Arguments in Favor of Accounting does Not Communicate Reality, It Constructs Reality - Essay Example

Management Accounting By Recent changes in Accounting have received much attention lately because they have been seen as part of a New Public Management system. As part of reforms brought about by the system, it pushes for financial devolution to public service units, terming it important to ensure elevation of standards for those units. The new public management systems facilitate measurement of performance for those units as well. The changes have significantly changed service delivery in many ways hence forming part of a huge debate as to whether accounting itself does communicate reality, or whether it constructs reality. This debate lies in the context of the shifting role of accounting in organizations. In my point of view, both stands are strongly supported by the following facts. Arguments in favor of “Accounting does not communicate reality, it constructs reality” in the context of the changing role of accounting in organizations.  So many publications have been written to clarify the whole issue about the resent changes in accounting, for example, Dent (1991) went on to describe the influential role of accounting in organizational change: Accounting tends to enter the settings of an organization to incorporate knowledge of culture in specific ways. This created certain rationalities for the action of an organization either bad or good (Dent, 1991, p728). This description begs the question, what does the writer mean by accounting being influential? In my point of view, the fact that accounting is influential in some way, in an indication that it is involved in constructing reality in whatever field it is put in practice, altogether. Reality is brought about by the same people and institutions it influences. Well, there is a contingency theory that suggests that the influence of accounting varies in relation to its context. For example, accounting is influences daily routines of all the places accounting is adopted. For example British National Health Service have had, until recently significantly lesser investment in their systems of accounting and financial calculations, put in place to enable smooth internal management. When they attempted to introduce these accounting systems, the changes offered an excellent opportunity to analyse and understand the manner in which accounting and budgeting systems when put together, constructed or fabricated cost effective ways of doing things. Many more publications say much more about accounting itself, each writer having his or her own description of what accounting really is. Another writer says that however ambiguous or particular the meaning of accounting is, it remains a powerful tool for constructing economic meaning and logic to an organisation or enterprise (Schwartz and Catanach 2009, pg 18). Additionally, according to Labour, accounting is a disciplinary tool or technology that acts upon the world to ensure cost control, surveillance and monitoring. According to Foucault, accounting is an implication of relational, countervailing and localised power in analysing the economic world. If really it were a means of communicating reality, none of those descriptions would have made sense, yet the writings continue to lay a strong foundation on what is going to be a comprehensive breakdown of the changes we expect in this field of accounting. Historical studies on the enhancement of accounting systems give significant insight concerning the emergence of accounting systems. For instance, Chandler & Daems (1979), Kaplan (1984) and Johnson & Kaplan (1987) went on to offer detailed analyses of the progress of accounting techniques (for instance, the return on investment as well as standard costing) as responses to variables of the market and other technological determinants.   Like Broadbent and Laughlin would say in the book Accounting control and controlling accounting: interdisciplinary and critical perspectives, “Accounting colonization is argued to occur when accounting as a ‘steering medium’ gets “out of control” and ‘forces through changes’ coercively which ‘impose’ the ‘imperatives’ of the ‘system’ upon the ‘life world’ (Power and Laughlin, 1996 p444). An example of an organization that has seen a change of this nature in its accounting would be the British National Health Service. The public health facility since its launch in 1948 has experienced an impressive growth and is now arguably the largest publicly funded health service globally. It is also among the most efficient, comprehensive and egalitarian public institution, and its success can be traces partly from incorporating these changes in accounting. This forms enough evidence that truly, accounting does not communicate reality, but it constructs reality. The second fact that supports this statement stems from the characteristics of accounting colonization. The following characteristics serve as an indication that indeed accounting constructs reality rather than communicate it because tools unlike languages have characteristics, and accounting change as a tool for improving economic practices, include the following; Accounting changes have contributed to an increase in accounting discourses. They have led to the Introduction of decentralized specialty budgets accompanied by performance measurement, value for money audits, programs for improving costs. With the apparent changes in accounting, little emphasis is placed on the prominent discourses of the past, and therefore challenging idea that resources are allocated based on the medical need for common good. Through the introduction of decentralized budgets, the accounting changes serve as proof of existing accounting systems. One cannot restructure a language, but can restructure or improvise a tool. The changes in accounting have brought about better accounting orientation, the same way a tool can be used in construction (Broadbent and Laughlin, 2013). Were accounting a communication of reality, the changes in accounting would not have brought about the changes in conceptions as seen in the case of British Health service whereby clinical officers now see themselves as financial managers. The changes have also brought about reductions in cost in the same institution through the iintroduction competitive tendering. Moreover, these accounting changes have constructed economic discourses through the introduction of internal markets, for example, clinical budget holders will purchase services from facility budget holders and so on. Looking at the associated management techniques used by British National Health Service in pushing the reforms in its accounting, we see the introduction of new policies and government initiatives. This is evidently not communicating reality, but constructing the reality through which the institution will undertake its economic activities henceforth. Secondly, the clinicians who were previously engaged at district level were excluded from the discussions at the District level of budgetary change. This rearrangement of employees is constructional in nature and it serves a clear indication that the accounting changes are not communicating reality, but are constructing it (Burchell, 2005). According to Burchell accounting emerged from the management practices of the trader, the estate, and the embryonic corporation. He further states that accounting has developed into an important component of social management and modern organizational. (Burchell et al., 1980, p.5) The words ‘important component’ are a clear illustration as to why accounting does not communicate reality but constructs it. Burchell in pg 6 of his book also says that in the state’s continuing search for greater social and economic efficiency, it has been an active agent for both the industrial and commercial enterprise, the continued development of accounting systems and therefore contributing to its introduction into more sectors of society. This is an example of the reality constructed by accounting. (Burchell et al., 1980, p.6) Burchell goes on ahead to add that accounting cannot be regarded any longer as being just a collection of techniques to assist in the assessment of both public and private economic magnitudes. According to him, accounting can no longer be viewed as a mere collection of calculative routines. It now plays the part of an influential and cohesive mechanism for enabling economic and social management. Hence, it constructs reality in management. (Burchell et al., 1980, p.5) Another illustration of why we cannot quantify the accounting changes as communicators of reality is because, the reality of District managers most of whom were on fixed term contracts will be constructed since with the new changes in accounting, they will face evaluation partly according to how they develop and run management budgeting systems. Arguments against “Accounting does not communicate reality, it constructs reality” in the context of the changing role of accounting in organizations. In regards to the changing role of accounting, accounting communicates reality and does not construct reality because first, according to the case study on British National Health Service, when there was resistance by clinicians, they used the accounting changes in collaboration with the British Medical Association to rise against the management budgeting initiative. They pushed for the re-evaluation the initiative through the accounting reforms to establish how it can become less wasteful of the limited resources. In contrast to the prior argument, Broadbent and Laughlin, (2013) Burchell, R. W. (2005) and look deep into changes in the incorporation of specific management control systems in order to respond to contradictions in control mechanisms of the various labour process related to the apparent change in economic and social conditions. Regardless of varying theoretical approaches, these studies view accounting changes as a result of economic imperatives; the appropriation of economic surplus or the search for profit. The analysis of these specific cases is in relation to the general forces, which happen to shape the practices of accounting in organizations. (Catanach and Schwartz, 2008). Secondly, the failure to establish a network of support interconnecting administrators, the requests for additional time to implement new system and the claim of insufficient resources serves as proof that the changes in accounting are just a means to an end and not the end itself. This is because better accounting will facilitate equitable distribution of resources, which is one of the grievances addressed by the health officers in that organization. A vital observation that can be drawn from these studies is that there exists a variety of conditions, which could result to the development, and elaboration of accounting in organizations. Shifting competitive pressures, emergence of bodies of ideas, technological enhancements, and the changing patterns of institutional forces can all depend on the growth development of the field of accounting. This represents a message that is waiting to reach more and more people, only whom it still needs a better medium to reach as many people as possible. Here, the message is accounting change and the people are the institutions waiting to benefit from incorporating a better system of accounting. A more important observation is that accounting itself can help render such conditions both more prominent and influence how they are seen (Burchell e t aL, 1985) Thirdly, despite the management budgeting initiative having been labeled a failure by 1886 there are still attempts to devolve budgets, because the it serves the purpose of communicating reality, it has led to the introduction internal markets and continued development of more sophisticated accounting information. The initiative for accounting change was modified, re-fabricated and re-named, since it is merely a means to achieve some desired result. (Grabski, Leech and Sangster 2009). . The incorporation of systems of budgeting and accounting within hospitals is also brought about by the changing attitudes to the access of public health care, change in perceptions of the expenses of health care, technological capabilities, and emergence of ideas concerning appropriate ways to run hospitals. These pre-conditions present a chance for the development of specific accounting and budgeting possibilities. From the discovery of the emergence of these particular systems out of the available possibilities, we can get that this is enough evidence to proof the fact that changes in accounting are necessary to communicate the reality of the situation. Through examining how these changes in accounting take specific forms and acquire their path to acceptance as effective and adequate technologies of management, I can comfortably say that in my point of view, both arguments for and against the statement “Accounting does not communicate reality, it constructs reality” are true. It would also be appropriate to say that accounting can play both roles. References Burchell, R. W. (2005). Sprawl costs economic impacts of unchecked development. Washington [D.C.], Island Press. http://site.ebrary.com/id/10149921. Broadbent, J., & Laughlin, R. (2013). Accounting control and controlling accounting: interdisciplinary and critical perspectives. Bingley, Emerald. Burchell, S., Clubb, C., Hopwood, A., Hughes, J. and Nahapiet, J. (1980). The roles of accounting in organizations and society, Accounting, Organizations and Society. Broadbent, J. and Laughlin, R. (1998). Resisting the “new public management” Absorption and absorbing groups in schools and GP practices in the UK. Accounting, Auditing and Accountability Journal Schaltegger, S., Bennett, M., & Burritt, R. (2006). Sustainability accounting and reporting. Dordrecht, Springer. http://site.ebrary.com/id/10140811. Jorge, S. (2008). Implementing reforms in public sector accounting: comparative international governmental accounting research (CIGAR). Coimbra, Universidade de Coimbra / Coimbra University Press. Catanach, A. H., & Schwartz, B. N. (2008). Advances in accounting education teaching and curriculum innovations. Volume 9 Volume 9. Bingley, UK, Emerald Group Publ. Riahi-Belkaoui, A. (2002). Behavioral management accounting. Westport, CT: Quorum Books. .Grabski, S. V., Leech, S. A., & Sangster, A. (2009). Management accounting in enterprise resource planning systems. Oxford, CIMA. http://www.books24x7.com/marc.asp?bookid=37205. Schwartz, B. N., & Catanach, A. H. (2009). Advances in accounting education: Teaching and curriculum innovations. Bingley, England: Emerald. Read More