Modern managerial accounting faces challenges of being not proper to address the social variables while explaining the facts of the figure. Undoubtedly, Accounting has a lot more collective implication that has previously thought, however the proper understanding of its collective interpretation is yet to develop. It often falls short in proper methodological considerations as well. Addressing issues as such have already hit up some arguments known as ‘polyphonic debate’. Systematic approach of empirical research in behavioral accounting is rare, so does the construction of theory is vague. One of the primary works in this line is the research of Peter Armstrong.

In his article ‘the influence of Michel Foucault on Accounting Research’ he tries to delineate some social indicators that are essential in interpretive accounting ^[1]. The first task would be to incorporate the sociological concepts in accounting to understand the implications. Second, the public discourse and the decision-making structure of the management need to be considered. Finally, an approach to reconstruct the behavioral accounting needs to be proposed. To do that, a proper analysis of the development of accounting in the historical content is required. The objectives of this paper are manifold, starting off with the identification of the prevailing problems in the current research methodologies and practices of managerial accounting and explanation of their causes. Later on, the interpretive or naturalistic paradigm of the managerial accounting research is discussed focusing on the areas where this view excels the preceding one. Further, it is demonstrated that although the interpretive view based on adductive reasoning delivers the necessary corrections to the predominant problems of the conservative management accounting concepts and practices, it itself is not free from certain fallacies in scopes that are rather valuable. In this regard afterwards, another critical insight is furnished that can be developed for managerial accounting researches with adequate justifications.

Discussion:

Managerial accounting theories and practices descended as an added dimension in the financial reporting domain of the business. The purpose lies in the fact that financial reporting calls for preparing statements and reports that meet the needs of external stakeholders only, bracketing the uses of internal managers and other parties. Management accounting, as a viable science creates value within organizations of private and public sectors ^[2]. This particular field of science targets the managers who are the internal parties of companies controlling and directing those companies. As a driver of a successful business operation, managerial accounting combines finance, accounting and management functions altogether. Strategic decisions and management processes are backed by management accounting as it uses updated tools and techniques, keeps relating parties informed and establishes controls in the achievement of or deviation from preset goals and objectives ^[3]. The necessity for the theories and practices of managerial accounting can be addressed by focusing on the fact that numerous interest groups need to make frequent decisions in the business ^[4]. Zimmerman (2001) argues that, for a theory to achieve success, it needs to breed value to the users ^[5]. As managerial accounting encompasses the needs of people in general within an organization, it has to be seen as a social science. When critically analyzing the underlying assumptions on which the conventional managerial accounting theories are founded, several criticisms make their way. Fingers are pointed to the fact from different directions to the traditional management accounting concepts and their applications. As a consequence, different versions of visions have emerged over time, namely the functionalism, interpretive or naturalistic and the critical approach ^[4].

Managerial accounting remains to be flourishing as an entirely social practice ^[6]. Although started off with practical concentration, critics agree that it does not have bearing on the rational decision scenarios, resulting in a gap between the theory and application. With the narrow social science methodological base, the typical accounting research barely discusses the social and politico-economic contexts and still lags short of providing with proper bases for such decision making purposes. There are certain limitations concerning the conventional Management Accounting Research. The purpose of managerial accounting research is to gather and interpret managerial accounting data and communicating the transformed data to intend users for the varying purposes. When analyzing the mainstream managerial accounting knowledge and research, doubts might be cast on two aspects. One is the theoretical and technical base on which the management accounting theories are founded and the other is the non-applicability of typical managerial accounting practices often leading to disagreeable consequences ^[6]. It is merely noted that the narrow podium of social science on which the rest of the larger managerial accounting knowledge body is constructed should be blamed for the above two accusations.

First, a critical insight is given to the mainstream texts embodying the managerial accounting theories, practices and methodologies. The conventional text books present the business organizations as a way of achieving the organizational goals and shared interests of the related stakeholders. The texts depict managerial accounting as an empowering and legalizing mechanism, a rather neutral system of providing information to decision making purposes. As a result, the validity and control procedures for such device are not taken into serious consideration. Also, when the goal congruence is at stake and different parts or departments and people in the organization have conflicting interests, management comes as the arbitrator and plays the mediating role. While doing so, management needs information that is the outcomes of managerial accounting system as reflected in the textbooks. When it comes to broadly discussing the relationship between management accounting and the social science, the typical texts again fall behind. With the features of management accounting stated above, it can clearly be called a social science. Horngren (2009) stated that accounting should be related to the social sciences because organizations might have to confront and deal with behavioral or social problems^[7]. On the other hand, the inclusion of such problems and their probable solutions sought by managerial accounting work as the grounds for coming forward with the thought that they rather should be omitted. This is because accounting techniques are by default considered simple and easy to comprehend and they should be preserved that way in the texts. Consequently, the behavioral aspects are left unfolded in the management accounting texts and papers ^[6].

The traditional management accounting view states that this branch of accounting knowledge, like others, addresses the changes in the business atmosphere in an unbiased manner, frequently resulting in the exclusion of subjective issues such as the cultural or ideological concepts of accounting information. Another critical issue is that although textbooks are aware of the managerial control system and the managerial roles, it is regarded that any management dilemma faced by people in the managerial positions might be solved by casual, unscientific observation, rather than the rigorous and exploratory scientific approach. All of these above mentioned problems result in a managerial accounting culture where little emphasis is placed on the related behavioral and social education.

On a secondary note, a skeptical look is laid onto the conventional management accounting research to determine whether similar problems arise in this area. It is well known that most of the accounting theories follow an economic panorama. Within the spheres of this fiscal viewpoint, rests the agency theory which needs to be properly understood if the underlying problems of the conventional research need to be addressed. In general, agents, the management people, work wholly to maximize the interests of their principal, the company, in an agency relationship and correspondence accordingly. Whereas this is the base of the theory, in reality, the situation is more intertwined as both parties want to maximize their self-interest. As organizations mainly concentrate on converting the goal conflict into goal congruence and go through different complex methods to achieve that, the activities of organizations can be compared with the operations of the market ^[8]. This calls for a situation were implied harmony is assumed as well as a need for social control also cannot be overlooked. Subsequently, maintaining these two at the same time again brings out questions regarding the omitted behavioral and societal perspectives of accounting in the conventional research. On one end, organizations and market are looked upon through the same lens, on the other, the underlying operations of the market are tactfully ignored, ultimately neglecting the fact that there can be an inequity in the much acclaimed agency relationship residing within an organization. Different behavioral and socio-economic consequences that might appear as of products for this mismatched agency relation are not looked at proper depth and detail alongside. If all the problematic areas are put together, it might be said that conventional accounting research always opted for not only reflecting accounting policies and practices in a simplified manner but also maintaining the status quo. Complex socio-economic and cultural issues are not covered with the mere justification that they are too complicated to enter the plain and neutral portrayal of management accounting. As a consequence, the role of theories to shape the broad outline and notions of reality is left unchallenged in the mainstream management accounting research.

Naturalism or the interpretive approach of management accounting research indicates something different. When emphasis is diverted from the conventional management accounting research approach and its limitations, much focus is drawn on an alternative paradigm known as the naturalism or the interpretive research. The basic understanding of this approach lies in the fundamental assumption stating reality is subjective – everything gets its meaning on the basis of how people perceive them to be. According to Colville (1981), people act towards things as per the meanings those things carry to them ^[9]. These meanings accompanying such things are the outcomes of the interaction in society leading to shared explanations of reality. Consequently, management accounting is regarded as unnatural phenomena and social actors are believed to be able to alter social accounting practices. Everything is considered from a idiosyncratic point of view held by the participating actors in the society. While social interaction remains the primary focus of this approach, right up front fact that all organizations have definite goals faces difficulty. The prejudiced view point here explains this situation as the one when all the social actors try to direct the work and resources in the way they perceive to be right. As a result, goals are rather regulating devices that need negotiation among the people in the organization ^[3].

Likewise the portrayal of organizational goals, different spheres of management accounting is looked upon differently under the naturalistic depiction of managerial research. Management accounting itself is judged as a process where certain parties negotiate perceived meaning rather than a representation of reality. Along with this varied conception comes the question as to whose interests are used as management accounting if interpretive approach comes into play. This way opts to disclose all the related disputes and discords that might be present in an organization. Within naturalism, the question about which party is going to be affected because of such disputes is left out relatively open the social settlers.

Although following the naturalism approach has led to some comparative advancement in the arena of managerial accounting research, some recent studies indicate the limitations of such interpretive perspective of accounting. It is analyzed that even with the exposition of factions and conflicts of the organization; little judgment is used to reveal the causes of such conflicts. The financial implications of any particular social phenomena cannot be addressed by mere dependence on naturalistic approach. It needs the labor process theory as well in doing so. On that note, it can be said that while emphasizing the broad societal context, the naturalistic or interpretive approach fails to think through the micro level. Moreover, conservative bias might pop up as a by-product if the interpretive approach is used in which the sole focus is given on the related party’s personal judgment and rationale. Conservative bias occurs when in any definite problem or experiment, more weight is given on the prior distribution and less than required on the new sample evidence. Hence, in the event of a conflict, accounting is not considered as a mechanism for control and change since broader distributional and structural issues relating to a social event are neglected. In one hand, accounting knowledge tries to anticipate different meanings beforehand and the other, the role of accounting as a subjective control is largely ignored by naturalism. This can be seen when the same accounting data are used differently by people who hold rather different positions in the organizations, yet the question regarding how these positions and structures affect the established accounting practice is not answered in the naturalistic approach.

Therefore, it can be said that the key questions unanswered by the conventional approach of management accounting research still lack some proper explanations and major focus areas when they are put under the light of the naturalistic approach. While the societal interaction has been the focus of analysis, diving into the institutional level has not been done on this approach. Also, as discussed earlier, the causes as to the persistent conflicts are not adequately examined. Management accounting is considered a process where associated people share meanings, but how the power works and what are the control mechanisms are not discussed deeply. Overall, the interpretive approach of management accounting research fails to address fully or partially several issues including one that asks whose interests are actually met by management accounting. As a result, a whole new different light is given on these issues from a different perspective which might be termed as a labor process approach to management accounting. In addition, frequently, accountants are honored to contribute to the information such as the financial statement on the basis of which economic and managerial determinations are based. The International Accounting Standards Board (IASB) project report, "The primary users need information about the resources of the entity not only to assess an entity's prospects for future net cash inflows but also how effectively and efficiently management has discharged their responsibilities to use the entity's existing resources" ^[10].

Such prominent importance is put on the use of accounting in the commercial industry despite the upshot of trust has continually been the primary problem. Donald Mackenzie indicates, "Trust in numbers, however, works only if those who produce the numbers can be trusted” ^[11]. Evaluating and comprehending the primary ideas of accounting is notably significant as they ascertain the conventional arrangements of accounting in which utmost of the formed theory is based on. It acquaints the principles of accounting that gives the perception of intentions behind all settlements. In accounting, it has an obligation to attend the prescribed formation that the pre-factual arguments can be employed. The theory can be principle transferable and convertible yet in accounting, criteria are pre-established in the permissible form of principles that must be obeyed. This may appear trivial as most other sciences concern in a presented model though it renders distinct motivation: experts can proceed to explore information at a paradigmatic degree still accountants are restrained and barely able to appreciate about particularities in a way that is compatible with the existing information.

The term 'technical' is in connection to accounting practice as employing procedures of knowledge construction that are usually and frequently genuine. It can be consulted on numerous accepted interpretations of accounting criteria, or from commonly accepted accounting postulates. Therefore, detects a position that the conventional method of forming and settling the controversies is a mechanical one. On the other hand, sociologist Max Weber embraces the term rationalization to explain the progressive improvement in what he describes rationality in societies. Formal rationality is presented as “calculability of means and procedures” ^[12]. Weber illustrates economic rationalization as 'The extent of quantitative calculation or accounting which considers technically possible and which is actually applied' ^[13]. There are ample indications of economic rationalization in the society. Accounting practice is becoming increasingly complicated and strictly observed. This is further supplemented by a growing enrichment of accounting for firms’ managerial procedures.

Nonetheless, because of the constraint of scope, it can support an inadequate embodiment of the responsibilities in assembling new knowledge, accounting being profoundly pre-established and actual standards. Furthermore, when accountants contend, the technocratic officials can refuse any different perspectives. While technocratic support a standardized, quantitative, and the actual system of thinking that can drive to an exclusion of all decrepit area that can have detrimental impact on firms’ economic or managerial decisions. In addition, contrary to technocrats, pragmatic accountants are fairly flexible and admit several potential means while a dispute can be resolved. Matthew Gill argues. ‘Accountants’ foundation tends to confirm a differentiation amid technical education that can be moved in an education center’s classroom and a room for analysis that can only be gained in the business. In addition, the more complicated and technocratic accounting guidance becomes, the further pragmatically accountants need to address their task to get anything done ^[14]. Pragmatic accountants further demonstrate that there needs to be a symmetry between being neutral and leaving the business to function without too several interruptions. Strategic pragmatism and technocrats don’t typically repudiate each other. Particularly in risk evaluation, risk bridges the rift between pragmatic strategy and technicality through shaping policy a technical matter. Niklas Luhmann, in his article “Familiarity, confidence, trust: Problems and alternatives” mentions, the individualism of risk-calculating merchants, learning from the experience, attentive to the news, making decisions on the basis of a well-judged mix of trust and distrust ^[15]. This thought spreads to the technocratic scheme of getting things quantifiable by estimating and assessing the potentialities of probable outcomes.

Conclusion:

Accounting studies have come to serve as a key position within the corporation of cutting-edge economies and societies. Nowadays, within the economic sector in addition to in the public region, organizational sports are established around price-benefit analyses, balanced scorecards, income facilities, discounted cash float analyses, trendy costing techniques, price added accounting, monetary risk calculations and plenty of other numerical varieties of organizational representation and monetary size. In opposition to the heritage of these traits, it is surprising how little interest accounting techniques have obtained in contemporary social thoughts. The origins of empiricism behavioral accounting are indistinct. Recent moves generally begin in difficult to understand style, construct to an important level and in the end generate an output sufficient to depart a perpetual writing. The basis of accounting is the conceptual structure for the expert preparing and auditing of accounts and financial statements. The concerns which occur include the challenge of establishing a reliable and reasonable value of an industry and its assets; the ethical foundation of divulgence and discretion; the measures and instructions required to meet the political exigencies of investors, agents, and other stakeholders. In that sense, accounting, as a discipline asserts that transparency is attainable. Truth plays an essential function in the application of accounting. Consequently, it appears appropriate that conception as a consistent way of assuming truth and fairness is well examined. Some scholars have previously underlined the fundamental role played by the outlook in accounting such as social equity, ethical duty, financial entitlement and so forth. Thus concepts like fairness, justice, equity, and truth have an anticipated place in accounting.

CONFLICT OF INTEREST:

The authors declare no conflict of interest.

References:

1. Armstrong, P. The influence of Michel Foucault on accounting research. Critical perspectives on accounting, (1994). 5(1), 25-55.

2. CIMA. Retrieved from CimaGlobal: (2009, June). http://www.cimaglobal.com/Thought-leadership/Newsletters/Insight-e-magazine/Insight-2009/Insight-June-2009/

3. Breuer, A., Frumusanu, M. L., and Manciu, A. The Role of Management Accounting in the Decision Making Process: Case Study Caras Severin County. Annales Universitatis Apulensis Series Oeconomica, (2013). 15(2), 355-366.

4. de Ara'ujo Wanderley, C. a. Management Accounting Research: Mainstream versus Alternative Approaches. Contabilidade Vista and Revista, (2013). 22(4), 15-44.

5. Zimmerman, J. L. Conjectures Regarding Empirical Managerial Accounting Reserach. Journal of Accounting and Economics, (2001). 411-427.

6. Hopper, T., Storey, J., and Willmott, H. Accounting for accounting: towards the development of a dialectical view. Accounting, Organizations and society, (1987). 12(5), 437-456.

7. Horngren, C. T. Cost Accounting: A Managerial Emphasis. Pearson Education India. (2009).

8. Tiessen, P., and Waterhouse, J. H. Towards a Descriptive Theory of Management Accounting. Accounting, Organizations and Society, (1983). 8(2), 251-267.

9. Colville, I. Reconstructing “Behavioural Accounting”. Accounting, organizations and society, (1981). 6(2), 119-132.

10. International Accounting Standards Board. The Conceptual Framework for Financial Reporting (2010). 2010. IFRS.

11. MacKenzie, D. Empty cookie jars. The London Review of Books, (2003). 25(10), 6-9.Quoted in page 8.

12. Brubaker, R The limits of rationality: An Essay on the Social and Moral Thought of Max Weber. London: George Allen and Unwin. (1984).

13. Weber, M. Economy and society: An outline of interpretive sociology. Univ of California Press. (1978). Quoted in page 85.

14. Gill, M., and ABBOTT, A. Accountants' truth: knowledge and ethics in the financial world. The Accounting Review, (2011). 86(1), 359-361.

15. Luhmann, N. Familiarity, confidence, trust: Problems and alternatives. Trust: Making and breaking cooperative relations, (2000). 6, 94-107.

Received on 30.09.2016 Modified on 12.10.2016

Asian J. Management. 2016; 7(4): 287-291.

DOI: 10.5958/2321-5763.2016.00044.5