Accounting Theory and Current Issues Positive Accounting Research

Question: Discuss about theAccounting Theory and Current Issuesfor Positive Accounting Research. Answer: Introduction The present study is based on critical evaluation of Half a Defence of Positive Accounting Research written by Paul V Dunmore for Massey University, Wellington, New Zealand. In this research paper, positive approach to accounting is examined in a broader sense in order to understand cause and effect relationship. This article aims to develop casual explanations of human behaviour in accounting settings. The objective of present literature critique is to assess the relevance of present article in the field of positive accounting. For this aspect, an initially summary of the article will be provided by focusing on its main argument. It will be followed by research questions and theoretical framework to develop an understanding of its literature review. By considering literature review, significance and limitation of the article will be evaluated in order to draw a valid conclusion. Summary of The Article Positive accounting theory is one of the crucial segment of academic accounting research which aims to evaluate and forecasts actual practices in accounting. This approach is in contrast with the normative accounting which is focused on the description of optimal accounting standards. Half a Defence of Positive Accounting Research had evaluated ontology and epistemology of positive research by considering deficiencies of present practices of accounting research. Further, it also determines ways to improve approach of present accounting to promote better practices that can be followed by individuals. A foremost argument in the article is that positive accounting requires better theoretical models which are highly specific and vulnerable. The article states that inappropriate progress in positive accounting is due to ad hoc quantitative models which are restricted to expected sign of a relationship between two variables. These models are not structured in a proper manner due to which i t cannot be operationalized. In the contemporary era, there is a need for effective measures to which theoretical models can be tested rigorously. It is because accounting concepts are to be operationalized carefully in support of interesting concepts which are beneficial and significant for businesses. Policy makers are required to focus on consideration of appropriate functional form with can be form better linear relationship with the existing accounting concepts. Study of Paul V Dunmore shows that after the establishment of reliable manner for measuring a concept then it will be considered standard for further studies. This approach will prevent reinvention of measurement of each study and promote improvement in standards. A further argument in this article is about transference in attention away from the testing of hypotheses towards an approximation of parameters. For this aspect, confidence intervals for parameters is needed to be compared with theoretical predictions or with comparable measurements of those parameters from other relevant studies. In accordance with the present article, there is a need for data archives of measurements of important concepts for the testing of particular theories and contribute to the archive. It is because forming of cautious measurements is a substantial skill for which results are to be acknowledged as part of the discipline in research activity. These measurements work as resources as well as constraints for future theoretical advances. In last, there is a necessity for widespread replication, in order to draw valid conclusions from hypothesis testing. This will assist in confirmation of accuracy of measurements and for exploring the limits of applicability of research findings. Research Question Considered article is focused on the critical evaluation of positive accounting research, and its research questions are enumerated as below: What is required for a successful positive research program? What are the vulnerable models that are tested stringently What are the ways of analytical modelling? Whether should be focused on measurement instead of testing? To determine the viability of existing results in order to explore limits of applicability of previous findings? Theoretical Framework The review reveals severe drawbacks in the performance of positive accounting research which holds it back from giving an effective involvement in broad-based projects. A basic requirement of a significant qualitative research is that the conceptual outlines maintain the standards of testing in order to limit their applicability in the research. Such theories must be formulated with tests against each other for reaching an appropriate conclusion. The need for extensive replication of the research may arise in order to verify the conclusions driven from the testing of hypothesis. A shift in focus is also required to develop a conceptual framework. This shift should be from theory testing towards ascertainment of the basic outlines of the research. Better measurement tools are the need of an accounting research to be perfect. This may result in better evaluation and testing of the models developed so far. In addition, the models which form the basis of hypothesis testing must be developed. These models must be clearly stated and must be free from environmental vulnerability. Some good research has been considered for illustrating the examples. Major criticism outlined in the article by Paul V Dunmore are enumerated as below: Positive accounting does not provide any prescription as it explains and predicts what would happen instead of clarifying what ought to happen. This aspect does not satisfy major aim of positive accounting theory. Theory of positive accounting is not value-free as it merely focused on the explanation of what people might do by ignoring the aspect that what are they are actually required to do. In this theory assumption is made that each action of management and shareholders have their self-interest with the primary goal of maximising their own wealth without consideration of its adverse aspects. According to Kuhn normal science appropriately fits to be used in positive accounting research instead in actual sciences. An accounting research which is positive in all aspects has a significant contribution towards understanding the behaviour of humans. This is because positive accounting research included some behavioural patterns. Kuhn also argues that a model is replaced only when it can no longer support the concept of normal science, and it incurs some revolutionary crises in some forms. Due to some reason it has been analysed that social system does not remain stable is not but adoption of amended system appropriately suited to advance knowledge will not lead to any crises. The concept of normal science suggests that core characteristic features of the collective communal system included in positive accounting research are noticeable and practical drawbacks of the research. The objective of this social system is to furnish some queries related to human behaviour to the researchers. Thus, it assists them to have solutions to these queries with a very little effort. The social system may not necessarily add to our already formulated information related to human behaviour in the context of accounting. The stability of the social system remains in doubt for an extended period of time. But this does not imply adoption of a new system every time a new crisis is addressed in the research, which best suits the existing information. Thus, Kuhn views normal science as an enlightening activity, authenticated by the participating group. He describes normal science in a corrective context area of the set of practices, beliefs, and attitudes that are well modified to adjust to the needs of the group and solve a number of queries related to the matter of accounting research. If all the theories are formulated in a way that they have some amount of truth in them, then they could serve a wide variety of economic interests. They also emphasise the importance of measurement of hypothesis testing rather than just testing of hypothesis. Watts and Zimmerman (1978, 1986, 1990), almost patented Positive Accounting Theory; however it can be said that their theory was much narrow in comparison to the broad-based concept of positive research. They had put forward the idea that accounting events occur because of the functions performed by parties that enter into competent contracts of work with some particular objective. These functions comprise of not only specific accounting operations but also other decisions which are related to pricing and other important functions of the management (De Angelo, 1981) Positive accounting research is a social system which is well-established for contribution in the research projects. However, the purpose of each research may be different from another. The notion of the disciplinary matrix used by Kuhn (1970) advises that positive research may be an example that can be optimally used for solving puzzles, irrespective of its contribution in the social system. The potential of accounting research can be attained only by anticipation of future crises and opportunities in it.. Many other areas of positive accounting research are not based upon these theoretical models. The significance of these important literature models attempts to derive their inferences from the prices that the users of accounting information use as a base to their decisions. Further research has been conducted to develop a controlling system that seeks to understand the factors which cause adoption of some theories (Davila and Foster, 2007). These approaches presuppose the rational behaviour of humans (Fukuyama 1995, p. 13). These approaches of theories also suggest that the primary model of balanced, self-focused behaviour of humans is accurate. Some accounting research also evaluates the performance without the presupposing the behaviour of humans (Gibbins, 1984). These examples are not comprehensive when taken as a whole, but they attempt to demonstrate that the entire positive research program is much broader concept than the theory of accounting research. Any research which promotes a better understanding of the environment and causes related to a particular occurrence of accounts in the aspects of human psychological theory meets the criteria of a positive accounting theory. The purpose of an accounting research is to extend the understanding the applicability of various theories in various accounting research. A better approach is to ascertain the validity of the findings of the research. Significance and Limitations of The Article Research paper provided by Paul V Dunmore has a valuable contribution to offer to the wider project for understanding human behaviour. It is because of its inimitable setting used in the research regarding the particular range of behaviours that accounting encompasses. Provided research paper, will assist policy makers in future research for developing better theories by working on existing cons in models of positive accounting. However, there is a significant limitation in the analysis section. In current practice main outputs contains statistically significant coefficients but its interpretation cannot be made for connecting suspect measurements which are inconsistent with sample and theories which are not challenged and whose applicability is presumed instead of evidenced. Study of Flick (2015), shows that tools and models which are supposed to be used in the analysis must be appropriate to the objective of study else it will adversely affect the reliability of the study due to inadequacies related to hypothesis and qualitative research Limitations and benefits of the research article are cited in the study but it is not clear from a reader perspective. Constraints identified in the study affects the validity of research due to which it can be considered for further studies (Creswell, 2013). Theoretical conclusions drawn by the Paul V Dunmore by research analysis is viable as it is supported by proper justification, facts and previous research studies. Conclusion Present literature critique concludes that this article has exposed a wide gap between how positive accounting research is actually practised and what would be required for. The study shows clear the fact that development of rigorous theories is not an easy task, and most of the existing theories will fail when properly tested. The present article will assist policy makers in developing better theories by working on existing cons in models of positive accounting. The present article was presented in clear and concise manner to answer research questions and to draw valid findings. In present research article, there is a requirement for widespread replication, in order to draw valid conclusions from hypothesis testing. By this aspect, there will be confirmation of accuracy of measurements through which researcher can explore the limits of research findings of the study. References Books and Journals Creswell, J.W., 2013. Qualitative inquiry and research design: Choosing among five approaches. Sage. Davila, A., Foster, G., 2007. Management control systems in early-stage startup companies. The Accounting Review 82 (4), 907-937. Flick, U., 2015. Introducing research methodology: A beginner's guide to doing a research project. Sage. Fukuyama, F., 1995. Trust, the Social Virtues and the Creation of Prosperity. Free Press, New York. Gibbins, M., 1984. Propositions about the psychology of professional judgment in public accounting. Journal of Accounting Research. 22 (1), 103{125. Kuhn, T. S., 1970. The Structure of Scientific Revolutions, 2nd Edition. University of Chicago Press, Chicago. Watts, R. L., Zimmerman, J. L., 1990. Positive accounting theory: A ten year perspective. The Accounting Review 65 (1), 131-156. Watts, R., Zimmerman, J., 1978. Towards a positive theory of the determination of accounting standards. The Accounting Review 53, 112{134. Watts, R., Zimmerman, J., 1986. Positive Accounting Theory. Prentice Hall.