Summary of the lectures of Advanced Management Accounting. Includes a summary of the book Advanced Management Accounting by Groot and Selto and several research papers mandatory for the course.
Management accounting: concerned with generation, communication, and use of financial
and non-financial information for managerial decision making and decision control
- For: decision making (reduce uncertainty) and decision control (assess profitability
units/products and stimulate and reward employees) -> tension between both; using
same information for both leads to misrepresented information or situations where it
is easy to reach targets
Balancing the dual responsibilities of BU controllers (Maas and Matjeka, 2009)
- Two roles controller:
o Local responsibility: add value to BU, identify opportunities (local decision
making)
o Functional responsibility: providing higher levels with information about the
BU (corporate control)
- Increasing the emphasis on the functional responsibility of BU controllers improves
the quality of financial reporting and internal controls (direct effect)
- However, such an increase also leads to role ambiguity and conflict, which in turn can
lead to an increased tolerance of data misreporting (indirect effect)
Controllers and their fiduciary duties (Eskenazi, Hartmann and Rietdijk, 2016)
- Positive association between controllers’ mirror neuron system functionality (hMNS)
and their inclination to yield to managerial pressure (excessive alignment between
interest pursued by the BU manager and those served by the reporting behavior of
the BU controller) to engage in misreporting
o Low hMNS (mu) = more mirroring = more sensitive to emotions of others
- Especially for scenarios in which managers pressed their controllers out of personal
rather than organizational interest (interaction effect)
- So, BU controllers’ neurobiological characteristics are involved in financial
misreporting (could be used in hiring decisions)
- hMNS functionality: emotional influence, sensitivity to the emotions and well-being
of others
- Multiple roles of controller also relevant for auditors -> work with the firm and create
fair picture for shareholders
Evolution of management accounting
- Management accounting information became more complex over time due to
o Level of integration of value chains (market-internal transactions)
o Organizational structure (centralization-decentralization)
o Increased complexity of production process
- More recent innovations are developed by consultants that try to sell innovations,
instead of developed by employees working in firms
- It has become clear that both managerial activities require specific accounting
information that may be different from accounting information for financial reporting
purposes
- It has also become clear that decision making and controlling activities also require
additional insights from economic, psychological, and organizational theories to
provide a more complete understanding of human behavior in decision making
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