Management And Strategy In Action As Strategic Management Accountancy

International Journal of Applied Finance For Non-Financial Managers (ISSN: 1742-528X) Volume 1 Issue 2

Professor Mike Harvey

This series concerns management and strategy – areas which have, these days, increased in both interest and importance as far as the skills and competences that the accountant needs to develop if s/he(1) is to keep abreast of entrepreneurial and business developments. Even, as far as the accountant in practice is concerned, knowledge of tools and techniques in these areas has become important when considering clients performance and how they can be helped to become more effective and efficient in their enterprises.

Recent examples, such as the Enron and Worldcom cases, point to this. Press reports in the case of the later suggest that some £2.6 billion of operating expenses were allowed to be capitalised – having, of course, the effect of inflating the company’s reported profits. Assuming that this was not the result of something which was untoward, the question to my mind is whether the auditors concerned would have let such an amount of revenue expenses be capitalised if they had have had sufficient knowledge and understanding of the appropriate ratios associated to the firm’s operational management – such as those related to: expenses/turnover; working capital/fixed assets (the trading ratio); and a string of others.

Today the CCAB bodies have increasingly recognised the importance of the accountant developing administrative and business proficiency skills generally and management and strategic talents and expertise in particular. They have done this by giving greater emphasis to such in the study packages they have developed for the students they enrolled – that is their potential members. The recognition of the need to be armed with these competencies is no longer only the province of those aspiring to become management accountants through CIMA, but also those following ICAEW and ACCA courses where the attraction in the past has been to gain a qualification that enabled the holders to be employed or set up in practice – not forgetting the need for CIPFA members involved in public sector organisations to acquire wider skills.

This series will be heavily focused on ‘real world’ situations. However theory will be linked to practice where appropriate, especially when this helps to demonstrate applications. But the obvious, namely that management and strategy are living subjects and so dynamic rather than static, which enables the needs of every changing environments be met, must be remembered.

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