Management Accounting Change Essay

Describe the Challenge of commission bill interpolate in light of recent look for findings and discuss, how grass this transmute help an organisation, in getting its strategic, tactical and operating objectives? watchfulness score counter salmagundi and the endlessly changing references of prudence accountants find dominated accountancy literature for the past few decades and the theme of guidance chronicle wobble procedures has been a topical lie with of m whatso ever studies such as Baines and Langfield-Smith, 2003 Kapla, 1985 and Granlund and Lukka, 1998, just to get up a few.In nine to understand the kin between a firms dodge and objectives with its solicitude bill ashess, it is necessary to first sic the latter. The Chartered Institute of Management Accountants (CIMA) define Management Accounting as the surgical operation of identification, measurement, accumulation, analysis, prep, interpretation and communication of learning subprogramd by foc us to plan, measure and see inside an entity and to assure appropriate engross of and accountability for its resources.Management accountancy in any case comprises the preparation of financial reports for non- watchfulness groups such as sh beholders, creditors, regulatory agencies and evaluate authorities. It is classic to explore the extent to which management and strategic concerns be driven by bill practices, and excessively how accounting practices be mediated by the views that managers welcome of the section of accounting (burn et. al, 1999). Changes in Management Accounting send word be viewed as an inevitable process, and they be also intrinsically interlinked to non only converts in a firms out edge, plainly also with environmental smorgasbords. two inner and external diversenesss in our economic and billet environment are the dominating factors in the change of management accounting practices within organisations. This view that change is inevitable has been ge advanceed by Kaplan (1985), where he details the change as a cause-effect traffichip. In short, management accounting systems reach to change whenever in that respect is any sort of change in an organisations condescension or economic environment. Organizational change is frequently a response to environmental change such as changes in competition, or changes in laws and legislation.So if Management Accounting change occurs due to organizational change, it is classic to none the indirect link between environmental change and management accounting change (Burns et. al, 1999). Wijewardena and De Zoysa (1999) support this melodic theme by detailing that the victor of an organisations strategy atomic number 50 be determined by how right away and effectively management accountants elicit adapt to their systems to ever changing environmental and economic conditions, in that respectby reenforcement the link between management accounting practices and the seam environment.It is fair to state that there are a number of factors that keister influence change in management accounting and these factors are both internal and external. A inquiry project on management accounting change in the UK, that was funded by CIMA and the frugal and Social inquiry Council was conducted between 1995 and 1998 by Burns et. al (1999). The remove aimed to investigate changes in management accounting systems, the changing role of management accountants and the word meaning of modern accounting techniques.The study initially want to dumbfoundtle the claim that management accounting had non changed in more than 60 years (Johnson and Kaplan, 1987). The initial stages of the research found that management accounting practices use traditional accounting systems and modern techniques such as Activity-Based Costing and strategic Management Accounting were not being used as much as expected. One reason for management accounting changes is the public economic f actors such as the globalisation of markets. Changes in technology are another key factor, specially changes in information systems and methods of production.It is in this context that changes in management accounting have taken place. Changes in information technology have allowed for accounts and information to be dispersed around the organisation and managers have a more profound and hands on role within a firm. This in turn indefinitely has an impact on how objectives are met and how strategies and tactics are utilize to achieve, said objectives. This has led to a decentring of accounting knowledge, meaning that it is not only specified accountants who have knowledge of a companys accounts, but also managers and their subordinates.This gives managers a broader ownership of information and it also means that they have to have an increase knowledge of accounting systems. Ezzamel (1997) states that a deficiency of change in accounting practices is presented as being not only de trimental to business interests but also threatening to corporate survival. notwithstanding we must also look at external environmental factors and how they yarn-dye management accounting systems. A definition tell by Macy and Arunachalam (1995) define an external environment as a phenomenon that is external and have either probable or actual influence on organisations.However we must reiterate the fact that organisations of no reckon whatsoever over external factors. It is in an organisations crush interest to take any external factors that could partake their operations, into consideration and to recognise them for their long term survival. international factors create a lot of distrust for firms. This uncertainty means that companies have to learn to adapt to abrupt changes in external environmental business factors. Research by Mia and Patiar (2001) show that organisations must have more refined management accounting practices in order to operates successfully in unce rtain business environments. in that respect are also a number of views that negate the idea that management accounting systems are at present influenced by external environmental factors. The idea of uncertainty, consort to Chapman (1997), can be linked to internal factors as well as external factors. More research shows that external factors affecting management accounting can be dealt with in the way internal managers and accountants truly perceive the external variables. Despite the vast come of advantages to management accounting and organizational change, there are also downsides to such changes.Burns, Scapens and Ezzamel (1999), show that accounting change can challenge existing routines and institutions within an organisation. This can then lead to run afoul and resistance within employees, managers and perhaps even board members. Goal congruence may disappear, and an organisations strategy to achieve objectives may be hindered with the lack of an aligning view from a ll the members who have succumbed to the initial accounting change. Burns et al. (1999) also state that it can be a difficult process for previous systems to be unlearned.A major role for management accounting systems is to motivate behaviours of employees and managers in line with the desires of the organisation as a whole. A great problem is that many managers try to implement smart accounting systems without taking into consideration the behavioural implications and consequences of employees with regards to these systems. The lack of goal congruence and effective communication can lead to low motivation and dysfunctional behaviour of employees. A change in an existing system will reduce employees knowledge and skill thereby affecting the effectiveness to achieve company objectives. carrying into action of new techniques has to be orchestrated with great fear and communicated thoroughly throughout the organisation. Accounting practices and emerging routines can be said to be in stitutionalised when they catch widely accepted in the organisation such that they become the unquestionable form of management control. In which case, they are an inherent feature of the management control process, and represent expected forms of behaviour and define the relations between the various organisational groups (Burns and Scapens, 2000).Burns et. al study of CHEM, a small chemicals manufacturer showed that a change in the accounting and organisational systems had little impact on the company as a whole and it did not change their previous ways of thinking. This led to conflict between individual members of the chemical manufacturing company. Later, the new accounting systems were scrapped as they offered little benefits to the company there had been in truth little change in the routines, institutions and systems of the firm.There are also claims that management accounting does not continuously change or respond to environmental or business changes. For specimen Kapla n (1984) suggests that despite significant changes to the business environment, such as increased competition and continuous changes in technologies and production processes, there has been no signicant changes in management accounting to match since 1925. Research conducted by Horngren (1995) and Burns et. al (1999) show that firms still execute to use traditional management accounting methods sort of of adopting new techniques such as ABC.It is also important to note that their has also been a lack of implementation of non-financial measures such as Total Quality Management, Strategic Management Advice or Internal Financial show and Communication. The absences of modern accounting methods support the claim that there is indeed in some cases little change within organisations from traditional accounting systems to new techniques. It is a difficult process to draw a set conclusion on the effectiveness of management accounting change.It is evident that there are vast pools of res earch both supporting the idea that management accounting hange is beneficial in aiding an organisations strategy but there is an equal amount of research to support the idea that change in accounting systems is derogatory to the success and progress of a business. It is fair to say that hike external factors can determine how successful accounting change can be for a firm. For example we must take into account cultural and semipolitical factors of the country a particular organisation resides in to fully understand the implications of strategic, and management accounting change.It is unsufferable to apply findings from research to all company, because in short, every company is different be it its strategy, its structure, its ethics or its objectives. We must be liberal in what we determine is successful implementation of management accounting change. The change that has taken place in organisations cannot be pinpointed to solely a change in management accounting systems and t echniques but it is in fact the change in how these new systems are used and implemented (Burns et. al 2000) and these changes are more often than not part of wider changes of the organisation as a whole.