TRUST ENHANCEMENT IN ACCOUNTING PROFESSION

TRUST ENHANCEMENT IN ACCOUNTING PROFESSION

Student’s Name

Institution

Trust Enhancements in the Accounting Profession

Management accounting principles were crafted to serve the crucial requirements of international management in order to improve internal business objectives, decision support objectives, resource application, capacity utilization required to attain corporate objectives in an optimal manner, and customer value. Managerial costing principle is also another term used in referring to management accounting principle. Therefore, the two principles of management accounting that are usually applicable are principle of causality and principle of analogy.

The principle of causality involves the need for cause and effect resulting from insight while principle of analogy involves the employment of causal insight by any management in running their activities. These two principles significantly serve the management accounting community as well as its customers who are the management of the business. Furthermore, these two principles are indiscriminately amalgamated into the Managerial Costing Conceptual Framework which is also known as the MCCF together with constraints and concepts to ensure smooth governing of the management accounting practice. This framework further brings an end to decades of immense confusion that surrounds management accounting approaches, techniques and tools and their capabilities.

It is the job of a managerial accountant to give correct information to all the other internal managers. This simply means that the costing information gathered must be absolutely true and factual, like for example ‘the cost that reflects the actual use of processes and resources’. In short, since truth corresponds to verifiable facts, when it is properly employed in management accounting, it translates to factual situation created by resources in operation. The decision of the manager will significantly impact in changing the situation due to the fact that the manager‘s sole interest is the economic impact of the possible outcomes.

“The stock market clearly does not value a company for excellently prepared financial statements if operational excellence is lacking”. In addition, for proper inventory of all outputs and their required inputs, properly implemented managerial costing makes use of data drawn from logistical and operational systems instead of general ledger accounts. By doing this, operational quantities and their corresponding costs are tied to the establishment’s internal value chain.

The correspondence theory of truth was initially defined by Aristotle. Nonetheless, a simpler and updated definition is: “A statement or opinion is true if what it corresponds to is fact.” This correspondence definition of truth forms the backbone for management accounting principles. It is in this regard that the foundation of the MAP is firmly grounded in the laws of logic and properly structured reasoning which are outlined and widely discussed in management accounting philosophies. “It is very important that costs should not be regarded as something that may be manipulated, nor should they be thought of as representing anything but the cold truth, however unwelcome that may be.”(Church, 1910).The emphasis on truth should however not be confused with precision. This is because costing techniques are disputable, while principles are not. The principles greatly support the managers who are expected to make inferences on future outcomes for all plans and decision alternatives which they are considering based on effects and cause insights. The applications of principles also enable managers to tackle issues arising on costs and their possible effects in different time frames. It is also important to note that management accounting is a science, it isn’t. However, decision science- which management accounting supports through the information it gives, is a science. “In order to provide a sound basis for decisions, cost measurement should, in so far as possible, reflect the truth.”(Benninger, 1954).Contradicting practices and theories do not instill truth or trust towards enhancement of an entity. Fundamental principles are specifically aimed at driving the classification of tools, approaches, and processes, whereby issuing a solution for managers and accountants to evaluate the tools and approaches which they may be putting into consideration for the costing task or decision at hand. The aforementioned principles serve as a way of better understanding the compromises and risks associated with a method or practice when it strays from concepts of analogy and causality.

References

Hoecht, A. (2006). Quality assurance in UK higher education: Issues of trust, control, professional autonomy and accountability. Higher Education, 51(4), 541-563.

Seal, W., & Vincent-Jones, P. (1997). Accounting and trust in the enabling of long-term relations. Accounting, Auditing & Accountability Journal, 10(3), 406-431.Broadbent, J., Dietrich, M., & Roberts, J. (2005). End of the Professions?. Routledge.Fisher, R., & Chu, S. Z. (2009). Initial online trust formation: the role of company location and web assurance. Managerial Auditing Journal, 24(6), 542-563.