Critical Review of the Traditional Paradigm

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Critical review of the Traditional Paradigm of Management Accounting Arnold and Hope (1983) defined that management accounting is considered to provide the information to managers to assist them to make decisions about the ways in which an organisation’s resources should be allocated. Puxty (1998) said that a framework should be provided because of many different approaches that can be taken to define a subject. Also, in order to understand management accounting, it is necessary to study the assumptions and reasoning behind the various frameworks (Puxty, 1998). Therefore, Puxty (1998) categorised a wide variety of perspectives on management accounting into five frameworks, which are the traditional paradigm, the systems movement, the interpretative approach, radical critique and universal abandon. The traditional paradigm will be primarily explained and discussed in this paper. Puxty (1998) referred to conventional management accounting as the traditional paradigm that has philosophical roots. The definition of Management Accounting made by Arnold and Hope, in some ways, reflects the characteristics of the traditional paradigm. In this paper, six typical characteristics of traditional paradigm will be identified and explained in detail. And then the validity of these characteristics will be discussed with the relevant examples. There are six characteristics of Management Accounting’s Traditional Paradigm being described and explained with respective examples. Simultaneously, the traditional paradigm of management accounting has come under critical review, which has resulted in many accountants and others beginning to question the current validity of the management accounting practices currently utilised by many organisations. Therefore, the overall validity of these characteristics will be discussed and illustrated with relevant examples after the description of each character. The first characteristic is that management accounting is framed from the perspective of the organisation (Puxty, 1998). Management accounting takes place within an organisation which means that business activities concerning about management accounting should be considered from the organisation’s viewpoint. Specifically, the problems and the solutions are both defined and evaluated from the point of view of the organisations. As for the statement of Arnold and Hope (1983), the management accounting is suggested to focus on the provision to make decisions about the organisations. It is also from the organisation perspective. An example will be provided to illustrate this characteristic. A phrase “dysfunctional behaviour” came out in the light of budgeting behaviour by the members of the organisation. This term was defined as being what seems to be harmful to the organisation. Take budget biasing as example, it is regarded as dysfunctional because it made the organisation unable to lead the manager towards making effort which would be beneficial for the organisation (Puxty, 1998). It seems that the characteristic which is to treat the organisation as a closed system in effect (Puxty, 1998) is similar to the organisational orientation. It will be discussed with the characteristic of managerial orientation. The traditional management accounting tends to disregard the existence of the environment of the organisation and the interaction between the different components within the organisation. It could be said that the management accountants rarely concern about the outside factors. For instance, although cost-volume-profit analysis deals with the interaction among the various elements within the organisation it still ignores the organisation’s interaction with other organisation. A second example is the pricing models. These models are rarely or never built in the dynamics that result from the change in price which is derived from a change in cost. They omitted these interactions (Puxty, 1998). In respect to the validity of organisational orientation...
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