Recently, the role of a managerial accountant is widely discussed in the scholars. Johnson and Kaplan (1991) argue that management accounting is “too late, too aggregated, and too distorted to be relevant for managers’ planning and control decisions” (1). Haedr (2012) considered the mediation effect of management accounting information on motivation using contingency theory stating that “MAI usefulness accounts for a full (i.e. complete) mediation effect only on the relationship between centralization and MCS effectiveness.” (n.p.). As the number of views cannot present a unified opinion on the matter, the purpose of the current paper to reveal whether the functions of the managerial accountant can be performed by other professionals or this profession cannot be substituted by other professions. The role of the managerial accountant and its changes will be considered from three perspectives namely: technical-managerial, pragmatic-interpretive, and critical socio-economic. The following theories will be used for analysis of the functions of the managerial accountants in the company: transaction cost theory, agency theory, and contingency theory.
The role of a managerial accountant had been changing in the history with the development of industrial production starting from ancient civilization. The role of managerial accounting was changing together with the requirements of the professional environment (Parker, 2002).
According to Parker (2002) contemporary professional environment is characterized by the following factors: business globalization, expansion of non-accounting competitors, knowledge-based economy, using innovative information technologies, increasingly discriminative consumers, broader scope accountability, and changing work attitudes and patterns. All the factors listed above changed the scope and nature of managerial accounting thus influencing expectations towards the role of the managerial accountant.
Wickramasinghe and Alawattage (2007) referring to Johnson and Kaplan (1991) summarized that conventional managerial accounting that emerged in 1825-1925 in a monopolistic environment is no more relevant for the environment characterized by the high level of competition and quickly changing technologies.
Analysis of Relevant Theories
Wickramasinghe and Alawattage (2007) offered three different views on managerial accounting namely: technical-managerial, pragmatic-interpretive, and critical-socio-economic. A technical-managerial view is a set of functions of management accounting developed by practicing management accountants and scholars. Pragmatic-interpretive view was developed by accounting researching aiming to understand the practices of management accounting. The critical-socio-economic view considers management accounting in a broader context. Management accounting can be defined from the three perspectives. A technical-managerial view presents management accounting as a set of calculative practices supporting decision-making and control functions by using specific accounting practices such as budgeting, variance analysis, cost and profit analysis, and many others. A managerial function from technical-managerial perspective is seen as a sub-system of overall organizational information system. In pragmatic terms, management accounting is defined as part of the managerial process focused on adding value to an organization attaining effective use of the organizational resources. The proponents of critical-socio-economic view argued that management accounting should be considered from a wider perspective, not just in the organizational boundaries. They stated that management accountants play a significant role in the reproduction of socio-economic systems promoting exploitation and domination (Wickramasinghe and Alawattage, 2007).
According to Wickramasinghe and Alawattage (2007), managerial accounting from transaction cost theory perspective is seen as the function targeting cost reduction. Wickramasinghe and Alawattage (2007) stated that profits can be increased through cost reduction “by enhancing the managerial coordination, development of the capitalist enterprise can be made.” (16). This theory explains the importance of managerial accounting in the historical development of business. However, Johnson and Kaplan (1991) questioned the necessity of emergence of managerial accounting in response to managerial actions searching efficiency.
If compared to the transaction cost theory, agency theory considered managerial accounting from a different perspective. Agency theory developed in the framework of neoclassical economic model considered managerial accounting as interaction between principals (owners and senior managers) and agents (managers and subordinates) in terms of being motivated or de-motivated acting in the interest of principals aiming to maximize the wealth (Wickramasinghe and Alawattage, 2007). The role of the managerial accountant in the context of this theory was to exercise management control, make managerial decisions, and develop the models of performance evaluation. In whole, from the agency theory perspective, managerial accounting appeals to resolve the problems that arise between the principals and the agents. If managerial accounting activities appear to be incapable to resolve these problems, the principals start to search new techniques (Wickramasinghe and Alawattage, 2007). Agency theory reflects and explains the current situation in the managerial accounting field when old techniques of managerial accounting seem to be outdated, and the need in a new technique emerged.
The third view on managerial accounting is presented by contingency theory: the scope of managerial accounting was developed together with the development of industrial relationships. If the role of managerial accounting in the framework of transaction cost theory was presented in a one-dimensional function targeting cost reduction, the agency theory and the contingency theory considered this role as an interaction. However, the agency theory considered interaction between the principal and an agent while the contingency theory examined the interaction between internal and external environments. Contingency theory of managerial accounting attempted to understand interlinks between environmental and organizational variables. Environmental variables included technology, complexity, and uncertainty while structure, size, ownership, decentralization, and task complexity are included in organizational variables (Wickramasinghe and Alawattage, 2007). The role of managerial accounting in this case is to focus on interrelationships between environmental and accounting variables such as budgeting, forming control models, and systems of performance evaluation.
The three theories described are examined in this paper. Also, several perspectives of contemporary researches were represented adding to the modern concept of management accounting. The absolute majority of the authors whose publications were examined noticed essential changes in the role of management accounting. They put forward their arguments exposing their opinion related the three perspectives outlined: technical-managerial, pragmatic-interpretive, and critical-socio-economic. Besides, the majority of them were concerned about technological-managerial function, but less information was collected about critical-socio-economic perspective (Holtzman, 2004; Jakling and Spraakman, 2006; May, 2011). A great number of authors examined the impact of globalization on management accounting profession (Lockwood and Redoano, 2005; KPMG, 2006; Diamantropoulos, Reynolds and Simintiras, 2006; Gabriels, 2002).
Analysis of Academic Literature
There is no a consensus opinion regarding the role of management accounting in the contemporary literature. Johnson and Kaplan (2007) argued that “management accounting systems became less relevant to the organization’s operations and strategy” (15) because of the development of the new technologies while Parker (2002) saw the opportunity for managerial accountants stating that “Information technology development is deskilling routine account and budget preparation work‘freeing up’ accountants for more advanced diagnostic, advisory, decision-making and control work” (3). However, the last statement contains the contradiction because if managerial accountants switch to the decision making roles than senior managers would be out of job.
The study of Haedr (2012) presented important conclusions related the role of management accounting claiming “each of the four MAI dimensions explored in this study was perceived useful in relation to planning and problem solving activities, it is the aggregated information that was perceived the most important, available, and, thus, useful information.” Although the information collected with the help of managerial accountants was considered relevant, Haedr (2012) agreed with Johnson and Kaplan (2007) that it was aggregated. Besides, Haedr (2012) commented on using technologies when collecting managerial accounting information stating that SPSS was used for analysis purposes. Thus, a conclusion can be made that this information can be collected by anyone who is familiar with SPSS tool, not just an accounting manager.
Otley (2008) developed counterargument towards the opinion of Johnson and Kaplan (2007) stating that the future of the management accounting role should be considered from the perspective of “a more integrated view of the role of formal control systems in organizational functioning” (238).
Several authors such as Albreht and Sack (2000), Boer (2000) presented their understanding of changing role of management accounting in the contemporary business environment emphasizing on the changes in requirements towards accounting information. Burns and Vaivio (2001), Burns, Ezzamel and Scapens (1999) agreed to the point. On the contrary to Johnson and Kaplan (2007), Parker (2001) marked out broadening the scope of the accounting profession into assurance services, financial planning, strategic and risk management, knowledge and change management, and advisory services. It means that a managerial accountant will likely replace such professions like financial planner or risk manager rather than these professions replace the managerial accountant. Cheney (2000), Clifford (2000), and Maher (2000) expressed a similar opinion stating that the profession of a managerial accountant requires vast knowledge, excellent analytical skills, ability to work with vast data, and high level of proficiency. The professions of the financial planners or the risk managers are more narrow-oriented in comparison to the profession of the managerial accountant that involves wider scope of information analysis.
Brazel and Dang (2005) with Cooper (2006) stated that the profession of the managerial accountant is losing its relevance because innovative information and data collecting systems appear. However, this opinion is opposed by Carruth (2004) and Cooper and Dart (2009) who stated that even if part of accounting work could be replaced by innovative devices and technologies, but analysis and presentation of information can be performed by a knowledgeable person who has specialized accounting education (Gabbin, 2002). This opinion is supported by O’Mahony and Doran (2008) who researched the issue of Enterprise Resource Planning perspective and found that, despite the claims related the redundancy of the managerial accountants, they are still essential to the organizations.
Forsaith, Tilt and Xydias-Lobo (2004) marked out that the emphasis of contemporary accounting management should be made on decision making that is the evidence of switching from transaction cost to contingency perspective of the role of management accounting. Byrne and Pierce (2007) presented an opposite opinion to this statement arguing “a 'business partner' model for MAs is found here to be ambiguous, conditional and uncertain.” (35). Siegel and Sorensen (1999) also questioned the role of management accountants as business partners, and emphasized the necessity of reconsidering the conventional role of management accounting as well as Burn and Baldvinsdottir (2005) and Byrne and Pierce (2007).
Jarvenpaa (2001) offered a unique study with interesting findings. The author split the role of the managerial accountant into several components (metaphoric, management, and dominant roles) that proposed the number of patterns of how this role can be interpreted and how the talent of managerial account can be used. Using the analysis of the accounting manager’s roles provided by Jarvenpaa (2001), the role of accounting management can be examined in details. The roles were split within the framework of transaction cost, agency, and contingency theories. Each organization can find the way an accounting manager talent can be applied using framework of Jarvenpaa (2001).
Critical Assessment of the Role of Managerial Accountant
The studies presented in the current research proposed several perspectives on the role of management accounting in the changing business environment. These perspectives are ambiguous and present the variety of views developed in the framework of accounting management theories. According to technical-managerial, pragmatic-interpretive, and socio-economic views on managerial accounting, the definition of the role of the managerial accountant is three-dimensional (Wickramasinghe and Alawattage, 2007). The majority of the authors considered in this paper offered one-dimensional perspective on management accounting. However, Jarvenpaa (2001) considered the role of managerial accounting from all three perspectives. Fahy and Lynch (1999) together with Scapens and Jazayeri (2003) emphasized technical-managerial perspective of the role of the management accountant in the framework of ERP system.
On the one hand, the role of management accounting is minor taking into account the contemporary level of development of technologies and changing business environment. On the other hand, this profession includes not only a set of certain accounting skills. It is rather a way of thinking. Analytical thinking and ability to organize information accurately are the most important feature of the profession of the accounting manager.
Thus, there is a necessity to reconsider the role of management accounting that was emphasized in a number of studies developed by Cooper (2006), Lukka and Shields (1999), and Burn and Baldvinsdottir (2007). However, the most comprehensive description of the changes in the management accounting role was developed by Jarvenpaa (2001) who observed environmental, organizational and cultural changes of management accounting function. Gould and Fahy (2006) expressed the similar opinion that disclosed socio-economic component of management accounting in a great depth. Similarly to Gould and Fahy (2006), Hassall, Joyce, Montano and Anes (1999) emphasized socio-economic aspect of the management accounting role. Their findings are supported by the survey of UK management accountants. A certain group of authors concerned the issue of changes in accounting education. Thus, Howieson (2003), Boer (2000), Albreht and Sack (2000) stated that changes in the external environment of management accounting profession implies changes in accounting education. Another group of authors including Forsaith, Tilt and Xydias-Lobo (2003), Fischer (2004), IBM (2005), and Collins (2000) added to this discussion stating that accountants should pay more attention to the technical-managerial component of the management accounting role.
A number of publications presented by Parker (2001; 2002), and Pierce (2001; 2002) evidenced switch from technical-managerial to critical-socio-economic role of management accounting. Based on the historical background of accounting management provided by Edwards (1989), Parker (2001) and Pierce (2001) elaborated on advancements of the role of management accounting stating that the role of management accountant is now considered from a broader in comparison to the perspective that was developed in the 20th century. Parker (2001) marked out that the scope of accounting work had significantly expanded out of the traditional beancounter image. Byrne and Pierce (2007) investigated the issue of conflicting views on the role of management accounting. They stated that the accounting and managerial functions are mixed due to globalized nature of modern business. Also, a chain of accounting activities was replaced by the emergence of new technologies forcing people struggle for their work. As a rule, managerial accountants have more specialized education allowing them express more competence, they pose a threat to other, more narrowly-directed professions like finance or risk manager. Pierce (2002) also addressed this conflict in his publications. He stated that elimination of routine jobs, availability of more detailed information, expansion of the role of the management accountant to other areas of financial activy, and an absence of accounting education in the circle of line managers had greatly contributed to the conflict that should be immediately addressed by the senior managers and scholars. Waxer (2006) agreed to the point emphasizing the role of the management accountant. He stated that the role of the management accountant is unique and cannot be replaced by any other profession. This opinion is supported by Weygandt, Kimmel and Kieso (2009) who stated the importance of the role of management accounting in decision making process.
Thus, the majority of the authors supported the opinion that management accounting is still important and cannot be substituted by other professions because of several reasons. The first reason is that management accounting education is a specific type of education offering tools for analysis of factual data. Employees not having such education cannot replace management accountant simply because they will not be able to analyze financial statements and make appropriate conclusions (ONS, 2006). Also, the management accountant is a type of personality rather than merely a function that could be assigned to anyone (Burns and Yazdifar, 2001). A management accountant should possess a set of certain characteristics and features allowing him or her to make complex decisions and analyze available data (Carlton, 2004). Therefore, I consider that the role of the management accountant is unique. This profession cannot lose its relevance and the functions of the management accountant cannot be distributed among other managers.
According to Edwards (1989) the historical role of the management accountant associated with performing calculations was emphasized reflecting technical-managerial function outlined by Wickramasinghe and Alawattage (2007). In the course of history, the role of the management accountant had significantly changed being influenced by the number of factors including economic development, globalization, and technology progress. It shifted from the role of the traditional beancounter to sophisticated research and data analysis not taking into account the participation in decision-making (Nash, 2000). The great number of authors considered advisory and consultancy role of management accounting rather than technical-managerial aspect of this role (Gerard, 2005). Similar insight was offered by Murphy (2004) who presented the practitioners’ perspective on the role of management accounting touching upon the pragmatic-interpretive role that was ignored by the majority of the authors and scholars. The revolution in the management accounting role was also discussed by Parker (2002a) who worked out the components of the management accountant role in details. Thus, the future role of management accounting is seen as consultancy because senior managers have to manage their strategic roles and the professionals in other areas often do not have appropriate education to perform the functions of the management accountants.
The role of management accounting is currently experiencing significant changes in comparison to that role the majority of professionals used. The changes in the role are conditioned by changing nature of business and emerging technologies supposed to substitute managerial accountants. The problem is that the role of the management accountant is seen from a narrow-directed perspective that does not reflect the real situation. At the present time, management accountant is not only involved in bookkeeping. More often accountants are involved in decision-making and financial planning processes. Besides, specialized education gives them the opportunity to compete with other related professions such as risk manager or financial planner. However, these professions are more narrow-specialized than the profession of the management accountant. Thus, the management accountant would rather challenge other professions than being challenged by other professionals. Management accounting is not merely connected with calculations. It requires analytical thinking and making rational decisions based on factual data. Senior managers cannot substitute accountants even if they have specialized education because it is not easy to combine strategic thinking and analytical abilities. Besides, each person has to do his or her job not trying to manage everything.
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