Question

UNIT 1 Learning Activity 1 (LA1): Cowboys and Managerial Accountants "Can you imagine accountants as American cowboys of the Wild, Wild West in the 1800s? I can. And they can be dangerous. Yeehawl Yippee-i-o-l-al" (Cokins, 2013) One of the readings this week is an article published in a blog by Business Finance which compares managerial accountants to cowboys in the Wild West. The main argument provided by the author stems from the many rules imposed on financial accountants and the comparative lack of rules for managerial accountants. In BUSI 1043 (Financial Accounting) you may have learned about the effects of Enron, World Com, and Arthur Anderson as well as many other companies who committed fraud and the resulting impact/creation of governing bodies. As a result of such scandals, many accounting standards were created with the purpose of trying to mitigate the risk of fraud occurring in the future. However, there are very few rules and regulations for managerial accountants (similar to the cowboys of the Wild West). Do you agree or disagree with the author's arguments? Please provide your thoughts and analysis in class during the discussion. The instructor may split the class into two groups (an "Agreeing" group and a "Disagreeing" group), so prepare to take a position that may be different than your initial opinion.

Answer 1

I agree with the author’s arguments and indeed managerial accountants can be compared to cowboys in the Wild West due to very few rules and regulations that are imposed on managerial accountants.

The main premise of my argument is that the practice of managerial accounting lacks regulation and the situation is similar to the situations of cowboys of the Wild West. For instance managerial accountants can allocate overhead costs to product costs based on a single broad factor with no cause or effect relationships to products. The managerial accountants can do such allocation without any restrictions while the financial accountants, on the other hand, cannot do such allocations freely as they are subjected to various regulations. As such the level of accountability is very low for managerial accountants when compared to financial accountants. While each company has its own set of rules with regards to managerial accounting there is no centralized system for regulation for the practice and profession of managerial accounting. This is unlike the practice and profession of financial accounting which is highly regulated in nature. The practice of managerial accounts and the profession is not regulated by a governing body and hence this makes their functioning and situation quite similar to that of cowboys in the Wild West.