Analysis of the Evolving Role of Management Accountant

This report explores the evolving role of management accountants in the context of modern business environments. It begins by defining management accounting and its function in providing information for managerial decision-making. The report then examines the changing responsibilities of management accountants, highlighting the impact of technological advancements, particularly ERP systems, and the increasing need for cost classification. Several factors influencing this evolution are discussed, including globalization, advancements in manufacturing technology, and increased competition. The report emphasizes the importance of cost classification for cost control, price setting, income ascertainment, and effective decision-making. The conclusion reiterates the critical role of management accountants in adapting to the evolving business landscape, highlighting the importance of IT advancements and cost analysis in fulfilling their responsibilities.

Running head: EVOLVING ROLE OF MANAGEMENT ACCOUNTANT
Evolving Role of Management Accountant
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1EVOLVING ROLE OF MANAGEMENT ACCOUNTANT
Executive Summary:
Management accounting is a part of accounting that provides decision-making
information to the managers in order to use in controlling and planning operations. The
management accountants are responsible for operational scorekeeping, in which accounting
information is utilised for meeting the reporting obligation of the organisation. The growth of
information technologies related to management accounting, especially the ERP system, has
been a significant change in IT and conventional techniques of management accounting need to
be in line with the increasing advancements. Finally, the increasing need of cost classification
has significant effect on the changing role of the management accountants in the current era.

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Table of Contents
1. Introduction:................................................................................................................................3
2. Changing role of management accountant:.................................................................................3
3. Factors influencing changing role of management accountant:..................................................5
4. Cost classification as a necessity:................................................................................................7
5. Conclusion:..................................................................................................................................8
References:....................................................................................................................................10

3EVOLVING ROLE OF MANAGEMENT ACCOUNTANT
1. Introduction:
Management accounting is taken into account as a segment of accounting and it is
involved in providing information to the managers that could be utilised in controlling and
planning operations. The management accountants are responsible for operational scorekeeping,
in which accounting information is utilised for meeting the reporting obligation of the
organisation (Chenhall and Moers 2015). The role of the management accountants to facilitate
the management in efficient process of decision-making is agreed highly from the perspective of
the complex business environment. This is because there is increase in demand and needs for the
managers to undertake decisions. Hence, the responsibilities of the management accountants
have increased over time in contrast to the past and their role would be active in the decision-
making process of the management.
2. Changing role of management accountant:
In the words of Cooper, Ezzamel and Qu (2017), the management accountants were
traditionally responsible to provide operating and financial information to the management.
However, the changing organisational shape and business environment have increased the
expectations from the management accountants and they are considered as the essential part in
order to assure the success of the organisation. In addition, it is necessary for the management
accountants to keep them aware of the competitors and customers due the changing conditions n
business environment in terms of time, flexibility and continual development.
As the field of technology has made rapid advancements, management accountants could
be redefined as the analysts, in which they are needed to take part in strategy formulation

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decision within the firm. The intention is to attain the likely competitive advantage (Fullerton,
Kennedy and Widener 2014). The change in the role of the management accountants takes into
account the decision pertaining to resource allocation like technology, finance, people, products
and processes for accomplishing the determined strategies. The redefined role of the
management accountant has direct effect on the business operations, since the accountants are
probable in contributing towards change management in an environment of uncertainty, speed
and complexity. This signifies that the management accountants provide information to the
management so that the latter could have an effective insight of the complicated business
environment. This, in turn, enables them to undertake better decisions (Hiebl et al. 2015).
However, Makrygiannakis and Jack (2016) are of the view that the management
accountants have a different role to play, since the newer information system like Enterprise
Resource Planning (ERP) has offered adequate time to evaluate information, instead of obtaining
the base financial figures. Due to this, the position of the managers has improved in terms of
undertaking suitable decisions. This is carried out after conducting a critical assessment of data
and thus, there could be attainment of enhanced business performance. It is possible for the
management accountants to have direct impact on the business, since they could identify the
primary drivers of spending and greater control could be carried out to accomplish better
operational efficacy.
Hence, based on the above analysis, it could be cite that there is increase in role of the
management accountants with the passage of time in the current complex business environment
in contrast to conventional role of providing the figures only to the higher-level management.
They are involved even in developing strategies for assuring the organisational effectiveness and
thus, better organisational growth could be accomplished. However, the varying role of the

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management accountants in the current era is due to certain factors. These factors take into
account shift towards the service economy, applying advanced system of information like
enterprise resource planning, enterprise risk management, international competition and just-in-
time management. Thus, there is significant increase in the responsibilities and roles of the
management accountants and hence, the impact would be positive on the decision-making
process of the organisation.
3. Factors influencing changing role of management accountant:
The various factors that have direct impact on the varying role of the management
accountants include the following:
Progress in globalisation and manufacturing:
The organisations have made huge investments in new technologies of manufacturing.
These include “computer aided design”, “computer aided manufacturing” and transparent
manufacturing systems. These technologies have direct effect on conventional management
accounting systems and thus, there needs to be changes in management accounting with the
change in manufacturing systems. In relation to overhead costs and product costing, it is not
possible to track different individual products. Conventionally, in order to apportion overhead,
the base is considered in the form of labour hours (Messner 2016). The suitability is minimal
since the charge of automated products would be made via an inadequate overhead rate.
The effect of global competition on organisations and deviation from cost-led pricing to
price-led costing along with globalisation are few major factors affecting the rising expense on
research and development and new product development which majority of the organisations
incur.

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Competition:
In the conventional era, many nations tend to function in protective environments. The
cross-border organisations were restricted to function in the local market with communication
barriers, protected markets and geographical distance. However, the manufacturing organisations
were open in severing competitive pressure from the cross-border firms offering greater quality
products at cheaper prices. In order to assure success against these organisations, they need to
progress along with adoption to change and finding a competitive strategy to cope up with the
leading manufacturing firms. Due to the increasingly competitive market, expectations of the
customers and changes in their preferences and tastes, the organisations need to have the
pliability of coping up with customer demand for higher improvements and variety and reduced
lifecycles (Walker 2016).
Progress in manufacturing technology:
The growth of information technologies related to management accounting, especially the
ERP system, has been a significant change in IT and conventional techniques related to
management accounting have to cope up with the increasing advancements. As stated by Odar,
Kavčič and Jerman (2015), the association with management accounting seems significant, since
one class of advantages from integrated system is expected to transfer from rapid and easy access
to the data pertaining to operations. Thus, the need for management accounting arises in this
situation in order to transfer data in a managerial usable and pertinent form.
Since ERP is a fully integrated system of information, all data from manufacturing
department are merged with the division of sales and the flow of integrated data is immediate in
the system. Due to such integration, the accountants need to work with the new system and the

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business needs to be viewed as a process instead of divisions, which would result in greater
teamwork and higher cross-functional communication and cooperation.
Changes in organisational structure:
The changes in globalisation, production technology and increasing rivalry have resulted
in modifications in the organisational structure. The organisations need to concentrate on
outsourcing support services and downsizing (Otley 2016). The growth of technologies in
robotics of flexible manufacturing has helped in automating production, planning and
computerised engineering. This has direct influence on the market enhancing the product and
service quality while minimising and eradicating stock levels.
4. Cost classification as a necessity:
In the current competitive landscape, the cost classification is extremely important for the
management accountants for certain number of reasons, which are elucidated briefly as follows:
Determination of cost:
The cost classification is carried out to determine the cost related to a project or process
of production. For manufacturing organisation, the process of production for a group of products
is carried out in combination and due to this; the cost spent for a specific product is identified. As
a result, cost classification based on resource consumption could be traced for determining the
cost spent on a specific product (Ramli, Sulaiman and Zainuddin 2015).
Cost control:

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With the help of cost classification, cost could be controlled effectively, since the cost for
each specific area could be identified and the specific activity having greater cost could be
traced. As a result, the management could undertake certain steps in order to control greater cost
(Sunarni 2015).
Fixation of price:
Since effective function of cost classification helps in identifying cost of a specific
product, the management could set the prices of its products effectively.
Ascertainment of income:
The ascertainment of income could be achieved with the help of cost classification, since
the variations in selling price of a product and amount spent in producing the same could be
utilised as a base to ascertain the appropriate income level (Uyar and Kuzey 2016).
Decision-making process:
The managers could make different types of significant decisions with the help of cost
categorisation. The product prices could be fixed effectively, which provide an opportunity to
make effective business decisions.
Such increasing need of cost classification has significant effect on the varying role that
the management accountants need to play in the current era.
5. Conclusion:
From the above evaluation, it has been found out that the changing organisational shape
and business environment have increased the expectations from the management accountants and

9EVOLVING ROLE OF MANAGEMENT ACCOUNTANT
they are considered as the essential part in order to assure the success of the organisation. The
growth of information technologies related to management accounting, especially the ERP
system, has been a significant change in IT and conventional techniques of management
accounting need to be in line with the increasing advancements. Finally, the increasing need of
cost classification has significant effect on the varying role that the management accountants
need to play in the current era.

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References:
Chenhall, R.H. and Moers, F., 2015. The role of innovation in the evolution of management
accounting and its integration into management control. Accounting, Organizations and
Society, 47, pp.1-13.
Cooper, D.J., Ezzamel, M. and Qu, S.Q., 2017. Popularizing a management accounting idea: The
case of the balanced scorecard. Contemporary Accounting Research, 34(2), pp.991-1025.
Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm
performance: The incremental contribution of lean management accounting practices. Journal of
Operations Management, 32(7-8), pp.414-428.
Hiebl, M.R., Duller, C., Feldbauer-Durstmüller, B. and Ulrich, P., 2015. Family Influence and
Management Accounting Usage. Schmalenbach Business Review, 67(3), pp.368-404.
Makrygiannakis, G. and Jack, L., 2016. Understanding management accounting change using
strong structuration frameworks. Accounting, Auditing & Accountability Journal, 29(7),
pp.1234-1258.
Messner, M., 2016. Does industry matter? How industry context shapes management accounting
practice. Management Accounting Research, 31, pp.103-111.
Odar, M., Kavčič, S. and Jerman, M., 2015. The role of a management accounting system in the
decision-making process: evidence from a post-transition economy. Engineering
Economics, 26(1), pp.84-92.

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Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research, 31, pp.45-62.
Ramli, A., Sulaiman, S. and Zainuddin, Z.N., 2015. Factors driving change in management
accounting practices: Malaysian survey evidence. In Proceedings of the Colloquium on
Administrative Science and Technology (pp. 479-490). Springer, Singapore.
Sunarni, C.W., 2015. Management Accounting Practices at Hospitality Business in Yogyakarta,
Indonesia. Review of Integrative Business and Economics Research, 4(1), p.380.
Uyar, A. and Kuzey, C., 2016. Does management accounting mediate the relationship between
cost system design and performance?. Advances in Accounting, 35, pp.170-176.
Walker, S.P., 2016. Revisiting the roles of accounting in society. Accounting, Organizations and
Society, 49, pp.41-50.