Figure 1.2. Theoretical/Conceptual Framework.
METHODOLOGY
The research adopted a quantitative, non-experimental mode of inquiry, as non-experimental studies give authors more insight into how a treatment or intervention works, with authors typically going into more detail and providing richer descriptions about program practices and procedures. Basically, quantitative method is compatible with this paper because it allows the research problem to be conducted in very specific and set terms ( 1992). Besides, quantitative research plainly and distinctively specifies both the independent and the dependent variables under investigation (2002). It also follows resolutely the original set of research goals, arriving at more objective conclusions, testing hypotheses, determining the issues of causality and eliminates or minimises subjectivity of judgment (2002). Furthermore, this method allows for longitudinal measures of subsequent performance of research subjects ( 2002). Finally, it provides the attainment of high levels of reliability of gathered data due to controlled observations, mass surveys, or other form of research manipulations (1970). This study is based on surveys and employs statistical treatment, so the quantitative approach fits well with it.
This research is be descriptive in nature, and employs a simple purposive sampling as it is easy to understand, analyse and interpret the results and little knowledge of the population needed. In this method, it is possible for the study to be convenient and quick. Descriptive research could also suggest unanticipated hypotheses. Nonetheless, it would be difficult to rule out alternative explanations and especially infer causations. Thus, in this project report, it is practical and reliable to use this kind of research approach. To illustrate the descriptive type of research, (1994) guides the author when he states: Descriptive method of research is to gather information about the present existing condition. The purpose of employing this method is to describe the nature of a situation, as it exists at the time of the study and to explore the cause/s of particular phenomena. The author opted to use this kind of research considering the desire of the author to obtain first hand data from the respondents so as to formulate rational and sound conclusions and recommendations for the report. Also, this type of study may serve as an extension or a forerunner to a piece of exploratory research, the latter a valuable research approach to discover what is happening, to seek new insights, to ask questions and to evaluate a phenomenon in a new light ( 2002).
Secondary Data Treatment
Secondary data is also utilised to complete this research. Accordingly, finding relevant secondary data involves two interlinked stages. The first stage is identifying the availability of the data that a author is looking for as secondary data, while the second stage is finding the precise data that is needed for the study (2003). For this study, the author is able to establish that the pertinent data needed for the fulfilment of this research’s objectives were available through the literature review previously conducted. Because of the review, the author was able to gather the full citation references to the sources of the needed data. Tertiary literature (like indexes and data archive catalogues) also helped especially those on-line indexes and catalogues of Universities and organisations. After determining the availability of the data, the next step for the author was to locate them. As a result, the author had gone to several libraries within the author’s vicinity in order to locate the books, journals and magazines that were needed.
Documentary secondary data, accordingly, are the ones often used in research projects that also use primary data collection data methods, although such data can also be used on their own or be combined with other secondary data. This type includes: written documents (notices, correspondence, minutes of meetings, reports to shareholders, diaries, transcripts of speeches, administrative and public records, as well as articles from books, journals, magazines and newspapers) that can be important raw data sources on their own right, a storage medium for compiled data, provide qualitative data, and can be used, as well, to generate statistical measures (e.g., data on absenteeism derived from company records); and, non-written documents (like tape and video recordings, pictures, drawings, films and television programmes, digital versatile disks and CD-ROMs) that can be analysed both quantitatively and qualitatively, as well be used to help triangulate findings based on other data such as written documents and primary data collected through observations, interviews and questionnaires ( 2003).
The Respondents
The author, in choosing subjects or respondents for the topic at hand, is usually thought of to have the power over who the respondents of the study will be. Such a task would have been easier, except that the author cannot simply choose out of whim; the subjects must be selected carefully with the intention of having subjects who each posses characteristics that, when put together, will represent a community. It is not only themselves, whom these subjects will represent, but the bigger whole or the whole population. The characteristics which the author has chosen them for will determine which part of the community they belong and what part of the community they are representing. Thus, the choosing of the subjects must be based on their characteristics.
In this study, it is necessary to collect information from the XYZ Ltd. employer, people from senior management, and the management accountants of the firm themselves. They were surveyed with a combination of open-ended and closed-ended queries in the questionnaire. Basically, the author presented or distributed the questionnaires to the employees of XYZ Ltd. during break time. In addition, the sampling method used is purposive sampling, as the respondents were purposively selected as to the extent of their knowledge in the subject of this project report. Overall, the study has collated eight respondents who filled up the structured questionnaires. The filling-up of the structured questionnaires took 15 to 20 minutes for each respondent.
Data Collection Techniques
The data collection technique to be used is the survey, through the use of a questionnaire to be administered to the purposively sampled population. The survey technique was chosen because it permits anonymity among the respondents, thus potentially resulting in more honest answers. Survey-based secondary data are those data collected by questionnaires that have already been analysed for their original purpose; usually, such data refer to organisations, people or households and are made available as compiled data tables or as a computer-readable matrix of raw data. These type of data are typically collected through: censuses (usually conducted by governments, where participation is obligatory; since these surveys are done in order to meet the needs of government departments as well as of local government, collected data are usually clearly defined, well documented and of high quality); continuous/regular surveys (surveys that are repeated over time, but these don’t include censuses, such as those which collected data throughout the year and those that are repeated at regular intervals; examples of these are general-purpose market research surveys or regular organisation surveys such as employee attitude survey); and ad-hoc surveys (usually one-off surveys and are far more specific in their subject matter, and these include data from questionnaires administered by independent authors as well as surveys done by governments and organisations) ( 2002; 2000).
Statistical Treatment
After the entire survey questionnaire has been collected, the author used statistics to analyse all the data. A five-point Likert scale (5=Strongly Agree; 4=Agree; 3=Neutral; 2=Disagree; 1=Strongly Disagree) was utilised in part to determine the level of agreement of the respondents regarding the survey questions. The statistical formulae to be used in the survey questionnaire will be the following:
1. Percentage – to determine the magnitude of the responses to the questionnaire.
n
% = ——– x 100 ; n – number of responses
N N – total number of respondents
2. Weighted Mean
f1x1 + f2x2 + f3x3 + f4x4 + f5x5
x= ——————————————— ;
xt
where: f – weight given to each response
x – number of responses
xt – total number of responses
Validity and Reliability
In order to ensure the credibility of this research’s findings, the research design will emphasise reliability and validity. Reliability can be assessed by posing the following questions: (1) ‘Will the measures yield the same results on other occasions?’; (2) ‘Will similar observations be reached by other observers?’; and (3) ‘Is there transparency in how sense was made from the raw data?’ (2003). On the other hand, validity, which is concerned whether the findings really are what they appear to be, can be ensured by addressing the threats of validity (i.e., history, testing, instrumentation, mortality, maturation and ambiguity about causal direction) (Saunders et al 2003:101-102).
Primary Data (Class 1)
The primary source of data came from a questionnaire and interviews conducted by the researcher. The primary source of data gave actual responses from people which provide further understanding of the situations.
Secondary Data (Class 2)
The secondary source of data came from research of books, academic journals, scholarly articles and previously published studies regarding the subject matter at hand. They have already been condensed and organised in order for data analysis and interpretation to be done more easily.
Tertiary Data (Class 3)
The tertiary source of information will come from the internet, current news and other sources of information which can help in providing illustrations of different points being discussed.
FINDINGS AND ANALYSIS
In this section, the data gathered from the XYZ Ltd. respondents are presented and analysed. This chapter discusses the results of the interview responded to by the eight management accountants, senior management and employer of XYZ Ltd. Prior to the initiation of the interview process, the purpose, the significance and objectives of the study were relayed to the participants. They were also assured that all the information they had provided are solely for the purpose of the study while their identities would remain confidential. All questions asked in the questionnaire pertain only to the respondents’ insights on the changing role of management accountants in contemporary organisations.
For a clearer presentation, the findings of the interview are presented in a table. To further facilitate clarity, the findings and analysis section is divided into two subsections: Part One presents the first part of the survey, which consists of the collation of their answers to the five pre-set queries in the survey form. Part Two lays out the respondents’ magnitude of response to each of the 10 questions using the five point Likert scale (5=Strongly Agree; 4=Agree; 3=Neutral; 2=Disagree; 1=Strongly Disagree) and interpreting the data collated and application of said results to the literature review.
Part One
The first part of the survey required the respondents to answer in their own words a set of five questions in relation to the changing role of management accountants in their organisation. There were eight survey respondents, who remained anonymous so that no one survey form was identified with a particular respondent. This promoted more honest answering of the questions, and preservation of anonymity among the respondents. All the answers to Part One of the survey form will be presented in this section and linked to what has been found in the review of related literature of this paper.
Question # 1: What kinds of key activities would you currently expect a Management Accountant to carry out?
The first question is a general question, which relates to the respondents’ personal expectations of a management accountant. The answer that was given by almost all of the respondents was budgetary control/budgeting. This common expectation is in agreement with what is written in current management accounting literature, particularly that of (1966), who stated that management accountants has taken the form of a more or less conventional approach to budgetary planning and control, from the previously limited scope of cost accounting. The second most common answer to Question # 1 is cost control. Again, this common perception from the respondents is evident in existing academic literature regarding management accountants. For one, (1999) asserted that management accounting systems are basically designed to reduce costs associated with large firms. (2002) likewise agrees with this assertion. Also, (2004) noted that purpose of management accountant is to make sure that business activities contribute to cost savings, most notably those associated with environmental transaction costs. (2006) have consequently added that the management accounting profession has designed ways to respond to situations through, among other things, cost reduction.
The third most common answer was financial planning and financial control. This is the more general scope of the budgetary control function of a management accountant. Financial planning and control, during their phase, will touch on the budgeting function as part of their implementation. Although not in the literature review of this paper, (2003) described the budget as a purely financial plan. When the management accountant initiates the costing exercise he or she is able to take the initiative when competing for funds and the costing exercise forms an essential part of the financial planning and control process, which ultimately, will lead to the formulation of a formal budget. Other answers which surfaced in the first question were: (1) Analysing non-financial performance; (2) Variance Analysis; (3) Using financial information to help achieve organisational goals; (4) Communicating with operation managers; (5) Making suggestions to business decisions; (6) Managing change; and (7) Integrating operational performance with accounting information in the context of the organisation’s strategic aims.
Question # 2: What are the organisational changes in XYZ which led to the shift of the role of a management accountant?
The second question asked about the internal organisational factors which triggered the change in the role of the contemporary management accountant. The most notable answer from the eight management accountants, senior management and employer which stood out was that the advancement in information system/information technology, particularly database technologies. (2006) has been distinctively found to observe that advances in accounting information systems have resulted in the automation of traditional accounting functions involving data collection, data entry and data reporting and a corresponding shifting of those functions from management accounting to clerical staff. The second most common answer that came out was increased global competition. A respondent even went out of the way to say that due to severe competition of international markets, the firm had to strengthen effectiveness, which led to the shift in the role of their management accountants.
Other answers were: (1) New management structure; (2) Increase in the use of financial systems to support business strategies; (3) More systematised management; and (4) Business expansion/growth/transformation. As was stated in the review of related literature in a previous section of this paper, as business environment continues to change, together with financial situations of companies due to different factors that affect finances, traditional management accounting creates ways to respond to such situations.
Question # 3: Which roles would you prefer that they would undertake? (i.e., advising on operation decision and business planning)
A majority of answers in the third question stated that business planning should be one of the roles of the contemporary management accountant. It is implied that contemporary management accountants feel less involved in the functional activities of accounting and more involved in supplying management with information needed to make decisions, thus their participation in business planning. Management accountants, as a general observation, also enjoy a broader scope of responsibility and the opportunity to work on the business level. The respondents’ general perception is that management accountants will be of great help to the business if they would participate more in planning for the business as a whole, instead of getting cooped up in financial accounts, like what the traditional management accountant is expected to do. According to some of the respondents, the application of financial information to business strategies could only be effectively realised if the people who are experts on the subject will participate in the actual process of business planning. The ways formulated and implemented by contemporary management accountants are ways to prevent worse scenarios from happening and mend current problems in the business’ financial situation. The management accountant can and should play a decisive role in the development of business plans. The other answer to the third question is advising on operation decisions. Some of the respondents thought that management accountants should first and foremost take a support role.
Question # 4: What are your expectations regarding the role of management accountancy in the future?
This second to the last question asked the respondents’ future expectations of management accounting role. This particular question was faced with diversity in responses, with no one respondent in agreement with any other in the group. To this end, this paper will present al the answers in random order, with no particular emphasis on the depth or relevance of the answer. Since there are only eight respondents, laying them all out will only be proper. The answers are as follows: (1) To integrate different understandings of non-financial information amongst different managers; (2) To link management systems with operation system to support new business decisions; (3) To design and maintain new integrated accounting systems; (4) To educate other people in the organisation to understand cost variances and accounting reports; (5) To become part of executive teams involved in strategic planning or business development; (6) They are expected not only to provide relevant information but actually participate in the decision-making process; (7) To maintain the company in a well financial condition, reduce financial crisis and risk and effective financial planning; and (8) The willingness to devote considerable time and resources in new technology and training.
The respondents expressed a belief that management accountants’ roles were evolving from a traditional recording function to an analyst position. Creating reports and explaining changes, trends, variances, and other issues, as well as forecasting future performance, will be future responsibilities according to most of the respondents. However, some of them stated that their own management accountants were much further away from this goal than others. The respondents viewed their current management accountants’ positions as support personnel to decision-makers, and not as decision-makers themselves. The observations in this particular question provide support for the changing roles of management accountants from a scorekeeping orientation to an active support role in the decision-making process. Management accountants are not only involved in providing cost support to local plants, but also to business controllers and managers involved in a decision process at a company level.
Question # 5: What are your preferred management accounting tools?
The top preferred management accounting tools chosen by a majority of the eight respondents is budgeting/budgetary control, in partner with one or two of the other tools. The next was job costing, followed by a tie between standard costing and cost-based management system. One preferred traditional management accounting, another said variance analysis. One answer that differed significantly from all the other answers was a tailor-made management accounting tool for the particular industry that XYZ Ltd. is operating in. This diversity might be explained by the fact that even with a friendly and easy to access front-to-end corporate information, and sophisticated analytical tools, the complexity, diversity and incompatibility of management accounting information systems in most organisations is prohibitively costly to maintain.
Part Two
This part of the findings and analysis section presents the collated data from the second part of the distributed survey forms, which has closed-ended questions provided with a five-point Likert scale to determine the magnitude of response to each of the 10 questions in Part Two of the survey. Table 1 lays out the results of Part Two, including the weighted mean and interpretation.
The first statement in the survey form was ‘Management accounting (MA) is a key input to strategic decision making for the organisation’. Three of the respondents answered that they agree on the statement while five have neutral feelings about it. Anton (1966) has explicitly stated that management accounting has taken steps to develop single-instance decision situations, paving way for more conclusive and definite decision-making activities which contributes to the betterment of the organisation. Further, a basic objective that is to assist management in decision making are derived both secondary objectives and qualitative characteristics of management accounting was noted by (2005). The finding that on an overall level, the respondents feel neither strong agreement nor strong disagreement that MA contributes to strategic decision-making for XYZ Ltd. implies that MA in the firm does not visibly participate in decision-making. This opens an avenue for improvement within the confines of XYZ Ltd.
makers of a given organization, to facilitate their decision making, to motivate
their actions and behaviour in a desirable direction, and to promote the efficiency
of the organization. It is accounting-based and individual-, organization-, strategy-, problem-, and decision-centred. Thus, management accounting requires an accounting, decisional and problem, organizational, behavioural, and strategic grounding. In general, the respondents to this report believe that management accountants’ role has been enhanced by the new accounting system and business realignment. Accountants are an important source of information about the system for organisation personnel since more of the actual entry-generating activities are taking place outside the accounting department. Management accountants also enjoy a broader scope of responsibility and the opportunity to work on the business level. The implication by the literature review that management accountants will adopt a more supportive role in the organization is upheld by observations in this study. Management accountants feel less involved in the functional activities of accounting and more involved in supplying management with information needed to make decisions.
A role of the management accountants is to ensure the integrity of reported financial numbers associated with inventories and expenses. The manner in which these responsibilities are performed has changed dramatically. Each respondent interviewed cited a reduction in the manual activities of reconciling, calculating, and inputting necessary to perform the management accountants’ duties, as compared to the manual activities performed under the old system. Some of them reported these clerical tasks had been replaced by other clerical activities. These new clerical activities were related to problems specific to certain plants and were not indicative of an overall replacement of old clerical activities with new ones. Many of them also expressed a belief that most new clerical tasks would disappear after plant personnel became fully accustomed to their new responsibilities. Manual accounting entries have been reduced significantly and the majority of accounting entry-generating activities have been moved to clerks. The accountants’ role has expanded to include support or coaching for plant personnel as they perform activities that create accounting entries.
RECOMMENDATIONS
From a managerial accounting perspective, the changes in the economy, in industries and individual firms alike, must be supported by the firm’s management accounting and control infrastructure (1994). Accounting is, after all, a financial model of business. When changes occur in the business, accounting should change to reflect them. Managers of companies that fail to make appropriate modifications in their accounting systems will find they have inaccurate product/service/activity cost figures and lack data for making decisions. They may lose their competitive edge because they do not have the necessary information for operating in the constantly changing business environment. Much has been written about how management accountants must change to meet customer needs. Most authors advocate more participation by management accountants in proactive activities, such as membership on strategy- and decision-making teams. As many of the traditional accounting tasks are automated, an increased emphasis is placed on predicting future activities. Thus, management accountants must become part of the management team to retain importance in the organization. Several authors have also documented an expectation among accounting executives for more involvement in activities that focus on customer and product profitability rather than on the traditional costing activities of the past.
Another finding from this study involved the accuracy of MA reports. The education community should take the lead in sensitizing the students to the existence, the gravity, the immorality, and the consequences of the problem. The short-term-oriented management style that may account for a large proportion of corporate fraud needs to be deemphasized because of its myopic view of the environment. The management accountant can and should play a decisive role in the development of business programs. This role demands a set of skills which should be developed over time: (1) Expertise in systems design. The management accountant can become the person the functions specialist turns to for help when he or she is designing new management accounting systems; (2) Expertise in change management. The management accountant can ensure that not only is a technically sound system installed but also that it is used; (3) The ability to relate strategy to overall business targets. The management accountant can help shape the company’s strategic cost control and budgetary programs; (4) Increased functional expertise.
In the analysis of contemporary organisations, the traditional three-fold planning and control cycles—strategic, tactical, and operational—are replaced by an alternative three-fold classification of control domains; the business domain, the communication domain, and the information domain. Although these domains do not mean a complete departure from the control elements and instruments in the traditional typologies, they do mean a fundamental refocus on the control questions brought about by the central roles of knowledge, information, and communication in contemporary organisations.
The management accountant can help the functions specialist take advantage of the information that is provided by the new management accounting systems. Many management accountants will react to the above recommendations by saying, ‘I already do all that’; and in many cases they will be right. These are skills that all good management accountants should develop. The central message of this paper to management accountants is that those skills are going to become even more essential and only individuals with such skills stand a chance of escaping the reengineer’s knife.
APPENDIX 1. SAMPLE SURVEY FORM
The following are questions in relation to the changing role of management accountants in an organisation. I am currently doing a project report on the subject and assistance would be highly appreciated. This is a two-part survey, the first part consisting of open-ended questions, the second part closed-ended ones. Kindly fill them out for academic purposes. Results of the survey will be treated with utmost confidentiality. Thank you very much for your cooperation.
PART 1. Please answer as concisely as possible.
PART 2. Please clearly mark the answer you consider most appropriate.
ITEMS
Strongly Agree
(5)
Agree
(4)
Neutral
(3)
Disagree
(2)
Strongly Disagree
(1)
1. Management accounting (MA) is a key input to strategic decision making for the organisation.
2. Management accountants identify accurate and actionable cost information as the #1 priority, followed by cost reduction.
3. Priority on implementing new cost management tools and systems in the current economic environment is exercised.
4. Distortions in MA reports are significant.
5. Resources of MA used in business strategic and planning are wisely used.
6. Change management is also exercised by management accountants.
7. In-house support, technology capabilities and clear, qualified ROI are key considerations.
8. The role of management accountants have changed in keeping with organisational changes.
9. The MA of the firm contributes positively to organisational change.
10. Improvement is needed in the current MA system.
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