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Introduction
Accounting is referred to as a powerful tool (or several tools) which is utilized conventionally to find ways for optimizing the economic and financial performance of an organization. A span of accounting management techniques has assisted managers in controlling and planning their activities in order for commercial organizations to maximize their profits while those providing public services aim to magnify the advantages of funding available to them.
To help in the communication of different aspects for an organization’s economic performance to the company’s stakeholders which are both customers and investors, there has been used of diverse financial accounting techniques. (Bebbington, et al., 2014) These techniques lay down the foundation for managers through which they are able to perform the duties of accountability to above-mentioned shareholders or owners (stockholders) from whom it is not possible to be involved in daily activities and operations of any business. An establishment can be made that conventional financial accounting and management has indeed provided tools for organizations to better plan, manage and control their operations.
From an accounting view
Accountability
In an aspect of governance, accountability is acknowledging and assuming responsibility for actions, decisions and results. Since corporations are defined as self-organizing systems, systems that are able and do modify their programming and structures in following their own operations, they are held accountable for their own actions. (Marris & Mueller, 1980) If a corporation is autonomous in leading its operations so a corporation should ideally take responsibility for its performance and purpose. However, the accuracy and validity of performance indicators should be viewed or checked upon by external institutions. (Hurst, 2004) As long as the corporation keeps on growing, it will be burdened with more responsibilities and actions to account for.
Similarly, in the dimensions of accounting, an individual or department is rightfully liable to for their actions and some people have the rights to hold these individuals accountable for their actions. An example of any instances of fraud or misstatements will be conferred upon the auditor because he is legally liable and responsible for reviewing the financial statements of a company.
Representation
Representation, a notion coined in the social theory describes it as a means for people belonging to groups to talk with each other. A system based on a familiar understanding of themes such as ideas and concepts which are alien to a common understanding or hold relevance only to the specific group of people. Therefore, particularly social groups have knowledge of special meaning attached to specific words. (Moscovici, 1973) Accounting is also a social practice which was crafted by a human mind, and the role of representation is given significant importance in the process of crafting accounting. A company can easily express its financial performance and position in the industry through the simplified form of numerical data which are associated with accounting representation. (Bloomfield & Vurdubakis, 1997)
Paul Jackson (1997) developed a theoretical framework for adopting information systems metaphor which served as a purpose for understanding the representational aspects of any corporation. The approach which in particular highlights how information systems plays a role in representing space and time with the de-politicization of corporation’s time and space. (Brooke, 2001) It is somewhat similar to Zuboff’s three aspects of representational technologies which coincide Jackson’s framework of
• Informational systems (IS) being space-transcending having no geographical barriers. Immediate presence of managerial personnel is not necessary as accounting enables boundary less control
• Information systems (IS) providing possibility for work tasks to be done electronically where symbols can replace the necessity of face-to-face contact. Representation can enable controlling events from centre without having immediate presence as a result of electronic signatures.
• Information systems (IS) defining representational concepts which help in managerial tasks. Net profit, a numerical representation which outlines financial stability of an organization.
Prominent superiority and impersonality is given to accounting representation because of its form as a quantified representation. An objective number is of such an accounting representation nature that it removes any sort of unclear considerations which might be the result of subjective thoughts and bring in judgmental bias directly. Dissimilar desires, expectations and needs are measured by the same standard through numbers. It helps in the decision process through expressing realities in numbers. (Porter, 1995)
Control
A widely used word, control, is very common in the field of organization management. The methods which managers take to produce good performance for the organization is the instance of control associated with management. Control may vary widely in context but the main interlink age of control consist of monitoring and regulating activities to keep a check on actions and direct them. Secondly, the exercise of dominance and power is achieved through control.
In accounting, these methods and procedures of control are enacted by any firm to assist in the accuracy and validation of its financial statements. Complete compliance with laws and regulation is not the objective of accounting controls because it never ensures meeting the rules. Rather they are in place to assist a company for compliance.
An example of internal control by audit can be seen as a practical example of control in accounting. Recording of operational status and error avoidance in representation of accounting is done by auditors to achieve internal control. Sarbanes-Oxley Act of 2002 is seen as a foundation of strengthening importance of internal control and its acceptance in accounting reports. (Deloitte, 2004)
Better understanding, better management
How accountability helps
Organisations seldom realize that there exists a connection between large problems or failures of financial management respective to the collapse or breakdown of record systems. The recording system of accounts provides a strong safeguard against fraud and corruption in organizations. A report by Kimberly Barata stats that in the region of sub-Saharan Africa, the systems of financial management had deteriorated, much of the suggestions for the cause being accountability. Where theft of government assets were gone unchecked and corruption cases were unexamined, they were proof of failure in the system of accountability. Numerous endeavours to fortify financial controls were unsuccessful in light of the fact that the major structures expected to support them were frequently ignored; this incorporates record keeping or accounting. (Barata, et al., 1999) Accountability is the duty of a person taking care of assets or public office to give an account of the intended utilization of those resources with the assigned office. When these systems were not developed in the Sub-Saharan Africa, the region saw a weak administration and inadequate governance from the representative institutions. A strong system of accounting is crucial for making officials accountable for the fulfillment of their due duties for effective management.
Management requires the steady due diligence that is present in every piece of work to be done or undertaken. It requires administering the instruments and resources needed to help develop individuals, tasks and objectives. Incredible management must be accomplished by the individuals who have the capacity to manage themselves before managing others. The best manager knows how to oversee him or herself while getting the most ideal results from the individuals, resources and other support available to them. But the most crucial ingredient to great management is the term of accountability. The ability to manage doesn’t exist without accountability. When managers are accountable for their actions and they make their subordinates aware of the success they are accountable for, this results in proper administration working. (Llopis, 2012)
Another paper by Bracci & Llewellyn looked at the effects of accounting reforms in Italian social sector where enactment of accountability resulted in better service. Professional workers in the social care industry perform a vital part in democratic welfare societies by helping citizens who are disadvantaged or are going through varying stages of crisis. They help them to cope with their hardships which ultimately results in transformation of those citizens to lead more productive and satisfying lives. In Italy, where financial systems are taxed, the social service sector expend an increasing and large percentage of public money, which accounts for local authority’s spending of about 20-25 percent. Throughout all developed countries, a crucial characteristic of new public management (NPM) was to call for a requirement of greater accountability for outcomes and outcomes through which the monetary inputs can be justified for a welfare budget and the budget being created accordingly. The efficiency in public sector has been generated through accounting-led initiatives which was a requirement on part of government’s role for establishing more accountability. NPM reforms emphasized on official technologies which were accounting-based (i.e. accounting procedures, performance evaluation systems, and coordinating/controlling mechanisms) as an action whose result was aimed towards increasing in public sector the role of accountability.
They also took into consideration that the sole criteria for being accountable should not exist in narrow cost cutting measures. Considering it is a social service, the accountability should be reflected in an individual’s ability to transform the lives of their clients and make a profound contribution to the society in general. Through accounting, cost efficiency standards were developed in Italian social sector which enabled tracking of the accountability of contractual workforce in the private sector units as some services where outsourced to them. The measures developed through accounting based performance outlined improvements in the work of professional managers involved in social work and furnishing budgets which were according to the service objectives. Development of accounting systems in the Italian sector had profound implications in the methods through which accountability was experienced, observed and delivered in the social services. (Bracci & Llewellyn, 2012)
Accountability starts off with an exact and definitive as can be stated determination of an entity or institution’s objectives and goals, as well as a consensus on what measurable indicators will define the successful or unsuccessful performance of a person. To hold legitimacy of institutions in climate finance, which consist of support mechanisms for climate and providence of financial aid which aims to adapt projects that help in low carbon emission and climate resilient growth. The financing is channeled by international, national and regional entities to pursue such projects. To gauge their legitimacy, institutions who are given these financial aid and entrusted with climate finance are to be accountable to their providers and recipient governments, also to the beneficiaries that have provided these investments. When looking at climate finance, accountability must be established through some measure of results which can be terms of minimizing emission of greenhouse gas, upgrading versatility to atmosphere affects, and doing as such in a manner that is constant with succeeding social and environmental standards. When coupled with accounting systems, these recipient of aid, concessional lending and grants are kept in check by their contributors through account information and transactional processing. The institutions who are entrusted with climate finance now hold accountability of providing those results in lieu with their expenditure through those accounts. (Ballesteros, et al., 2010) Thus, they will need to demonstrate in conformity and compliance of international standards for carrying out development assistance. Hence, even in sectors of social development a tendency is seen that whenever accounting systems are either introduced or strengthened in their framework, it leads to institutions becoming more accountable for their actions in terms of service and product providence. Individuals within specific departments are further held accountable for their actions in delivering the best desired outcomes which are carried forward towards the institutions. When each and every individual acknowledges his role, becomes accountable, then it proliferates to an everlasting impact of increasing efficiency and governance.
Accounting leads to Management Control
Hoskin’s and Macve’s define control as a term of power knowledge which emerged from the system of management through calculations being conducted on abacus, each transaction having specific wooden tallies, stock being purchased or stored through receipts and the whole process of these transactions being recorded in the Pipe Roll. They further go on to explain control as an idea of dominance, where one group or individual dominates another one through the exercise of their legitimacy and power. The second notion of control is something which is more practiced and observed in today’s world. The meaning that control is the concept of monitoring activities and regulating them. (Hoskin & Macve, 1986)
The study of accounting being connected with application of control needs to be associated with how organization and control are closed interrelated as control is seen as an inescapable and central feature of any organization. Practically it would be impossible for organizations to operate without some form of control and that there is an established agreement about organization implying control over their processes and tasks. Another way to look at organization is to see it as a form of control process existing because of a need for people to co-operate with each other to achieve purposes which would not be possible without join action. Control is highly related to procedures and co-ordination into which an aspect of planning for an organization’s procedure is also incorporated. (Otley & Berry, 1980)
In understanding how accounting fits into control, Tocher’s definition of control holds very useful and interesting characteristics when implemented in the context of controlling an organization. Tocher indicates that control can only happen when there exists a goal for the system which is being controlled, a method through which results could be measured along the parameters set by the objective, a predictive model of the system which is being controlled and a choice of possibly relevant alternatives one can act upon which are at the availability of the controller. (Tocher, 1976) However, alignment of an individual’s goals with that of an organization has several conflicts. So, the existence of inducements which are constantly exchanged must be present to gain contribution and there could be a series of basic objectives common to the organization such as its survival, but the agreement upon such objectives is limited. There will always be differing levels of..
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