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In the previous chapter, the discussions focused on developments in the concepts of quality management, progressing from its original limited role of inspection to its present state as an integral part of business strategy through strategic quality management (SQM). This chapter traces the parallel historical developments in cost and management accounting from its traditional cost accounting stage to its current stage that addresses the needs of organisations operating in dynamic and competitive contexts and explores the adoption of quality issues within the ambit of management accounting. The chapter commences with an overview of the historical developments in accounting that led to cost and management accounting. From this literature, an analytical framework is put forward to:

Discuss the major stages leading to the development in cost and management accounting paying particular attention to the management of quality at each stage; and

Discuss the interface between management accounting practices and SS quality initiative.


In its earliest form, accounting focused mainly on proper score keeping and profit reporting (Johnson, 1991). Although these two functions continue to play a key role in the accounting systems, accounting practices have progressed to cover wider business activities and applications such as the management of quality initiatives (IFAC, 1993). Following these developments, Lenhardt and Colton (2000: 21), analysed accounting practices into three types:

Historical - uses cost information that has a historical or results perspective and whose purpose is to record what has happened in the past. People outside the company who typically use such information, include bankers, stockholders, creditors, bondholders, regulators and taxing authorities.

Real time - uses cost information that has a current perspective and is useful to people and teams making real time decisions about business processes.

Strategic - uses cost information that has a forward-looking, strategic perspective and is useful to those making pricing and other strategic decisions about the company's future.

The second perspective involving real time practices and their development is usually referred to as cost and management accounting practices. The literature has provided a number of frameworks to analyse the evolution of cost and management accounting. Some of these writers have traced the development from its beginning (Johnson, 1972; Chatfield, 1974; Chandler, 1977; Johnson and Kaplan, 1987), while others have either looked at the country specific developments (Bhimani (1996) and Dugdale and Jones (2003) for UK developments; Virtanen et al. (1996) for Finnish developments; Scherrer (1996) for German developments), or the modern strategic management accounting developments (Lee, 1987; Luft, 1997; Srikanthan, 2004). None of this literature has traced the developments at the interface between management accounting and quality management. The aim of this chapter is to use an analytical framework proposed by International Federation of Accountants (IFAC) to discuss the changing role of management accounting and its interface with changes in quality management.


IFAC (1998) in its Statement on Management Accounting Concepts analysed the evolution and change in management accounting through the following four recognisable stages:

Stage 1 - Prior to 1950, the focus was on cost determination and financial control, through the use of budgeting and cost accounting technologies;

Stage 2 - By 1965, the focus had shifted to the provision of information for management planning and control, through the use of such technologies as decision analysis and responsibility accounting;

Stage 3 - By 1985, attention was focused on the reduction of waste in resources used in business processes, through the use of process analysis and cost management technologies;

Stage 4 - Beyond the mid-1980's attention had shifted to the generation or creation of value through the effective use of resources, through the use of technologies, which examine the drivers of customer value, shareholder value and organisational innovation (IFAC, 1998. para. 7).

According to IFAC (1998. para. 9), 'each stage of evolution represents adaptation to a new set of conditions facing organisations, by the absorption, reshaping and addition to the focus and technologies used previously'. In Stages 1 and 2 the management accounting developments focused on traditional technical activities and the provision of information (IFAC, 1998. paras. 17 and 19). During these stages, the information concerning quality was not captured in the management accounting literature (Yasin et al., 2005). A critical shift between Stage 2 and Stages 3 and 4 is the change in focus from information provision towards resources management in the forms of waste reduction (Stage 3) and value generation or creation (Stage 4). This shift promoted the widespread use of quality oriented business practices and strategies (Yasin et al., 2005). The subsequent sections will examine these developments with reference to IFAC's four stages of development.

3.3.1 Stage 1: Cost determination and financial control

Between 1880 and mid-1920s rapid developments in cost accounting theories and techniques gave a real impetus to the growth of cost accounting. During this period practising accountants and industrial engineers contributed widely to the development of cost accounting literature (Littleton, 1933; Solomon, 1968). Solomon (1968) referred to this period as the "costing renaissance". Initially cost accounting information was developed for the purpose of product costing and profit determination, but over time this role evolved to include elements of planning, control and decision-making (Solomon, 1968). These major developments marked the basis for traditional cost management accounting practices (Johnson and Kaplan, 1987).

Product costing and profit determination

Product costing and profit determination has long been the function of cost accounting. Garner (1954) traced the development of product costing and profit determination to the early 'domestic' structured system, under which the whole manufacturing process was completely under the control of the owners. Johnson and Kaplan (1987) noted that the owners of single activity businesses created new accounting procedures to control the output from internal processes. This approach was similar to the craftsmen's quality development practices discussed in the previous chapter. In a 'domestic' structured system, the owners devised input cost measures such as materials cost and conversion costs to record the 'price' of output from internal operations (Johnson and Kaplan, 1987: 7). Even in the early years, the owners of centrally controlled single activity businesses held the opinion that by effectively managing the costs of their internal business processes greater value could be achieved (Johnson and Kaplan, 1987). However, limitations on cost accounting measurement restricted the scope for quality cost measurements (Johnson and Kaplan, 1987; Yasin et al., 2005).

With the onset of the industrial revolution internal administrative processes were established to co-ordinate multiple production activities; operating costs were generated to evaluate performance and elaborate cost reporting mechanisms were devised, particularly for direct labour and materials (Smith, 1995: 7). For example, Johnson and Kaplan (1987) report that the development of an integrated double entry cost accounting system helped management monitor the efficiency of internal processes and employee performance and subsequently formed the basis for the development of a performance related rewards and incentive scheme. Despite the strong concern for controlling internal costs, quality cost measurement was not considered a part of the management accounting function. Instead, the underlying principles of product costing and profit determination provided the direction for a wider organisational planning and control role (Black and Edwards, 1979; Johnson and Kaplan, 1987).

Planning and control

In the early twentieth century, planning and control tools such as standard costing and variance reporting were introduced as part of the management accounting function (Solomon, 1968). Standard costing formed an integral part of production planning, while variance analysis was used for cost control. Solomon (1968) noted that the first reference to "management by exception" was founded in Taylor's famous paper on "Shop Management" that was closely linked to early quality control and that Taylor's concept of standard processes and standard operating time (time and motion study) was used as the basis for the development of standard costing. This demonstrates that the principles of standard costing are derived from Taylor's scientific management theory and ideas of quality control discussed in Chapter 2. Therefore, even in the early part of the twentieth century there were indications of a link between change management strategies and management accounting systems.

Another significant development in Stage 1 was the development of business budgeting techniques (Black and Edwards, 1979; Johnson and Kaplan, 1987). Business budgeting was founded on the principles of governmental budgeting procedures used in England and US (Black and Edwards, 1979). In contrast to standard costing, a budgetary control system involves all the functions and departments in an organisation. Despite including all functions and departments in the budgeting process, quality costs budgeting was not considered as a part of the management accounting function.

Short-term decision-making

The final development of early cost accounting information was the provision of cost information for decision-making. According to Johnson (1981), in the early years conversion costs were used for the purpose of pricing decisions. In later years, increased problems with 'price fixing' created doubts in the supporting historical based cost accounting system (Solomon, 1968). Academicians observed the lack of relevance of historical costs for future decision-making, which led to the development of a 'modern' cost accounting system aimed at improving internal decision-making and control (Black and Edwards, 1979). The new cost information system emphasised that for effective decision making it is important to distinguish variable costs from fixed costs, and relevant costs from irrelevant costs. Despite a shift to a forward looking cost information system, the importance of measuring quality costs or evaluating the success of quality efforts was not mentioned in the management accounting literature.

The classification of costs into fixed and variable elements had implications both for improving the planning and control process and short-term decision-making (Black and Edwards, 1979). Any improvements in performance concentrated on controlling the variable elements of total costs. Consequently, these developments increased the value of cost accounting information in three fundamental perspectives: 1) "Co-ordination of Operations", 2) Performance Evaluation" and 3) "Decision -Making" (Black and Edwards, 1979: 16). There was however, limited sharing of these roles with other business functions within the organisation (Yasin, et al., 2005). As such, the issues and challenges of managing quality efforts continued to progress without assistance from the cost accounting function or profession.

Overall, the traditional management accounting tools and techniques developed in Stage 1 pursued manufacturing and organisational objectives. IFAC (1998. para. 19) referred to this period of the evolution in management accounting as a period of "technical" activity necessary for the pursuit of organisational objectives. The management of quality remained the exclusive domain of the quality management staff, manufacturing and production engineering department personnel and product design and engineering department personnel (IFAC, 1993. IMAP 5, para. 29). A closed system view of quality had little interaction with external elements such as suppliers and customers as well as the internal accounting subsystem (Yasin et al., 2005).

As such quality information was neither captured by the accounting function, nor was it reported to the collective quality management entities throughout the organisation (Yasin et al., 2005). Hence, the management accounting development in Stage 1 progressed forward ignoring the developments of quality efforts. Perhaps this absence of interest in quality efforts can be attributed to two primary reasons (Johnson and Kaplan, 1987 and Johnson, 1992). First, the accounting profession after World War 1 stipulated rigid accounting rules that prohibited the development of management control systems for more effective decision making. Second, academics increasingly encouraged the use of financial accounting information for managerial decision-making, which closed the mindset of future managers to wider applications.

3.3.2 Stage 2: Transition to management accounting

A shift from cost accounting to management accounting, which involved a shift from technical focused activities to managerial centred responsibilities, occurred principally in the 1950s. Managerial centred responsibilities relied mostly on the provision of information for more effective planning and control decisions; hence it contributed to the accounting information era (IFAC, 1998). Despite this information oriented approach, the accounting information system failed to capture information concerning quality (Yasin et al., 2005). Instead, to ensure proper accountability in a multi-divisional organisational structure, "responsibility centres" and "responsibility accounting" was developed, thus providing the impetus for management accounting to be applied to more complex areas like divisional pricing and long term planning and control decisions (Anthony, 2003).

Divisional pricing, long term planning and control decisions

In mid-1950s, the incorporation of vertically integrated multi-activity firms and multi-divisional structure changed the original function of management accounting (Johnson and Kaplan, 1987). For example, a new focus on "responsibility accounting" led to the development of transfer pricing policies such as market based pricing and cost plus pricing strategies as well as long term planning and control techniques (Antony, 2003). Johnson and Kaplan (1987) report that with the development of responsibility accounting, investment responsibilities shifted from the market to top management who were then accountable for decentralised divisional performances. Despite the major restructuring of responsibilities, managing quality improvements continued to remain outside the domain of the management accounting function.

Another development in this stage was capital budgeting techniques. Capital budgeting techniques initially focused on accounting measures such as the payback period and return on investment (ROI) measures, but with the development of the time value of money concept, discounted cash flow (DCF) methods such as NPV and IRR were introduced for evaluating long term decisions (Johnson and Kaplan, 1987). During the same time, GE Corporations pioneered and promoted the residual income approach to overcome some of the weaknesses identified in the ROI measure (Johnson and Kaplan, 1987). Today, these methods continue to play a vital role in the evaluation of capital expenditure activities (Smith, 1995). The capital budgeting developments coincides with the scientific quality control developments and both had their origins in industry. Despite sharing a similar inception, only capital budgeting developments gained recognition in the management accounting literature, while quality measures remained the concern of the non-accounting function (Johnson and Kaplan, 1987; Morse, 1993).

Overall, the management accounting developments in Stage 2 continued to serve the traditional cost accounting functions. According to Martin (1997), most companies used traditional cost accounting systems along with production control systems, however, these systems were not properly designed to capture or monitor the performance of quality initiatives. Albright and Roth (1992) add that early quality movement progressed forward with very little assistance from the accounting function. During this period, factory foremen with technical expertise carried out traditional quality inspection and control procedures (Bromwich and Bhimani, 1994). Further, both the management accounting and quality developments were linked to the works of non-accounting professionals, like the industrial engineers and production engineers (Littleton, 1933; Garner, 1954; Soloman, 1968; Flood, 1993). Even so, quality management concerns were ignored in the management accounting literature. Johnson and Kaplan (1987) noted that despite considerable changes in the nature of organisations and the dimension of international competition, there have been no major publications by practitioners or academics describing innovations such as quality initiatives in the management accounting literature before 1980.

3.3.3 Stage 3: Japanese influence and transition to SMA

By 1985, the management accounting focus on information provision (Stage 2) was revised in IFAC Stages 3 and 4, where information became an organisational resource, along with other organisational resources. The key focus in Stage 3 was the reduction in waste in resources used in business processes, through the use of process analysis and cost management technologies (IFAC, 1998. para. 7). Bromwich and Bhimani (1994) noted that the management accounting developments during this period were mostly promoted by Japanese industries that adopted quality as their key competitive tool. For instance, the pursuit by Japanese industries of strategic organisational objectives, especially in the area of cost reduction, formed the beginning of a new concept of strategic management accounting (SMA) in the West (Bromwich and Bhimani, 1994). Further, a new focus on waste reduction led to the development and the widespread recognition of quality management in the management accounting literature (Bromwich and Bhimani, 1994).

The Japanese organisations who dominated the world in quality management during this period, focused on three fundamental developments that changed production methods to meet consumer demands: 1) just in time inventory system (JIT), 2) total quality control and 3) computer integrated manufacturing (CIM) systems (Johnson and Kaplan 1987; Monden and Sakurai, 1989). From a strategic perspective, these techniques were also utilised by Japanese top management for target costing exercises which contributed to cost management through the emphasis on planning cost reductions from the design and development stages to manufacturing (Bromwich and Bhimani, 1994: 176). Over time, the successful application of these techniques by Japanese industries triggered a world-wide revolution in manufacturing operations which resulted in a new direction for best practices in management accounting (Bromwich and Bhimani, 1994). The subsequent sections will provide a brief discussion on the three fundamental management techniques developed by the Japanese.

Just in time (JIT) inventory system

JIT was originally developed at the Toyota automobile plant and has been designed to reduce the levels of raw materials and work in process inventories (Johnson and Kaplan, 1987). The introduction of JIT had substantial effects on accounting (McWatters et al., 2001) as significant elements of conventional material cost accounting became redundant and were replaced by modern techniques, such as back-flush accounting, and a cost benefit approach statement was used to monitor the JIT system (Drury, 2000). The JIT system provides real time information in non-financial terms, and this therefore led to the extensive used of non-financial indicators in Japan (Bromwich and Bhimani, 1994). The quality standards implemented under JIT focus on the reduction of non-value adding activities, such as the reduction of inventory storage and holding costs, which are elements closely linked to modern quality management initiatives that also had significant implications for management accounting (Bromwich and Bhimani, 1994).

Total quality control

In the seventies, Japanese companies adopted total quality control, a philosophy aimed at zero defects (Johnson and Kaplan, 1987). In this approach, quality was built into the design stage and products were produced in conformance with the design specification. According to Johnson and Kaplan (1987) companies implementing zero defect programs, worked closely with suppliers to ensure defect free items were delivered hence, eliminating the need for incoming inspection. To evaluate the success of quality initiatives, quality cost were analysed into conformance (prevention, and appraisal costs) and non-conformance costs (internal failure and external failure costs) and these developments were subsequently incorporated in management accounting textbooks (Drury, 2000).

Computer integrated manufacturing (CIM) system

The development of new management practices such as JIT and total quality control ultimately led to the increased use of digital computer production technology that has not gone unnoticed by the management accounting function (Johnson and Kaplan, 1987). According to Johnson and Kaplan (1987), computer integrated technology enabled greater manufacturing flexibility with improved quality and reliability. A properly implemented CIM system should be closely linked with other systems in the organisation. For example, in an organisation, CIM is initially linked to the design stage by a system referred to as computer assisted design, and this system is then linked to a computer aided manufacturing system (McWatters et al., 2001). The impact of extensive manufacturing automation and technology has revolutionised the way organisations operate. These changes, which were adopted with the aim of achieving total quality control in the production function, were incorporated as a part of the management accounting function (Bromwich and Bhimani, 1994).

Overall, the management accounting developments from Stage 3 onwards began supporting the management of strategic quality efforts. During this period, business organisations found it necessary to broaden their emphasis from an efficiency-only based orientation to an orientation that integrates efficiency and quality to achieve organisational effectiveness (Yasin, et al., 2005: 323). As discussed in Chapter 2, the post World War decline of American enterprise competitiveness and performance were attributed to the failure of management accounting practices to adapt to the needs of the "new" enterprise that included the planning and control of quality concerns (Johnson and Kaplan, 1987). Consequently, the National Association of Accountants, now the Institute of Management Accountants, influenced by Japanese innovations, published a monograph in 1987, that was designed to introduce accountants to quality issues, and this subsequently led to quality management being formally recognised as a significant part of management accounting function (Morse et al., 1987). The IMA also worked closely with the American Society of Quality to publish a volume on quality based cost management that promoted a customer-oriented approach to management reporting (Atkinson et al., 1994; Smith, 1995).

3.3.4 Stage 4: Widespread use of SMA practices

According to IFAC (1998. para. 32), management accounting developments in Stage 4 were mostly concern with the effective use of organisational resources, and this involved supporting strategic positioning, and developing or adapting the management strategies necessary for organisational success and survival. From a strategic point of view, Srikanthan (2004) notes that SMA techniques gained widespread recognition in the management accounting literature, as a tool for better resource management and value generation. The management accounting developments during this period were strongly influenced by emerging strategic management practices such as value based management, and quality management (McWatters et al., 2001). Srikanthan (2004) adds that many techniques developed during this period focused on addressing the critical success factors needed for a business to obtain sustainable competitive advantage in its markets. Hence, the major element that distinguishes SMA from previous accounting practices is the adoption of innovative strategies that emphasise external organisational factors such as global competition (Ward, 1985).

SMA techniques

The SMA techniques are influenced by both external factors and internal processes (Srikanthan, 2004). The former techniques include life cycle costing, benchmarking, supply chain management and strategic quality management initiatives. While the latter include value chain management, theory of constraints, process management, activity based management, and the development of an integrated or balanced performance measurement system. In recent years, the widespread application of SMA techniques has extended the boundaries of management accounting practices across other disciplinary areas (Bromwich and Bhimani, 1994; IFAC, 1998). Hence, Otley (2001: 259) suggested that research in management accounting should shift from its accounting origins to incorporate "the management back into management accounting".

Previous literature also suggests that most SMA techniques tend to overlap in their applications. For instance, life cycle costing was introduced as a marketing strategy, whereby all stages (designing to marketing) in supplying a product were analysed, and benchmarked with leading competitors using competitor analysis (McWatters et al., 2001). Similarly, from a quality management perspective the value chain analysis and internal benchmarking processes helped firms identify their level of performance for each business activity (Chiang, 2002), while a balanced performance measurement system is used to demonstrate the link between productivity, quality, and profits (Harrington, 1996). Along this line of argument, Kaplan and Norton's (1992) balanced scorecard approach has been highly recommended to assess quality initiatives such as TQM (Talwar, 1993) and SS (Phadnis, 2003).

More recently, process management and activity based cost management have been found to have a significant influence on the success of TQM and SS quality initiatives (Talwar, 1993; Hammer, 2002). Benner and Tushman (2003) added that process management, which is a derivative of the value chain management approach, has been the focus of quality management applications since the 1980s. Similarly, Ishikawa (1984) Deming (1986) and Juran (1989) proposed process management practices as a key to the successful deployment of quality management initiatives. Along this line of discussion, Breyfogle III (2003) claims that SS may use the ABCM system to track the drivers of possible business process improvement opportunities along the value chain. ABCM focuses on analysing business process activities, with the intention of seeking opportunities for cost reduction, which are features attributed to TQM and SS quality initiatives. By analysing activities along the value chain, ABCM seeks to improve the value received by the customers and this ultimately impacted positively on customers and the profits (Turney, 1992; Glad and Becker, 1995).

Overall the management accounting developments in Stage 4 show a close link with quality management initiatives. In the eighties, TQM was incorporated into management accounting literature as a new cost reduction technique that is aimed at eliminating non-value adding costs in mainly production activities (McWatter, et al., 2001). Smith (1995) claims that TQM provides a vehicle for the accounting function to achieve control, continuous improvement and maximum efficiency by ensuring that all of the processes carried out by that function are in control. In 1993, IFAC produced its first statement on quality ('Managing Quality Improvements') that recognised that TQM was an integral part of management accounting function in many countries.

More recently, SS's effect on customers, costs and bottom -line performance inevitably require a management accounting input. For example, Breyfogle III (2003) asserted that SS methodology through techniques like the theory of constraints will cause firms to abandon their traditional cost management accounting measures for more dynamic measures that focus on throughput, inventory and operating expenses as well as promote a data driven decision approach. By applying a data driven decision approach, SS interfaces with a number of management accounting practices and this relationship will be examined in the next section.


The underlying foundation of SS methodology is the perception that the organisation is made of processes and sub-processes/activities that drive business performance, and this approach is demonstrated by the use of several management accounting practices developed within Stage 4 of the evolution in management accounting. The subsequent sections will examine the literature and discuss the significance of using the following key management accounting practices with SS and the role they should play within the SS led DMAIC process:

3.4.1 Process management and supply/value chain management

Process management, like SS initiatives, focuses on the key drivers of business performance highlighting the interdependencies that define, enable or constrain an organisation's potential (IMA, 2000. para. 16). By adopting the DMAIC process, SS organisations emphasise the flow of business activities and efforts and their linkage to high performing value chain process activities (Hammer, 2002). Hammer (2002) adds that by positioning SS under the process management umbrella, companies used a structured approach to performance improvement that is centred on the disciplined design and careful execution of a company's end-to-end business processes, and this approach benefited SS organisations. Other SS writers have voiced similar views. For instance, Swinney (2000) claims that a properly executed process management coupled with the DMAIC process can result in tremendous gains for organisations. Similarly, Averboukh (2002) reported positive results from deploying process management with SS.

Further, process management has also been recognised as a primary enabler for the implementation and management of an integrated supply chain, which is a key feature of SS methodology (Schiegel and Smith, 2005). Dasgupta (2003) noted that SS methodology adopts supply/value chain management principles to ensure the effective and efficient use of organisational resources. Trent (2001) argues that suppliers invited to be part of the SS value chain analysis process can actively review customer specifications and provide ideas to the buyers on materials and process improvement opportunities. By doing so, firms have been able to save resources, and ultimately price their products more competitively without affecting their customer quality (Trent, 2001). Weigang (2005) claims that the significance of managing non-value adding activities at all organisational levels and in all business processes with the key aim of improving bottom-line results, gained greater recognition only after the introduction of the SS methodology.

3.4.2 ABCM and benchmarking

ABCM system is recognised as an extension to process management practice. The underlying foundation of ABCM systems is the perception that activities transform resources driven by the process into outputs (Bromwich and Bhimani, 1994) and this is a view strongly observed by SS organisations when targeting project improvements. For instance Gupta (2004) and Breyfogle III (2003) claim that the use of ABCM for process activities offers the added flexibility of combining costs with process activities to prioritise process improvement opportunities and also enables SS organisations to quantify the return on investment for process changes. Further, using SS as an example, Cokins (2003) showed that the integration of ABCM and cost of quality could provide fact based data for organisations to learn, focus and take necessary actions.

In a recent SS study, Chiang (2002) noted that process management in healthcare organisations involved the combined application of activity-based management and internal benchmarking procedures, which he referred to as activity based benchmarking. Chiang added that activity based benchmarking for healthcare processes involve three steps:

analysing process flow and identifying major activities,

choosing the appropriate measurement of resource consumption for benchmarking,

identifying the best process and practice for benchmarks.

The benchmarking technique is often used in define, measure and analyse phases of SS on the basis of distinct comparisons like: competitive benchmarking; strategic benchmarking; and internal benchmarking (Harry and Schroeder, 2000). Competitive benchmarking evaluates the firm's position within its industry, while strategic benchmarking sets a direction for the organisation by reference to world class practice and internal benchmarking relates to best practices within the organisation (Stroud, 2006).

3.4.3 Balanced scorecard (BSC) approach

Besides benchmarking, SS practitioners have repeatedly stressed the importance of having appropriate measurement systems in place for successful SS initiatives. Gupta (2004) and Phadnis (2003) advocate the use of a balanced scorecard (BSC) type of approach for the selection of projects, as this will ensure that the project meets both customer and business needs. Pyzdek (2004) claims that Kaplan and Norton's (1992) BSC approach helps SS organisations maintain a holistic perspective by providing a concise display of performance metrics in four areas that correspond to the major stakeholders.

Overall, the review has shown that SS interfaces with several SMA developments. Despite SS's relationship with management accounting practices, SS has received little attention from management accounting researchers. CIMA (2004) has recently encouraged researchers to undertake fieldwork and case studies, which demonstrate the linkages between performance measurement systems and SS and also other analytical technologies that support management processes. Therefore, there is a timely need for exploring SS quality initiatives in a management accounting context, particularly given that quality management forms an integral part of the management accounting function and that management accountants have an important role to accommodate the changes by designing new measurement systems to measure and evaluate business performance (Lee, 1987; Bromwich and Bhimani, 1994).


This chapter has reviewed the changing role of management accounting, and identified that management accounting's concern with quality issues has come relatively late in the function's evolution. Indeed it was not until the 1980s that quality management techniques, such as TQM, were considered to be an integral part of the management accounting function. The change arose from a shift "away from information provision" towards 'resource management' strategies which was occasioned by an emphasis on cost reduction reflecting international competitive pressures from globalisation and Japanese innovative programmes like JIT, TQM, and CIM. A significant contribution to this shift was the close collaboration between IMA and the ASQ that resulted in recognition that formalised quality management was a significant part of the management accounting function and this also promoted a customer oriented approach to management reporting.

Later evolution focused on strategic issues, and these developments coincided with the development of SMA which involved many techniques, such as benchmarking, ABC/M, value chain management, process management, integrated PMSs and the BSC approach, that were an integral part of SS and other modern quality initiatives. From a PMS perspective, the section also notes that the CIMA among other issues has called on researchers to demonstrate the linkage between PMSs and SS. SS's link with PMSs and the interest shown by CIMA on this subject matter fits the requirements in research question two that examines the association between PMSs change and SS. The review has also shown that in the modern view of quality, the most important contribution from accounting is a new focus on continuous process improvement initiatives, data collection and measurement. This development fits closely to research question three that explores the role of management accountants in SS implementation process.

Given SS's relationship with management accounting practices and in particular with the PMS, the next chapter will develop the literature on the key research issues relating to SS methodology that have been identified in the current and preceding chapter.