The recent report from the ‘Parliamentary joint committee on Corporations and Financial Services’ recommends that the term ‘accountant’ be legally protected, addressing concerns that unqualified individuals can currently claim this title (Parliament of Australia, 2024).
At present, anyone can present themselves as an ‘accountant’, and there are whole lot of accountants with a prefix in front, such as Tax Accountant, Bank Accountant, Insolvency Accountant, Investment Accountant, Government Accountant, Public Accountant, Financial Accountant, Cost Accountants and of course, ‘Management Accountant’. Many of such individuals are not members of a recognised professional body of accountants.
This lack of regulation of the descriptor ‘accountant’ has led to public confusion and complaints directed at professional bodies, which cannot act against non-members. The Parliamentary report claims that protecting the term ‘Accountant’ would ensure that only qualified individuals who are members of recognised professional associations can call themselves accountants, therefore supposedly enhancing consumer trust and accountability (Ravlic, 2024).
The main professional bodies identified in the Report in Australia are Chartered Accountants Australia and New Zealand (CAANZ), CPA Australia, and the Institute of Public Accountants (IPA) — all generalist accounting bodies which have self-regulatory functions. ‘Management Accountants’ are not covered in this particular Australian Parliamentary Report.
However, concerns about membership retention and the need for greater scrutiny of these bodies’ disciplinary processes have also been raised. Ravlic (2024) emphasises the importance of accountability and oversight for professional associations if they are granted legal privileges.
Protecting the term ‘Accountant’
The recommendation to protect the term ‘accountant’ would mean that only individuals who are qualified and members of recognised professional associations can use this title. This change aims to enhance consumer protection and ensure that those providing accounting services meet specific educational and ethical standards. This is certainly true of “accountants’ who are in ‘public practice’, and who regularly meet individual clients for accounting and taxation services. Protecting the term would also reduce the risk of fraud and malpractice by unqualified individuals misrepresenting themselves.
However, accountants in organisations are less likely to be unqualified individuals, as they would have some time in their life obtained an accounting degree or recognised professional qualification. The problem is that these ‘once-qualified accountants’ (let’s call them OQAs) may not have kept up to date with their ‘continuing professional development (CPD) requirements. Many OQAs have even stopped paying their membership fees, so do not come under the scrutiny of their former professional bodies.
Professional Bodies
For professional bodies, the legal recognition of ‘Accountant’ should come with increased scrutiny over their disciplinary processes to ensure they uphold high standards of practice. This could involve regular reviews by parliamentary authorities to assess their effectiveness in managing member conduct and protecting the public interest.
Professional bodies would need to implement rigorous monitoring and enforcement mechanisms to uphold their standards and ensure accountability among their members. Further, they would need to significantly beef up their CPD offerings and monitoring to ensure that members stay current. However, it is the opinion of many in the profession that the CPD regulations of accounting professional bodies are woefully inadequate (De Lange, et. al., 2015).
Clearly, regulating every variation of the term “accountant” poses significant challenges due to the diversity of roles and responsibilities associated with the profession. The term can encompass a wide range of specialties, such as tax accountants, forensic accountants, and management accountants, each requiring different qualifications, skills, and regulatory standards. Additionally, variations in state and national laws regarding licensing and certification in some countries (e.g. USA) create a complex regulatory landscape. This variability complicates the establishment of a unified regulatory framework, potentially leading to inconsistencies in the professional standards and practices across jurisdictions.
Whilst the financial accounting and auditing professions have attempted to install a unified regulatory framework for financial reporting called the International Financial Reporting Standards (IFRS), even here there is a lack of consistency. The USA mainly still reports with Generally Accepted Accounting Standards (GAAP). In management accounting, the strategic nature of decision-oriented reports prevents such a unified regulatory framework. Also, there is significant variation across the globe on how both generalist and management accountants are educated, trained, and kept up to date.
Should the term ‘Management Accountant’ be protected by statute?
Very few management accountants, if any, provide their services directly to the public. They instead work in a range of organisations and provide decision support information of a more strategic nature. Management accountants are employed across a wide range of industries due to their essential role in strategic financial planning and analysis, and increasingly in the areas of Environment, Society, and Governance (ESG). Key industries in which management accountants are found include:
- Manufacturing: Management accountants help analyse production costs, budgeting, and resource allocation to improve efficiency and profitability.
- Healthcare: They assist healthcare organisations in financial management, budgeting, and cost control while ensuring compliance with regulations.
- Retail: Retail companies rely on management accountants for inventory management, sales forecasting, and analysing profit margins.
- Financial Services: In banks and investment firms, management accountants focus on performance analysis, budgeting, and risk management.
- Technology: Tech companies use management accountants to evaluate project costs, manage budgets, and support strategic decision-making.
These industries benefit from the expertise of management accountants in driving financial effectiveness and operational efficiency.
Career paths available for management accountants can vary widely based on their skills, experience, and interests. Some common career paths include, amongst others, (a) Cost Accountant; (b) Budget Analyst; (c) Financial Analyst; (d) Financial Controller; (e) Environmental and Sustainability analysts; and (f) Chief Financial Officer (CFO).
Properly qualified management accountants typically should have the following qualifications:
- Educational Background: A bachelor’s degree in accounting, finance, business administration, or a related field is essential.
- Professional Certification: Undergoing a rigorous training program post-degree to obtain certifications such as Certified Management Accountant (CMA), or similar credentials, which demonstrates expertise and commitment to the profession is essential.
- Experience: At least 5 years of practical experience in business accounting or finance roles, increasingly in strategic decision-making, is essential.
- Continuing Education: Ongoing professional development through workshops, seminars, and courses is important to stay updated with industry standards and practices is also essential throughout their careers.
These qualifications help ensure that management accountants have the necessary knowledge and skills to provide valuable insights to organisations. Unfortunately, many claiming to be qualified management accountants may not actually be adequately qualified as per the above requirements in order to provide the best advice to their own organisations or their clients.
For example, in Australia, many calling themselves ‘management accountants’ have only a ‘generalist’ accounting qualification from CAANZ, CPA Australia, and IPA. Most of them would have done just one subject in management accounting in their professional courses. This is hardly enough to keep pace with the fast-moving professional requirements needed of today’s ‘strategic management accountants’ and ‘environmental and sustainability analysts’.
Even those that have a specialist management accounting qualification may not be adequately trained. For example, the Chartered Global Management Accountant (CGMA) qualification from AICPA & CIMA does not always require a degree. In fact, many CGMAs have been ‘grandfathered’ in with only a generalist CPA qualification. Further, many senior executives without any management accounting experience have gotten their CGMA qualification without doing any theory—only by sitting one case study. In the case of CMAs from the Institute of Management Accountants (IMA), they offer their CMA course to first-year accounting degree students in their first semester of study. They can complete all their CMA training even before they get their degree.
Only the CMAs from the Institute of Certified Management Accountants of Australia & New Zealand (CMA ANZ) have a compulsory degree requirement and 5 years of business experience in addition to a rigorous training program in strategic cost management and strategic business analysis. The CMA qualification from CMA (ANZ) also has the NZ Government’s equivalency recognition at the master’s degree level.
What is the role of a management accountant in a business?
The role of a management accountant in a business includes several key responsibilities:
- Budgeting and Forecasting: Management accountants are involved in preparing budgets and forecasts, helping businesses plan for future financial performance and allocate resources effectively.
- Cost Analysis: They analyse costs associated with business operations, identify inefficiencies, and recommend strategies to improve profitability.
- Financial Reporting: Management accountants prepare internal financial reports that provide insights into the company’s performance, assisting management in decision-making.
- Strategic Planning: They contribute to strategic planning by providing financial insights, analysing market trends, and assessing the financial implications of new initiatives or investments.
- Risk Management: Management accountants assess financial risks and help develop strategies to mitigate those risks, ensuring the organisation’s financial stability.
These functions are crucial for informing management decisions and supporting the overall financial health of the organisation, and therefore it is crucial to ensure that these professionals are properly educated, trained, and have kept themselves informed and up to date with monitored CPD activities.
How does a management accountant differ from a financial accountant?
Management accountants and financial accountants serve different roles within an organisation, and their focuses differ significantly:
- Focus of Work: Management accountants primarily focus on internal processes, providing information and insights that help management make informed decisions about operations, budgeting, and strategic planning. In contrast, financial accountants focus on producing external financial reports and statements that comply with regulatory standards for stakeholders such as investors, creditors, and regulators.
- Reporting: Management accounting reports are typically forward-looking, including forecasts and budgets, and are used for internal decision-making. Financial accounting reports are historical and provide a summary of the organisation’s financial performance over a specific period, like balance sheets and profit and loss statements.
- Regulatory Compliance: Financial accountants must adhere to stringent accounting standards and regulations (like GAAP or IFRS), while management accountants have more flexibility in the methods they use, as their reports are primarily for internal use.
- Skills and Tools: Management accountants often require skills in data analysis, strategy, and operational planning, using tools like budgeting software and performance management systems. Financial accountants focus more on compliance, auditing, and reporting tools.
These distinctions highlight the complementary roles both types of accountants play in supporting an organisation’s financial health.
Pros of Protecting the Term ‘Management Accountant’:
- Consumer Protection: Protecting the term ensures that only qualified individuals can call themselves management accountants, reducing the risk of unqualified practitioners misleading businesses and other organisations.
- Professional Standards: It establishes a clear standard of qualifications and ethics that must be met, enhancing the credibility of the profession.
- Market Differentiation: A protected title can help distinguish qualified management accountants from other financial professionals, aiding businesses in making informed hiring decisions.
- Accountability: With statutory protection, there would be a formal mechanism for accountability and recourse for consumers who experience issues with management accountants.
Cons of Protecting the Term ‘Management Accountant’:
- Increased Regulation: Implementing legal protection may lead to bureaucratic hurdles and increased regulation that could burden both practitioners and businesses.
- Limited Access: It could restrict access to the profession for capable individuals who may not meet formal requirements but possess relevant experience and skills. [CMA ANZ provides membership alternate pathways for these individuals.]
- Potential for Overlap: There may be confusion over roles if multiple titles are similarly protected, leading to overlaps in responsibilities and qualifications. This would be particularly significant in the areas of business valuation and environmental, social, and governance (ESG) areas.
- Administrative Costs: The cost of enforcing the protection and maintaining compliance with oversight bodies may be high for professional associations and could lead to increased fees for members.
How can I verify an accountant’s qualifications?
To verify an accountant’s qualifications, potential employees or consulting clients can take several steps. First, request to see their credentials, including degrees, certifications, and proof of membership in a recognised professional body, such as CMA (ANZ), CAANZ or CPA Australia. One can also check the professional body’s website or contact them directly to confirm the accountant’s membership. However, many of these professional bodies do not have strict CPD monitoring requirements so the quality is variable.
Summary
The complexities surrounding the regulation of accountants stem from various factors, including the differing qualifications required for specific accounting roles, the myriad of industry standards that exist, and the evolving nature of financial practices. Each specialisation within the accounting field has unique requirements that may not align with a one-size-fits-all regulatory approach. Additionally, the influence of technology and globalisation introduces new challenges, making it increasingly difficult to maintain consistent standards across different regions and markets. As a result, any attempt to regulate the term “accountant” must navigate these multifaceted issues to ensure both accountability and professional integrity.
References
De Lange, Paul; Jackling, Beverley; and Suwardy, Themin (2015). “Continuing professional development in the accounting profession: Practices and perceptions from the Asia Pacific region.” Accounting Education. 24, (1), pp. 41-56.
Parliament of Australia (2024) Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry, Report – November. https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Corporations_and_Financial_Services/ConsultancyFirms/Report
Ravlic, Tom (2024), “Protecting the term ‘accountant’ in law must come with parliamentary scrutiny”, The Mandarin, November 15. https://www.themandarin.com.au/281593-the-term-accountant-must-come-with-parliamentary-scrutiny/