and to be able to supply such information that will enable houses take determinations and follow such schemes that will assist them remain in competition. ( Kerremans et al. , 1991 ) . Automation is advantageous in take downing labor cost, but may make occupation losingss. ( Mantripragada and Sweeney, 1981 ) .

Other factors:

Other noteworthy factors driving the function alteration in direction accounting include ; the accent on quality, rational capital, more client focused organisations, addition in overhead cost, less of direct labor cost, and precedence on environmental and external issues. These factors have helped orient the direction comptroller ‘s function to that of a strategic contriver and a concern spouse. The direction comptroller now takes a more proactive function in cognizing and supplying solutions to strategic issues in his organisation. The issue of competitory concern environment which is closely related to globalisation is another major factor impacting the manner direction accounting maps are handled in organisations.


Although there have been demands for the alteration in accent on the function of direction comptroller, this alteration has non been absolute. This is because the cost and complexness of using these new techniques have made their acceptance slow.

The debut of new techniques in direction accounting and the impact of assorted factors have made the direction comptroller more focussed on non-financial facets of organisations and has widened the range of activities external to the organisation, doing him a utile portion of the determination devising procedure. However recent issues ‘ following the economic downswing has suggested keeping of portion of the traditional function in combination with new techniques might be more utile. ( Balvinsdottir et al. , July/Aug. 2009 )

Furthermore, the importance of these new techniques and the benefit they provide to organisations can non be overemphasized. These new inventions have made the direction comptroller more flexible, a solution supplier and an of import portion of the organisation as concern spouse and strategian, reconstructing relevancy. ( Johnson, 1992 ) . It is notable that though many are the advantages of implementing these new techniques, some organisations still stick to traditional accounting because it is less complex to implement, salvaging clip.