Accounting

&counting, Organizations

Printed in Great Britain.

and Society,

Vol. 8, NO. 213, pp. 153-169,

1983.

0361-3682183

$3.00 + .OO

Pergamon Press Ltd.

ACCOUNTING, BUDGETING AND CONTROL SYSTEMS IN THEIR ORGANIZATIONAL CONTEXT: THEORETICAL AND EMPIRICAL PERSPECTIVES*

ERIC G. FLAMHOLTZ Graduate School of Management University of California, Los Angeles

Abstract This paper examines the relationship between accounting, budgeting and control in its actual organizational context from a theoretical as well as an empirical perspective. It argues that the process of exercising control in an organization is significantly more complex than conventional managerial accounting theory suggests. It also argues that budgeting and even an accounting system cannot be viewed as a control system per se; rather, they must be seen as a part of a carefully designed total system of organizational control. If the linkages between budgeting or an accounting measurement system and the other essential prerequisites of a control system are not adequate, then the system may not fulfill its intended functions. The validity and implications of these ideas are examined in the context of the control systems of three organizations. The results suggest the need for a different orientation of the role that accounting and budgeting play in the control process as well as a broader concept of control itself.

During

the past two decades

the idea of behavioral

As Hopwood where tional ships

(1978)

points

out,

even in cases

research in accounting has struck a responsive chord both among behavioral scientists who are aware systems of the significant behavior effects of accounting who on human and accountants

accounting has been studied in its organizacontext, there has been little attempt to of the complex For example, focused upon interrelationand acbetween organizational processes

gain an appreciation counting systems. area studies have

are aware of...