Financial statements and managerial reports are all very important
for business. However, they have significant difference. b Financial
statements are documented records that communicate the business
activities and financial performance of a company. Financial
statements are usually audited by government agencies, accountants,
companies to provide assurance of accuracy and for tax, financing, or
investment purposes. These are used by investors, market analysts
and creditors to assess the financial health and profit potential of a
company, which used for the external purpose (Murphy). On the
other hand, the managerial reports are focused on the segments of
the business. By segmenting, they can get into the details and
analyze the drivers of the business. Management reports are very
important for CEO to gain insight on specific areas of their business.
They are used for internal purpose (Ross).
The role of the accountant in a company is essential, as both
investors and the company's executive team rely on the financial
statements prepared by the accountant to understand the company's
situation. At the same time, the preparation of management reports
is also important for the company. Some people argue that
accountants should focus on producing the financial statement and
do not involve in the managerial reports, but I do not agree with the
opinion. b On the contrary, I think there are some disadvantages to
doing so. If the accountant is excluded from the design of the
management reports, the accountant misses out on information that
may be relevant to the management team's decisions, thus missing
the opportunity for efficient communication internally. This is likely
to pose a risk to the company's growth. b In addition, information
systems specialists may not have the same experience and relevant
knowledge base as accountants. So, there may be flaws in the
details. If accountants could be included, they could effectively
improve the accuracy and reasonableness of the reports, at the same
time they could make more professional interpretation and analysis.
Accountants should be actively involved in the production of
management reports when available. Accounting information
systems should be effectively integrated with other aspects of the
company's activities. b The inclusion of an accountant ensures that the
reliability of the information generated is maximized and plays an
active role in the company's subsequent decision-making process. b
With the involvement of accountants, the design of managerial
reports can be better developed and formatted to better provide the
required information. In addition, accountants will be better
equipped to answer questions about the data reported in the
financial statements and to provide timely explanations and address
any problems in the relevant content.
Reference:
Romney, M. B., Steinbart, P. J., Summers, S. L., & Wood, D. A. (2020).
Accounting Information Systems (15th ed.). Pearson Education (US).
Murphy, Chris B. August 15, 2022. Financial Statements: List of
Types and How to Read Them
https://www.investopedia.com/terms/f/financial-statements.asp
Ross, Sean. April 30, 2021. How Financial Accounting Differs from
Managerial Accounting
https://www.investopedia.com/ask/answers/041015/how-does-
financial-accounting-differ-managerial-accounting.asp
