Managerial Accounting Systems in a Multinational Context
The primary body of theory underlying managerial accounting comes from transaction-cost economics
and principal-agent theory. Thus far, your formal study of such theories has not yet taken into account the
additional factors that multinational enterprises face when making organizational design decisions and,
hence, evaluating and designing managerial accounting systems.
This week�s Discussion will address the implications of cross-cultural and cross-border factors with
respect to transaction cost economics and principal-agent theory and, therefore, how managerial
accounting systems must adapt to factors which characterize the multinational enterprise.
By Day 5 of Week 1, post answers to at least two of the following questions:
�How do cultural factors impact managerial accounting system design?
�Is it possible to take an existing domestic managerial accounting system and apply it to an international
or multinational firm? Why or why not?
�Explain how various types of enterprise risk are relevant to designing optimal managerial accounting
systems in cross-border settings.
Cultural factors indeed affect the design of managerial accounting of a firm. This is as a
result of the fact that cultural factors influence the controlling methods of the management. The
impact of the differences is shown by the variations in the extent to which duties and
responsibilities are delegated. In the decision-making process, the managerial accounting design
is greatly influenced by the prevailing cultural factors. The decision-making process is not
participative especially for a global scenario given the varied cultures (Chenhall, R. H.2003).
The level of work standard and monitoring of quality is also affected because of the cultural
factors thus making it a significant challenge in managerial accounting.
Managerial accounting is mainly used by people operating within a given organization or
company. This is because the reports can be generated over any specified period and will bring
in a forecasting value to only those people within the firm. It is, therefore, hard to apply domestic
managerial accounting system in an international perspective. Multinational companies as a
result of a lag in generally accepted accounting principles in managerial accounting choose to
employ managerial accountants with widely recognized certifications (Leidner, et al.,2006).
Firms are increasingly adopting a similar enterprise resource planning systems that are integrated
and standardization software packages. The managerial accounting formats should be analogous
to that of the parent company. A transnational firm can be headquartered in a different country
thus making it hard for its employees to adopt a typical managerial accounting process.
Due to the various enterprise risks in cross-border businesses, the managerial accounting
designed should be optimal and able to accommodate these risks. The global flow of information
is standardized thus limiting the ability to generate information that is locally relevant to the
firm. Companies should, under ambiguity, copy an openly known and appreciated replicas of
managerial accounting operations from each other particularly the profitable companies with
good repute (Leidner, et al.,2006).
Leidner, D. E., & Kayworth, T. (2006). Review: a review of culture in information systems
research: toward a theory of information technology culture conflict. MIS
quarterly, 30(2), 357-399.
Chenhall, R. H. (2003). Management control systems design within its organizational context:
findings from contingency-based research and directions for the future. Accounting,
organizations and society, 28(2), 127-168.