Management Accountant – A Perspective

Bogor, July 22th , 2011

Understanding organizations and the work of those who manage organizations helps us to understand management accounting and its functions.

All organizations have basic objectives and a set of strategies for achieving those objectives.  Both the setting of strategy, sometimes called strategic planning, and planning for more short-term nature are basic functions of the manager. In addition to planning, the work of the manager centers on organizing and directing day-to-day operations, controlling, and decision making.

The managers of an organization choose an organizational structure that will permit a decentralizaton of responsibility by placing managers over specific departments and other units. The responsibility relationship between managers are shown by the organization chart. The organization chart also shows which organizational unit are performing “line functions” and which are performing staff functions. Line functions relate to the specific obejectives of the organization, whereas staff functions are supportive in nature, their purpose being to provide specialized services of some type.

A large part of the information needs of management is provided within the structure of the organization itself. Channels of communication exist between various levels of management through which information flows. Management also calls on various specialist to provide information, including the “economist” , the “engineer” , the “operations research specialist” , and the “accountant”.

Since management accounting is geared to the needs of the manager rather than to the needs of stockholders and others, it differs substantially from “financial accounting”. Among other things, management accounting is oriented more toward the future, it places less emphasis on precision, it emphasis on segments of an organization (rather than organization as a whole), it draws heavily on other disciplines, it is not governed by “generally accepted accounting principles”, and it is not mandatory. The role of management accounting is expanding rapidly, and managerial accounting has become recognized as a field of professional study through which professional certification can be obtained.

Ethical considerations can occur at several organizational levels, including the corporate, the intercorporate, the intracorporate, the professional, and the personal. Personal ethical standard can be viewed as the bedrock underlying ethical conduct at all organizational levels. Many companies have developed codes of ethical conduct to guide their employees in dealing with matters involving ethical judgements. Code rarely spell out specific do’s and don’ts or suggest proper behavior in a specific situation. Instead, they give broad guidelines of responsibilitiy and expect employees to direct their behavior accordingly. Professional organizations also have code of ethical conduct, and codes exist on the international level that outline ethical requirement in cross-border activities and other matters.

The code developed by IMA ( Institute of Management Accountants) is somewhat more specific than the codes developed by many organizations in that it outlines step for managers and accountants to follow in resolving ethical dillemmas.

” Standards of Ethical Conduct for Management  Accountants” set by IMA ;

Management accountants have an obligation to the organizations they serve, their profession, the public, and themselves to maintain the highest standards of ethical conduct. In recognition of this obligation, the Insitute of Management Accountants, has promulgated the following standards of ethical conduct for management accountants. Adherence to these standards is integral to achieving the Objectives of Management Accounting. Management accountants shall not commit acts contrary to these standards nor shall they condone the commission of such acts by others within their organizations.


Management accountants have responsibility to :

* Maintain an appropriate level of professional competence by ongoing development of their knowledge and skills.

* Perform their professional duties in accordance with relevant laws, regulations, and technical standards.

* Prepare complete and clear reports and recommendations after appropriate analyses of relevant and reliable information.

” Confidentiality”

Management accountants have responsibility to:

* Refrain from disclosing confidential information acquired in the course of their work except when authorized, unless legally obligated to do so.

* Inform subordinates as appropriate regarding the confidentiality of information acquired in the course of their work and monitor their activities to assure the maintenance of that confidentiality.

* Refrain from using or appearing to use confidential information acquired in the course of their work for unethical or illegal advantage either personally or through third parties.

” Integrity ”

Management accountants have responsibility to :

* Avoid actual or apparent conflicts of interest and advise all appropriate parties of any potential conflict.

* Refrain from engaging in any activity that would prejudice their ability to carry out their duties ethically.

* Refuse any gift, favor, or hospitality that would influence or would appear to influence their actions.

* Refrain from either actively or passively subverting the attainment of the organization’s legitimate and ethical objectives.

* Recognize and communicate professional limitations or other constraints that would preclude responsible judgement or succesful performance of an activity.

* Communicate unfavorable as well as favorable information and professional judgements or opinion.

* Refrain from engaging in or supporting any activity that would discredit the profession.

” Objectivity ”

Management accountants have resposibility to :

* Communicate information fairly and objectively

* Disclose fully all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, comments, and recommendations presented.

( adopted from “Managerial Accounting: Concepts for Planning, Control, Decision Making, 7th Ed., by Ray H. Garrison and Eric W. Noreen)



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