An Examination of the Association Between Organizational Design Factors and the Use of Accounting Information for Managerial Performance Evaluation.

Abstract Responsibility accounting is an important use of accounting information. However, concerns have been expressed about using accounting information to evaluate managerial performance. Based on contingency theory, we contend that the use of accounting information for evaluative purposes is related to organizational design. A survey of plant managers and plant controllers of medium sized manufacturing companies was conducted. The purpose of the questionnaire was to collect evidence on the association between the use of accounting information for managerial evaluation and three organizational design factors, as follows: 1) the type of production process (e.g., a job shop versus a flow shop), 2) the frequency that work-in-process inventory was maintained, and 3) the type of accounting procedures for set-up costs. The results of probit regression found a significant (p 0.05) effect for the production process variable. The other two variables were marginally significant (p .10). Overall, the results suggest that the costs and benefits attributable to using accounting information for evaluative purposes are associated with organizational design factors.