the role of the management accountant

Question 1

what is accounting?

Answer 1

“the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information”
(American Accounting Association, 1966)

Question 2

what does management accounting provides information for?

Answer 2

managers of an organisation who direct and control its operations (INTERNAL)

Question 3

who does financial accounting provide information to?

Answer 3

shareholders, creditors and others who are outside the organisation (EXTERNAL)

Question 4

what is the management cycle?

Answer 4

decision making at core
1) formulating long and and short-term plans (planning)
2) implementing the plans (directing and motivating)
3) measurement performance (controlling)
4) comparing actual to planned performance (controlling)

Question 5

what is management accounting?

Answer 5

“the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources” (CIMA chartered institute of management accountants)

Question 6

what is the role of management accountant?

Answer 6

• developing plans and analysing alternatives
• communicating plans to key personnel
• evaluating performance
• reporting the results of activities
• accumulating, maintaining, and processing an organisation’s financial and non-financial information

Question 7

characteristics of useful information

Answer 7

accurate - reliable and correct
relevant - relevant to problem for which it is collected
timely
understandable - presented in an easy and understood way
comparable

(completeness - complete in sense and cost-effective)

Question 8

what is the purpose of information?

Answer 8

information should ultimately be aimed at achieving organisational objectives
but
- objectives may be poorly defined
- there may be several objectives in conflict
- objectives could change over time

Question 9

cost/benefit criterion

Answer 9

cost of obtaining information should not outweigh the benefit of possessing it

Question 10

users, time focus, verifiability versus relevance, precision versus timeliness, subject and requirements of financial accounting

Answer 10

• users - external persons who make financial decisions
• time focus - historical perspective
• emphasis on verifiability
• emphasis on precision
• subject - primary focus is on the whole organisation
• requirements - must follow prescribed formats (e.g. IFRS)

Question 11

users, time focus, verifiability versus relevance, precision versus timeliness, subject and requirements of management accounting

Answer 11

users - managers who plan for and control an organisation
time focus - future emphasis
- emphasis on relevance for planning and control
- emphasis on timeliness
- subject - focuses on segments of an organisation
- need not follow IFRS or any prescribed format

Question 12

what are the factors that increase the need for management accounting information

Answer 12

• increasing complexity and size of organisations
• economy
• increased emphasis on quality
• rapid development and implementation of technology
• world-wide competition
• sustainable development

Question 13

what was the emphasis on before and now for management accountants?

Answer 13

before:
- achieving cost efficiency
- effective cost management

now management accountants need to be prepared for:
- manage value
- manage for environmental sustainability

Question 14

skills required of management accounts

Answer 14

hard skills;
- analysis
- planning
- risk

soft skills;
- communication
- interpersonal
- creativity and innovation

Question 15

what is the emphasis on ethics in accounting?

Answer 15

• ethical accounting practices build trust and promote loyal, productive relationships with users of accounting information
• many companies and professional organisations, such as the Chartered Institute of Management Accountants (CIMA), have written codes of ethics which serve as guides for employees

Question 16

what is the CIMA code of ethics?

Answer 16

1. Integrity: being straightforward, honest and truthful in all professional and business relationships.
2. Objectivity: not allowing bias, conflicts of interest or undue influence of others to override professional or business judgments.
3. Confidentiality: not disclosing any confidential information acquired as a result of professional or business relationships without proper and specific authority.
4. Professional competence and due care: maintaining professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service.
5. Professional behaviour: complying with relevant laws and regulations and avoiding any action that discredits the profession

Question 17

what is related to integrity ethics for management accountants?

Answer 17

• truthfulness
• straightforward
• honest
• fair dealing

Question 18

what is related to objectivity ethics for management accountants?

Answer 18

• communicate unfavourable as well as favourable information
• refuse gifts or favours that might influence behaviour