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Should Accountants Have a More Significant Role in Corporate Decision-Making?

Autor:   •  November 6, 2016  •  Research Paper  •  2,339 Words (10 Pages)  •  1,077 Views

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Should accountants have a more significant role in corporate decision-making?

Over last few decades, it is widely realized that accountants are regarded as an essential participant of corporate decision-making. At that time, the most significant role of accounting is collecting and calculating the data of finance. However, as world economic is becoming more unstable, corporate management need accountants to perform extra roles during the decision-making process in order to avoid negative effects of the economic events. Moreover, the increasing pressure of competition in economic integration and the separation of ownership and management firms determines that companies need accounting to provide financial information before making decisions. As a result, accountants should have a more significant role in corporate decision-making by reducing the impact of financial crisis; evaluating the value of firms and monitoring the managers. This essay will argue why accountants should be more significant in corporate decision-making by comparing different roles of accountants in different times. After comparing, it will illustrate three more significant roles of minimizing the impact of a financial crisis; assessing corporate value before making decisions to enhance competitiveness; being relied on by managers after the separation of ownership and management.

It is important first to show the original functions of accountants in order to illustrate why the original functions are not good enough for the decision-making comparing with the roles nowadays. According to Lambert, Sponem (2011), the fundamental roles of accounting are collecting; calculating and analyzing data in last few years. But they also have the roles of making forms and supervising the behavior that is inactive. This means they barely participate in corporate decision-making because they only focus on data for a long time. However, they argue that in order to achieve benefit maximization, it is time for accountants to show the ability of motivating those functions to fulfill the goals of a company. For instance, it is necessary for accountants to make financial statement with the information they collect instead of giving data directly to managers (Frezatti, Agular, Guerreiro & Gouvea, 2011). Furthermore, accountants should be involved in the decision-making process because they are capable to calculate the value of the company rather than calculating data. They also state that the role of analyzing the information needs to be transformed to monitoring the data giver by managers in the company whose ownership and management are separated. That is to say, it is a trend for accountants to take full advantage of other functions in order to meet the requirement of companies and to be a nuclear role in decision-making section.

One of the roles that can make accountants take active part in decision-making to reduce the influence of a financial crisis is analyzing the financial statement before predicting the solvability. The most common issue of a company during financial crisis is low solvability. It is a data to evaluate the ratio of liquid assets and liquid liabilities (Hopwood, 2009). This means if the solvability is above the average, the company is capable enough to survive from a financial crisis. Thus, for the aim of reducing the impact of financial crisis, managers need accountants to rapidly predict the cause of low solvability while making decisions. Hopwood (2009) points out that all the information needed in predicting solvability can be found in financial statement such as liquid assets and liquid liabilities. That is to say, it is very important for accountants to collect data to make financial statement. Due to the effects of every decision, it is necessary for the managers to have accurate financial data in order to reduce the impact of financial crisis (Zimmerman, 2011). For example, the short and long term loans should be judged whether they could be retrieved from borrowers within the required time. Zimmerman states collecting and analyzing the data in financial statement can make the result of predicting the solvability more accurate. Thus, accountants should have a more significant role of analyzing the financial statement to make appropriate decisions in financial crisis.

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