Are Certified Accountants Joining the Dark Side?

Are Certified Accountants Joining the Dark Side?

The reputation of certified accountants, perhaps exaggerated, is that they are precise, introverted, and conservative. (Certified accountants are those who have successfully passed qualification examinations.) Whether they are employed by a public auditing firm or by an organization, a certified accountant’s traditional responsibilities have been financial stewardship and assurance of financial accounting compliance with regulatory, statutory, and tax agencies and typically report past historical data.

Generally, certified accountants have not had a reputation for deep involvement with operations, marketing, and sales management nor being a strategic advisor to their executive team, although articles by the media, consulting firms, and IT analysts have been claiming this is a trend and direction for them.

Are the claims becoming reality?

Maybe there is now a glimmer of change. Perhaps certified accountants are increasing in numbers with their transition to expanding from being primarily financial accountants to management accountants and performing financial planning and analysis (FP&A). I have some evidence for this.

Here are some impressions I have from presenting at AICPA accounting conferences in the USA. (As many are aware the AICPA and CIMA created an alliance, the CGMA. I have authored two CGMA books). A first sign of change of this transition from “bean counter to bean grower” is that the number of FP&A sessions at AICPA conferences is increasing. 

However, a much better indicator is the common FP&A themes by the presenters, including myself. At a summary level these themes are:

  • The CFO and controller are indeed becoming more of a strategic advisor.
  • There should ideally be less emphasis on the annual budget and monitoring spending control and more emphasis on analysis, forecasting, and planning.
  • Enterprise risk management (ERM) should be integrated with enterprise and corporate performance management (EPM/CPM) methods.

Which “dark side” do I mean?

When I asked the question in this article’s title if certified accountants are now joining the “dark side” (as with Darth Vader from Star Wars), what I am referring to is the management accounting and FP&A’s side of accounting’s taxonomy neighbored with external financial and tax accounting.

To clarify, external financial accounting is intended for reporting to satisfy regulatory compliance, bankers, and the investment community. In contrast, internal management accounting is for reporting executives, managers, and employee teams to provide insights and to support better analysis and decisions. (Tax accounting is in my mind a digital game somewhat disconnected from economic reality.)

The AICPA has been the USA’s primary professional institute for external financial accounting. Similarly is the Association of Chartered Certified Accountants (ACCA) in the UK. However, in the past few years, both of these professional societies have established partner alliances with premier management accounting institutes. The ACCA with the USA’s Institute for Management Accounting (IMA), and, as earlier mentioned, the AICPA with the Chartered Institute of Management Accountants (CIMA) headquartered in London. Similar partnering has occurred with Canada’s accounting institutes.

My interpretation is that these new joint alliances reflect a shift in emphasis of certified accountants from “valuation” (i.e., external financial accounting) to the more critical need for “creating financial value” (i.e., internal management accounting) by providing insights and facilitating better decisions. 

Certified accountants joining the dark side?

To sum up, yes, this is good news that certified accountants are increasingly acquiring FP&A and management accounting skills and competencies. It is their “Force.” But to clarify the Star Wars “dark side” analogy represented by management accounting, it is actually the “bright side.” Why? Good management accounting, such as activity-based costing (ABC) practices, brings visibility and transparency to product, standard service-line, distribution channel, and customer-related costs and profit margins. Management accounting displays profit margin layers like in an onion skin that are typically hidden with GAAP reporting. With management accounting, internal managers and employee teams gain more insights and foresight to support better decision making.

It has been a long time coming for certified accountants to display high interest in FP&A and management accounting. Hopefully certified accountants will now be like the moths-to-the-flame pursuing analysis. Certified accountants are seeing the light and are expanding their FP&A and management accounting skills and competencies. It is a win-win for both them and the line function managers who they support and who thirst for better information.

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A great article by Gary Cokins. Helping management make informed, data driven decisions is the most important role of the management accountant. Making cost (and its drivers) more transparent through multi-dimensional (ABC) modelling, analysis and communicating the insight effectively is a core skillset for the successful finance professional 'on the dark side'.