Question

Why is it important for an accountant to understand their business and industry as well as managements informational needs in addition to knowing how to generate financial statements? Note: You may use S&S as the context while answering this question. However, please present your own examples.

Answer 1

It is important for an accountant to understand their business and industry because in today’s dynamic world the role of an accountant is not merely restricted to making financial statements and annual reports. The role of accountants has broadened and accountants now assist with corporate strategy, providing assistance and advice on sustainable methods to reduce costs, ways to mitigate risks and improve top line (revenues) and bottom line (profits). Thus today accountants play an important role to help organization’s meet their objectives.

Similarly accountants need to have an understanding of the informational needs of the management as it will enable them to present to the management data and accounting information in proper reports and in a manner that will enable the management to make decisions in an optimal manner. Accountant’s role will be that of a facilitator in decision making process.

For example in companies like GE and P&G the role of accountants are vast. The accountants in these companies, like many other companies, are expected to use their inquiring mind on the basis of the company’s financials. They are expected to suggest ways for improvement and optimization and for this they are given training with regards to the company’s business, its competitors, nature of the industry it operates in etc. For instance in P&G accountants know extensively about the consumer products industry, sectors that P&G operates in and major competitors of P&G. The accountants then advise management how P&G can achieve its goals and objectives and maintain its competitive positioning through accounting insights, cost reports, incremental revenue analysis etc.