Recognition of Cost Accounting as a Profession: Standard #2
Sep 15, 2014
The creation of professional standards
The creation of professional standards will likely be the most difficult part of the entire process of recognizing cost accounting as a profession. This is true because of the broad diversity of businesses, uses of cost accounting and cost accounting methods both in-use right now and under development. I believe it will be very difficult to cut across all of those lines and create standards that are universally applicable to cost accountants who will use them in their day-to-day work.
Nevertheless, I believe the benefits resulting from the creation of such a body of knowledge and professional standards will be worth the effort and, ultimately, worthy of the undertaking by the entity created to raise cost accounting to a professional level.
I view the creation of the standards in three different groups. The first group would be the technical standards that would be followed regarding technical completion of any assignment in the cost area. The second group of standards would be related to principles of work, meaning how cost accountants conduct themselves in the operation of their day-to-day assignments. These might be considered somewhat related to the professional ethics and standards of conduct within the profession. The final area of development of standards that I would envision would be an agreed upon list of definitions, terms, descriptions, acronyms and all the other tools that cost accountants need relative to the completion of their day-to-day duties. Another body would be responsible for the development and maintenance of both the work standards, the principles of conduct, and the development and maintenance of cost accounting terms.
As I mentioned before, it would be logical to me that the board formed to develop these standards would be a cross-section of all the areas of cost accounting that might need these standards as part of their day-to-day. I think it would also include at least a few members from the consulting area who could provide insight as to the complexity and nature of the cost systems used today and how diversity of the standards would have broadened to include all of those various costing methods.
I believe the technical standards could be related to basic concepts, such as the development of the classification of accounts. This would provide a general definition as to what account or nature of expenses are direct and should be included in with the manufacturing process and the recovery of costs as part of the cost system. I would also see that there might be a principal or a standard related to what represents a direct cost that would be recorded in some fashion directly to the product. I think it would also dictate what would represent an indirect cost that might have to be allocated to a product for recovery. I can imagine a half dozen other such general topics which would be the foundation for the development of the technical standards.
I also believe that other standards of work such as the development and maintenance of work files and reporting to management would also be included as part of the technical standard. This would provide cost accountants who are working in the area with guidance on the completion of all of those components of their day-to-day assignments from an independent board of cost accounting standard who set standards.
What are some standards that you think would be helpful or that you would like to see?
Categories: Cost Accounting