Management Accounting And Auditor Skepticism: Factors Impacting Today’s Management Accountants

External Factors

Management accounting is a process in which data pertaining to both past and future estimate are analysed in a manner to provide the management with decision making capabilities based on the results of the analysis. By the help of this tools, the management would be able to formulate better policies and procedure and plan their path accordingly (Andiola, et al., 2018). However, its application has seen an overhaul in terms of the way it must be implemented as the dynamics of the businesses have changed immensely over several decades. From being an analyst of numbers, management consultants have now transformed into business consultants for the companies.

There are many factors that have contributed to the development an evolution of a new form of management accounting. We will discuss them as follows:

External Factors: There has been an enormous rise in competition as the number of players in industries risen over several decades. This has impacted the behavioral aspects of consumers which in turn has altered the way in which the businesses needed to measure their knowledge about consumers preferences to reduce the levels of customer return cases or potential loss in sales due to dissatisfaction. Globalization made the world as one giant market. AS the barriers were lifted, the methods and practices of doing business also expanded if it became successful in one part of the world. This meant that a greater level of uniformity was required for a better accounting and management practice system (Bumgarner & Vasarhelyi, 2018). As a greater level of uniformity was required on the statutory front of a financial accounting, changes had to be made to give room for those adjustments in the management accounting aspect as well.

Internal Operations of the entities: Many principles of management accounting are deeply embedded in the internal peculiarities and dynamics of the company. The technical competencies, core business areas and revenue cycle are key to the tools to be implemented for planning trough management accounting. A change in the production process driven by the implementation towards by a new technological change will change the way the product costing takes is done. Also shift from manpower driven processes to more automated processes will alter the cost cycle of the products or services delivered or made. Also, entities such as e- commerce which did not exist a few decades back will have a whole new approach towards management accounting. As the organizations become more customer centric, methods Total Quality Management (TQM) will gain more focus in the field of management accounting.

Internal Operations of Entities

Alterations to Organizational Structures: Changes in structure of the organization will directly impact the way management accounting is being taken up. Events like decentralization, mergers and acquisitions, restructuring will have impact on the techniques and will eventually the change the way in which management accountants go about their work.

Hence it ca be seen that today’s management accountants must consider an array of factors such customer inclinations, employee attributes, Global standards and evolutionary practices and these will act as a broader base of information in using management accounting techniques (Fukukawa & Mock, 2011).

Balanced Scorecard: This is technique used in modern day management accounting whose aim is to identify and improve upon several internal business functions which are basically sub-categorized for a better understanding. The improvement in the functions is then compared to the business outcomes. This technique was first conceived by Dr. Robert Kaplan and Dr. David Norton in a journal published in 1992. We can enlist seven key usefulness of balanced scorecard has under:

Improved Strategic planning: This tool provides a healthy framework for building a strategy as well as communicating it. The whole business is treated as a strategy map and then the cause and effect relationships are analyzed with regarding to different business objectives. The creation of strategic maps highlights that the fact there is consensus on objectives that are inter-related. This ensures early identification of factors that will affect future outcomes.

Alignment of various initiatives and projects: The method basically aligns the initiatives as well as projects with the long term strategic objectives of the enterprise. This in turn ensures that those objectives always remain in focus.

Improved communication and execution levels related to strategy: If the company has at its disposal a wholesome picture of the entire strategy map, it would be less cumbersome and easy to interpret and communicate the strategy both internally as well as externally. AS the saying goes that a picture is worth a thousand words, similarly a concise and comprehensive single page document will speed up delivery, communication and review of the strategy at each level of employees and stakeholders. Clear understanding is a fulcrum in effectively and efficiently communicating strategy (Garon, 2018).

Better information for the management: This approach of balanced scorecard facilitates in designing certain performance indicators that have different strategic objectives. This results in elimination of those measurements which don’t have much significance.  This method equips the management to make quality informed decisions based on high quality data.

Alterations to Organizational Structure

Better Alignment of processes: A balance scorecard that has been implemented in a very efficient and effective manner will integrate various other function for he entity such as risk management or budgeting with the strategic objectives of the company.  This will eventually increase the levels of focus towards strategic objectives.

Better reporting of performance: The tool of balanced scorecard can be utilized to design performance dashboards and reports. In this way, the most important issues are considered by the management and it ensure enhanced levels of monitoring by them (Kangarluie & Aalizadeh, 2017).

Better organization wide alignment: Balanced scorecard if well implemented, will integrate, align any synchronize the structure of the organization with the objectives of the business. If all units of a business and all those functions that support it work in a way that is well planned, then all the activities will be channelized towards a common cause of achieving same goals. To link the operation to the strategies, it becomes imperative to cascade this tool to individual business units and functions aiding it in its operations.

Committed Management: The company maintains a strong control on how its management functions.  Since customer satisfaction is their primary concern, they have equipped their people to deliver that in an efficient way (Mock, et al., 2018).

A workforce that is competent: This the second most critical factor. The staff which is present on board the flights are highly skilled in their communication skills and prompt reaction to customer enquiries and redressal of any issues. This wins the customers for the company. In the event of any abnormal or unpleasant circumstances, they can be seen taking responsibility and showing leadership skills in tackling the situation. The training courses offered by the company to its employees are focused towards customer satisfaction (Mubako & O’Donnell, 2018).

Non-stop Flights: Flight travel time is one thing that the flyers are very particular about. Qantas has the maximum number of flights that are non-stop. From the year 2006, the company has aggressively started its long-haul operations from the Australian coast to South east and Asia and Central Asian destinations like Tokyo (Lessambo, 2018).

Route System: This is a critical factor not just restricted to Qantas Airlines but to the civil aviation industry. This is basically a decision of what routes to fly on and what should be the frequency of those flights. This decision has a far-reaching impact on the overall profitability. Qantas covers 186 destinations spanning across 40 different countries.

Promotional tactics and on-board services: The promotional events or tactics are constantly employed to target returning customers. Various other ancillary services provided such as option to choose seats, meals, easy booking gateways makes Qantas flying experience easier and more comfortable for the flyers (Kim, et al., 2017).

References

Andiola, L., Lambert, T. & Lynch, E., 2018. Sprandel, Inc.: Electronic Workpapers, Audit Documentation, and Closing Review Notes in the Audit of Accounts Receivable. Issues in Accounting Education, 33(2), pp. 43-55.

Bumgarner, N. & Vasarhelyi, M., 2018. Continuous auditing—a new view.. Continuous Auditing: Theory and Application, 20(1), pp. 7-51.

Fukukawa, H. & Mock, T., 2011. Audit risk assessments using belief versus probability. Auditing: A Journal of Practice & Theory, 30(1), pp. 75-99.

Garon, J., 2018. Ownership of University Intellectual Property. Cardozo Arts & Ent. LJ, 36(1), p. 635.

Kangarluie, S. & Aalizadeh, A., 2017. ‘The expectation gap in auditing. Accounting, 3(1), pp. 19-22.

Kim, M., Schmidgall, R. & Damitio, J., 2017. Key Managerial Accounting Skills for Lodging Industry Managers: The Third Phase of a Repeated Cross-Sectional Study. International Journal of Hospitality & Tourism Administration, , 18(1), pp. 23-40.

Lessambo, F., 2018. Audit Risks: Identification and Procedures. Auditing, Assurance Services, and Forensics, 3(1), pp. 183-202.

Mock, T. J., Ragothaman, S. C. & Srivastava, R. P., 2018. Using Evidential Reasoning Technology to Enhance the Audit Quality Assurance Inspection Process. Journal of Emerging Technologies in Accounting, 15(1), pp. 29-43.

Mubako, G. & O’Donnell, E., 2018. Effect of fraud risk assessments on auditor skepticism: Unintended consequences on evidence evaluation. International Journal of Auditing, 22(1), pp. 55-64.

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