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Accounting for organizational control

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Accounting for Management Control


This chapter sets out the main features of the organizational context within which accounting controls operate. Organizations use many different types of control to coordinate their different activities, but accounting provides a convenient language for discussing the impact of a wide range of disparate activities. However, accounting information is inevitably used in conjunction with less routine, more informal and more qualitative information in decision making and control. A model of control is advanced which allows four necessary conditions for control to be derived; the adequacy of accounting controls is assessed against these four criteria.

A predictive model is central to every controlled process. Where such a model is weak, decisions become non-programmed and control becomes more dependent upon managerial judgement. Clear objectives are also necessary for effective control, but in most organizations goals are ambiguous and subject to political compromise. In these circumstances, control is effected by ensuring that agreed plans of action are implemented rather than by the use of guiding objectives.

The patterns of organizational control observed in practice vary according to the nature of the organization being studied. Business organizations are predominantly utilitarian in nature, and thus reliant on negotiated bargains as their main control device, although this varies across organizations and with managerial level. Control at lower levels is often more coercive in nature; at higher levels it may become more normative.

Finally, issues in the measurement of performance are discussed, together with the meaning of notions such as economy, effectiveness and efficiency. Accounting information serves a central role in organizational control where it provides a means of quantifying over-all performance. By contrast, in organizations where performance cannot be captured in accounting terms (e.g., public sector services), its role in control is much more restricted. However, even in business organizations having overall profit goals, accounting information is only an imperfect measure of the performance and needs to be used with a degree of sensitivity and care.

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© 1990 Clive Emmanuel, David Otley and Kenneth Merchant

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Emmanuel, C., Otley, D., Merchant, K. (1990). Accounting for organizational control. In: Accounting for Management Control. Springer, Boston, MA.

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  • Publisher Name: Springer, Boston, MA

  • Print ISBN: 978-0-412-37480-7

  • Online ISBN: 978-1-4899-6952-1

  • eBook Packages: Springer Book Archive

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