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Challenges Faced by Management Accountants in the 21st Century

Article  in  Procedia Economics and Finance · December 2016

DOI: 10.1016/S2212-5671(16)30153-8


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Zairul Nurshazana Zainuddin Suzana Sulaiman

Universiti Teknologi MARA Universiti Teknologi MARA


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Procedia Economics and Finance 37 (2016) 466 – 470


INCOMaR) 2015

Challenges Faced by Management Accountants in The 21st Century

Zairul Nurshazana Zainuddinᵃ*, Suzana Sulaimana
ᵃFaculty of Accountancy,Universiti Teknologi MARA,40450 Shah Alam, Malaysia.


Management accountant in the twentieth centuries is no longer a traditional ‘bean counting’, but now has to become a ‘hybrid
accountant’ within an organization. They are now facing intense challenges and are expected to adapt with rapid changes in
business environment. Companies demand for more proactive management accountants, who are now expecting to become part
of management and ready to accept exciting challenges ahead. This paper discusses issues on environmental and organizational
factors, which are believed to be the major contributor to the key challenges faced by management accountant nowadays. A
conceptual framework was developed which forms the relationship between management accountants’ roles, tasks and factors
driving to the changes that leads to challenges faced by management accountants in the 21st century.

B.V.This is an open access article under the CC BY-NC-ND license
Peer-review under responsibility of Faculty of Business Management, Universiti Teknologi MARA.
Peer-review under responsibility of Faculty of Business Management, Universiti Teknologi MARA
Keywords: management accountant; challenges; management accounting change; factors drive the change.

1. Introduction

Since late 1980s, management accountings were being heavily criticized by accounting practitioners and
educators on the grounds that such practices are not in path with the radical changes in the business environment
(Roslender, 1996). An enormous amount of publicity has been generated Johnson and Kaplan (1987) as a result of
their claim that current management accounting practice has lost its relevancy with recent business environment. The
continuous changes in environment influence management accounting practices, which leads to intense challenges
faced by management accountants nowadays. Besides that, the rising in accounting scandals such as failings of the
accounting and auditing profession also contributes to the changing in governmental regulation (Tomasic, 2011).

* Corresponding author. Tel.: +60355444802.

E-mail address:

2212-5671 © 2016 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
Peer-review under responsibility of Faculty of Business Management, Universiti Teknologi MARA
Zairul Nurshazana Zainuddin and Suzana Sulaiman / Procedia Economics and Finance 37 (2016) 466 – 470 467

This resulted in recent increases for imposition on regulations; monitoring and sanctions (Loo, 2011) hence
indirectly drive the changes in organizations’ activities. This is due to the fact that it is closely connected to ethical
failures in the business community (Foote and Bange, 2006). The changes of organizations’ activities due to
globalization (Sulaiman, 2008), intense competition (Kariyawasam, 2009), information technology (Talha,
2010) and changes in regulations (Loo, 2011) definitely change the role of management accountants in an
organization. Moreover, advances in production technologies, including advanced manufacturing technologies,
computer-aided design and computer-aided manufacture also give significant impacts to the companies (Cooper and
Dart, 2009). Recent years have witnessed changes in how products and services are supplied and delivered to
customers (Cinquini and Tenucci, 2009) as well as advances in information technology (Tuanmat and Smith, 2011).
Preparation of information and dissemination become much easier and processing capacities are much greater hence
leads to faster customers’ response times (Lobo, 2004). Traditional tools such as standard costing, variance
analysis, budgeting and cost volume profit analysis are believed to be no longer adequate to today's manufacturing
companies (Tuanmat and Smith, 2011). In global market, intensifying competition has obligated many organizations
to use innovative managerial practices such as just in time (JIT), total quality management, advanced manufacturing
technology (AMTs) in managing their business. The pressures from market competition have created challenges for
management accountants in adapting contemporary management accounting practice such as activity based costing
and balance scorecard in order to react to business changing need (Abdel-Maksoud, 2007).
Therefore, this study discovers several factors may influence the changes in management accounting practices
that lead to challenges in management accounting profession. Environmental factors and organizational factors are
believed to be an underpinning theory for challenges faced by management accountants in the 21st Century. Based
on previous literatures, a proposed framework was developed which describe on the relationship between
management accountants’ roles, tasks and factors driving the changes in the study. The remainder of the paper is
organized as follows; Section 2 addresses previous studies on factors that caused changes to management accounting
profession. Section 3 is dedicated to the proposed framework developed in the study. Finally, a concluding section
which overviews the study main contribution, its limitations and recommendations for future research are identified
in Section 4.

1.1. Challenges faced by Management Accountants in the 21st century

Management accounting profession should adapt to the recent changes in order to be relevant and competitive in
the near future. Generally, there are several factors that may influence the transformation to the current state of the
management accounting profession. Prior study by (Talha, 2010) , factors that caused the changes include:
x Environment of Business – Globalization, Customer focus and Rapid changes in technology
x Responses by business – Flattering hierarchical structures, World class manufacturing, Cell type of layout,
Business to Business, Business to Customers, Reduce inventory costs and Value Chain
x Management Accounting tools - Benchmarking, Activity Based Costing, Enterprise resource planning, Balance
Scorecard, Target Costing, Supply chain management and Just in Time inventory.

Based on a study conducted by Sulaiman (2008), in Malaysia, there were two categories to trigger changes
in management accounting namely, Environmental factors and Organizational factors. Environmental factors consist
of the impact of market competition and emphasize of new non-financial performance indicators (Sulaiman,
2008). This leads to the changes in customers’ behavior due to globalization and there was a link between financial
accounting requirements and regulations with management accounting practices. Organizational factors were related
to changes in organizational ownership such as acquisition or merger, organizational restructuring such as
decentralization, hierarchical structure, downsizing and outsourcing and the enhancement of corporate governance
(Sulaiman, 2008).

1.2. Environmental Factors

Environmental factors are also known as external factors. For example, rapid changes in business environment
such as globalization of markets, intensifying competition and advances in information and production technologies
468 Zairul Nurshazana Zainuddin and Suzana Sulaiman / Procedia Economics and Finance 37 (2016) 466 – 470

are among the major factors contributing to the evolutions in management accounting practices in recent years
(Allot, 2000). Changes in the business environment often lead to changes in how organizations do their business,
operate and managed (Lobo, 2004). This may indirectly influence the management accounting profession, since
management accountants play a vital role in providing information to facilitate and support the effectiveness of
business operations and management (Atkinson, 1997). Talha (2010) in their study highlighted that the
emergence of latest information technology and manufacturing technologies as well as environment trends also
contribute to the changing in management accounting. Management accounting must take lead in providing
companies with customer oriented information (Cloud, 2000). This is due to the fact that management accounting
practices in organizations covers a broader scope and it has also become an integral part of the management process
(Sulaiman and Ramli, 2006). Due to globalization, firms not only compete locally but are also exposed to the
international market. It is important to ensure an attractive price, good quality product, speed of delivery, and
customer service is meeting the customers’ expectation. Therefore, managers need measures on all these factors.
This is when the management accountants, as the information provider of the organization should play their role.
The establishment of global markets, emphasis on customer relationships, improved product quality and
enhancement of production technologies all served to increase the level of competition between organizations
(Kariyawasam, 2009). The availability of user-friendly financial and analytical software and technological tools
such as e-mail, the Internet, Intranet as well as intense business competition lead to challenges faced by management
accountant nowadays (Lobo, 2004).
The emergence of tremendous advances in information technology may provide better capacity and speed in
database that enables to store vast amount of information in the system (Lobo, 2004). The information will be
easier to be accessible by different users at the same time [17]. Rapid progress of information technology gives
‘signal’ to management accountants to become more aware of the availability for more accurate, timely and relevant
information in the future. The rise of modern technologies also means that management accountants can renounce
much of the ‘bean counting’ and ‘number crunching’ tasks to computerized accounting systems (Lobo, 2004).
This is due to the fact that technology advancement in business improves efficiency and effectively of business
operated (Burns and Scapens, 2000). Other factors such as deregulation of finance sector, implementation of new
practices and increased importance of service sector are also highlighted by Talha (2010) in their previous
study. The introduction of new manufacturing tools and techniques and imposition on new regulation made the
management accounting profession to be more challenging.

1.3. Organizational Factors

According to Laitinen (2006), organizational factors can be described as organization, strategy, products,
perceived uncertainty and competition. This is one component of internal operations as organizational factors may
influence directly to the day-to-day operations. Organizational factors emphasis on core competencies, customer and
supplier relationships, downsizing, outsourcing, flatter organizational structures and team work (Talha et. al, 2010)
Survey done by Yazdifar and Tsamenyi (2005), discovered that ‘information technology’ and ‘organizational
restructuring’ due to ‘take-over’ and ‘merger’ events as the top two most important change drivers between
independent and dependent companies in United Kingdom. Organizations are influenced by a multiplicity of
interests whereby some interests are located primarily within the organization; some are located in the environment
within which organizations operate and some straddle in between organizations and the environments (Sulaiman and
Ramli, 2006). Organizational factors relate to internal factors within the organizations, for example, new
management style. If there is new management in place, the organizational structure and information flow in an
organization will also change (Cloud, 2000). There will also change in work patterns and attitudes among the
organization’s staff. Management accountants have to liaise with both operation and top level. They are expected to
act as middle person to ensure both parties get relevant and timely information (Kariyawasam, 2009). Product
quality, changing work pattern and new management style or organizational restructuring have been more observed
as the organizational factors that leads to the challenges faced by management accountants (Sulaiman, 2008).
Other factors related to core competencies, customer oriented activities, size and type, form of ownership,
autonomy, profitability or authority-driven, calls for broader scope accountability and financial position of
Zairul Nurshazana Zainuddin and Suzana Sulaiman / Procedia Economics and Finance 37 (2016) 466 – 470 469

organizations also contribute to challenges faced by management accounting profession in the 21st century (Talha, 2010) As most organizations nowadays are having flexible organizational structure with managers and
accountants are working cross-functionally, demand for information by stakeholder has intensified. They demand
information for accountability of transaction. The impact of global era such on globalization of the markets, advance
in information and production technology, core competency and customer and supplier relationship lead to the
challenges among management accountants to be able to work cross-functionally (Ahid and Augustine, 2012).

2. Proposed Framework

The continuous changes in environment influence the changes in management accounting practices. The
evolution of management accounting has indeed changed the management accounting profession. A conceptual
framework was developed to show how management accountants’ role and task were affected by the factors drive to
the changes (both environmental and organizational factors).
Management accounting profession is evolving due to both environmental and organizational factors. External
forces outside the organization (also known as environmental factors) such as globalization, intensifying
competition and advances in information in technology leads to the changes in organization’s activities and how
they operate and are managed (Lobo, 2004). To succeed and survive, organization should proactively adapt to
changes in their environment (Atkinson et. al, 1997). This situation is directly influenced the organization to change,
which is known as organizational factors, such as new management style, customer-oriented activities and changing
work pattern. Both factors have indirect influences to the changes in management accountants’ roles and tasks
within the organization. Therefore, both environmental and organizational factors are proposed by this study as
major contributors to challenges faced by management accountants in the 21st century.

3. Discussion and Conclusion

In the dynamic business environments, management accountants are experiencing significant changes of role and
tasks. Therefore, to be competent and reliable in an organization, management accountant should proactively
involve in leadership, strategic management, operational alignment and long-life learning and improvement. They
are now responsible as the internal business consultants. They are expected to be able to work closely with all
managers in the operation and top level. They also assist management by providing valuable information in their
decisions making. They also involve in issues pertaining to value added activities. The fast changing environment
requires them to adapt with the unexpected changes. They are no longer regarded as conservative accountants. One
of the biggest challenges for management accountants nowadays is the preparation to face globalization in local and
global market. Globalization, intense competition, changing governmental regulation and innovation in technology
led to changes in market environment which have greater impact to an organization. Many of the companies have
started going global by undertaking business activities across national frontiers. As a result, the business transaction
becomes voluminous and complex to account for. However, with technology advancement, more innovative
software and other tools have been developed to assist management accountants in performing their task. This show
that today’s business environment cannot operate without technology. The future of management accountants
depends on how they able to adapt and respond to emerging technologies. As the world becoming unified, entity
with board less transactions worldwide need for standardization. This definitely led accounting profession under
intense pressure to warrant comparisons uniformity. Management accountant is expected to be able to provide for
accurate information then assists them in decision making since they work closely with company’s management.
Intensifying competition and business environment changing has brought into significant challenges and pressures
on management accounting profession to change.
The organizational factors such as new management style and customers’ expectations also contribute to the
significant changes. Globalization and intense competition have shifted companies’ focus towards meeting
customers’ needs and their core activities. Management accountant has significant role in pursuing business survival
and success as they are expected to be proactively involved in value creation activities and propose solution to the
470 Zairul Nurshazana Zainuddin and Suzana Sulaiman / Procedia Economics and Finance 37 (2016) 466 – 470

management. The top management themselves were said to be the recent challenge faced by the management
accountants in relation to their expectation and requirement in decision making process. In order for management
accounting to maintain its relevance, there is a need to react to changes in business environment and expectation
from management in an organization. In summary, management accounting profession need to be relevant or else it
will be considered as a subservient to financial accountants.


The authors would like to express their gratitude to the Ministry of Education of Malaysia for funding the
research project through the RAGS grant. Our appreciation also goes to the Faculty of Accountancy/Communities of
Research (Humanities & Quality of Life), Universiti Teknologi MARA for facilitating the research project.


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