Bernardus Alan Handoko

11/311392/EK/18212
IUP Accounting 2011

CHAPTER 9
BEHAVIORAL AND ORGANIZATIONAL ISSUES IN
MANAGEMENT ACCOUNTING AND CONTROL
SYSTEMS
Summary:

Management Accounting and Control Systems (MACS)

MACS generates and uses information that helps decision makers assess
whether an organization is achieving its objectives. The term control refers to
the set of procedures, tools, performance measures, systems, and incentives
that organization use to guide and motivate all employees toward
organizational goals.
The process of keeping organization in control consists of 4 stages:
o Plan : Develop organizations objectives, choose activities, select
measures
o Do
: Implement the plan
o Check : Monitor by measuring and evaluating the systems current
level performance
o Act
: Take actions to return system to an in-control state

Characteristics of a Well-Designed MACS

o Technical Considerations
Consists of 2 factors:
1. Relevance of the information generated
Measured by 4 characteristics:
a) Accurate
Inaccurate information is not relevant or useful for
decision making because it is misleading.
b) Timely
Accurate information that is late is also of little use for
decision making.
c) Consistent
Consistent framework means can be applied globally
across the units or divisions of an entity.
d) Flexible
Designer must allow employees to use the systems
available information in a flexible manner.
2. The scope of the system
The scope has to be comprehensive and include all activities
across the entire value chain of the organization.
o Behavioral Consideration
Four major behavioral characteristics should be considered when
designing a MACS:
1. Embedding the organizations ethical code of conduct into MACS
design.

Bernardus Alan Handoko

11/311392/EK/18212
IUP Accounting 2011
2. Using mix of short and long term qualitative performance
measures.
3. Empowering employees to be involved in decision making and
MACS design.
4. Developing an appropriate incentive system to reward
performance.

The Human Resource Management Model of Motivation

HRMM introduces a high level of employee responsibility for and participation
in decision in working environment.
The Organizations Ethical Code of Conduct and MACS Design
o Avoiding Ethical Dilemmas
The hierarchy is listed descending order of authority. However, an
action that is legally and socially acceptable, such as strategically
underestimating product costs, may be professionally acceptable and,
in turn, unacceptable to the organization and its employees.
o Dealing with Ethical Conflicts
Organizations that formulate and support specific and unambiguous
ethical codes can create an environment that will reduce ethical
conflicts.
o The Elements of an Effective Ethical Control System
The elements should include the following:
1. A statement of the organizations values and code of ethics
written in practical terms.
2. A clear statement of the employees ethical responsibilities
for every job description and a specific review of the
employees ethical performance as part of every
performance review.
3. Adequate training to help employees identify ethical
dilemmas in practice and learn how to deal with it.
4. Evidence that senior management expects organization
members to adhere to its code of ethics.
5. Evidence that employees can make ethical decisions or
report violations of the organizations stated ethics.
6. An ongoing internal audit of the efficacy of the organizations
ethical control system.
o Steps in Making an Ethical Decision
1. Formal training.
2. Gathering facts related to particular decision and evaluating
alternative courses of action.
o Motivation and Congruence
Three dimension of motivation:
1. Direction
2. Intensity
3. Persistence
o Task and Results Control methods

Bernardus Alan Handoko

11/311392/EK/18212
IUP Accounting 2011
: Process of finding ways to control human

1. Task Control
behavior
2. Results Control : organization has to have clear objectives in
order to be effective