The contingency theory of management accounting and. Request pdf the contingency theory of management accounting and control. The contingency approach to management is grounded in fielders contingency theory of leadership effectiveness. The contingency approach to management accounting is based on the premise that. Contingency theory in manage ment accounting describes the situational factors and portrays that management accounting system is contingent upon such factors in reality.
It drew heavily on the contingency theory of organizational structure which had been developed over the previous twenty years to codify which forms of organizational structure were most appropriate to specific circumstances. According to this theory, there is no particular managerial action or organizational design that is appropriate for all situations. Working mainly from the literature of modern organization theory, it was. In the context of management accounting, contingency theory is based on the premise that there is no universally appropriate accounting system that applies. Pdf explored and critique of contingency theory for. Smith environment,theparentcompanyifrelevantandmarketconditions,respectively seemitchelletal. Contingency factors and accounting information system. The idea of a contingency theory of management accounting began to develop in the 1970s in an attempt to explain the varieties of management accounting practice that were apparent at that time. Based on a tenyear field project, over 250 interviews with senior risk officers, and three detailed case studies, we put forward a contingency theory of erm, identifying potential design parameters that can explain observable variation in.
The independent variables used to explain organizational structure were often transferred wholesale into the emerging theory of management accounting to. Contingency approach helps to understand that management activity such as planning, controlling, leadership, or organization are completely dependent on the circumstances. It is concerned with revenues, expenses, assets and liabilities of a business house. These typically include the environment, technology, size and structure of an organisation, but recently strategy and national culture have been added chenhall, 2003. A managerial perspective on management accounting system adequacy gap. A contingency theory is an organizational theory that claims that there is no best way to organize a corporation, to lead a company, or to make decisions. Towards a contingency theory of enterprise risk management. Situational and contingency theories of leadership. It is the if and then approach to management, if represents the independent variable and then. Contingency theory free download as powerpoint presentation. This study uses a quantitative methodology to explore the impact of contingency factors on use of strategic management accounting techniques sma, and combined impact of sma usage and contingency factors on organisational performance in a less developed country ldc context. A model to evaluate variables impacting the productivity of software maintenance.
In a general sense, contingency theories are a class of behavioral theory that contend that there is no one best way of organizing leading and that an organizational leadership style that is effective in some situations may not be successful in others fiedler, 1964. The view that there is no single management accounting system acceptable to all organizations or any system that is satisfactory in all circumstances in a single organization. Contingency theory of management accounting oxford reference. Studies integrating transaction cost economics and contingency theory, by widener 2004, gerdin and greve 2004 explored forms of contingency fit in management accounting research. The impact of contingencies on management accounting. Cognitivecontingency theory and the study of ethics in. The contingency approach is a management theory that helps the manager to adopt the best management style is dependent on the context of the situation. Inthecompanionpapertothisone,sathe1974clearlypointsout,that adventofcontingencytheoriesoforganizationstructure,andthe researchthesetheorieshavestimulated. By surveying the development and content of these theories it is argued that they have been based on an inadequate and insufficiently articulated model.
Contingency theory in management accounting describes the situational factors and portrays that management accounting system is contingent upon such factors in reality. It is argued that stances in which an organisation finds itself. A contingency theory perspective on the risk management control system within birmingham city council. Towards contingency theory of accounting information in the. The intent and implications of hayess research were to provide a sufficiently rich description of organizational subunit performance so as. The contingency theory of managerial accounting created date.
Thus the contingency approach is an important a contingency theory must identify specific development in the theory of management aspects of an accounting system which are accounting. Download fulltext pdf download fulltext pdf download fulltext pdf explored and critique of contingency theory for management accounting research article pdf available. I january 1977 the contingency theory of managerial accounting david c. Contingency formulations of organizational structure. Fiedlers contingency theory of leadership explains the 3 elements affecting the relationship between leadership style.
The contingency theory is simply an extension of the systems organizational theory. Contingency theory of leadership holds that people become leaders not only because of their qualities but also because of various situational factors. It drew heavily on the contingency theory of organizational structure which had been developed over the previous twenty years to codify which forms of. The literature has shown that contingency theory is applied in management accounting research in order to address three types of questions. An expanded view of contingency theory is that the structure of an organization depends on the companys technology and environment and the effectiveness of the management accounting system is contingent on the organizations structure.
The contingency theory explains that there is no easy and exact answer when dealing with employees. Strategic management accounting practices in palestinian. The technique of management depends on complexity of the situation. The contingency theory of managerial accounting jstor. The appropriate management accounting system is contingent on the external environment. Consequently, accounting systems are contingent upon the circumstances that prevail at any time. Situational factors or contingent factors vary organization to organization and it is impossible to describe and spell out the character of management accounting in the. Instead, the optimal course of action is contingent dependent upon the internal and external situation. The use of contingency theory in management and accounting. Some of the major limitations of contingency approach are as follows.
A theoretical model is offered using cognitive and contingency field theories to gain insight into how ethical considerations enter into. Chenhall discusses contingency theories from a functionalist perspective where the assumption is that management control systems are developed, or adopted to aid in achieving desired organizational goals and outcomes. Cheapo toys needs to figure out what exactly is causing the employee turnover. Financial accounting has twofold objective, viz, 1. The article comments on the paper the contingency theory of managerial accounting, by david c. Fred luthans the contingency theory of management a path out of the jungle fred luthans is a faculty member in the department of management at the university of nebraska, lincoln. Pdf the contingency theory of management accounting. Management theory has taken divergent paths in recent years. Pdf on jul 3, 2018, naziru suleiman and others published explored and critique of contingency theory for management accounting research find, read and cite all the research you need on. Advantages and disadvantages of contingency approach to.
These studies mirror early contingency research in managerial and accounting research, which simply examined whether various plausible contingent factors. Towards a contingency theory of enterprise risk management anette mikes1. Although contingency theories of management accounting, both formulations were developed in the organisation empirical and theoretical, is outlined and. By surveying the development and content of these theories it is argued that they have been based on an. Working mainly from the literature of modern organization theory, it was possible to develop a model of organizational performance for. Prices 1968 inventory of findings in the area notes that most of the. The contingency theory of management accounting and control. Contingency theories of management accounting have become a current vogue but have produced few significant new results. T1 the contingency theory of management accounting and control. In fact, the design, as well as the managerial decision, depends on the. N1 this is the authors version of a work that was accepted for publication in management accounting research. Contingency theory in management accounting describes the situational factors and portrays that management accounting system is.
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