Accounting Theory And Issues: Essay For Scientific Research.

Summary of Article

Describe about the Accounting Theory and Issues for Accounting Scientific Research.

The research article aims to provide a detailed evidence of the contribution of positive accounting theory to the field of accounting. The research paper analyses and examines the various literatures related to the positive accounting theory for developing its in-depth understanding. The main argument presented in the paper is related to the lack of empirical evidences in support of positive accounting theory for achieving the accounting research scientific objectives. The author through the research article has expressed the concern over the effectiveness of positive accounting theory to achieve success in the field of accounting research. The theory of positive accounting is a subject of criticism since its emergence as it is not based on testable predictions. The prediction power of the theory is relatively less that makes it largely ineffective in the field of accounting (Bazrafshan and Talebina, 2016). In this context, the present essay aims to provide a critical analysis of the research article ‘Half a Defence of Positive Accounting Research’. The critical analysis include summarising its main points, identifying the research question, discussion of the theoretical framework and at last discussing about the significance and limitations of the article.

Summary of Article

The main argument presented in the research paper has been summarised in this section. The author in the article has stated that the theory of positive accounting has been largely used by the accountants since its emergence for explaining and predicting accounting operations. The views and opinions of various authors have been presented in the research paper for gathering evidences in support of the main argument developed by the author in the article. Positive accounting theory has been described as not so useful in the field of accounting as it is more theoretical based and does not provide practice-oriented outcomes. The positive accounting theory has an important influence on the accounting researches by explaining the reality of accounting through demonstrating cause and effect relationships. The theory was developed by Watts and Zimmerman in 1970’s that is in contrary to the normative accounting theory. Normative accounting theory is mainly used for developing the accounting principles however on the contrary positive accounting theory is based on scientific phenomena for explaining the reality of accounting (Dunmore, 2009). There is no development in the positive accounting theoretical model since its emergence and as such is regarded as inappropriate for attaining the accounting research aims and objectives. Thus, the research article focuses on widening the theoretical concept of positive accounting so that it can achieve the scientific objectives of contemporary accounting. The field of accounting has undergone much development in the recent years and it is based more on testing the accounting predictions. Thus, all the recent changes in the field of accounting should be incorporated in the theoretical model of positive accounting for achieving the scientific objectives of contemporary accounting research. Thus, the research article has such contributed largely to the field of accounting research by highlighting the deficiencies in the positive accounting theoretical framework (Dunmore, 2009).

Research Question

Research Question

The research question as identified in the research article is ‘Does positive accounting theoretical framework used in accounting research is effective in attaining its scientific objectives?’ In the context of this main research question, the article also addresses the following sub-research question:

• What is the importance of positive accounting theory in the field of accounting research?
• What are the main weaknesses of the positive accounting theory that needs to be improved for achieving the accounting research objectives?
• Does positive accounting should be used in combination with other theoretical frameworks for conducting accounting researches?

All the above mentioned research questions have been identified and extracted from the literature review of the research article. The overall literature review has discussed about the contribution and weaknesses of positive accounting theory in attaining the scientific objectives of accounting research. Thus, all the above research questions are extracted from critically analysing the overall research article in detail (Dunmore, 2009).

Theoretical Framework

The present section critically evaluates the literature review of the research article. The theoretical framework of the research article states positive accounting theory as an economic-based theory that tends to explain the objectivity of accounting problems. The theory is in contrast with normative accounting theory that is mainly subjective based and provides recommendations to the accountants based on accounting principles. However, positive accounting theory implements phenomena of natural sciences for describing the accounting principle and practices (Ghnabari et al., 2016). It is mainly based on empirical studies and provides outcome to the accounting problem through testing the hypothesis that researches observes in practice. The theoretical framework also presents various critics against the theory of positive accounting due to which it is not proving to be effective currently for carrying out accounting research. The main criticisms as analysed from the research article against the theory is that is largely economics based and thus has reliance on perfect market. This is in contradiction with accounting concepts as there is no existence of a perfect market as evaluated from the capital asset pricing model (Dunmore, 2009).

Also, Watts and Zimmerman have largely argued about positive accounting theory to be scientific and practically based but the outcome achieved from the theory is not such practically oriented. Various authors have argued that positive accounting theory is more of rhetoric than scientifically based and is also regarded as based on value judgement. The positive accounting theory was regarded as based on objectivity but its heavy reliance on value judgment has contradicted its objectivity basis. Thus, all these criticisms of positive accounting theory have regarded it as largely ineffective for attaining scientific objectives of accounting research (Rhonheimer, 2000). The deficiencies in positive accounting theory make it largely inappropriate to be applied in actual situations. Thus, positive accounting research is mainly regarded as theoretical rather than scientifically based. Positive accounting research has gained dominance in the field of accounting as it was claimed to be scientifically based on its development. However, the clams of the theory have proved to be false as it is regarded as more theoretically based and less practically oriented due to it based on value judgement (Deegan, 2014). The theory is simply regarded as mix of other accounting theories such as agency and efficient market hypothesis theory nowadays.  Its reliability has been put in question by various accounting researches that depict it to be inappropriate for carrying out future accounting research (Dunmore, 2009).

Theoretical Framework

The theoretical framework of the research article has regarded positive accounting theory to be inappropriate for analysing and predicting the human behaviour in accounting settings. The theory that was stated to be based on explaining cause and effect relationships in accounting is now regarded to be only rhetorical (Bazrafshan and Talebina, 2016). The literature review of the article also suggests that researchers should use positive accounting theory in combination with other theoretical concepts for attaining the practically oriented objectives of accounting research. There is high need for the development of better theoretical models for analysing and testing accounting predictions. The positive accounting theory is not so effective in testing accounting predictions as it is based more on value judgment. There is lack of objectivity in theoretical model of positive accounting and such the researchers should develop a more appropriate theoretical model for guiding accounting research. Accounting research mainly involves statistical testing of hypothesis developed for achieving a reliable outcome of the accounting problem. Thus, positive accounting theory does not seem to be appropriate for developing an accurate answer for the research problem in accounting research (Bazrafshan and Talebina, 2016). Thus, the overall discussion held in the literature review of the research article has questioned on the scientific status of positive accounting theory and has recommended the adoption of better theoretical models in accounting research (Dunmore, 2009).

Significance and Limitations of the Article

The research article is highly significant in the field of accounting as it helps in identifying the main shortcomings in the positive accounting theory. The theoretical model of positive accounting is largely used by the accountants for examining the accounting principles. However, the theory is largely been criticised as it is based mainly on subjectivity rather than being objective in nature. The research article is highly significant as it recommends the users to implement better accounting theoretical concepts for attaining practical outcomes of accounting research (Dunmore, 2009). The main limitations of the research article as it lacks practical evidences in support of the main argument presented in the paper. The article has only reviewed secondary literary sources for presenting an in-depth understanding of the research topic. The article lacks objectivity as it has not collected any quantitative data against positive accounting theory but has only demonstrated qualitative data in support of the research topic. The research article should also incorporate some standard measures for providing the main weaknesses of positive accounting theory. All the discussion held in the research article is mainly subjective in nature and therefore lacks practical evidences in support of the findings developed. The findings of the research article needs to be supported by practical evidences through the collection of primary data. Primary data is regarded as the data that is not available and is collected mainly for carrying out a research. It is mainly quantitative in nature and provides a practical approach to the research topic (Dunmore, 2009).

The research article has adopted qualitative research methodology for analysing the research topic in detail. There are various limitations attached with qualitative research methodology. The limitations include lack of objectivity and as such the research becomes less reliable. The lack of practical demonstration in support in empirical evidence developed in the paper questions on its reliability and validity. The author should have incorporated the use of exploratory research methodology that involves the collection of both quantitative and qualitative data for attaining a specific answer for the research problem. The qualitative data should aim at supporting the findings obtained from quantitative analysis. The quantitative analysis involves collection of primary data through survey process for evaluating the research topic in detail. The lack of quantitative data also limits the usefulness of the research article for future researches held in this context. The qualitative data is not regarded a reliable and therefore the findings obtained from its analysis cannot be used by future researchers that aims to carry out the research in the respective field.  Also, the theoretical framework of the research article is not well-presented and such is not easily understood by the readers. The author should have presented the theoretical framework in a more synchronised way so that readers can easily understand the main concepts presented thorough the author in the literature review section. Thus, all these are the main limitations that have impacted the significance of the research article (Dunmore, 2009).

Conclusion

It can be said from the overall analysis of the research article that it has provided a base for future researchers to analyse and examine the importance and weaknesses of positive accounting theory. The author has recommended that better theoretical models in accounting research should be adopted for attaining its scientific objectives. The main shortcoming of positive accounting theory is being highlighted by the author so that future researches in the field of accounting can be improved. The research article concludes that positive accounting theory though has largely being used in explaining accounting phenomena needs to be improved to meet the objectives of contemporary accounting. The researchers should implement the theoretical concepts advocated by positive accounting in addition with other theoretical models of accounting for accurately achieving the objectives of empirical accounting research.

References

Bazrafshan, M. and Talebina, G. 2016. Challenges Positive Accounting Theory. International Journal of Basic Sciences & Applied Research 5 (2), pp. 119-122.

 Chatfield, M. and Vangermeersch, R. 2014. The History of Accounting (RLE Accounting): An International Encylopedia. Routledge.

Deegan, C. 2014. Financial Accounting Theory. McGraw-Hill Education Australia.

Dunmore, P.V. 2009. Half a Defence of Positive Accounting Research.

Ghnabari, M. et al. 2016. PAT (Positive Accounting Theory) and Natural Science. International Research Journal of Applied and Basic Sciences 10(2), pp. 177-182.

Rhonheimer, M. 2000. Natural Law and Practical Reason: A Thomist View of Moral Autonomy. Fordham Univ Press.