Organisational Context of Management Accounting Essay - 1

Organisational Context of Management Accounting - Essay ExampleAgency scheme has been considered as one of the signifi so-and-sot theoretical paradigms in steering accounting dust for the last 25 years. This theory is real with the notion of conflicting aims between two groups, primarily agents and principals. One of the significant features of the agency theory is that it allows accounting researchers to unambiguously integrate conflicts of interest, incentive problems and mechanism to control incentive problems (Lambert, 2007). The objective of this theory is to structure the contractual connection between the two groups the agents take actions to exploit the welfare and benefits of principals. At the fundamental level, agency theory is utilised in accounting research in order to address two issues. The important issues touch on accounting, information and compensation structure that affects incentive problems and the other significant issue is the presence of incentive probl ems that incline the structure and design of information, compensation systems and accounting (Lambert, 2007). On the other hand, agency theory fails to explain that the reason between the agent and the principal is flexible in nature. This is a well known fact that principals employ to possess shortage of information and are restricted in their sense of rationality however, they are sensible that incentive related problems exist, when the contract takes place (Hauswirth, 2006). This theory can be applied in this trip to understand the impact of budget cuts on the universities. The level of autonomy, as well as academic acquaintance in universities and colleges vary thus it has been considered that universities act as agents, while the government acts as the principal (Auld, 2010). The eventuality theory develops an expressive theory of management accounting systems (MAS). It implies that the effectiveness of a management accounting system is based on the structure of the orga nisation. According to this theory, the organisational structure is based on the environment and technology of the organisation. The cosmos of MAS enhances the effectiveness of managerial process which is dependant on the structure of an organisation. Along with the environmental and technological chemical element the structure of the organisation is also controlled by the situational attributes (location of information). In a certain environment where technology is issue, there is an influence of external information. In an uncertain environment with non-routine technology, the information is considered to be internal. The decentralised office staff is suitable for the contingency model where the environment is uncertain or technology is non-routine. When environments are certain or technology is routine, centralised authority is suitable (Martin, 1983). The contingency theory fails to explain the resemblance in the systems of management accounting across organisations. Further more, this provides little assistance in designing an organisational structure (Graubner, 2006). Various aspects of this theory can be applied to the case. The structural alteration in universities is dependant upon the situational calculate and based on the situational factor the decision making process of the boards can be changed. Hence, it can be concluded that the structural alte