Passage of Bill 46 in December 2007 has terminated the monopoly exercised by chartered accountants over public accounting since 1946. While from now on, all CMAs with the qualifications to practice public accountancy will be able to do so, on condition of obtaining an auditor’s permit from the CMA Order, management accounting remains the domain of CMAs. Accordingly, here are the fundamental characteristics that distinguish management accounting from financial accounting.
Management accounting
Management accounting seeks to respond to the needs of the organization by providing management with the information needed to make decisions. Senior management needs to follow operating results, coordinate activities, make decisions on product design, content and price and plan operations. Such information cannot be provided systematically because it is generally based on particular situations. This means it must be original and provided on an ad hoc basis, and the structures that provide it must be flexible and adaptable.
Financial accounting
Many authorities claim that the traditional role of financial accounting is to audit the quality of the organization's management. It requires the use of retrospective data based on operations. Some say that it provides information to external decision-makers. Still others maintain that it measures and accounts for phenomena that are not always easy to understand. Inventory costing is one example. These difficulties have led financial accounting to rely on structures and rules. Unlike management accounting, it focuses on form rather than on information. This can be clearly seen in the Canadian Institute of Chartered Accountants (CICA) Handbook, which stresses the rules and methods allowed, rather than the type of information users may need.