Welcome to Accountancy Portal

A couple of months back, Management Accountant Blog posted a guest post by CMA V R Kedia on “Emerging Role of Management Accountants in New Economy”. The role as described by CMA Kedia expected the management accounting practitioner should have attributes of a learning professional, a change agent and be hands on latest technology.

Management Accounting techniques has undergone a lot of development from preparing Cost-Volume-Profit Analysis to latest techniques like EVA, Activity Based Management, Target Costing, Kaisen and many more. The expectation from management accountant has been changing consistently with the advancement of technology and new challenges faced to analyse business for its competitiveness.

I wondered Management Accounting is a specialized field ….. is it necessary to have an accounting background ?

According to New Accountant USA,

“According to a study commissioned by the American Institute of Certified Public Accountants (AICPA), the average cost of the finance function has dropped from 2.2 percent of revenues in 1988 to 1.4 percent of revenues in 1996. The study further projects that costs may be reduced by as much as 50 percent in the next few years and that the number of people employed in finance should drop by one-third. Those accountants trimmed from finance will likely be individuals who are unwilling or unable to switch their focus from historical-based data-gathering activities to future-oriented, decision-focused activities.”

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CIMA is one of the leading Management Accounting institutes in the world. The American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA) have agreed to collaboratively develop products and services that are in the common interest of their collective membership who work in business and industry. With its focus on management accounting and the latest developments in global business, CIMA is a natural partner for the AICPA’s Financial Management Center, which serves CPAs working in business and industry.

The first effort of the initiative is the “Developments in Management Accounting” series, which includes multiple titles concentrating on current management accounting issues and principles and strategies for implementation.

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Three deadly sins lie in wait to wreak havoc on a portfolio: a disproportionate percentage of the portfolio in the low pass categories; emphasis on higher-risk types of lending; and concentrations that build in the portfolio with a small group of borrowers. Some banks commit multiple sins–aggressively underwriting individual loans to borrowers in higher-risk types of lending and taking large positions in those loans. How does your bank fare? Is it time to pass out the pitchforks?

Prem Sikka in his article “The Auditors have failed” in Guardian explains how the top audit firms had given a clean chit to the companies whose survival today is doubtful. Moreover the audit firms have charged an atrocious amount of fees for performing the job. The directors also had fat cheques to take home.

The question is

whether auditors should rely on management representation while commenting on true and fair view of the Balance Sheet ? Or do they have go further to investigate in the dealing to see whether they have any material impact on the financial statements ?

The reason for the fall of Lehman Brothers only became known when the bank collapsed. Who knows how many such caskets will opened to know the magnitude of damage. Should the auditors gone into the trail of the dealings to confirm the representations made by the management is correct !!!

Or to protect themselves from neglience, should the auditor insist on the management for an expert opinion in all aspect of the Balance Sheet. E.g.

• Bad Debts Provision - Assessment from the legal department of the company
• Brand value and goodwill - Expert opinion from valuerers
• Fixed Assets - Report of the surveryor
• so on and forth.

Just like how a jury relies on the experts opinions and finding on a case, should the auditor follow a similar trace. Top firms, I am sure, they should be following the convention. I don’t understand how does collapse of such magnitude is trigged every 4 years.

The other question that is raised frequently is the audit fees are exhorbitant. Big 4 firms audit more than 80% of the fortune 1000 companies in the world.

The question is will such auditors be impartial while auditing the companies ?

Regards,

Santosh Puthran

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1. Have Auditors failed us - Prem Sikka
   
2. Does IT strategy of your company influence your career
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Prem Sikka in Guardian discusses on Auditors fees for giving a clean chit to the companies whose survival is doubtful now.

“The deepening financial crisis brings daily news of corporate collapses and bailouts that plunder the taxpayers’ pockets at an unprecedented scale. Innocent people are losing jobs, homes, pensions and investments. Each collapse shows that highly paid directors had little idea of the value of company assets, liabilities, income, costs, profits and financial health. This has been accompanied by one constant factor: the silence of the auditors. Auditors collected large amounts in fees and dished out clean bills of health.”

The government of Iceland has taken control of Glitnir, the third largest bank in the country, and injected €600m. The bank’s 2007 accounts received a clean bill of health (page 69) from PricewaterhouseCoopers with an assurance, “We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion”. Auditors collected (page 93) ISK364m (£1.8m) in fees, including ISK218m in consultancy fees.

Read the full article on Guardian

The salaries of the companies that failed

Lehman Brothers - Richard Fuld $ 715 K salary and $ 6.20 million bonus. According to New York Times, he took half a billion dollars in compensation between 1993 - 2007.

Mail on Sunday reports Senior staff at beleaguered Northern Rock have received secret bonuses doubling their salaries ?

This is for the Accountants on the move. Recent updates in work permits or immigration procedures in different countries:

United Kingdom

01-Oct-08: Points-based system - apply for your sponsor licence as soon as possible

Under the points-based system, employers will need a sponsor licence to bring in skilled or temporary workers from outside the European Economic Area or Switzerland. You should make your application for a sponsor licence as soon as possible so we can make sure you get the earliest possible decision and minimise any delays to your recruitment process. Read More

11-Sep-08: Changes to Tier 1 guidance notes

On 11 September 2008 new versions of the guidance notes for Tier 1 (General), Tier 1 (Entrepreneur) and Tier 1 (Post-study Work) applications were released. Read More

08-Sep-08: Strict new jobs list for migrant workers

A strict new list of shortage jobs which targets migration better at the needs of British businesses, while reinforcing the selective approach of the new Australian-style points based system, was presented to the Home Office today by independent advisors. Read More

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Canada

05-Sep-08 Canadian Experience Class now open for business

The Canadian Experience Class is a new avenue of immigration for certain temporary foreign workers and foreign student graduates with professional, managerial and skilled work experience. Unlike other programs, the Canadian Experience Class allows an applicant’s experience in Canada to be considered a key selection factor when immigrating to Canada. Read More

05-Sep-08 Government of Canada announces pilot project to help speed the processing of new applications

With funding provided in the 2008 budget, which set aside $109 million to help meet the growing demand for permanent and temporary immigration, a centralized intake office will be established at CIC’s Case Processing Centre in Sydney, Nova Scotia. Over 30 additional staff will eventually be hired and trained. The centre will begin reviewing applications in October. Read More

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Do you like to be updated in Accountancy ?

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You may also like to read

1. Does IT strategy of your company influence your career
2. ICAEW, UK launches new qualifications
3. Choosing an Accountancy Qualification
   
4. Ethics on ACCA website 11-Feb-2008
5. Combined of Corporate Governance UK 20-April-08
6. 100 Most Influential People in Business Ethics 18-Feb-08
7. Accountable Crisis - Richard Aitken Davis
8. Professional Body 28-April-07
9. Accountancy Profession in India 22-May-08
10. Membership of Accounting Body - Value Proposition 20-Mar-08
11. The Audit Cartel - Prem Sikka in Guardian 06- June-08
12. Profession v/s Professionalism
13. Accounting Technician course in India
14. CMA 2.0 Portal Launched
15. How to Share Blog posts with friends 25-May-08
16. Management Accountant Blog Home

The irresponsible bosses should face court. Others, we accountants included, must accept we’ve erred.

Richard Aitken-Davies, President of ACCA writes in The Guardian

Remuneration and incentivisation packages for senior figures within the banking world have rocketed, but these rewards have become too closely linked to short-term, easy-to-manipulate financial metrics. The traders of derivatives want to have their “profits” recognised straight away in the employers’ accounts and, thus, in their annual bonuses. But bonuses need to be related far more closely to long-term financial performance and, importantly, to movements in cashflow, rather than profitability. Rewards should not be paid out until proceeds have been banked.

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The roles of the chairman and chief executive are ultimately ones of accountability - to shareholders, to customers, to staff and, whether they like it or not, to government, the taxpayer and society at large. But our increasingly well-defined principles of corporate governance have not prevented this crisis. We therefore need to open our thinking to alternative models and, in particular, to the role and effectiveness of independent non-executive directors.

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If directors ignored bad habits, if they accepted complacency after a prolonged bull market then they should be held accountable. If they have overseen failure, and allowed greed to flourish then they are accountable for this, too.

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Naivety has also played its part, with well-meaning people succumbing to the seductions of advanced risk management techniques at the expense of common sense. And perhaps we accountants haven’t said no enough, either.

Read Full Article on The Guardian

Do you like to be updated in Accountancy ?

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Visit MA Stores ? You will find something you are looking for ….

Management Accountant Store, US - Powered by Amazon
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Digital Store, US

You may also like to read

1. Does IT strategy of your company influence your career
2. ICAEW, UK launches new qualifications
3. Choosing an Accountancy Qualification
   
4. Ethics on ACCA website 11-Feb-2008
5. Combined of Corporate Governance UK 20-April-08
6. 100 Most Influential People in Business Ethics 18-Feb-08
7. Professional Body 28-April-07
8. Accountancy Profession in India 22-May-08
9. Membership of Accounting Body - Value Proposition 20-Mar-08
10. The Audit Cartel - Prem Sikka in Guardian 06- June-08
11. Profession v/s Professionalism
12. Accounting Technician course in India
13. CMA 2.0 Portal Launched
14. How to Share Blog posts with friends 25-May-08
15. Management Accountant Blog Home

Management Accountants are known for strategic accounting rather than doing mundane things. The Canadian Management Accountants recognise themselves as “Creative Accountants”. Yes, internal accounting is like that. A product may show profit by applying overheads in the traditional way but may go into loss when applied the concepts of ABC.

Do you feel advances in Information Technology has direct influence on Management Accounting ?

I have posted the point on http://cmaindia.informe.com forum and views of members are as follows:

Rajendra Patil of Appsconsulting

My primary answer would be ‘YES”.

In various areas of management accounting, it is ‘essential’ to collect, calculate and present the data to the users. The advancement in the field of harware and software solutions has helped management accountant in a great way.

First example would be the ERPs. The regular job of the management accountants in manufacturing industries is to calculate the cost of the inventories. This has become very simple (or fully automated). So the professional can look into the other areas.

With the development of various tools to generate cubes, we can now ’slice and dice’ the data very easily and can use the tool to generate views to find the possible reasons for the business pains. Using the Business Intelligence (BI) solutions we can now use the information of profitability in other areas of Customer Intelligence solutions like Customer Segmentation, Cross Sell-Up Sell, Campaign management, Customer Life cycle costs etc.

B V Prabhakar also shared the same view

IT , has no doubt, revolutionised the Management Accounting.

ERP , such as SAP helps Management Accountant to prepare separate Financial Statements for Tax laws under Local GAAP and also under International Standards such as IAS/IFRS/US GAAP. The time taken by Accounting Groups for Monthly Closing Process such as Bank reconciliation, Inter-company reconciliation, FOREX Payables/Receivables reinstatements and Consolidation, is considerably reduced.

Ashutosh Gupta had concerns

With the advancements of IT in day to day life of management accountants whether the role of Accountant has been secondary to IT professionals ?

Management Accountants roles has gone a drastic change over the years. The role of accountants has enhanced with these IT tools where we have to work with operations and business. Our role is understanding the requirements of the business and designing the solutions that would help them in decision making. ABM, EVA is a good examples.where you require details for analysis.

This leads to another question:

As Management Accounting is directly influenced by technology, does IT strategy of the company influence your career ?

I feel it does. Just like how a company scans you by looking at your CV of your achievements in past, you should review the history of the company on how it has progressed till now. A general drive in improvement of the system indicates that you will be able to demonstrate your role as a Management Accountant.

E.g. long time back, I had a interview call from a large MNC in Hyderabad where they needed Business Analyst. I went through the interview process where they told me they were using SAP 3.1h when the world had moved to 4.6C. On enquiry about the upgrade, they said, it was not on their agenda in the near future. I had terminate the interview process since I did not feel that I would be able to progress over there with the ancient technology.

Exchange your thoughts and share your experiences on

Whether IT strategy of the company influence you as a Management Accountant? Should you continue with a company or look for another opportunity ?

Regards,

Santosh Puthran

Do you like to be updated in Accountancy ?

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Visit MA Stores ? You will find something you are looking for ….

Management Accountant Store, US - Powered by Amazon
Management Accountant Store, UK Stores - Powered by Amazon, UK
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You may also like to read

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4. Emerging Role of Management Accountants
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