Users currently view accountants and the financial reports they
prepare with scepticism. Should we be equally concerned regarding
management accounting statements and techniques?

Hi bp72-ga,

The short answer to your question is NO - equal concern should not be
placed on management accounting statements and techniques.

There are several reasons for this (most of which bring out the
differences between management and financial accounting):

1. Users of management accounting statements are internal (ie.
employees and management of the organization), and so there is no
motivation to generate false reports.

2. The reports generated by management accounting focus on the future,
and thus are an important tool for decision making. By contrast,
financial reports are based on the past and are typically used to
gauge the success of the company.

3. There is no requirement for management accounting statements in an
organization by federal or state law - however, most corporations
realize its has huge benefits and use it extensively.

4. As a result of these statements not being required, there is no
standard (such as GAAP or IAS in financial accounting) that applied to
management accounting. Instead, it can be though of as a set of
techniques used improve the way the company operates.


You can see that the environments and regulations surrounding the two
fields of accounting are vastly different, and therefore it is
unreasonable to be skeptic of management accountant in the same way
that many have recently become about accountants that prepare
financial statements.

Hope that helps :)

answerguru-ga

I agree with the comments above.  I prepared management reports for 15
years for a large public company.

For the most part, many internal statements distributed to management
are a sub-set of the high-level reports issued to the public.  They
break down opeating expenses for various operating departments,
divisions, subsidiaries and operating units.  The purpose of these
statements is for department heads to manage their costs, as they are
expected to do.

From my experience, they are prepared in the same manner as external
statements using generally accepted account principles.  They
typically include a budget and forecast for past and future looking
periods.  These are estimates made by accounting and finance
management at the beginning of the year and revised as more
information and trends present themselves.  They serve only as
guidelines and targets and cannot always be considered accurate
because no one can precisely predict what the future will bring.

Certain forward looking information is 'fairly predictable' (such as
non-controllable expenses [ i.e. rent, utilities, telephone, etc.],
but they are only one part of the equation.  Payroll for example is
difficult to predict, especially if the business is growing or
shrinking.  Management makes cost decisions throughout the year,
affecting what total expenses will eventually be.

Hope this input helps a little.