Crisis! When Will the Accountancy Profession Finally Recognize the Value of Management Accountants?
Clinton, B. Douglas, Strategic Finance
The accountancy profession is facing a crisis. Evidence suggests that widespread systematic institutional bias permeates the accounting education system and fosters misperceptions that are applied to practice. Higher education has essentially omitted management accounting from the required portion of the accountancy curriculum. Junior-level cost accounting texts provide precious little guidance on how to run a business: Essentially, they replicate traditional cost accounting tools (e.g., cost-volume-profit analysis or variance analysis--not complete management accounting approaches) covered in principles-level courses while often just adding greater detail. (I use the term cost accounting throughout this article in the narrowest sense to refer to the support of external reporting.) Public accounting in general, the National Association of State Boards of Accountancy (NASBA) and individual state boards, the Financial Accounting Standards Board (FASB), the American Institute of Certified Public Accountants (AICPA), and other groups have displayed an approach to the profession that has elevated financial accounting to an undeserved position. Academic research also overemphasizes financial accounting (as I'll explain later).
In the area of practice, the 2003 Institute of Management Accountants (IMA[R])/Ernst & Young (E & Y) joint survey (whose results were published in "Roles and Practices in Management Accounting Today," in the July 2003 issue of Strategic Finance) offered startling statistics that provide a siren song for the profession. The data in the survey revealed that 98% of decision-making users of accounting information believe it is significantly distorted and complain of impaired cost visibility, yet 80% of these respondents said change wasn't a priority. Professional accountants in business (PAIB)--I'm borrowing the term from the International Federation of Accountants (IFAC)--and academics have been arguing among themselves over which management accounting tool is better--essentially fighting an internecine battle that prevents us from helping management make decisions. At the same time, opportunistic consultants are continually rushing in, all too willing to provide services that reflect great inconsistency and produce an equally wide range of ineffective results. Moreover, managers don't know how to compare accounting optimization methods such as activity-based costing (ABC), resource consumption accounting (RCA), or Lean Accounting, so they seem to have lost hope that any change would be beneficial or cost effective given that contemporary management accounting innovations have left them dissatisfied.
These and other influences have resulted in excessive regulation and inadequately trained professional accountants in business. The dominant accounting approach in business practice--traditional standard costing--doesn't have the ability or proper focus to provide useful data for decision support--accounting's most important and fundamental purpose. To end the crisis, the global accountancy profession and its thought leaders must acknowledge the problem and be willing to address it on behalf of decision makers in organizations vs. the parochial interests of financial accounting or those out for a fast buck.
During the late 1990s, the premier organization representing PAIB in the United States--the Institute of Management Accountants (IMA[R])--was suffering from an identity crisis that led to a dilution of focus. Responding to declines in university accounting program enrollment and professional membership, IMA decided to become more inclusive. It began the Certified Financial Manager (CFM[R]) certification program, changed the name of its flagship publication from Management Accounting to Strategic Finance, and made additional efforts to appeal to those in finance and information systems (rather than just accounting). IMA also didn't seem to provide a significant degree of intellectual leadership or strong advocacy for the profession and its constituents. …