M1: Evaluate the Context and Purpose of the Accounting Function in Meeting Organizational, Stakeholder and Societal Needs and Expectations

 

M1: Evaluate the Context and Purpose of the Accounting Function in Meeting Organizational, Stakeholder and Societal Needs and Expectations

Introduction

Sri Lanka's MAS Holdings (MAS) is one of the foremost and biggest textile and garment manufacturers in the country. The company has an extensive international network and large production facilities accommodating a diverse workforce. According to Armstrong (2020), among the reasons for the MAS's fame are the mentioned traits but they also made it a sustainable and responsible player in the eco-system. Basically, Horngren et al. (2018) point out that when it comes to large and complex corporations such as MAS, an efficient and effective accounting department is simply the only way to provide reliable financial data, help in the decision-making processes, and create a picture of the company's performance that internal and external stakeholders can easily understand. Therefore, the accounting role at MAS is essential for keeping the operation going, gaining trust of the stakeholders, and aligning the company's goals with the expectations of the society at large.

Purpose of the Accounting Function in Meeting Organizational Needs

According to Atrill and McLaney (2022), the main reason for accounting to exist in an organization is to render trustworthy financial information that contributes to the decision-making process in all instances. In the case of MAS, management makes use of accounting information about revenues, costs, cash flows, and profitability to develop strategic plans, make resource allocation decisions, and control operations effectively. Horngren et al. (2018) argue that accounting is an irreplaceable tool through which the performance of an organization is assessed and managers are thereby informed if the operational and strategic objectives are met. Through financial reporting that is very detailed, management is able to detect inefficiencies, eliminate risks, and conduct activities that result in productivity and profitability gains. According to Armstrong (2020), besides the fact that accounting helps in compliance with the necessary rules and regulations, it also prevents the organization from incurring legal or financial penalties.

Needles, Powers, and Crosson (2020) point out that accounting actively participates in resource optimization by making it possible to see what is happening with the inventory, regulating the overhead costs, and putting the capital to use in an efficient manner. The functions mentioned above are desirable in a very competitive and resource-demanding industry like the manufacture of apparel as they contribute to the firms being able to keep on making profits and being efficient in their operations. In addition, the very accounting function which has been a barrier to the short-term invasion of companies through accountants, provides the long-term through historical data and financial projections, allowing MAS to decide wisely about the areas of geographical expansion, investments in technology, and product development. Therefore, the accounting function is fundamental to MAS's operational stability, strategic planning, and sustainable growth.

Stakeholder Needs and Expectations

At MAS Holdings, the accounting function is a crucial factor in the credibility, openness, and good relationships among the main informed and assured stakeholders, both internal and external. Grad and others (2014) state that accurate financial data are not only important for organizational decision-making but also for external stakeholder's trust and accountability in the whole organization.

Internal Stakeholders

Armstrong (2020) observes that the management teams in the company are mainly dependent on the accounting function to control and evaluate their performance in the planning process. The mangers at MAS are using the financial data to make the necessary decisions in the areas of investment, expansion, and cost, thus allocating the resources in an efficient way and achieving the organizational objectives at the same time. The management would be taking decisions that are not supported by any reliable accounting information and as a result, the decisions would be very ineffective in terms of both operational and strategic areas.

Atrill and McLaney (2022) elaborate that employees, notwithstanding being internal stakeholders, are also the ones who enjoy the benefits of the transparent accounting practices, and thus they should be counted as the major internal stakeholders. Right financial reporting gives employees the assurance about the financial soundness of MAS and the presence of such assurance provides the bond of confidence in the very important areas of job security, continuity of operations, payment of salaries and bonuses on time, and career development. By being transparent, MAS not only wins the trust of employees but also engages them which are very important for productivity and retention in a large, global workforce.

Horngren and his colleagues (2018) point out that regulators and tax authorities require accurate accounting as the main basis for ensuring that statutory obligations, accounting standards, and tax regulations are being met. Compliance protects MAS from legal penalties and at the same time, it increases the company's reputation as a responsible corporate entity. Moreover, according to Needles, Powers, and Crosson (2020), the financial stability and transparency of the Central Bank not only affect the customers but also the entire business community. Thanks to moral accounting and open reporting, MAS is gaining credibility and trust, which is also contributing positively to its brand image; thus, the Company is able to maintain long-term relations with customers and society in general.

In brief, the accountant function is considered by Armstrong (2020) as a connector of communication between MAS and its diverse stakeholders. It reveals the financial condition of the company, thus the viewers can make their decisions based on facts, trust is built, and accountability is reinforced. By meeting the needs of both internal and external stakeholders, MAS not only strengthens relations within the organization but also promotes transparency and gains long-term sustainability and reputation in the global apparel industry.

 

Responding to Societal Needs and Responsibilities

Gray, Owen and Adams (2014) claim that accounting not just through financial reporting but also through socially accountable acts extends to societal expectations and moral responsibilities. MAS shows its CSR commitment through sustainability and social accounting that are the communication channels of the organization’s impact on ESG (environmental, social and governance) dimensions. Horngren et al. (2018) state that ethical accounting practices gaining public trust, supporting economic stability, and ensuring legal and tax obligations compliance are the three benefits of such practices. Armstrong (2020) remarks that socially responsible accounting gives MAS the opportunity to put profitability and ethical considerations on the same scale, thus, revealing the concern for the welfare of employees, the local community, and the environment.

Moreover, Needles, Powers, and Crosson (2020) point out that transparent accounting creates social legitimacy for showing stakeholders that MAS acts responsibly, reduces adverse social or environmental impacts, and is a good corporate citizen.  By integrating sustainability metrics into reporting, MAS aligns itself with the society's expectations for being a good environmental steward, a fair employer, and a good neighbor.  Hence, accounting at MAS is considered as the ethical stewardship, helping in and promoting the long run sustainability, and hence being the company’s reputation as a globally responsible business.

Evaluation

Atrill and McLaney (2022) point out the accounting function as the one indispensable but still struggling feature the modern business environment to be faced by during the whole process. The massive need for sustainability and non-financial reporting has forced MAS to incorporate ESG metrics, social accounting, and full disclosure of all environmental and social impacts besides integrating them into its accounting practices. According to Horngren et al. (2018), it is the global nature of the company’s operations which makes it exposed to complicated regulatory and ethical pressures, thus requiring, among others, good internal controls and continuous monitoring to avoid possible misreporting or financial misconduct. Armstrong (2020) states that accounting is challenged to balance the different needs of the stakeholders, given the financial expectations of the shareholders as well as the ethical and social responsibilities, while also making sure that the quest for profits does not adversely affect the welfare of the employees, the environment, and the community.

Gray, Owen and Adams (2014) opine that the provision of transparent, reliable, and ethically sound financial information to stakeholders is how accounting justifies its role in the organizations’ juggling of competing stakeholder claims. This way, MAS can continue to be seen as a legitimate player, win stakeholder support, and enjoy the benefit of sustainable growth in a highly competitive global industry. Hence, the accounting function, albeit imperfect, is still of paramount importance as an instrument for bringing together the different interests of MAS’s operations - organisational, stakeholder, and societal ones.