The Application Of Traditional And Contemporary Management Accounting Essay

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There is almost no research done in Pakistan by academics on the application of traditional and contemporary management accounting techniques used by practitioners, whereas a strong information base had been created through continuous studies in many other parts of the world. Such research provides an opportunity for academics to study the efficient and effective management tools as successfully employed by firms.

Statement of the Problem

"To find out whether the profitability of the firm is influenced by the usage of management accounting techniques in Pakistan"

Review of the Related Literature

Abdel-Kader and Luther (2006) studied management accounting practices (MAPs) in the food and drinks industry in the U.K. in order to understand the level of MAP's sophistication and the factors that affect implementation of MAPs in this industry. The research methodology used in this study was a survey questionnaire sent to 650 executives of the industry. In total, 245 usable completed questionnaires were received and analyzed. Respondents were asked to indicate the frequency of use of 38 management accounting practices (MAPs) using a Likert scale (1 indicating never and 5 indicating very often). They were also asked to assess the importance of each technique/practice by rating these as 'not important, moderately important or important'.

Unlike previous contingency theory studies, this study investigated the relationship between the development of management accounting practices and explanatory factors (such as external, organizational and processing factors). Variables studied were (a) the use and importance of management accounting practices; costing systems, budgeting, performance evaluation, information for decision making, strategic analysis and communication of management accounting information. The respondent firms were classified into management accounting evolution stages in order to explore the sophistication of current practices and to examine whether there are relationships between their sophistication and potential explanatory factors. This was done on the basis of their emphasis on certain practices and then relating those management accounting practices to the stages of management accounting evolution (IFAC, 1998). Finally, the study sought to understand the effect of explanatory factors (e.g. external, organizational and processing) on management accounting practices. The study found that as companies moved into a more uncertain environment, the sophistication level of management accounting practices increased. Likewise, as their power relative to customers' diminished, companies moved up the stages of evolution. Analysis of the management accounting practices used suggested that the management accounting systems employed in many food and drinks companies were not particularly sophisticated. Taking the industry as a whole, there

was little evidence of management accounting directly connected with 'value creation'. There were, however, indications that increased use may be expected of techniques relating to cost of

quality information, non-financial measures relating to employees, and analysis of competitors' strengths and weaknesses in future.

Anand et al. (2004) in their study of cost management practices in India studied the responses furnished by 53 CFOs in Indian corporations. The objective of their study was to capture the development in cost management practices such as accounting for overheads, applications of budgetary control and standard costing in corporate India. The survey questionnaire also aimed to verify any significant difference in management motivation for the implementation and use of standard costing as a control tool between activity based cost management (ABCM) user firms and firms using traditional costing systems. This study also sought clarification about whether firms using ABCM were more likely to have a: better insight for benchmarking and budgeting; clearer structure of priorities of budget goal; clarity of reasons for effective implementation of budgeting process in their organization and were less likely to use department-wide budgeting systems, absorption costing systems, and variable costing systems. The questionnaire was sent to CFOs of 579 private sector companies. Despite two reminders and assurances that only aggregate results will be published, only 53 companies chose to respond. The response rate was about 8.52%. This rate was low in comparison to another longitudinal study of 249 companies conducted by Joshi (2001) which elicited a response rate of 24.4% but much higher as compared to response rate of 1.8% to Rigby's (2001) survey mailed to North American executives. Fifty three responses received constituted the sample which was stratified in two segments; ABCM user firms and Non ABCM user firms. Five point Likert scale was used to gauge success achieved in the application of present costing systems to capture (a) accurate cost information with respect to product pricing, inventory valuation, value chain analysis, supply chain analysis and outsourcing decisions; (b) accurate profit analysis by product, by process, by department and by customer; (c) better insight for benchmarking and budgeting and (d) better insight about manufacturing performance. The results showed that firms which have adopted ABC were significantly more successful in capturing accurate cost information for value chain analysis and supply chain analysis vis-à-vis the firms which had not adopted ABC. No significant difference was found in the use of standard costing among ABC user firms and non users.

Wijeywardena and Zoysa. (1999) in a comparative analysis of management accounting practices in Australia and Japan investigated the differences in the adoption of management accounting techniques through a survey questionnaire which was mailed to 1000 largest manufacturing companies in each country. The size of the company was based on total assets. A total of 217 Japanese companies and 231 Australian companies responded to the 31 questions asked covering various aspects of managerial accounting techniques. This analysis involved comparisons of techniques in different cultural contexts. Major cultural differences identified in the study were collective decision making, unique company philosophy, usage of small firms as sub contractors, company specific cost accounting training for each employee, and the difference in educational background of management accountants as seen in Japan compared to Australia. Based on

responses, the profile (e.g. type, asset size, export ratio, annual sales, number of employees and nature of market competition) of the sample firms was tabulated in percentage terms. Other

variables explored were; importance of management accounting tools, uses of cost accounting data, purposes of standard costing, investment appraisal methods, components of budgets, timings of budget, main overhead allocation bases, manufacturing cost structure, inventories as a percentage of total assets, quantitative techniques, performance evaluation measures, product costing methods, major participants in new product cost estimation, costing systems and significant changes to costing systems. Mean and coefficient of variation were computed alongside ranking of studied variables for data analysis methodology. In four questions asked, a five point Likert scale from' much less important to much more important" was utilized to obtain the respondents views on the importance of various areas of management accounting. The responses to these questions were than ranked in accordance with the coefficient of variations. Statistical significance of differences between Australian and Japanese responses was examined by the Kruskal-Wallis non parametric analysis of variances. Other questions which intended to elicit factual responses were analyzed in terms of percentages. Findings of the comparative survey revealed that management accounting practices of Australian companies placed emphasis on cost control tools (e.g. budgeting, standard costing and variance analysis) at the manufacturing stage while Japanese companies focused attention on cost planning and cost reduction tools such as target costing at the product planning and design stage. This finding is in agreement with another study of Howell and Sukarai (1992) that "Japanese companies seem to understand better than their western counterparts that cost should be managed and avoided during the product planning and product cycle stages rather then when products have entered full scale production". Another noteworthy difference that emanated from the survey was that activity-based costing (ABC) appeared to be popular among Australian companies while it was rarely used in Japanese companies. Despite the decreased labor component in the manufacturing cost structure, manufacturing companies in both countries seemed to allocate factory overhead mainly on the basis of direct labor. Inventory levels were significantly lower in Japanese companies for finished goods and raw materials in comparison to Australian companies.

Liaqat (2006) carried out an empirical study to find out the application of contemporary management accounting techniques in Indian industry through a survey of 530 member companies of the National Association of Financial Directors and Cost Controllers. Sixty three companies responded which constituted the sample; a response rate of about 12%. The sample was stratified in two segments; ABCM user firms and Non ABCM user firms. A five point Likert scale was used. The focus of the study was to find evidence on how widely traditional and contemporary management accounting practices were adopted by Indian industry. The investigations revealed that improvement of overall profitability and cost reduction were the motivating factors for using management accounting in Indian companies. The researcher found a positive association between the adoption of ABC and company characteristics (e.g. degree of customization, pressure of competition, business size, and proportion of overhead to total cost). However, none of the differences was found to be significant at 10% level.

Isa & Thye (2006) examined the usage of management accounting practices in manufacturing firms in Malaysia. They also studied the relationship between product variety, complexity of production process, level of competition, company size, overhead expenses and usage of advanced management accounting practices. Management accountants in 500 manufacturing firms were randomly selected from the 2004/2005 Federation of Malaysian Manufacturers Directory. A total of 75 usable responses were received, that represented a response rate of 15%. Respondents comprised of senior level managers, including Chief Executive Officers, General Managers and Management Accountants. To check for non-response bias, two procedures, similar to those utilized by Williams and Seaman (2001) were used. First, the final sample was dichotomized according to size based on sales turnover. Response bias did not appear to be problematic since the cross-correlation for all variables in the two groups were not significantly different. Second, the final sample was divided into two groups: early and late responses. Response bias did not appear to be problematic since the cross-correlation for all variables in the two groups were not significantly different. The instrument for measuring intensity in competition was a modified version of the composite scale for measuring competitive pressure in Khandwalla (1977), as well as in Libby and Waterhouse (1996) and Mia and Clarke (1999). This measure consisted of eight items for rating the intensity of competition in price, product range, quality, new product introduction, advertising and promotion, technological change, marketing distribution and changes in government regulation or policy on a scale ranging from 1 (very low) to 7 (very high). In this study, the measures for traditional management accounting techniques (TMAT) and advanced management accounting techniques (AMAT) were adopted from Waldron and Everett (2004). The TMAT were represented by four techniques: full costing, standard costing, job order costing and process costing. The AMAT comprised thirteen techniques:

Activity-Based Costing, Activity-Based Management, Target Costing, Kaizen Costing, Value Added Accounting, Cost of Quality, Economic Value Added, Life Cycle Costing, Target Cost

Planning, Cost Modeling, Strategic Management Accounting, Throughput Accounting and Back Flush Costing.

Past and present usage of management accounting techniques was determined through frequency distribution and in percentages. To examine whether contextual factors such as product variety, complexity of production process, level of competition, company size and overhead expenses are related to the use of advanced management accounting practices, Spearman correlation coefficient was calculated. Spearman correlation indicated no significant relationship between the contextual factors mentioned earlier and the use of advanced management techniques. Significant positive relationships were indicated between line production process (least complex) and advanced management accounting techniques and also between job shop order (most complex) production process and traditional management accounting techniques. These results,

however, contradict the notion that usage of advanced management accounting techniques is related to the more complex production processes. Advanced management accounting techniques usage was found to be significantly and negatively related to perceived competition due to product range, new product introduction, changes in government regulation and advertising and promotion. Traditional management accounting techniques were negatively significantly related to only one factor, changes in government regulation. These results implied that usage of AMAT does not necessarily correlate with higher level of perceived intensity in market competition. In fact, the negative coefficients suggested low usage of AMAT as perceived competition increased.

Adler, Everett, and Waldron (2000) conducted a survey that asked management accountants, in New Zealand manufacturing businesses, to indicate the techniques adopted in their business. While many studies have focused on particular techniques such as ABC or target costing, Adler et al. provided a questionnaire that included a vast array of management accounting techniques to provide a fuller set of response options. Respondents were asked to rank management

techniques on a five point scale "from most used to least used". A judgment sampling method was chosen to achieve a response rate of 19% that provided 165 completed questionnaires.

Traditional management accounting techniques, such as full costing, direct costing and standard costing were found to be used more often than advanced management accounting techniques, such as strategic management accounting. The study by Adler et al. (2000) is generally consistent with the lack of adoption of advanced management accounting techniques as stated by the Ainikkal (1993) and Hawkes et al. (2003) studies, but inconsistent with respect to individual techniques. It was found that firms in Australia adopted ABC, and cost of quality

techniques and also that big firms were more likely to use modern accounting techniques.

Drury et al. (1993) found that allocation methods such as plant wide rates and labour based rates are being used in U.K manufacturing firms because of their simplicity. ABC was widely considered, but not used extensively. Standard costing, payback analysis, and target profit and return on investment were widely used. Management accountants still appeared concerned with

product costing and profitability. The survey by Drury et al. is consistent with a similar study in1990 that found target costing and ABC was widely used. The high use of performance measures such as return on investment was not evident in other surveys. There also appears to be a changed emphasis towards nonfinancial indicators, as opposed to financial indicators.

Chenhall and Langfield (1998) selected and surveyed large Australian manufacturing firms. The response rate was high, at 56%, compared with other studies. There were a total of 78

responses after the second mailing. The survey asked accountants whether the business they worked in had adopted the management accounting technique stated in the survey. The

results showed relatively high rates of adoption for all of the techniques, with the lowest adoption rate 38%. The highly adopted techniques were used by 90% or more of the firms.

Suggested reasons for the unusual high adoption rates were due to the chosen firms being large, and the situational differences of Australia.

Yazdifar (2005) asked respondents to identify the five most important techniques out of 32 in a postal survey of management accountants in the United Kingdom. Survey responses were disaggregated into parent and subsidiary organizations. The results of the survey showed business performance evaluation, budgets, strategic management accounting, variance analysis, and rolling forecasts were the most important. There was no significant difference between

parent and subsidiary organizations.

France (2004) used a novel approach to surveying management accounting practices by recording management techniques that appeared in job advertisements on situation vacant job sites in New Zealand. The survey period ran for four weeks during February 2004. There were a total of 36 techniques that were found as the type of techniques that management accountants use. The various techniques of reporting, forecasting, budgeting, cash flow management, strategic management accounting, and variance analysis found to be emphasized in situations vacant positions corroborated with other mail survey studies.

Ghosh et al. (1994) studied managerial accounting practices in 650 companies of Singapore through a mail questionnaire. 109 firms responded and constituted the sample. The response rate was 16.8%. The study did the ranking of the management technique used based on frequency distribution of the responses received from the firms. Techniques investigated were budgets, long term planning, cash budgeting, periodic income statement, standard costing, activity based costing, total quality management, break even analysis, return on investment, capital budgeting, transfer pricing, quantitative methods.

Manalo (2001) in a telephonic survey inquired about the costing system employed in business operations from 500 corporations taken from the Philippine Yearbook, 2001. The result of the telephone survey conducted revealed that out of the top 500 corporations in the Philippines, only 16 percent ( 83 companies) were using activity based costing as their costing technique, 55 percent or 275 companies are still using traditional cost accounting techniques, and 28.4 percent or 142 firms included in the survey could not be contacted. Of these 142 firms, 86 companies were not cooperative and 55 companies did not want to reply to any telephone inquiries regarding their companies' cost accounting system being currently used. Included in the 28.4 percent is one company that attempted to adopt ABC as their costing technique but eventually discarded it when they were overwhelmed by the magnitude of the tasks involved in the start-up of the system.

Objectives of the Study

This paper examines the application of management accounting techniques in the industrial sector of Pakistan. The purpose of this research is to find out whether the profitability of the firm is influenced by the usage of management accounting techniques in Pakistan.

Research Questions/Hypothesis

H01: Complexity of production process does not influence the usage of Job order costing; a traditional management accounting technique.

H11: Complexity of production process influences the usage of Job order costing; a traditional management accounting technique.

H02: Complexity of production process does not influence the usage of Kaizen costing; an advanced management accounting technique.

H12: Complexity of production process influences the usage of Kaizen costing; an advanced management accounting technique.

H03: Variety of product does not influence the usage of Kaizen costing; an advanced management accounting technique.

H13: Variety of product influences the usage of Kaizen costing; an advanced management accounting technique.

H04: Variety of product does not influence the usage of life cycle costing; an advanced management accounting technique.

H14: Variety of product influences the usage of life cycle costing; an advanced manag ement accounting technique.

H05: Overhead expenditure does not influence the usage of economic value added(EVA); an advanced management accounting technique.

H15: Overhead expenditure influences the usage of economic value added (EVA); an advanced management accounting technique.

H06: Degree of competition does not influence the usage of back flush costing; an advance management accounting technique.

H16: Degree of competition influences the usage of back flush costing; an advance management accounting technique.

H07: Degree of competition does not influence the usage of economic value added (EVA); an advance management accounting technique.

H17: Degree of competition influences the usage of economic value added (EVA); an advanced management accounting technique.

H08: The size of the company does not influence the usage of activity based management; an advanced management accounting technique.

H18: The size of the company influences the usage of activity based management; an advanced management accounting technique.

H09: Activity based management; an advanced management accounting technique does not influence profitability of the firm.

H19: Activity based management; an advanced management accounting technique influences profitability of the firm.

H010: Target costing; an advanced management accounting technique does not influence profitability of the firm.

H110: Target costing an advanced management accounting technique influences profitability of the firm.

H011: Exports sale ratio does not influence the usage of target costing; an advanced management accounting technique.

H111: Exports sale ratio influences the usage of target costing; an advanced management

H012: Exports sale ratio does not influence the usage of job order costing; a traditional management accounting technique.

H112: Exports sale ratio influences the usage of job order costing; a traditional management accounting technique.

H013: Industrial classification does not influence the usage of variable costing; a traditional management accounting technique.

H113: Industrial classification influences the usage of variable costing; a traditional management accounting technique.

H014: Industrial classification does not influence the usage of economic value added (EVA); an advanced management accounting technique.

H114: Industrial classification influences the usage of economic value added (EVA); an advanced management accounting technique.

Scope

The present research study intends to take in population only those manufacturing firms listed on the Lahore Stock Exchange who have their plants/offices in Lahore and its surroundings.

Limitations of the Study

This study is subject to the usual limitations associated with survey research. First, the sample size was small and there was no previous research on the subject. Secondly, response bias can not be eliminated due to the unwillingness of the respondents to share the accurate information. Thirdly, the measures studied may not be exhaustive thus, limiting the findings of the study.

Fourthly, it is possible that the effect of contextual factors used in this study yield different results for other types of industries i.e service etc. Finally, there can be other variables that may be added to the theoretical framework to enhance its explanatory power.

Key Points of Limitations:

1. Traditional management accounting techniques are popular in Pakistani manufacturing firms.

2. Advanced management accounting techniques are still in an evolving stage and are modestly used by the manufacturing firms.

3. Empirical evidence is found that complexity of production process influences the usage of Job order costing; a traditional management accounting technique and Kaizen costing; an advanced

management accounting technique.

4. Variety of product influences the usage of life cycle costing, Kaizen costing; both advanced management accounting techniques.

5. Overhead expenditure influences the usage of economic value added (EVA); an advanced management accounting technique.

6. Degree of competition influences the usage of economic value added (EVA); an advance management accounting technique.

7. Sector location influences the usage of variable costing; a traditional management accounting technique. Higher usage of variable costing, a traditional accounting technique is reportedly used by about 50% of the respondent firms. Of those reported high usage of variable costing, textile and cement sector comprised 68%.

Significance of the Problem

The conclusions inferred from data analysis may be useful to policy makers in the manufacturing

sector of Pakistan.

Justification

This study would be benefited for all relevant entities including Industrialists like Traders, Policy makers, Students/Researchers etc.

Basic Assumptions

Review of related literature shows that profitability of industrial sector is strongly influenced by management accounting techniques like ABC Costing one of the advanced management accounting techniques (AMAT), if we optimally implement these techniques profitability can also be improved.

Key Terms

Management Accounting Technique, Kaizen, Throughput, Process, Full, Traditional Management Accounting Techniques (TMAT), Advanced Management Accounting Techniques (AMAT)

SECTION-2

Research Methodology

Based on the foregoing discussion, the following were the objectives of this study:

1. To examine the level of management accounting practices in manufacturing companies operating in Pakistan.

2. To examine the relationships between product varieties, complexity of production process, overhead expenses and usage of management accounting practices.

3. To examine the relationship between level of competition and usage of management accounting practices.

4. To examine the relationship between company size and usage of management accounting practices.

5. To examine the relationship between the usage of management accounting practices and profitability of the firm.

6. To examine the relationship between export sale ratio and the usage of management accounting techniques.

7. To examine the relationship between industrial classification of the firm and the usage of

management accounting techniques.

The target group of this study will be derived from the list of firms, available on the website of the Lahore Stock Exchange. The present research study intends to take in population only

those manufacturing firms listed on the Lahore Stock Exchange who have their plants/offices in Lahore and its surroundings. Therefore, our population comprised 148 firms fulfilling the above stated criteria.

As detailed below, the sample size comprises of 51 manufacturing companies belonging to different sectors of the economy.

Data Collection Method

The sample size of this survey has been calculated on the basis of following formula:

n= N/ (constant x log N) where;

N= Population= 148

Constant= 1.33

n=Sample= 148/2.886= 51.28

The participants of the survey (senior management accountants in the surveying firms) will be informed that the objective of this study is to analyze aggregate responses. Thus, the sanctity of their data would be preserved. The data from the questionnaire will be first entered into Microsoft Excel program and then imported to Statistical Package for Social Sciences

Program (SPSS) to facilitate data analysis. The questionnaire will generate descriptive statistics as well as inferential statistics as two scales will have been used to draw responses; Interval and

nominal scales. Cronbach's alpha will be used to check the reliability of the measures; i.e. inter item consistency. Mean and standard deviation will be used to analyze the descriptive statistics of the sample. Significance of difference between mean scores would be done through t test. Chi square test of independence will be applied to analyze the inferential statistics and to determine the relationship among the variables for the studied objectives. In most of the studies reviewed ranking of the management accounting technique will be done by using frequency distribution.

The questionnaire for the survey will be divided into two sections. Section 1 seeks demographic information about the respondents (name, position, qualification, length of service, and contact information). Data will also be collected on organizational variables (sector, total sales, total assets, number of products being produced, and export sales ratio to gain valuable insights about the firms characteristics. These details will have been asked by every research work reviewed in the literature. Section 11 of the questionnaire investigates the usage of management accounting techniques, systems, methods and their relationship to certain contextual factors; export sales ratio, size, product variety, product price, product range, product quality, new product introduction, technological change, changes in government regulation, advertising and promotion and after sales service. This section contains 14 questions. All the questions in the survey have been designed on the basis of the findings in the literature review discussed earlier.

Techniques enquired of the management accountants in Question No. 1 have been used previously in a number of studies conducted around the world by numerous research scholars, Drury et al. (1993), Ghosh et al. (1994), Chenhall and Langfield, (1998) Wijeywardena and Zoysa (1999), Adler et al. (2000), Anand et al. (2004), France ( 2004), Manalo (2004), Yazdifar

(2005), Isa & Thye (2006) and Kader and Luther (2006). No such study has been done in Pakistan. This question is designed to find the techniques used/adopted in the Pakistani manufacturing industry and also explore the extent to which these are rated on a five point scale. The listed measures in this question consist of traditional management techniques as well as contemporary management techniques.

Choice of investment appraisal methods of the respondents as used in organizations and the relative perceived importance of the methods on a five point likert scale is checked in Question No. 2. These methods with minor adjustments were reported in most of the available longitudinal studies on management accounting practices in the literature reviewed. Researchers tried to establish relationship, for example between size and the choice of investment appraisal method. Zubairi(2007) found a significant negative correlation between size and the usage of certain methods in a survey based study on "capital budgeting practices". This question is expected to furnish further empirical evidence as to the choice of investment appraisal methods and the size of the firm and other variables. Other researchers who included this question in their studies are Drury et al. (1993), Ghosh et al. (1994), Wijeywardena and Zoysa(1999) and Kader and Luther (2006).

Respondents were asked to rate the usefulness of cost accounting data with respect to managerial activities ranging from decision making to performance evaluation in Question No.3 on a five point scale in their organizations. This question has been framed to find out the inclination of the Pakistani manufacturer as to the effectiveness of cost accounting data in performing several managerial tasks. This has been considered previously by Wijeywardena and Zoysa.(1999), Anand et al. (2004) and Kader and Luther (2006).

The usage of standard costing is reported to have declined in the accounting literature.

Question No. 4 is designed to find out the possible linkage between managerial functions and standard costing in the Pakistani manufacturing firms. Respondents are asked to rank the importance ofmanagerial function(s) as performed by standard costing on a five point scale to verify the assertions made in the literature. This question has been probed by Wijeywardena and Zoysa(1999), Anand et al. (2004), Isa & Thye (2006) and Kader and Luther (2006) in the past studies.

In recent times greater emphasis has been placed in the accounting curriculum on quantitative tools. These are supposed to be used by business. Question No.5 is intended to find out which quantitative tools are used in Pakistani business environment and weather these findings can be linked to the use of certain management accounting techniques. This has been enquired previously by Drury et al. (1993), Ghosh et al (1994), Wijeywardena and Zoysa(1999) and Kader and Luther (2006).

Question No.6 in this study aims to explore whether accurate cost information is captured for the profitability analysis by the present costing system and which variable is used in this analysis i.e. product, process, department and customer. Information gleaned through this question can be utilized in finding linkage with popular management accounting techniques. This has been examined in the past by Anand et al. (2004) and Kader and Luther (2006).

Questions No.7 and No.8 have been asked to gather information on the methods and the basis being used for overheads cost allocation by the corporate Pakistan.

While Question No. 9 sought answers in four broad categories about manufacturing overhead as a percentage of total manufacturing cost to find out the relevance of this cost component in the

total cost structure of the firm. These questions have been asked in previous studies by Drury et al. (1993), Wijeywardena and Zoysa(1999), Anand et al. (2004), Isa & Thye (2006) and

Kader and Luther (2006).

Accounting literature contains negative criticism on return on investment as A performance evaluation measure in view of the short term orientation resulting in low growth of the business in the long run. Question No.10 is framed to collect further empirical evidence of the assertion made in the literature by asking the respondents the preferred measure among the four listed measures. This question has been studied previously by Ghosh et al. (1994), Wijeywardena and Zoysa(1999) and Kader and Luther (2006).

It has been argued in the accounting literature that the choice of management techniques is dependent on the sophistication of the production process adopted by the manufacturing firms. Question No. 11 addressed this concern by asking the respondents of the process being used among the four listed in ascending order from the least sophisticated to the most sophisticated process to find out whether the choice of production process has any impact on the management

accounting techniques used in the Pakistani manufacturing environment. Isa & Thye (2006) and Kader and Luther (2006) probed this aspect in their studies.

Many researchers contended that to keep pace with the changing manufacturing environment, accountants are required to introduce timely changes in cost accounting systems. Question No. 12 was planned to look into whether Pakistani firms made changes with respect to their cost

accounting system in the last five years. This has been examined by Wijeywardena and Zoysa(1999), Isa & Thye (2006) and Kader and Luther (2006).

Increased trade liberalization and international/ domestic competition require firms to adopt advanced management techniques. Question No.13 was aimed to draw responses from the participants about the degree of competition being experienced in their respective firms and whether the degree of competition has an impact on the choice of management accounting practice/technique. The four choices given in this question ranged from "slight to severe". This

question has been previously used by Wijeywardena and Zoysa(1999) and Kader and Luther (2006).

Question No.14 is designed to capture perceived competition on a five point scale ranging from very low to very high on the basis of the following factors (product price, product range, product quality, new product introduction, technological change, changes in government regulation, advertising and promotion and after sales service) and to examine the relationship between level of competition and usage of management accounting techniques. Perceived competition has been measured by Isa & Thye (2006). The instrument for measuring intensity in competition is a

modified version of the composite scale for measuring competitive pressure in Khandwalla (1977), Libby and Waterhouse (1996) and Mia and Clarke (1999).

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