Introduction

The business climate has changed dramatically over the last several decades as a result of tremendous technological advancements that have improved company activities and provided greater opportunities for businesses to develop. The management accounting field is impacted significantly by the changing corporate environment. The altered corporate climate has resulted in several modifications in the management accounting process (Trucco, 2015). The business environment is changing as a result of technological advancements, globalization, and rising competition. As a result, the need to modify management accounting has been manipulated by corporate organizations. All of these developments have an unavoidable influence on management accounting, and management accounting has adopted the changing management practice (Franklin, Graybeal, and Cooper, 2019). The problem arose as a result of the interaction of several variables, including management accounting, which is influenced by changes in the worldwide business environment. On the other hand, cost accounting is said to have spawned the concept of management accounting. The importance of cost accounting in a corporate organization cannot be overstated (Shahjahan, 2019). With the altering business environment, cost accounting advanced through adjustments that were made by changing business circumstances.

Literature review

Accounting data is divided into two categories: management accounting (MA) and financial accounting (FA). management accounting (MA) is utilized by an organization’s internal management (main users), whereas FA is used by the users outside the organization. Management accounts, budgets, projections, and financial statements are common ways in which MA information is presented to management and workers (Chotiyanon and de Lautour, 2018). MA aids management in making well-informed choices, planning, managing operational operations, and maintaining financial control. It also allows management to assess the organization’s performance and position, and then take necessary actions to enhance the organization’s outcomes. Employees often utilize MA to analyze the profitability of the company in order to secure long-term job security and pay (McWatters and Zimmerman, 2015). FA, on the other hand, is used to portray an organization’s financial health to its external stakeholders. Suppliers, financial lenders, and banks utilize FA to analyze an organization’s creditworthiness and establish the loan duration depending on the evaluation of the organization’s financial health. Shareholders and bondholders utilize FA to assess a company’s viability in order to secure acceptable returns on investments (Smith, 2017).

According to Alawattage (2012), throughout the decades, the corporate climate has swiftly evolved. Customers’ needs and requirements have shifted, and new technologies have enticed new businesses to enter the target market with the help of a better and cheaper product, posing a challenge to established businesses. Growing markets and rising in the level of competition have necessitated management accountants’ ability to adapt quickly and flexibly to possibilities and challenges. They must be knowledgeable about foreign markets and diverse cultural contexts, as well as be mindful of the inherent dangers that come with working in numerous economies.

According to McWatters and Zimmerman (2015), the function of management accounting to provide relevant information to decision-makers for fulfilling the demands of decision-making has changed as the corporate environment has changed. As a result of the global business climate, firms were compelled to modify their structures, processes, and operations in order to adapt to the changes in the new environment. Such improvements in management accounting have also forced the organizations to make certain changes in the education and training methods that will improve the performance of the accounting team and aid in meeting the organization’s accounting demands. On the other hand, Smith (2017) says that the long-term viability of management accounting’s position in a changing corporate environment is a contentious topic that has piqued the interest of numerous scholars.

According to Chotiyanon and de Lautour (2018), Globalisation introduces fresh development to a given country, which has an impact on an organization’s management accounting practice. It also forces the organization to rethink its current organizational structure and strategy in order to adapt to the changing environment. In this context, cost management is a critical aspect for an organization in order to produce internationally competitive products since the cost of doing business rises year after year due to the rise in raw materials. As per the study conducted by Franklin, Graybeal, and Cooper (2019), management accounting became more important after 1960 in terms of supplying information for making managerial choices inside the business. According to established ideas, management choices inside the company altered after 1980. The data backs up opinions based on strategic and organizational adjustments made after 1980 to adapt to the changing business environment. Advances in technology, systems, operations, and structure required changes in managerial choices, which has influenced the requirement for conventional management accounting roles.

In this regard, Trucco (2015) says that management accountants may improve a company’s competitiveness by boosting efficiency and productivity and adopting cost-cutting strategies. Due to this reason, management accountants must also be able to distribute duties and influence and enhance top-level decision-making. It’s critical to have more visibility of the internal process and control on internal processes. Management accountants should contact managers from all departments on a frequent basis. While rapid growth markets present a unique opportunity to earn significant revenues, some companies are exposing themselves to risks of fraud, bribery, and corruption by overlooking the importance of proactive measures and communicating top-down commitments. Thus, management accountants play a role in guiding the matters of ethics and accountability and understanding the commercial rationale of things rather than just crunching numbers.

According to the statement of Prowle and Lucas (2016), changes in the business environment, the practices of accounting have been also changed in the organization. Because of this reason, management has started to separate the MA (management accounting) and FA (financial accounting) to get maximum advantages in the accounting practices. This is because that MA (management accounting) plays an important role in managing external and internal influence to ensure the organization achieves its vision and mission. On the other hand, Shahjahan (2019) says that FA (financial accounting), in the context of changing business environment, facilitates tax authorities to assess the organization’s tax returns’ credibility, as well as regulatory agencies to ensure the correct disclosure of information related to accounting to safeguard the interests of stakeholders who trust on such data for making decisions of investment. In a summary, while providing distinct functions for various customers, MA and FA are both critical for an organization. While FA offers information about business profit, it is insufficient for an organization to expand or run its business successfully. As a result, MA is offered internally as a supplement to the data provided by FA. The focus of MA practice evaluation has shifted from profit to business connections with a variety of stakeholders, including customers, workers, and society. Finally, to keep up with the ever-changing corporate environment, management accountants must cultivate and maintain an innovative culture.

Conclusion

As per the present business environment in the world market, the traditional function of management accounting is no longer appropriate, and adjustments are required to maintain long-term viability in the changing corporate environment. For operating in a rapidly changing corporate environment, substantial improvements in training methods and education are required that can help the accounting team members of the organization to create, identify, analyze, and present the accounting data in such a manner that helps the decision-makers to make an effective decision and improve the performance of the organization.

References

Alawattage, C.(2012). Management Accounting Change: Approaches and Perspectives. Routledge.
Chotiyanon, P. and de Lautour, V. (2018). The Changing Role of the Management Accountants: Becoming a Business Partner. Springer.
Franklin, M., Graybeal, P. and Cooper, D. (2019). Principles of Accounting Volume 2 – Managerial Accounting. 12th Media Services.
Hoque, Z. (2005). Handbook of Cost and Management Accounting. Spiramus Press Ltd.
McWatters, C. and Zimmerman, J. (2015). Management Accounting in a Dynamic Environment. Routledge.
Prowle, M. and Lucas, M. (2016).Management Accounting in the Contemporary Business World. Macmillan Education UK.
Shahjahan, M. (2019). Accounting: Basics for All. AuthorHouse.
Smith, S. (2017). Strategic Management Accounting: Delivering Value in a Changing Business. Business Expert Press.
Trucco, S. (2015). Financial Accounting: Development Paths and Alignment to Management Accounting in the Italian Context. Springer.