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In this Apr 2003 issue of On Target :
SWOT Analysis of the Management Accounting Profession
What's On
Bookshelf
SWOT Analysis of the Management Accounting Profession
The biggest opportunity for the profession is also its biggest threat, i.e. the need for more Corporate Governance in the aftermath of the Enron, WorldCom and Arthur Andersen debacles. Whilst this has resulted in the demand for more Corporate Reports that are forward looking (the area of expertise of management accountants) it has also resulted in the need for skills far more diverse than those processed by traditional CPAs and CMAs. This has given a window of opportunity to other professions, such as Chartered Financial Analysts (CFAs), Industrial Engineers, Insurance Professionals, and Lawyers, who are now lobbying for a role that is currently (or in some cases was formerly) performed by the accounting profession.
The accounting profession should therefore be more pro-active and lobby Government appointed Regulatory Bodies to legislate as mandatory (or at least recommended as best-practice) the following for good Corporate Governance :
Strategic Audits (including Shareholder Value Analysis)
Cost Audits
Risk Management Analyses
Securitisation Cost Analysis
Intangible Asset Valuation (based on Expected Future Cash Flows)
Report on Going-Concern
Environmental Impact Audits
Major management accounting bodies around the world, such as the IMA (USA), CIMA (UK), SMA (Canada), and ICMA (Aust) should lobby for such audits, analyses and reports. If a Regulatory body in any one of those three countries mandates (or at least recommends) any of the above reports, then the rest of the world will follow. Currently only India, Pakistan and Bangladesh have made Cost Audits mandatory as was discussed in the last issue of ON TARGET.
In keeping with lobbying to make such reports to be made mandatory/best-practice, the profession should also revamp its education program, in order to give its members a wider skills set in keeping with the broader requirements demanded by such audits, reports and analyses.
ICMA (Aust) is currently undertaking significant research studies in all of the above areas, with the objective of publishing a “Managerial Accounting Corporate Governance Manual” for use by practitioners. It has key members who have developed close relationships with major regulatory bodies in Asia and is in discussion with regards to the use of the Manual in these countries for Corporate Governance best-practice purposes.
The second major opportunity is the membership growth potential in the non-English speaking emerging markets, especially China and the former Soviet Union.
The threat in this area comes from two directions: First, generalist bodies such as the CPA and Chartered Accounting bodies around the world are trying to grow their membership in these markets (at the expense of more specialist bodies such as the CMA bodies) by claiming that their qualification covers all accounting areas fully, including management accounting. The CPA has become the qualification of choice in most domestic and international markets, to the detriment of the CMA qualification. Second, even excluding the CPA threat, the management accounting bodies are competing with each other in the potential markets for membership growth, with CIMA (UK), SMA (Canada) and CGA (Canada) being the major competitors, all conducting their own exams.
ICMA (Aust) has taken a different approach, by establishing strong network of universities and professional institutions in these markets, which work closely with ICMA to provide a post-graduate professional experience to its potential specialist members, very different from those other bodies vying for membership numbers.
Not only is ICMA’s strength in having established a strong network of universities and professional institutions in these markets, but also is its unique approach to the market via the grass-roots educational institutions. In both USA and Australia the professional bodies that work with universities have had the best long-term impact on membership. For example, the AICPA’s domination of university access in the USA has had an overwhelming impact on its membership numbers. Thus the ICMA (Aust) approach is not only a proven approach, but also it’s approach is differentiated from all other management accounting professional bodies operating in the Asian growth markets of interest to the profession. The ICMA has many university relationships and strong university based Recognised Provider Institutions, especially in emerging markets in Asia such as China). It has also developed undergraduate and masters level education programs in many Australian and overseas universities, especially within MBAs.
The strengths of the Institute of Certified Management Accountants (Australia) is not only its education program, but the resultant highly qualified membership (most Australian CMAs have masters degrees). Another strength is its range of Membership Services such as :
Research Reports to Members
Information Center (Web-library)
Corporate Alliances (2020 Program)
Job Listings
Member Interest Groups
Risk Management and Cost auditing Services
In addition it has currently world-class publications such as :
Strategic Finance (from IMA-USA)
Journal of Applied Management Accounting Research (Research Journal)
On Target (Newsletter)
Applied Research Monograph series
ICMA Research Studies
Cost Management Advisor Handbook
The Weaknesses of the ICMA (Australia) stem from its limited membership (2,500 members, with only 650 CMAs). The numbers are low mainly due to its strong insistence of a masters-level education. This has resulted from not being able to negotiate some much-needed Membership Services such as :
Discount Programs
E-Mail Exchanges
Ethics Hotline
On-Line forms
Referral Center
Industry Sectors
Branches in some Australian and Overseas markets
Education Assistance
The ICMA (Aust) also lacks a Professional Journal of its own (currently beholden to IMA for its Strategic Finance journal) and does not currently publish any Statements on Management Accounting (SMAs) although its Cost Management Advisor handbook provides best-practice guidelines. The Executive recognises these weaknesses and its slowly addressing them.
April 20, 2003 :
Advanced Strategic Management Accounting Exam - Malaysia
May 1-3, 2003 :
Management Accounting 2020 3-Day Advanced Management Accounting program run by Universiti of Utara Malaysia and ICMA
May 2003 :
Financial Statement Analysis and Financial Modelling GMA Exams- Singapore
(Conducted by ICMA at the AEC Centre)
May 18, 2003 :
Advanced Management Accounting Exam - Malaysia
May 8th-13 2003 :
Advanced Strategic Management Accounting: 4-Day Seminar in Sri Lanka
(Conducted by the Institute of Chartered Accountants of Sri Lanka and ICMA)
June 13th - 22nd 2003 :
Advanced Strategic Management Accounting: Weekend Seminar, Monash University
Book Shelf
Those who subscribe to the idea that strategic management is taking a broad view beyond the financial results for the next 3-6 months may be interested in two recent publications on “sustainability”.
The first is a new book by Dexter Dunphy, Andrew Griffiths and Suzanne Benn, Organizational Change for Corporate Sustainability (Routledge) which blends current theories on organisational change with issues of sustainability. The authors’ thesis is that business must understand its role as a powerful social force as well as creator of wealth. The first steps to sustainability – complying with government regulations – should provide firms with the understanding, tools and capabilities for engaging with other sustainability issues such as the firm’s social and ethical performance and other “legitimate expectations of stakeholders”. The tools and techniques developed will be valuable in themselves because they will assist in answering related questions about measuring and distributing resources, and building human capabilities in a competitive, knowledge-based world.
The second publication is an article in Sloan Management Review “Sustainability and Performance” by Karina Funk (Winter, 2003). With the message that “companies that actively manage a wide range of sustainability indicators are better able to create long-term value for all stakeholders”, Funk illustrates how indicators of sustainability are also indicators of how well a company is run. For example, research shows that expenditures on environmental compliance are likely to contribute to innovation and improved process efficiency through streamlined production and materials use, and access to new markets – providing competitive advantages through either reduced costs or differentiation.
While a longer-term, strategic view of sustainability may be inconsistent with the “urgency” of quarterly financial results, as Funk concludes, “both financial and intangible performance information … can give decision-makers a much more comprehensive understanding of what is required for performance over the long term.”
Please feel free to share anything that you have found interesting. You can send your ideas to: Bill Richardson, Dept of Accounting & Finance, Monash University, PO Box 197, Caulfield East VIC 3145.
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