Management Accounting Systems

AF 436: Assignment One

Name: ASITOSH PRAKASH

ID: S11086985

TRIMESTER 1, 2017

UNIVERSITY OF THE SOUTH PACIFIC

WORD COUNT: 982 Words excluding Reference

QUESTION ONE

As discussed by Flamholtz (1970, pp. 289-316), organizational control can be described as those set of actions and activities which are taken in order to influence the probability of decisions made by people which in turn will lead to the achievement of the organization’s objectives and goals. People tend to divert their actions from what is expected of them, hence, organizational controls are put in place to align the interests of the people working for the entity with the goals and objectives of the organization. As stated by Flamholtz and Tsui (1980, pp. 89-90), the organizational control can be described by a series of concentric circles. Firstly, the core control system forms the center, for example, planning and organizing of operations of an entity. Secondly, organizational structure which includes centralization and decentralization. Also, there is organizational culture which includes the beliefs, values and thoughts of members of an organization. For example, customer satisfaction is part of Motibhai Group’s corporate culture.

Management Control Systems help to orchestrate new strategies, advanced human resource management initiatives and new technologies. Some examples include job descriptions, budgets, performance management systems, segregation of duties and standard operating procedures as stated by Flamholtz (1970, pp. 289-316). The core function includes influencing desirable behavior in the members of the organization. Contemporary MCS do not focus on measured performance but do take a proactive approach whereby problems on performance are solved or limited before they occur. These include encouraging and also forcing the employees to work in the best interests of the organization. According to Ezzamel, Lilley and Willmot (2004, pp. 783-813), MCS are essential in cultivating an empowered labor force and developing harmonious industrial relations.

QUESTION 2

Management accounting studies have shown that the success of management control systems depend on a wide range of factors which are external to an organization. These include historical, social, political and cultural factors. These factors tend to cause changes in an organization’s MCS. The sheer complexity of accounting transactions and technological advancements call for more advanced accounting and information system developments. Donor agencies and the government have major influences on management control. Catalysts for change in control systems include donor agency consultations, public sector reforms, competition, industrial relations and the political climate of a country. These in turn are bound to affect budget related matters such as interaction among managers, budget participation and flexibility.

Fore mostly, the political climate and public sector reforms seem to be creating innovations in organizations. According to Sharma (2011), there was the separation of the lending division from the finance division of the Housing Authority as part of the state’s public sector reform. The consultant from the Asia Development Bank advised the government of this plan in order for the Housing Authority to become a financially viable organization. This change in the MCS was done to introduce responsibility center accounting and enhance the organizational division of HA.

Secondly, there was the separation of the Public Rental Board from HA as stated by Sharma (2011). In order to finance the HA the World Bank and the Asia Development Bank significantly influenced the state to take this step. This was because the rental estates were having financial constraints on the organization. However, the shifting of employees to PRB had detrimental effects on the workers as they feared losing their jobs because the liabilities of PRB exceeded its assets.

QUESTION THREE

As a management accountant the concept of organizational controls and management control systems has really influenced me to appreciate the controls that are in place at work and what are the various advantages it has to me as an employee and also my organization. The key function of MCS is to influence desirable behavior in the employees of the entity. The way the above information will help is that I can explain to management the amount of influence that the state and public sector reforms can have on an alcoholic producing company and its impact on budget accountability, flexibility and analysis.