The role of the accountant has continuously evolved


The role of the accountant has continuously evolved over the past twenty years. Likewise the challenges faced by the profession have evolved and continue to. This is in part heavily influenced by the changing needs and expectations of investors and other stakeholders regarding corporate governance issues (Starks 2009).

Changing role and challenges

Information technology and accounting software such as Quickbooks has made the accountant's job simpler as it can collate data and create financial statements. Accountants spend less time creating statements but have more time to spend analysing them especially with the emergence of Enterprise Resource Planning systems (ERP) (O'Mahony and Doran 2008). Accountants have become more of financial advisors than simply being stuck in a closed office with calculators. The other side of this however is that the role of accountants as number crunchers has been taken over by the IT and this has resulted in the accountant's role evolving. The internet has also resulted in accounting software being widely available and accessible. As such one doesn't necessarily require an accounting background in order to prepare financial statements and perform a cursory analysis of the data. The accessibility of such information has resulted in the role of financial accountants being somewhat eroded. According to a study commissioned by the American Institute of Certified Public Accountants (AICPA) cited by Kirby and Romine 2010, "the average cost of the finance function has dropped from 2.2 percent of revenues in 1988 to 1.4 percent of revenues in 1996." At my organisation for example, the bookkeeper post has been removed from the payroll after acquiring accounting software that could perform the same tasks, cheaper and quicker; the administrative assistant with no formal accounting training handles this responsibility.

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As management accountants become more of business partners and not simply transaction processors and compliance managers (Bhattachrya 2009), requirements from them now go beyond collecting data and collating it and producing financial statements. The accountant's role has become more concerned with enhancing the competitiveness of the organisation and driving organisational success by understanding and correctly interpreting financial information. It has become incumbent upon them to widen their skills base to include trend analysis and understanding both non-financial and financial indicators. Kirby and Romine 2010 and Bhattacharya 2009 insist that management accountants have become more of strategic advisors and partners and perform more sophisticated analysis and decision support services in an organisation and have therefore evolved from being at the lower end of the information hierarchy within an organisation to the higher end, which makes them part of a more essential business function.

Kirby and Romine (2010) purport that in financial accounting, "cost management continues to grow in importance" through activities such as ABC, target costing, value chain analysis, life cycle costing taking centre stage. Financial accountants therefore require more in-depth knowledge of an organisation's strategy, production and service delivery system in order to handle areas where resources are not being well managed and costs are unjustifiably high. Other activities such as Cost Volume Profit Analysis and Activity Based Management are also falling within the portfolios of Management and Financial accountants. Accordingly management and financial accountants are positioning themselves as information specialists and serving as change agents (Kirby and Romine 2010).

According to Starks (2009) investors should care more about risk factors such as regulatory risk, supply chain risk, product & technology risk, litigation risk, reputational risk, and physical risk and how these affect their investments. This may well be a developing trend and accountants will therefore be challenged to strengthen their risk management skills in order to anticipate and mitigate such risks.

Accounting scandals such as the Enron and Worldcom debacles have resulted in stricter accounting guidelines and constant regulatory changes to try and limit unethical accounting practices as well as protect investor interests for example changes in voting policies on mutual funds instituted by the Securities and Equities Commission (Starks 2009). In addition, the accounting profession suffered a lack of trust and accountability. As such transparency and trust have become key factors in what investors and stakeholders expect as well as the quality and reliability of the accounting information produced. Moreover investors and other stakeholders are demanding more comprehensive information as well as increased disclosure and are more likely to scrutinise company information and operations. Starks (2009) asserts that investors care about corporate governance issues such as transparency and operations management because these affect a firm's value. Investors are quick to walk away if there is lost trust and the accounting firm's name is in turn tarnished. Accounting practices now reflect on the entire organisation as well as the profession.

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Globalisation, which has caused increased flow of funds across international borders has resulted in the need for comparability and standardisation of accounting practices, systems and standards (Kolk et al 2009) . However the emergence of IT has also brought about numerous software versions and systems. Differences between systems and versions can be quite complex and different information gathering techniques used by different companies further complicate comparability of financial information across businesses.

The internet and IT has also resulted in information overload (Vecchio 2006). Management accountants therefore have to interpret, report and analyse information that affects business operations and financial standing of an organisation from many different sources in a succinct and understandable manner which can be quite challenging.

The global economy is becoming more service oriented. This in turn is increasing intangible assets to be accounted for eg human capital, intellectual property, brand value etc. According to Starks (2009) "brands and company reputation present greater difficulties, ... key human capital assets including employee competence, experience and expertise, leadership skills, capacity for inventiveness, or structural capital assets such as organisational culture, knowledge networks and management succession programmes," which are all crucial to business success but are not clearly reflected in financial statements. Human Capital Accounting and ways of accounting for intangible assets are therefore taking centre stage in the accounting profession (Chen and Lin 2004).

In light of changing and evolving accounting roles, Kirby and Romine (2010) report that AICPA has established a centre to help accountants in business and industry to prepare for the future because "accountants who view their jobs as historical data gatherers and reporters of financial information may find themselves victims of organisational re-engineering and restructuring."