Social Impact of Management Accounting - Literature review Example

Name: Course: Institution: Lecturer: Date: Social impact of management accounting As supported by Giovannoni et al (2011), management accounting in an organization is responsible for strategic planning, decision making and planning of resources in an organization. This is achieved through identification of the organization’s goals and management of information such as financial, cost information and performance analysis of the organization so as to facilitate efficiency in management of the organization by influencing management’s decision making through the use of the analyzed information. Management accounting information provided in an organization is mostly focused on the future of the organization so that it contributes in decision making and projection of the future of the business by analyzing its activities. According to Modell (2010), just as it is with the overall management of an organization the management accounting has techniques that it applies that make up the functions of the management accounting functions within the organization. They include controlling, planning, decision making, financial management, controlling and organization of information. These functions impact of aspects such as the political, social of cultural aspects of the organization. In our discussion we focus on the social implication of decision making as a function of decision making in management accounting. This is achieved by playing the management accounting roles adequately in an organization and from a theoretical perspective integrating the role of management accounting with the functions of the management accounting so that the objectives to be achieved through management accounting are made elaborate. Management accounting avails information that is applied in decision making within the organization so that social risks that the organization is exposed to are reduced. This is achieved by making decision s in the organization having in mind the implication of such decisions on social environment present in the organization. Thus, in analysis of information presented to management accountants it is important that likely social risks arising from any decisions are identified and communicated to the relevant departments so that in case of implementing the decisions made in an organization the social ties and framework available in the organization is not broken. Therefore, to ensure that decisions made by management accounting department do not result to any social risks but instead impact on the organization by hedging it against such risks it is important that the risks are identified in advance for proper monitoring. It is also important to apply social theories in ensuring that decisions made by management accountants in the organization are free from social risks since the right approach is given to use and management of information (Macintosh & Quattrone 2010). According to Zadek et al (2013), the social impact of decision making within an organization’s management accounting department is that it facilitates in defining the scope of its operations. In their information analysis management accountants will provide details whether the organization operates locally or internationally. The information is important in decision making since it is an eye opener to the stakeholder’s o the approach to give to interactions within the business. Decisions are made through management’s accountants on the expected performance of the organization with references to the social scope of the business. Management accounting information provided for the managements also contains the social targets and goals of the business so that it is easier for the management to lay down the appropriate strategies that will facilitate achievement of their objectives. For every decision made in the organization the managements is influenced by their scope of operation such that different social goals will be set for local and international businesses as agreed by the management guided by their objectives and information used as their basis for decisions making. It is the role of every organization to ensure corporate social responsibility by ensuring environmental protection. Thus, through their management accounting decision making function the organization aims at ensuring social responsibility of the environment. So that management accounting impacts on socially by ensuring environmental protection through prevention of pollution. Therefore, in presenting of information the management accounting department should provide analysis of the goals and extent to which environmental protection has been enhanced. Thus, depending on the nature of operating activities carried out in an organization management accountants make decisions that are geared towards ensuring environmental responsibility thus boosting relationships with the local community and enhancing proper social links with the employees, customers and people settled near our organization (Ward 2012). Thus, among the decisions made based on the influence of management accounting information is environmental protection which creates a proper avenue of interactions within the management. The ethical and moral basis of an organization determines the level of social interactions within an organization. Through use of management accounting information, decisions are made within the organization that facilitates social interactions within the organization. This is because management accounting information is used to set goals that form part of an organization’s ethical framework which is very important in directing social interactions at different levels within the organization. Thus, as a result of management accounting decision making function an organization will have a well established and defined ethical framework that guides operations within the organization. Decisions made by the management help in defining the acceptable behavior within the organization based on social theories and behavioral theories directing social aspects of an organization as supported by Alvesson & Willmott (2012). According to Jensen (2010), communication is an important aspect in enhancing social aspects of an organization. Due to effectiveness in accounting managements’ decision making function, effective communication is established, this is a basis for better performance within the organization through promoting the ownership of decisions made within the organization. Communication facilitates social interactions with customers, suppliers, employees and even the community. Through communication which is a social benefit realized due to decisions made by the management it is possible for the management to communicate its goals and expectations to its shareholders and the employees so that they can commit themselves to the achievement of such goals. Social aspect of the business is enhanced through decisions made through management’s decision making function because all decisions made are communicated within the organization to facilitate their implementation and later their monitoring and evaluation so as that all departments are brought on board in carrying out the proposed strategies so as to achieve better performance within the organization. Accounting is considered as the language of business within organization since it forms basis for decision making. Thus, decisions made by an organization’s management accounting facilitate control and coordination in the organization so that social aspects of the business are strengthened because the decisions made require human resources to be implemented. As pointed out by Drucker (2012), to effectively coordinate human resources into participating in resource management it is important that social basis in identified that will bring together the personnel and facilitate their incorporation to decision making within the organization. Thus, decisions made by management accounting within an organization facilitate in establishing a social framework within the organization by bringing together individuals to participate in implementation of the decisions so as to facilitate better performance of the organization (Granlund 2011). Theories suggest that human relationships however much they at times tend to be willfully determined, are majorly affected by external environment and factor around people that form basis of commonality within the organization. thus, decision making function of management accounting in an organization has social impact on the organization and its environment since the factors comprising the decision contribute to the external environment that results to interactions among individuals in the organization and also form a basis for bring people together in order to achieve same objectives. Depending on the decisions made their implementation can be delegated to different people in different groups or levels which forms a basis for social interactions since in each group people are aiming at a common goal and working towards achieving same results and thus will often interact thus strengthening their social basis (Ioannou & Serafeim (2010). Decision making as a function of management accounting in an organization is made by the apex of the organization which is the management. The decisions are not implemented by the management and thus, the ideas incorporated in the decision have to be shared to the middle management and the subordinate staffs within the organization for effective implementation of the same (Alvesson & Willmott (2012). Thus, decision making results to creating of a social network within the organization so that proper implementation is carried out and eventually achievement of organizational goals. It is also anticipated that the goals set in an organization are unitary and thus once decisions are made by the management accounting department based on information that incorporate all essential aspects of the management and after the decisions have been settled on and used to form the basis for goals expected to be achieved in the organization, the goals should be communicated to all parties in the organization. As such decision making creates a social avenue since in communication of the goals and laid down strategies expected to be used in their implementation there is social interaction. Kallunki et al (201) suppose that, as depicted in the social system theories decision making as a function of management accounting creates social networks within the organization which can be termed as one of the impacts of decision making within the organization. This is because; due to communication and dissemination of the goals within the organization I suppose that social groups and social influenced is created in the organization. The measurement of decision implementation within an organization after management accountants have made the decision means that people have to give feedback as a way of communicating their progress thus, it is true that due to decision made by the accounting management within an organization, and then, social aspects of the organization are implicated. As ascertained by the theories of bureaucratic function, each organization has its goals which are based on decisions made by the management. So, every organization cannot have goals without the interaction of people’s ideas. Thus, decision making in management accounting impacts on social development within the organization since decisions made are as a result of collaboration of people’s ideas. Arriving at a decision within an organization’s management accounting illustrates harmony and ability of people to develop their diverse ideas and form a single idea of focus which is the organization’s goal. Unity in decision making within the management accountants impacts socially on the organization by enhancing unity, harmony and corporation within the organization such that conflict that could be likely within the organization is minimized. As suggested by Ioannou, & Serafeim (2010), management accounting adopts make decisions with regard to use of information systems in the organization. These systems facilitate in reducing human limitation in handling of information within the organization and thus empowering them socially so that they remain relevant in decision making within the organization. This is because training s relating to processing of information using the systems in the organization are conducted and people are exposed to interaction using the information’s systems adopted despite their physical, social or role differences within the organization. Management accounting deals standard costs, budgetary control, corporate social responsibility, financial management and human resource management within the organization. In every decision made in the organization information provided on all the mentioned aspect is considered so that the decision made is functional and is not made in isolation, this impacts socially on the organization since the decisions made are achievable which acts as a source of motivation within the organization. This has promoted an open system in the organization such that interdependence of the various variables as well as resource sharing within the organization is possible thus enhancing social strengthening within the organization. In conclusion, management is accounting in an organization deals with analysis of both the financial and financial aspects in an organization using financial accounting, cost accounting, budgetary and operating information among others. Thus, management accounting facilitates of the information for effectiveness in management accounting functions such as planning, controlling decision making and organizing among others. In carrying out these functions, management accounting impacts socially, politically and culturally on an organization. In our focus on social impact of decision making function of management accounting we realize that decision making has direct impact on social aspects of an organization. Decision making impacts on risk management, communication processes, conflict management, creates harmony and unity of direction in an organization as well as creates open relationships and interdependency of departments within an organization. As such the impacts of decision making within the management accounting impacts directly on social aspects of an organization through their enhancement and motivation created. References Alvesson, M, & Willmott, H, 2012, Making sense of management: A critical introduction, Sage. Drucker, P, 2012, Management. Routledge. Giovannoni, E, Maraghini, M, P, & Riccaboni, A, 2011, transmitting knowledge across generations: the role of management accounting practices, Family Business Review, Vol.24, Iss.(2), Pp126-150. Granlund, M, 2011, extending AIS research to management accounting and control issues: a research note. International Journal of Accounting Information Systems, 12(1), 3-19. Ioannou, I, & Serafeim, G, 2010, August, the impact of corporate social responsibility on investment recommendations, in Academy of Management Proceedings (Vol. 2010, No. 1, pp. 1-6), Academy of Management. Jensen, M, C, 2010, value maximization, stakeholder theory, and the corporate objective function, Journal of applied corporate finance, 22(1), 32-42. Kallunki, J, P, Laitinen, E, K, & Silvola, H, 2011, impact of enterprise resource planning systems on management control systems and firm performance, International Journal of Accounting Information Systems, Vol.12, Iss.(1), Pp20-39. Macintosh, N, B, & Quattrone, P, 2010, Management accounting and control systems: An organizational and sociological approach, John Wiley & Sons. Modell, S, 2010, Bridging the paradigm divide in management accounting research: The role of mixed methods approaches, Management Accounting Research, Vol.21, Iss.(2), Pp124-129. Ward, K, 2012, Strategic management accounting, Routledge. Zadek, S, Evans, R, & Pruzan, P, (Eds.), 2013, building corporate accountability: Emerging Practice in Social and Ethical Accounting and Auditing, Routledge. Read More