The Kings of a Castle in the Air - A Constructive Study on an Accounting Process in a Large Traditional Manufacturing Company
KOIVUNIEMI, NIKO (2013)
2013
Yrityksen taloustiede, laskentatoimi - Accounting and Finance
Johtamiskorkeakoulu - School of Management
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Hyväksymispäivämäärä
2013-05-22
Julkaisun pysyvä osoite on
http://urn.fi/urn:nbn:fi:uta-1-23664
http://urn.fi/urn:nbn:fi:uta-1-23664
Tiivistelmä
Business processes are getting more and more complicated as the business world itself grows in versatility and complexity. Managing them is a core task in today’s enterprises. At the heart of business processes is the accounting process, linking the monetary and real worlds. Accounting processes in a company get often overlooked, leading consequently to poor outcomes in real processes. The need for systematic accounting process development is thus well founded.
The research studies ManuCorp, a large public listed company in the traditional manufacturing industry. The accounting process under study is that of operations responsible for sourcing Re-ABC, one of the main raw materials used in ManuCorp’s production process. Re-ABC is a good raw material for production but it is by its nature a difficult material to handle with a short shelf life and requires refining before it can be introduced to the production process, the refining process generating by-products that the company cannot use and has to sell to third parties. ManuCorp senior management has been reluctant to control Re-ABC operations’ development, letting it thus form naturally over time. This development has led to the situation where the accounting process itself is performing poorly, and a need for change is apparent.
The accounting process is studied from three different dimensions: internal environment, process responsibilities and reporting. Enterprise Risk Management theory along with Business Process Management and Business Process Re-Engineering approaches are used to analyse the prevalent accounting process from those three dimensions in creating a new construction that addresses the shortcomings found in the prevalent process. Process-related risks are assessed in the prevalent process along with such key concepts of Enterprise Risk Management as segregation of duties and division of power. The new construction establishes stronger cross-functional accountability and responsibility, strengthens the concept of responsibility accounting in reporting and comments on how the proposed construction could be implemented.
The research proves Enterprise Risk Management, an accounting and auditing theory and Business Process Management, an engineering and management approach work well together when conducting constructive research on an accounting process. Furthermore, the research contests that such concepts as cross-functional accountability, empowerment of stakeholders, clear lines of responsibility and harmonized reporting structures are concepts that can and should be improved and kept at high level in all accounting processes.
Keywords: accounting process, business development, enterprise risk management, business process management, internal environment, reporting structures
The research studies ManuCorp, a large public listed company in the traditional manufacturing industry. The accounting process under study is that of operations responsible for sourcing Re-ABC, one of the main raw materials used in ManuCorp’s production process. Re-ABC is a good raw material for production but it is by its nature a difficult material to handle with a short shelf life and requires refining before it can be introduced to the production process, the refining process generating by-products that the company cannot use and has to sell to third parties. ManuCorp senior management has been reluctant to control Re-ABC operations’ development, letting it thus form naturally over time. This development has led to the situation where the accounting process itself is performing poorly, and a need for change is apparent.
The accounting process is studied from three different dimensions: internal environment, process responsibilities and reporting. Enterprise Risk Management theory along with Business Process Management and Business Process Re-Engineering approaches are used to analyse the prevalent accounting process from those three dimensions in creating a new construction that addresses the shortcomings found in the prevalent process. Process-related risks are assessed in the prevalent process along with such key concepts of Enterprise Risk Management as segregation of duties and division of power. The new construction establishes stronger cross-functional accountability and responsibility, strengthens the concept of responsibility accounting in reporting and comments on how the proposed construction could be implemented.
The research proves Enterprise Risk Management, an accounting and auditing theory and Business Process Management, an engineering and management approach work well together when conducting constructive research on an accounting process. Furthermore, the research contests that such concepts as cross-functional accountability, empowerment of stakeholders, clear lines of responsibility and harmonized reporting structures are concepts that can and should be improved and kept at high level in all accounting processes.
Keywords: accounting process, business development, enterprise risk management, business process management, internal environment, reporting structures