External reports impotent

External reporting procedures are a ‘necessary evil’ and have no direct influence on management decisions, a CIMA survey claims.

Manchester University research for the management accountants into the effect of external reporting on management decisions in UK companies also reveals that the process is regarded as an exercise to ‘sell’ a business’s results to the outside world.

The poor reputation of external reports stems from their lack of influence due to flexibility, which allows managers to manipulate the effects of decisions on the reports. Others argued that the reports are ‘next to meaningless’ because they are not the major determinant of the reporting systems used within a business.

A further survey finding was that many traditional management accountants’ tasks, such as budgets and variance analysis, are being done by non-accountants.

Survey leader Professor Bob Scapens said: ‘More spreadsheets are around the organisation so the work is being done at a much lower level.’ Scapens viewed this as an opportunity rather than a threat. ‘The role of the management accountant is now a mix of decision-making and generating reports that enable decisions to be made higher up.

‘Management accountants are now in a position to act as a bridge between the operating level and senior management. But they can no longer think in technical accounting terms – they must also have a thorough understanding of the commercial process.’