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Human Behavior and Scientific Research in Accounting

Discuss about the Accounting Theory for Ontology and Epistemology .

The paper examines the ontology and epistemology of positive research and compared the same with positive accounting research to draw references and conclusions about the relationship between human behaviors and accounting settings in the society. The aim of the paper is to undertake a testing by the statistical and hypothesis methods and enable drawing of meaningful conclusions. The aim of the critics is to bring to limelight the shortcomings and flaws in the research models and techniques, each of which is discussed with a sufficient number of results of regression and coefficients and this is the main argument of the paper. Positive accounting is widely practiced these days and so whether it is achieving its aims and objectives would be worth testing. The illustrations from a few good papers are considered and discussed. The real potential of positive accounting might be liberated in the Kuhnian crisis and revolution, the prospects of which are discussed. The discussion of the prospect gives a glaring example of the current scenario. In a nutshell, the critics justify the real reasons as to why positive accounting research has not been able to achieve its full potential (Fogarty & Markarian, 2007). Moreover, this also sheds light on the shortcomings of positive accounting.

It is widely said that human being is a rational animal. So human behaviors react based on the circumstances and situations and this does not guarantee a same human reaction even in two similar situations. The main argument of this paper is based on this human behavior and the inquiry built on a scientific research project. The beliefs of various religions are examined and the scientific research has concluded that the world is rationally comprehensible (Spiceland et. al, 2011). The application of scientific research in accounting and the deficiencies in its implementation are discussed. The paper aims at increasing the effectiveness of the positive research by offering some suggestions. The examples from a few relevant research models are presented (Ashton et. al, 2004).  Such examples come as an eye opener. These approaches assume that humans act rationally but not in all cases. Hence, this is subjected to some limitation. Fukuyama also suggests that the fundamental concept of a rational human behavior is true in 80% of the cases. The end results and expectations are significant. Thus this shows hoe some faulty management decisions are being carried out despite pointing out of the same by the auditors. Hence, it is clear that the management does not completely take into consideration all the fundamentals provided by the auditors and hence, the results carry some deficiencies (Lapsley, 2012).

The Limitations of Hypothesis Testing and Statistical Methods

The statistical and hypothesis methods are used to test the different situations of reactions of auditors in real time based on the rationality of human being assumption. But all this has largely failed to explain the real reasons behind the same.

The results of these hypothesis methods are largely dependent on the samples selected and hence it fails to achieve its objective. It gets reduced to mere statements that establish relationships between to variables though in real time there are a lot of factors and not just two variables (Frankel et. al, 2002). The fundamental requirement would be to test theories competing against each other rather than testing a single theory for different conditions or hypothesis. Testing different theories will become significant as it will help in determining the status and will lead to a projection of the real scenario (Davila & Foster, 2007).

This paper focuses that there is a need for better theoretical models that are taken more seriously and are highly specified and highly vulnerable. Apart from this, measurement methods have to be better to enable rigorous testing.  The testing should be error free and this can be done when models are effective in nature. Reliable relationships with proxies have to be established which will lead to better linear relationships and establishment of measurement concepts. This will ensure that research papers do not focus on hypothesis testing alone. This leads to a major shift towards the estimation of parameters. Thus the development of measurement concepts is seen as the new way of a disciplined research activity. The results of all this will yield fruits if there is extensive replication, both to confirm the accuracy of the measurements and to explore the limitations of the research.

The research question in this article is to examine the effectiveness of positive accounting research and whether there exists any logic or set of predefined notions based on which accountants and auditors act. This is debated both for and against, the critics occupying a major part, though. The hypothesis tested is by taking samples of audit fees charged against the complexity of the audits and the size of the audit firm. This quantitative research tests the basis on which the audit fees are charged, presentation strategies by auditors and use of regression techniques which also form a part of the hypothesis. Type I errors are identified in this model due to the high level of misspecification. The qualitative research tests whether auditors merely fill in the results in the theoretical framework or also test the validity and relevance of the same for the current project. Thus the critical research analysis proves that the hypothesis and testing can never be fool proof and practically feasible. The aim of the hypothesis is only to prove that the null hypothesis is wrong though the results are largely based on the sample. Hence this appears to be no closer to reality. This evidences that hypothesis testing provides weak evidence in support of the alternative hypothesis. This leads us to doubt the established facts though we are grossly unaware about which of the facts are true and which not. Thus the value of hypothesis is not very significant in the positive accounting research.

Theoretical Framework

Thus the literature review of the paper is to test whether positive accounting research is meeting its aims and objectives and the qualitative and quantitative research models are a reminder of the fact that seeing theories succeed is almost astounding. In short, the entire focus is on positive accounting.

It is the varying behavior of the accounting firms and auditors that lead to this research and hypothesis. The overall framework of the accountancy profession is dependent and governed by a set of rules to be followed like accounting standards, so on and so forth. Still, the deviation from these standards and different behaviors in similar situations is the driving force behind this research (Tinker et. al, 1982).  The research acts as a bridge that will help in solving various situations.

The theoretical substance of the paper is to test the effectiveness of positive accounting research and statistical and hypothesis methods are used for the same. It would be pertinent to mention that statistical methods have its own shortcomings and it is largely governed by the hypothesis conditions decided as the null hypothesis and the probabilities of the occurrence. The results of this hypothesis are widely dependent upon the samples chosen which might not necessarily be a true reflective of the entire population. In short, the selection of the samples might not lead to a fruitful result because a said sample cannot be an indicator of the entire population. Hence, it suffers from this limitation.  Another drawback of the hypothesis is that only one alternative hypothesis is considered and if it is weak, then it might be consistent with different theories.

The limitations of the testing methods and hypothesis are well explained in the earlier sections. To overcome these deficiencies, a more practical approach has to be adopted.

The deficiencies of the testing methods are in fact well recognized by the author as the critic of the concept is presented by the findings of various authors.

The author draws theoretical conclusions from the research by using the statistical methods that positive accounting research is not achieving its aims and objectives. The results of the hypothesis prove the rational behavior of accountants and auditors who react based on facts and circumstances (Francis, 2006). These limitations give us a feel that the testing methodologies are a mere eyewash and do not lead to any meaningful conclusions that could contribute to the growth of positive accounting research.

Significance and Limitations of the Article

It would be pertinent to note that though the article discusses at length the limitations of the hypothesis methods, it not reduce the significance as the author has also made a serious attempt to provide solutions for a successful positive research program like using vulnerable models that are stringently tested, use of analytical modeling, a focus on measurement rather than testing, replication and more replication (Antle et. al, 2006). The article further goes down to explain why things are like this and the existence of constraints, what it takes to make a theoretically strong framework.

Conclusion

The paper focuses on the fact that if positive accounting research is having deficiencies, it would not be justified to say that a paper should not be published highlighting its anomaly.  It is a clear cut fact that positive accounting is not free from limitation and considering the practice it looks difficult in practice. The fact that this hypothesis and testing is showing results of anomaly is representative of the fact that further research in possibly the right direction is likely to occur which will improve the quality of positive accounting research and contribute largely to the profession of accounting and auditing. Acknowledging the fact that accounting is always subject to measurement error, statistics has a role to play but the problem is that it is being wrongly used and hence an efficient positive accounting research should aim at estimation. Moreover, the sample size cannot be a representation of the entire population hence; there appears a big difference (Carol et. al, 2016). Hence, this is one of the difficult scenarios that is faced while doing the research.

Positive accounting research has got meaningful contributions to make for the understanding of human behavior and the accounting it encompasses. However, its current results are based on statistics that are difficult to interpret as it differs from sample to sample. Positive accounting research is also currently dependent upon theories that are not challenged as its applicability is assumed to exist rather than being experienced and evidenced (Watts & Supreme, 1986). It proves that though deficiencies exist in the social systems, it does not limit the scope of research and does not preclude the adoption of a better social system with the advancing technologies and knowledge. With a better plan and implementation positive accounting can prove to be better practice and hence, can lead to a sound practice.

References

Antle, R., Gordon, E., Narayanamoorthy, G., Zhou, L 2006, ‘The joint de-termination of audit fees, non-audit fees, and abnormal accruals’, Review of Quantitative Finance & Accounting vol. 27, no. 3, pp. 235-266.

Ashton, D., Dunmore, P., Tippett, M 2004, ‘Double-entry bookkeeping and the distributional properties of a financial ratio’,  Journal of Business Finance and Accounting vol. 31, no. 6, pp. 583-606.

Carol, A.A, Brad, P , Prakash J. S& Jodi Y 2016, ‘Exploring the implications of integrated reporting for social investment (disclosures)’, The British Accounting Review, vol. 48, no. 3, pp.  283–296

Davila, A & Foster, G., 2007, ‘Management control systems in early-stage startup companies’, The Accounting Review vol. 82, no. 4, pp. 907- 937.

Fogarty, T. J & Markarian, G 2007, ‘An empirical assessment of the rise and fall of accounting as an academic discipline’, Issues in Accounting Education vol. 22, no. 2, pp. 137- 161.

Francis, J. R 2006, ‘Are auditors compromised by audit services? Assessing the evidence’, Contemporary Accounting Research vol. 23, no. 3, pp. 747- 760.

Frankel, R. M., Johnson, M. F., Nelson, K. K 2002, ‘The relation between auditors' fees for non audit services and earnings management’, Accounting Review vol. 77, no. 4, pp. 71.

Lapsley, I. 2012, ‘Commentary: Financial Accountability & Management’, Qualitative Research in Accounting & Management, vol. 9, no. 3, pp. 291-292.

Spiceland, J., Thomas, W. & Herrmann, D 2011,  Financial accounting, New York: McGraw

Tinker, T, B. Merino, & Neimark M 1982, ‘The Normative Origins of Positive Theories: Ideology and Accounting Thought’,  Accounting, Organizations and Society vol. 2, pp. 167–200.

Watts, R. & Supreme J 1986,  Positive Accounting Theory, Edgewood Cliffs, NJ: Prentice Hall.

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