Changing Role Of Management Accountants Accounting Essay

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Traditionally, management accountants had focused on accounting, recording, and reporting. To sustain in their organizations, management accountants should develop wide range of skills. It is known that management accountants become knowledgeable about trends of business and finance, prepared to change the types of tasks they perform, and willing to acquire the necessary knowledge and skills to function as full-fledged business partners.

According to IMA survey, management accountants were asked to define their position in an organization. Thirty nine per cent said that they work in Finance, thirty three per cent said Accounting and twenty eight per cent said something else (Russell et al, 1999). Management accountants have long played multiple roles variably described as scorekeeping, attention-directing, and problem-solving roles (Simon, Kozmetsky, Guetzkow & Tyndall, 1955). Management accountants are experiencing evolutionary change in almost all dimensions of their professional work environment. Increasingly, management accountants are being asked to become business partners and change agents

I. The changing role of management accountants.

The role of management accounting can be described as provision of information designed to enhance the ability of management and other people within the organization. They play an important role in three main areas: planning, decision making and controlling. Management accountants must develop a thorough understanding of all aspects of a business, apply analytical skills to the detection of trends and the development of forecasts, provide insightful advice to top management, and serve as change agents.

Decision making and planning are two area that management accountant has important role to manage. They support company in formulation and implementation of strategy. Moreover, they also provide information about the estimation of cost's output. In the late of 1990s, management accountant concerned more about decision making and planning. But until 2007 to now, the balance of three areas has been re-established. They focus on both of areas including stewardship and strategy development. The reason for this changing can be defined by some important points. The influence of IT is inescapable in today's world, as it would result in competitive advantage and growth in business.

Application of IT in management accounting has been popular recently, as organizations found the importance of management accounting to their benefit which helps to accesses the organizations' potentials. The management accounting professional bodies including Chartered Institute of Management Accountants (CIMA) and The Association of Chartered Certified Accountants (ACCA) has stressed on IT and emphasize that IT has got the future to provide information to management for better decision making. (MAIT PDF)

Firstly, the two accounting scandal are Enron and WorldCom. All of these mistakes were made by poor controlling of management accounting. In these scandals, based on the accounting loopholes, poor financing report, CFO (chief financial officer) and other executive accountant hided billions of debt from failed in deals and projects in the report to board of director and audit.

Secondly, the introduction of International financial report standard (IFRS) and Enterprise resource planning (ERP). This is an important point of changing role of management accounting. When the new technologies, new accounting systems becomes increasing day by day and helpful for accounting, the management accounting can be use this to innovate the collection, measurement, analysis and communication of information within the organization. Through these systems, the management accounting easily to provide the information to help manage resources, planning and controlling. Joan Luft, professor of accounting and information systems at Michigan State University, hinted at this in her lectures when she was CIMA's visiting professor in 2006. She contended that tomorrow's management accountant needed to be less of an "enabler", because that role served to "stoke the fires of over-optimism". Luft argued that the role should instead be that of a corporate brake, which called for accountants to be neutral and pessimistic. (MA roles word)

Other reasons such as: changing in regulation and legislation; corporate restructuring… also can consider as driver for the change role of management accountant.

II Skills and knowledge that is critical to the success of a management accounting professional

1. Analytical knowledge

According to Sarah Williams, operations director at FSS said "Management accountants have become increasingly high profile, as management teams seek detailed information to make critical decisions. In fact, global organizations are placing greater emphasis on internal mobility, offering top performing individuals opportunities to relocate, particularly to the US and Asia. It's widely recognized as a core retention tool. (Demand for analytical skills still high)

Management accountants are required to widen their knowledge related to financial and non-financial information. They must recognize different types of costs with different purposes in industry. For example, direct materials, direct labours, manufactured overhead costs. According to Yazdifar and Tsamenyi (2005), analytical skill is expected to be the most important skill in the future. Individuals with a high level of analytical skills are able to look beyond numbers to determine causes of events and prediction of trends (Sathe, 1983). In other words, they are more competent and are less constrained by technical aspect of the work. This would likely help them build up confidence in their own abilities to self-manage tasks and in deciding what to do, conditions which facilitate empowerment (Honold, 1997; Martin, 1994). Therefore, MAs with high level analytical skills are likely to be involved more heavily in the process of formulating strategies. These analytical skills can also benefit the strategy implementation process, through the Management Accountant's ability to predict trends, to take into account potential crisis, and to focus attention on aspects that are important in the successful implementation of strategy (Alexander, 1985). The analytical skills of MAs play an important role in supplying management with useful information for strategic management (Rouwelaar, 2007). This is because MAs, with a high level of analytical skills, would able to look beyond numbers to determine cause of events and provide forward looking information regarding the external environment, essential information for the SMP. . Analytically-oriented techniques have been demonstrated to lead to successful creativity generation. These take advantage of different ways of organizing known information to help approach problems from new perspectives and tend to follow a linear pattern or sequence of steps (Couger et al., 1993; Miller, 1987).

2. Strategic thinking:

Strategic decisions are broad‑based, qualitative type of decisions which include or reflect goals and objectives. Strategic thinking plays an important role in the management of company. Management accountants have to set goals and objectives for company in a competitive environment. They are required to overlook or predict useful information related to competitive advantage resources for company to get more profits in the future. For example, give some strategies about cost, prices in comparison with competitors. Good strategic decisions make company successful and strong in long term. The accountant is closely involved in decision support and providing advice throughout the business, on both strategic and operational matters (Burns and Baldvinsdottir, 2005; Burnett, 2003; Howieson, 2003; Parker, 2001; Boer, 2000; Maher, 2000; Granlund and Lukka, 1998b; Ezzamel et al., 1997), Management Accountant's decision‑making is highly subjective. Whether a decision is good or acceptable depends on the goals and objectives of management of the company. For example, management accountant must decide strategic objectives such as the company's product line, pricing strategy, quality of product, willingness to assume risk, and profit objective.

3. IT system knowledge

In modern world computer knowledge is must for every person. IT has become a backbone for most of the business. According to Siegel and Sorensen (1999:15), "The pace of change in technology is becoming much faster and accounting and finance people are very heavy users of technology, more so than a lot of other functions". According to US study, computer skills were the most important skill that management accountants had learned in the past five years. In addition to, they should have attention to details about data modelling, making forecasts and projections, developing assumptions and criteria, analysing processes, being adaptable and not resistant to change, being strategic and forward looking. Management accountants must have good computer skills which will help them using decision making tools.

4. Communication skills

According to an Institute of Management Accountants' (IMA) study in the USA (Siegel and Sorensen, 1999) reported that the most valued skills for entry level accountants were communication, teamwork, analysis, accounting, and a thorough understanding of how a business functions. Communication skills are skills which help management accountants convey information to users, opinions from managers, shareholders through formal and informal settings. Especially, writing and listening skills are more important to accountants. They need to use simple language to explain many academic words related to management and financial accounting to non-accountants. In addition, good listening is considerably required to management accountants because many ideas from co-workers or outside company help managers making good decisions. MAs with high level of communication skills are likely to be able to ascertain and manage relevant strategic information (Sathe, 1983) which may result in greater confidence being placed on them in contributing to the setting of strategic directions and thus encourages a higher level of involvement in strategic formulation. Management Accountants who have effective communicators. Communication skills are also critical for creativity. A high level of communication skills may provide an individual with good access to information and exchanges of ideas, leading to creative endeavours. When communication skills are low then these exchanges are likely to be fewer and access to information poorer, potentially stifling creativity (Tan, 1998)

5. Managerial skill

Robert Katz identifies three types of skills that are essential for a successful management process: technical, conceptual and human or interpersonal managerial skills. Decision making is one of critical functions in management accounting. Management must make different decisions on marketing, production, and finance. Decisions may also be classified as strategic and tactical in the short run and long‑run. A primary objective of decision‑making is to achieve maximum use of the business's capital or resources. Good decisions require relevant information and special analysis of data. An understanding of financial statements is critical to the ability of management to make decisions effectively

Skills

Members

Analytical knowledge

Strategic thinking

IT system knowledge

Communication skills

Managerial skill

Vishal

2

3

3

2

4

Mai

3

3

2

3

3

Hong

3

3

2

4.5

2.5

Linh

2

2

3

3

3

Assessment of group members' skills and knowledge

Members have evaluated themselves with the rate as 1 is very strong and 5 are very poor for each person strong and weak skills in management accounting. These rated skills are shown as below table:

Particularly, Vishal has highest rate in analytical and communication skills while he is not good at management skill. Mai has almost the five skills average rate as mark 3, only IT system knowledge has the highest mark among five mentioned above skills. Next, Hong is the person who evaluated that her best skill is managerial skills while communication skill is not good as other three skills. Finally, Linh evaluated herself that she has good analytical knowledge and strategic thinking ability while other three skills are less than these two skills. Overall, each person has strong expertise in different areas, which could improve other person disadvantages in order to do good job as a team. For instance, Vishal has good communication talent, which Hong is not good. However, Vishal is not good at managerial skills which other three persons has greater score in. likewise we can help each other to improve our weak areas or for instance Hong can join classes for improving the communication. This is possible if she a strong determination in her. She can interact with friends in spite of making mistakes she can learn. The more mistakes she make she can improve the skill. Even if we have good analytical skill we have to improve it and gain more knowledge on it by solving more number related questions and practise more and more. All the team members will join advanced level classes for improving computer skills. Each member can improve our strategic skills by solving case studies and have in-depth understanding about the SWOT analysis, core competes, PEST, Porter's diamond porter five forces and various other models.

Conclusion

In today's generation management accountants are giving more emphasis on strategy and decision-making roles, rather than the more traditional areas of costing and financial analysis. . The one traditional area to remain high on the list of important areas for management accounting is budgeting. Now is the time to begin preparing for an exciting and rapidly evolving management accounting career. The era calls for professionals with an appropriate balance between technical skills and breadth of knowledge. This balanced preparation can be accomplished only through a carefully structured educational program and continuing professional development. Those who are prepared to meet the challenges of a management accounting career will be valued members of their organizations.

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