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Topic 1 Reading Chenhall Notes

Accounting Notes > Management Accounting, Budgets and Behaviour Notes

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Topic 1: Chenhall - "Management control systems design within its organizational context"

"Management control systems design within its organizatonal context" - Chenhall (2003)

2. An organizatonal framework for contngency-based MCS research

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Theorists such as Burns and Stalker (1961), Perrow (1970) and Galbraith (1973) focused on the impact of environment and technology on organizational structure Waterhouse and Tiessen (1978) and Otley (1980) were able to structure their commentaries by categorizing the early research into these key variables Most important new stream of literature has been that related to the role of strategy o Important links between strategy, the environment, technology, organizational structure and MCS (Langfield-Smith, 1997) Role of MCS with advanced manufacturing settings such as TQM, JIT and flexible manufacturing have been explored by Young & Selto (1991) Role of MCS within new structural arrangements such as teams reviewed in human resource management literature (Cohen (1993), Katzenbach & Smith (1993)) National culture impact studied by Harrison & McKinnon, 1999)

3. The meaning of MCS

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The terms management accounting, management accounting systems, management control systems and organizational controls are sometimes used interchangeably o MA = A collection of practices such as budgeting or product costing o MAS = systemic use of MA to achieve some goal o MCS = Broader term that encompasses MAS and also includes other controls such as personal or clan controls MCS is conventionally perceived as passive tools providing information to assist managers o On the other hand, from a sociological orientation, MCS can be seen as more active
? "furnishing individuals with power to achieve their own ends o However, contingency-based research follows the more conventional view Given that many dimensions of MCS and their contexts change, novel studies will always be required to address emerging issues (Atkinson, Balakrishnan, Booth, Cote, Groot, Malmi, Roberts, Uliana & Wu, 1997) A further criticism related to the nature of accounting controls within contingency-based research is that these form only part of broader control systems (Chapman, 1998; Merchant, 1985; Otley, 1980) o Clan and informal controls, or integrative mechanisms have had limited studies o There are different control cultures:
? Organic or mechanistic
? This influences the processes of implementation
? Becomes particularly important when studying the adoption of innovative MCS such as ABC and BSC which are closely linked to the organization's control culture (Anderson & Young 1999; Gosselin, 1997; Krumwiede, 1998; Shields, 1995)

4. Outcomes of MCS

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There has been little work relating MCS change to share prices o Gordon and Silvester (1999) found no significant association between the installation of ABC and significant stock market reaction o "With the numerous possible events effecting share prices, control problems can become acute"

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