Co5103 Management Accounting- Control System Assessment Answers

Essay Topic: In what management accounting topics do we have established knowledge, what are some current themes in management accounting research, and what do we need to learn in management accounting research going forward?. Established management accounting knowledge. Journal of Management Accounting Research.

Introduction

The MA research can be traced to 1950 in the U.S and was a response to the Ford Foundation work to enhance the business schools. This contained more specification on the concept of social science. There has been many cases of MA research based on social science and was done by the non accounting faculty because the accounting faculty were not experienced in the conduct of social science research. Over the years, experts had devoted significant time period in putting their major significance about management accounting system. The experts and researchers had administered in-depth study in the field of management control system and its outcome on the subject and thereby, the researchers at different point of time they had encountered enormous challenges on the topic (Brown, 2013). The research points out, as the establishments and their strategies are aggressive and competitive, the formation of design, utility and advantage of the management control structure to have an impact only the factors like environment and work uncertainty (Bisbe et. al, 2007). The MA research is done by those accounting faculties who have a strong command in the field of social science research as accounting in the present scenario contains doctoral programs that are based on social science research method and theories.

The MA research is into practice for the last sixty years and here I have a chance to assess the concept of MA research. The evaluation is based upon three questions that are addressed.

1. In what MA topic do we have established knowledge
2. The theme that are currently present in MA research
3. What is required to be learnt in MA, going forward?

In what MA topic do we have established knowledge?

Established knowledge on MA topic is about to happen after innumerable researches have projected on the topic over a considerable time frame. As per the definition of Merriam-Webstar established is defined as ‘to cause something to be known widely and accepted. Going through the definition of established knowledge it can be explained that the established knowledge as drawing power that is accepted on a large spectrum of the establishment and finds places beyond the boundaries. Established knowledge in management is a subject of research and academics has been discussed all the time and carried out their research on the subject. Established knowledge can be compiled in the management accounting are from budgets, cost of the product, performance measurement, and evaluation of the measurement (Chenhall, 2007). The information gathered must be authentic in nature and unquestionable. Therefore, established knowledge has the power to influence decisions so academics are studying MA topics in the direction of established knowledge which is extensive in nature and power to provide solutions in the decision-making process. Therefore, the established knowledge or the conventional expertise in management accounting can extend great help in formulating guidelines and in taking the correct decision.

Management Control system

Individual MA research studies on MCSs does not assess the MCS in totality rather stress upon a single or few of the management control that is MA information or control of various types. Researchers have acknowledged the application and importance of management control system in MA. Studies are done based on the management control by circumstantial components like the framework of the organization and competitive planning. And if there is any shortcoming in between the circumstantial factors than it will have an adverse impact on the performance of the system. MCS research caters to three MA topics:

• Budgets and budgeting that is compensation based on budget, the goal difficulty in budget, etc
• Performance contingent incentives that are bonus that applies on performance that is measured or the difference that exists between budget goal and performance that is measured.
• Measurement of performance and measures like adjustment of performance for the influence of the uncontrollable.

The above three MA topic play a leading role in planning and controlling. An extensive research has provided evidence on the theory of the three MA topics. The vital reasons are environmental and uncertainty of the task and asymmetric information. The recent research impact are performance of individual or pertains to individual.

Cost Accounting system in Management Accounting

Academics have come out with two distinct analysis of cost accounting attributed to management accounting research. MA research on cost accounting has shown two main lines of inquiry. One of it focuses on the cost estimates accuracy that is provided by various cost accounting methods. Such a research leads to evidence on the validity of three assumptions that needs to be proper for activity based costing so that accurate cost estimate can be provided. Activity cost derived not only by the volume but also by non-volume operatives; there is a legitimate straight relationship exists between cost operative and the existence of overhead cost (Bol, 2008). Secondly, the inquiry spreads to inquiry on the cot accounting that assess environmental and organizational factors that influence whether organization should proceed with the application of ABC.

Difficulties preventing production of Established Management accounting knowledge

The small number of studies is one of the potent problem when it comes to the concept of established MA knowledge. When the results of the replicated and the original studies are not effective by nature, then their different possible reasons for the same and the deposition on whether those reasons can explain the indecisive outcomes of the exercise. Therefore, such replications can extend in recognizing situations to contain at a prescribed limit in the study of application theory. Therefore, a replication study may not have established for factors for ineffective results instead the diagnosed study can be applied for more credible results. On a sequential basis, this offer required information and can be utilized to explain the reasons and effect in management accounting.

The MA research focuses mainly on individual study validity that is constructing, external, internal and statistical conclusion that is essential for the individual studies to provide established knowledge. However, it needs to be noted that no single study contains all the four validity as every study is endowed with different tradeoffs. However, the number of comparative studies on all aspects relating to management accounting is so little that it restricts the assessment of the consistency of the results of studies. Management accounting research spells out more established management accounting knowledge of studies that are more feasible with the effective outcomes (Chapman et. al, 2007). Therefore, it is most important that the effectiveness of management accounting research outcomes can be examined so that the established accounting knowledge is capable on re-establishing the results.

Common themes in MA research in present time

Incentives of performance, Evaluation of performance and budget and budgeting are the three crucial data that have searched for in MA on a regular basis. These three are the foundations of the accounting management which signifies their importance. Participative budgeting, difficulty in achieving goals and budget comprising of compensation are the priority under the budget topic. Incentives topic can be said to as the difference in the achieved goals and the setup target as it checks the performance. Evaluation of the performance keeps a record of the financial and the non-financial ones so as to detect the flaws.

Managerial accounting works on the principle of distributing knowledge and thereby eliminating the threats from the decision evaluating processes. Production expense of goods, expenses that are in accordance with the marketing are used to prepare the accounting reports (Lipe & Salterio, 2000). These are the reports which provide data about the performance of the company for a span of time. Firstly, a continuing theme will evaluate the decision-making process of management accounting as stated by Sprinkle and Williamson. Rewards given to the employees are based on their performance which is evaluated as per their working in the company. It is to be seen that the performance contingencies, budgets, incentives are some of the key factors that can help to eliminate the problems (Lambert, 2007). Performance-based on partiality is also seen nowadays in the accounting reports. The second theme is that of the study of MA is the inter-organizational context as compared to the context that is the main context of intra-organizational of an established MA knowledge. It clearly depicts the ease in the decision-making process in accordance to select partners, design the contracts, control activities and behavior. Thirdly, it results in theme due to the management of accounting research by usage of behavioral economics. Rather than having a belief in any of the two theoretical outlooks it provides an explanation of causes and effects of MA by linking it with both neoclassical economics and physical theory. It provides evidence which is theoretical based and it basically shed light on MA influence the trade-off of the individuals. The non-monetary terms payoff influences on social psychological disadvantage which is due to bounded rationality and it also influences the emotion as well as mood. The fourth theme concentrates on competitive strategies which affect the balanced scorecard and another level of control (Basu & Park, 2014). This level mainly evaluates the impact of common and performances that are different and unique in terms of managerial performances.

A lot of things can be learned from management accounting research. The studies of the following research show reliability which are valuable for an accountant. The reason behind this is it cannot match the outcome derived in the original. Many others also have a way to get duplicated by some or the other means nut in unable to provide peaceful reliability and satisfaction to the users (Basu & Park, 2014). The reason for the outcome which does not match is the selected research methods are more suitable to them and the full reporting and analysis are not done here.

What to learn in MA in future

MA can be applicable on a more consistent basis if the studies are comparable and have consistent results. The comparable studies are very low that limits the results and hence, consistency is missed. When the result of the studies do not match the compared results then it is vital to know the cause of inconsistency and what lead to the limitation of the MA knowledge. There are situations where only linear impacts are shown through the various theories of social science also show nonlinearities. But examinations of basically linear part take place. Because of all this reproduction of original part does not take place as the replication might result in copying all the things but lack in the condition which should be favored. The replication sometimes proves to be advantageous as the study do not provide the features of reliability, validity and even do not provide the conspiracy theory which is on the concept of causes of variables in management accounting. For researchers to decide what studies are effective they should concentrate the process to replicate them (Banker & Johnston, 2007). The replication is important due to two purposes. The first one is to differentiate between the good and the bad one. The second one is it will improve the research. This conclusion can be made that good studies are those where the process of replication can be done. Replication of MA studies that have strong level of validity and reliability are important as the results will not match with the original or other studies that replicates. On the other hand, very little benefit can be gathered by the replication of a study that is published in nature. But, the good studies replicate as they shed light on the threat that is present to the validity and contains high level of reliability. However, the bad studies do not replicate as they fail to address threats.

Conclusion

It needs to be noted that the research literature on MA will remain feeble if no replication studies are produced. This limits the validity, as well as reliability of the MA research by evaluation of the consistency of the comparable results. Lots of replication studies are required in management accounting research as it will lead to the production of the established knowledge. Time pass and the people realize that at present there is fewer replication as this replication are not rewarded for the time being and the replication are even rejected by the journal review process. When publication of the following replication is done then more resistance is needed because many results are identified that is not yet replicated. When the replication is found to be common than the validity and reliability of the research is made in order to found validity in the establishment of MA knowledge. MA acts as a boon to the people to decide their financial decisions successfully. All the above facts denote that the production of more MA knowledge will enhance if replication study is increased.

A further peep into 25 years from now, when it will be the 50^th anniversary I hope the research community will have more replications that will support the concept. Therefore, it is requested by the current and future editors to stress upon replications that have high level of validity, as well as reliability.

References

Banker, R & Johnston, H. (2007). Cost and profit driver research. Oxford, U.K.: Elsevier.

Basu, S & Park, H.U. (2014). Publication Bias in Recent Empirical Accounting Research. Working paper, Temple University

Bisbe, J, Foguet, B & Chenhall, R. (2007). De?ning management accounting constructs: A methodological note on the risks of conceptual misspeci?cation. Accounting, Organizations and Society 32(8), 789–820

Bol, J. (2008). Subjectivity in compensation contracting. Journal of Accounting Literature. 27, 1–24.

Brown, P. (2013). How can we do better?. Accounting Horizons. 27(4), 855–859

Chapman, C, Hopwood, A & Shields, M. (2007). Handbook of Management Accounting Research. Oxford, U.K.: Elsevier

Chenhall, R. (2007). Theorizing contingencies in management control systems research. In Handbook of Management Accounting Research

Lambert, R. (2007). Agency theory and management accounting, In Handbook of Management Accounting. Oxford, U.K.: Elsevie

Lipe, M & Salterio, S. (2000). The balanced scorecard: The judgmental effects of common and unique performance measures. The Accounting Review 75(3), 283–298

Shield, M.D. (2015). Established Management Accounting Knowledge. Journal of Management Accounting research. 27(1), 123-132