Future of Management Accounting. There are a number of articles in the business and professional press in recent years that discuss the topic of the changing role of the management accountant. Very often the management accountant is referred to as a "finance professional" since the management accountant usually works in the finance departments of firms. A quick search of the professional literature has identified the two articles located at the links below.
Go to the web sites and review the articles. In less than 150 words, give your view of the future of the management accountant based on what you see in these articles and the trends you see in business and finance.
Identify one additional article in the business and professional press that discusses the future of the management accountant. In 100 words or less, compare the ideas in this article to your ideas in part 1 above.
Some of the key observations in the articles include:
the procedural aspects (transaction processing) of the management accountants job are being reduced by improved software and competitive pressures
the references to the Siegel study (Practice Analysis) indicate a shift in expectations from procedural activities to more analytical and problem solving activities -- internal consulting and strategic planning.
the new accountant's role will require an in-depth understanding of all aspects of the business, not just the financial reporting and financial management aspects - to become in effect a business partner as part of the management team
the accountant of the future will be forward looking rather than to report the effects of past transactions only; moreover, the accountant will need to begin to act as change agents, with an integral role in developing and implementing the firm's strategies
One additional article (here I show two of many possibilities):
http://www.dtrakker.com/library/pdf/mrktg010822w_management_acct_y2k.pdf
Dekker, Ltd. develops and distributes software for costing, government contract management, performance evaluation, and project management.
This article provides a brief history of management accounting from the point of view of the CEO of Kekker, Simon Dekker. The focus of recent developments in cost management is activity-based costing, strategic cost collection and life cycle costing. http://www.nysscpa.org/cpajournal/1998/0898/departments/D56898.htm
In this article a professor of business strategy explains the components of an effective mission statement. The articles reports the findings of research into the association between the components of a firms' mission statements and the financial performance of the firm. These include a statement of the non-financial goals of the firm (advertising,…) and a statement of values (integrity, trust, teamwork..) among others.
Different Professional Organizations.
There are a number of professional organizations throughout the world that represent the interests of the management accountant professional, providing educational materials and other services to the management accountant. A list of some of these organizations is provided below.
Required: In 200 words or less, explain how the different organizations support the profession of management accountant, that is, the nature and extent of the publications they offer, educational programs, etc.? Use specific examples that you notice in reviewing the web sites.
Solution (the following sets out a number of key aspects of the different organizations but is not intended to be comprehensive):
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Statistics Information (White House, New York Stock Exchange)
There are a number of sources of economic and demographic information that can assist the management accountant. The information includes financial information such as interest rates, employment, income, international trade, output of goods and services, consumer price levels, and market values of stocks and bonds. The management accountant uses this information to better understand the environment in which his or her firm competes. For example, when interest rates are moving up (or down) rapidly the management accountant will want to consider the effect of the interest cost changes on his or her analysis and recommendations regarding cash flow management, introducing new products, improving or expanding production facilities, and so on. Two sources of statistical information are shown below:
Required: Review the White House statistics for output, international, and production, and the New York Stock Exchange "market information." Comment on the current state of the economy that you see in these statistics, in 200 words or less.
Solution (selected data for January 2002)
In the third quarter of 2001, the U.S. current-account deficit on international transactions decreased to $95.0 billion.
The Nation's international deficit in goods and services decreased to $27.9 billion in November, from $29.3 billion (revised) in October, as exports increased and imports decreased.
The U.S. ratio of R&D to Gross Domestic Product is expected to increase to 2.65% in 1999, but will remain at a level less than Japan (3.06% in 1998) and more than Germany (2.29% in 1998).
In the third quarter of 2001, real GDP decreased 1.3 percent at a seasonally adjusted annual rate.
In the third quarter of 2001, real nonresidential fixed investment decreased 8.5 percent at a seasonally adjusted annual rate.
In the third quarter of 2001, real residential investment increased 2.4 percent at a seasonally adjusted annual rate.
In the third quarter of 2001 profits from current production decreased 8.3 percent at a seasonally adjusted quarterly rate.
In November 2001, real personal consumption expenditures decreased 0.6 percent at a seasonally adjusted monthly rate
Privately owned housing starts in December were at a seasonally adjusted annual rate of 1,570,000, down 3% from the revised November 2001 figure of 1,625,000.
New orders for manufactured durable goods in November, down five of the last six months, decreased $8.8 billion or 4.8 percent to $175.6 billion. (Released December 28, 2001)
New orders for manufactured goods in November decreased $11.1 billion or 3.3 percent to $321.7 billion. (Released January 8, 2002)
U.S. retail and food service sales for December were $295.1 billion, down 0.1 percent from the previous month. (Released 1/15/02)
Overall, these figures reflect an economy in recession at the time the data was obtained.
Different Professional Certificate Programs.
There are several professional certificate programs that are of interest to management accountants. Each certificate is awarded based on the results of a comprehensive examk plus other education and experience requirements. Perhaps the best known is the CPA which is administered by each of the 50 states in the U.S. The CPA certificate represents achievement of a broad knowledge of the accounting profession, including auditing, tax accounting and governmental accounting, among others. Information about the CPA is available at the American Institute of CPAs (AICPA) website.
The Institute of Management Accountants (IMA) has two professional certification programs of interest to management accountants. The first is the Certificate in Management Accounting (CMA) that is administered by the IMA. It has a framework similar to that of the CPA exam except that its focus is on broad business knowledge and competence in management accounting practices, with much less attention to taxation and auditing. The IMA also has a CFM (Certified Financial Manager Program) that is targeted to finance professionals and financial analysts. Information about these two programs is provided on the website below.
Required: Review the AICPA and IMA websites, and in 200 words or less, explain how the three certificate programs differ, and which certificate program (if any) might be most appropriate for you given your current career interests. Use specific examples that you notice in reviewing the web sites.
Solution: The CPA Certificate (American Institute of CPAs)
The Vision Statement for CPAs from the AICPA web site is as follows:
CPAs are the trusted professionals who enable people and organizations to shape their future. Combining insight with integrity, CPAs deliver value by:
Communicating the total picture with clarity and objectivity,
Translating complex information into critical knowledge,
Anticipating and creating opportunities, and
Designing pathways that transform vision into reality.
In practice, CPAs are considered experts at a variety of financial services including auditing, taxation, management consulting, personal financial planning, and a variety of other financial services.
The CPA exam contains the following topic areas
Business Law and Professional Responsibilities (LPR) - CPA's professional responsibilities and the legal implications of business transactions, particularly as they relate to accounting and auditing.
Auditing (AUDIT) - Generally-accepted auditing standards and procedures.
Accounting and Reporting - Taxation, Managerial, and Governmental and Not-for-Profit Organizations (ARE) - Federal taxation, managerial accounting, and accounting for governmental and not-for-profit organizations.
Financial Accounting and Reporting (FARE) - Generally-accepted accounting principles for business enterprises.
Each state in the U.S. determines the eligibility to sit for the exam and the requirement to obtain and maintain the certificate applicable to that state.
The CMA Certificate and the CFM certificate (Institute of Management Accountants)
From the IMA web site
"The Certified Management Accountant (CMA) and the Certified in Financial Management (CFM) Programs have been designed to recognize the unique qualifications and expertise of those professionals engaged in management accounting and financial management. These certifications provide distinction in today's economic climate and afford the opportunity to certify your expertise in the business areas that are critical to the decision-making process.
The Certification Programs have four objectives:
To establish management accounting and financial management as recognized professions by identifying the role of the professional, the underlying body of knowledge, and a course of study by which such knowledge is acquired;
To encourage higher educational standards in the management accounting and financial management fields;
To establish an objective measure of an individual's knowledge and competence in the fields of management accounting and financial management; and
To encourage continued professional development."
The certificate is awarded by the IMA on the basis of an exam and certain educational and experience requirements.
The content of the exam is summarized in four key knowledge areas:
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