The role and responsibility of the managerial accountant is selecting, analyzing, presenting and communicating information to non-accounting managers. The value-adding processes give the managerial accountant criteria for anticipating the potential value that a non-accounting manager will see in the information and therefore the kind of assistance they can provide that will be well regarded by the non-accounting manager. A major responsibility is providing quantitative (financial and nonfinancial) information, balanced with qualitative information in either routine output documents or customized documents. Because the managerial accountant is across the organization, they can view information as multi-dimensional. The six dimensions are paired as quantitative versus qualitative, operational versus strategic, external versus internal, primary versus secondary, time horizon (past,
present, future), and evaluation versus prediction. This requires the managerial accountant to select information from a wide pool and justify those choices. In addition, they are responsible for aggregating and integrating information. In doing this, the managerial accountant must be aware of the limitations of information as well as reflect on the way it is likely to be used. To do this requires understanding of its properties or attributes, to fulfill the further responsibility of ensuring the information meets the needs of its audience who are usually non-accounting managers and employees.
Much of the output prepared by the managerial accountant uses source documents to obtain costing and control information. These too have limitations and the non-accounting manager may not be aware of them. This may necessitate them providing a ‘walk through’ of the figures and their meaning.
With the review of resources available to the managerial accountant complete, the next part contains three chapters: role and responsibilities (Chapter 5), critical success factors (Chapter 6), and decisions (Chapter 7). Chapter 5 identifies the role and responsibilities, abilities and skills of the managerial accountant.
Notes
1. ‘Information’ is conceptually distinguished from ‘data’ to emphasize that recipients make meaning from what they read, see or hear (the data) by processing, organizing, synthesizing or structuring them. Data are the symbols, numbers, diagrams and images (still and/or video), which are the representation of stimuli and the content of communication (Zins, 2007). Similarly, knowledge is the combination of understanding, experience, skill, expertise or capability that resides in an individual and is tacit (Polanyi, 1966) or may be expressed explicitly as propositions or procedurally. Many discussions suggest they can be arranged in a hierarchy (e.g., Ackoff, 1989), but this fails to recognize the personal nature of knowledge.
2. A template is a calculation set out in rows and columns, which have headings (or captions) on columns and labels for rows.
3. The bullet notebook is a system of rapid logging (Carrol, 2018). It uses five modules: titles (topic), monthlies, dailies, future and collections. It has an index that links them. It uses bullets to arrange any bullet point into one of three categories (task, event or note).
4. Common methods are by location, alphabet, time, category and hierarchy, but this overlooks the process that is responsible for creating value.
5. Managerial accounting was pioneered in mercantile, textile and railway organizations. Mercantile operations required internal accounting for the purchase or trading of commodities and their eventual conversion into saleable products that were subsequently transported to major markets in cities in Europe. Coordination and decentralization required improved information (e.g., Spraakman, 1999). Textile mills used raw materials and labor to make fabrics. Internal accounting was used to assess the efficiency with which they used their inputs (e.g., Gourvish, 1972; Tyson, 1992). Railways required significant investments of capital over long periods of time for the construction of the permanent way (track) suitable for carrying freight. Once operational, they handled large volumes of cash receipts from numerous customers and required internal accounting systems to measure efficiency for moving freight and passengers (e.g., Previts & Samson, 1999 –2000).
6. Clarke and Dean (2007: 9) identify an accounting standards shortcoming: the mistaken proposition is that “uniformity of … input and processing rules would produce uniform, comparable financial statements”.
7. General expenses are operating expenses other than those specifically identified as cost of goods sold, selling and administration expenses.
8. Breadmore (1971: 76–77) suggests there are four generally applicable rules for work reduction, which should govern any approach to problem solving. In order they are eliminate the entire activity under investigation or failing that, as much of it as possible, simplify to remove non-essential aspects, combine forms, activities, jobs to avoid duplication and lastly, automate or mechanize.
9. The four reports are variously named depending upon country and the accounting standard. Revenues, expenses and profits/losses generated during the reporting period appear in the statement of income (USA) or profit and loss (Europe). The assets, liabilities and equity of the entity as of the reporting date are in the balance sheet (USA, Europe) or statement of financial position (Australia). The statement of cash flow outlines the cash inflows and outflows that occurred during the reporting period. Changes in equity during the reporting period are in the statement of retained earnings (USA) or owners’ equity (UK, Australia). Simplified reporting applies to small organizations in some countries where lodgment is with the taxation office (Europe).
10. Breadmore (1971: 54) comments on measurement that the three problems with counting are the following: What to count? How to count? When to stop counting? This overlooks the other important question: How often? He recommends counting all the kinds of useful information in a painstaking way on the grounds that the characteristics sought may not be immediately apparent. How to count should be preceded by paper and pencil design to determine feasibility. It is impractical to sample everything, and options from employees can be unreliable so to ensure accuracy of a result statistical sampling should be used after calculating the standard error to determine either the level or error or the number of items to sample (depending upon how values are substituted into the formula) using the formula standard error as a percentage.
11. Graphical reports were very common for many aspects of costs in production systems in the 1940s and 1950s. A variety of examples is provided in Lang (1958) indicating pre-computerisation formats.
12. Weil (2005) shows how alternative accounting treatments of identical economic events can allow different reported income.
Part III
Insights From the Managerial Accountant’s Role, Performance, Decisions and Judgments
5
Role, Responsibilities and Personal Qualities of the Managerial Accountant That Inform the
Managerial Accountant’s Compass
The role or function and responsibilities or tasks or duties of the managerial accountant inform the managerial accountant’s compass by highlighting the range of concerns and actions. Professions that control a body of expert knowledge enable its members to charge high prices when assisting a client.
Recent studies suggest three possible directions for professions in the twenty-first century. One is that technology may augment professional abilities allowing them to work faster and more thoroughly (Leicht & Fennell, 2001). Or, technology may develop artificial intelligence, which can do the same work better and cheaper (Susskind & Susskind, 2015). Finally, technology may use large datasets that make diagnoses or predict outcomes, thus reducing the need for professional assistance (e.g., Remus
& Levy, 2016). Of course, technology has already intruded on routine work with intended and unintended consequences, including reducing the numbers of professionals employed. The implication for the managerial accountant is that they should reflect on how the application and diffusion of technology affects them in terms of their duties (role and responsibilities) and personal qualities (skills and abilities) and how their profession has changed (Langfield-Smith, 2008). (The following chapter addresses the issue of performance and control.)
Managerial accountants could also be described as chief intelligence officers because, apart from senior management, perhaps no one else knows more about the various functions of the organization.
The managerial accountant plays a significant role in the decision-making process of an organization, whether by preparing information, validating it, interpreting it or implementing it. They are responsible for the installation, development and efficient functioning of the managerial accounting system and the framework of the performance reports that provide timely and meaningful information about organizational processes and outcomes. Irrespective of their level in the organization, the managerial accountant is competent in framing and asking questions, and suggesting answers.
However, as Hall (2010) observes, managers may use the knowledge of the managerial accountant to understand the organization rather than as an input to a specific decision. These different information needs are vary at the different levels of managerial accountant.