Professional Accountants in Business

A recent report published by the Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC) highlights the diverse roles, competencies and value of the professional accountant in business. The report is entitled The Roles and Domain of the Professional Accountant in Business.

Commenting on the report, Bill Connell, CIMA Council Member and Chair of PAIB, said, “As the only international accountancy body with a sole focus on business, CIMA very much welcomes the clarity that this paper brings. While there is certainly high awareness of the work of accountants in practice and audit, there is a less understood, but equally important role that professional accountants in business play in designing and maintaining mechanisms to assure effective, ethical and responsible corporate governance and control in their organisations.”

Charles Tilley, CIMA Chief Executive, continues:
“Professional accountants in business are instrumental in directing, influencing, evaluating and informing a business. We welcome IFAC’s recognition of the role they play in meeting the principles of Enterprise Governance by balancing corporate governance and compliance on the one hand and business performance and value creation on the other.”
In the IFAC report, a professional accountant in business is defined as someone who meets the standards of a professional. They:

• Have skills, knowledge and expertise tested by examination and continuously developed in a structured and monitored context;
• Are committed to the values of accuracy, honesty, integrity, objectivity, transparency and reliability;
• Are subject to oversight by a body with disciplinary powers;
• Belong to a recognised accountancy body upholding professional standards and approaches the discipline of recording, analysing, measuring, reporting, forecasting and giving advice in support of financial , management and strategic decisions;
• Work in an organisation of any size and ownership structure, or alone, whether or nor operating for profit, other than engaged in audit;
• Are integral members of, or support to, the management team striving to create and sustain value for stakeholders.

Over one half of the 2.5 million professional accountants who are members of the member bodies of IFAC work in business. This includes those who work in commerce, industry, the public sector, education and the not-for-profit sector. Their work, experience and responsibilities are extraordinarily varied and the diagram in Figure 1 has been developed to demonstrate the breadth of roles that professional accountants in business are performing today.

Typical mainstream job titles include chief financial officer (CFO), finance director, financial controller, financial analyst, treasurer, chief information officer, investor relations officer, planning manager, strategy analyst, chief accountant, management accountant, cost accountant, financial accountant, consolidation accountant, internal auditor, compliance officer, project manager, programme manager. Many PAIBs also move on to have more general management responsibilities such as operations director, chief executive officer (CEO), chairman, non-executive director.

Domain of the PAIB

The main activities of professional accountants in business, which are sometimes referred to collectively as ‘management accounting’ or ‘financial management’ can be analysed as:

• The generation or creation of value through the effective use of resources (financial and otherwise) through the understanding of the drivers of stakeholder value (which may include shareholders, customers, employees, suppliers, communities, and government) and organisational innovation.
• The provision, analysis and interpretation of information to management for formulation of strategy, planning, decision making and control.
• Performance measurement and communication to stakeholders, including the financial recording of transactions and subsequent reporting to stakeholders typically under national or international Generally Accepted Accounting Principles (GAAP).
• Cost determination and financial control, through the use of cost accounting techniques, budgeting and forecasting.
• The reduction of waste in resources used in business processes through the use of process analysis and cost management.
• Risk management and business assurance.

These activities are carried out in different modes including directing, influencing, evaluating and informing. Many of the activities are forward looking in nature and have to deal with ambiguity.

The principles of Enterprise Governance require an appropriate balance to be set between corporate governance and compliance on the one hand and business performance and value creation on the other. The professional accountant in business plays a key role in both these dimensions and in optimising the balance between the two.

In performing the above activities, the professional accountant in business draws from a broad base of capabilities, including a deep understanding of the principles of corporate finance, economics and accounting. A successful PAIB will deploy various analytical techniques, including strategic analysis, competitor review, benchmarking, ratio analysis, statistics and risk management. The PAIB has to respect a number of fundamental principles of management accounting such as incremental impact of decisions, opportunity cost and sunk cost.

The PAIB needs to be pragmatic and able to exercise rational, disciplined, objective analysis and judgement to often ambiguous and imperfect information. The PAIB needs to combine a challenging and questioning approach with a high degree of understanding of the business, its market and competitive environment. It is essential that the integrity and ethics of the professional accountant be beyond reproach so that management can rely on their reports, findings and recommendations.

To make a difference to an organisation’s success, the PAIB needs to communicate effectively. Innovative presentation skills have become essential in order to present analysis and recommendation in such a way as to influence decisions.

The activities of the PAIB continue to evolve to reflect the increasing sophistication of techniques and system tools available; the environment within which a business operates; and the need for a business to address its competitive situation.

The roles that PAIBs perform in implementing and maintaining operational and fiduciary controls, providing analytical support for planning and decision making, ensuring that effective risk management processes are in place, and in setting the tone for ethical practices are critical to the reputation and the credibility of the organisation, its management and the accountancy profession.

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This article is extracted with permission from the International Federation of Accountants (IFAC) report on The Roles and Domain of the Professional Accountant in Business, and is contributed by CIMA Malaysia Division.