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Management accounting concept - Essay Example

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Management accounting concept

Moreover, the paper will also entail the affiliation between moral hazard and decision making along with relevant information. QUESTION 1 Moral hazard is an interesting area of research in management accounting as it deals with various significant aspects concerning the perception of the managers in making effective decisions, determining disciplinary aspects and mitigating ethical issues. The area of moral hazard forecasts that the activities of the managers are hard to monitor and the compensation along with the financial decisions are linked with the performance of individual managers. It can be affirmed that moral hazards differ from one person to other based on the mental attitudes and the intention of the individuals to perform various operational functions. The moral hazards mainly occur due to the unethical practices that perform by the individuals or the managers belonging to any organization in order to attain personal along with organizational benefits. In this similar context, moral hazard can be explained from various aspects such as a company is running in loss. In order to recover such loss, the manager of the company arranges for fire to destroy the building and claim the money from the insurance sector. This denotes the conduct of unethical practices by the manager, resulting in causing moral hazard. The decision making with regard to moral hazard may lead towards the occurrence of several disciplinary actions and also data forgery. The decision concerning data forgery, at certain times may lead towards the conduct of unethical practices by the employers towards the employees. In management accounting, decision making mainly motivates the employees to perform their respective operational functions effectively (Sprinkle and Williamson 414-448). The area concerning moral hazard is evident particularly at the time when the managers belonging to any organization acquire valuable information from the accountants regarding financial data and misinterpret those for personal gain. This practice ultimately raises the conduct of moral hazard affecting the managerial compensation level of the organizations at large. It can be affirmed that the conduct of moral hazard in the management level hinders in forecasting true and real picture of organizational performance. The area of moral hazard within the context of management accounting research is quite interesting as it can be eliminated through making effective decisions and also through following ethical principles by the stakeholders and the employees ethically. It is worth mentioning that the judgment regarding the morality of business and management is quite crucial. The area concerning moral hazard delivers significant benefits to the managers and the organization as well. In the context of management accounting research, the intention of the managers is often to adopt effective decisions without forging valuable data, resulting in motivating the employees to perform better. This behavior might certainly support an organization to increase its overall performance by a certain degree (Sprinkle and Williamson 414-448). QUESTION 2 In order to determine about how the area of moral hazard could benefit the managers, it can be affirmed that it depends on the perception and the mental thought process of the managers. A manager, who is honest might work in accordance with the information provided and formulate accurate data. Moral hazard is when, the manager for his/her personal benefit forges the data provided and capitalizes on it. The managers might not take proper disclosure of policies for availing personal benefit. In this regard, moral hazard benefits the managers in terms of implementing policies that would provide them personal benefits by not ...Show more


This paper intends to discuss a particular area of moral hazard which is associated with the management accounting concept.It further intends to elaborate about how this area delivers significant benefits to the managers and the organizations as a whole…
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Management accounting concept essay example
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