Managerial Accounting Systems in a Multinational Context Managerial Accounting Systems in a Multinational Context
The primary body of theory underlying managerial accounting comes from transaction-cost economics and principal-agent theory. Thus far, your formal study of such theories has not yet taken into account the additional factors that multinational enterprises face when making organizational design decisions and, hence, evaluating and designing managerial accounting systems.
This week’s Discussion will address the implications of cross-cultural and cross-border factors with respect to transaction cost economics and principal-agent theory and, therefore, how managerial accounting systems must adapt to factors which characterize the multinational enterprise.
By Day 5 of Week 1, post answers to at least two of the following questions:
•How do cultural factors impact managerial accounting system design?
•Is it possible to take an existing domestic managerial accounting system and apply it to an international or multinational firm? Why or why not?
•Explain how various types of enterprise risk are relevant to designing optimal managerial accounting systems in cross-border settings.
Sample Answer for Managerial Accounting Systems in a Multinational Context
Cultural factors indeed affect the design of managerial accounting of a firm. This is as a result of the fact that cultural factors influence the controlling methods of the management. The impact of the differences is shown by the variations in the extent to which duties and responsibilities are delegated. In the decision-making process, the managerial accounting design is greatly influenced by the prevailing cultural factors. The decision-making process is not participative especially for a global scenario given the varied cultures (Chenhall, R. H.2003). The level of work standard and monitoring of quality is also affected because of the cultural factors thus making it a significant challenge in managerial accounting.
Managerial accounting is mainly used by people operating within a given organization or company. This is because the reports can be generated over any specified period and will bring in a forecasting value to only those people within the firm. It is, therefore, hard to apply domestic managerial accounting system in an international perspective. Multinational companies as a result of a lag in generally accepted accounting principles in managerial accounting choose to employ managerial accountants with widely recognized certifications (Leidner, et al.,2006). Firms are increasingly adopting a similar enterprise resource planning systems that are integrated and standardization software packages. The managerial accounting formats should be analogous to that of the parent company. A transnational firm can be headquartered in a different country thus making it hard for its employees to adopt a typical managerial accounting process.
Due to the various enterprise risks in cross-border businesses, the managerial accounting designed should be optimal and able to accommodate these risks. The global flow of information is standardized thus limiting the ability to generate information that is locally relevant to the firm. Companies should, under ambiguity, copy an openly known and appreciated replicas of managerial accounting operations from each other particularly the profitable companies with good repute (Leidner, et al.,2006).
Managerial Accounting Systems in a Multinational Context References
Leidner, D. E., & Kayworth, T. (2006). Review: a review of culture in information systems research: toward a theory of information technology culture conflict. MIS quarterly, 30(2), 357-399.
Chenhall, R. H. (2003). Management control systems design within its organizational context: findings from contingency-based research and directions for the future. Accounting, organizations and society, 28(2), 127-168.
