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Accounting Theory: Positive Accounting

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Question:

Write about the Accounting Theory for Positive Accounting.

 

Answer:

Introduction

The paper evaluates positive accounting research in a wider context and analyses the connection between human behavior and accounting set up using hypothetical as well as statistical testing methodology. The epistemology and ontology of this is contacted with the lacking methods of statistics like the casual constructive of theoretical models for examination, insufficient imitation to warrant morale in the process to accept finding due to reduction in interest of numerical limits of the attained values, so on and so forth. The deduction in the study is examined and focused because it leads to insufficient findings or the result that are not reliable. It further discuss on how the positive accounting study attains it full level. Thus, in the article the main issue would be on the positive impact pronouncement.

 

Summary of the Article

The study initiates with an analysis of a layman in usual situations and incidents. Many sacred convictions are also further discussed and thus the outcome is that the human being is influenced by a scientific approach that can freely act according to the situation and incidents. Concluding that the practices and acts are often distracted by a number of factors. Therefore it is normal that a same person might act differently in two same situations and this is the base of the study of positive accounting. Different kind of people react differently in different situations, this is totally based on discretion of every person that how they react in different situation. For instance many study analysis have been taken and discussed that the objectivity of human nature is applicable in 80%% of the incidents.

Because of growth of technical and automated accounting and operation system, human interaction has decreased and all the other things have become system oriented. One can be more reliable on the system due to which the rationality of human being is perceived difficultly. In such kind of situations, it is even more difficult to analyze the single human nature. The ontological and epistemological suppositions exposed the work areas in which positive accounting study is done and this regulates positive accounting study from creating resourceful contribution to the environment. Positive accounting study does not restrict to solve the hard puzzles that are not resourceful towards   the concern of accounting. Therefore, the contribution does not give any kind of back up in the situation which comes every time and needs a good remark. The inefficient work of study which is currently in process requires a focus for the future for the future workings and to manage the challenges that may be faced. In fact the out fashioned study methodology does not contribute anything to the astudy and hence it is orthodox in nature. The onus is a policy maker to sift the positive accounting so that a better outcome is received.

Positive accounting study is much wider concept than the positive accounting theory as it includes certain set of standards setting by regulators and the policy builders, advice of pricing and reporting by auditors as well as academicians. But the theoretical models which are selected for the study do not give a justifiable reason. Human beings are considered act intellectually in 80% of the situation which indicates that there are 20% exceptional cases as well. This exceptional study can give justifiable answers to different situation in which the manager tends to make false decision despite of the accounting feedback which clearly points out the fault. One of the important results that are traced is that the firm’s contractual theory is much linked to the positive accounting study. The contractual view provides more stress on the methodologies and policies of the accounting system. Concluding, the implementation of the conservatism rule has led a massive difference and criticized strongly.

Though there is no accurate list of behavioral exception, instead this only states that positive accounting study way broader concept than positive accounting theory. Thus any study that claims to understand the nature and causes of  particular of accounting phenomenon qualifies to be positive even if the causes lies in non-intellectual aspect of human psychology.

The numeric and hypothesis testing methods are used to analyze and test the intellectual of the human behavior but have badly failed in the same case. As the hypothesis is dependent only on the sample which is selected and analyzed therefore the real reason cannot be interpreted through it. A hypothesis limits the study to one variable select and then gives its reasoning o the basis of the sample only. But in reality there are a numerous number of outcomes which reflect the accounting system and the actions done by human being in rational accounting environment.

Due to these deficiencies, the paper emphasis on the construction of a better model of theory which facilitates the rigorous testing and sophisticated in nature. Moreover it is essential to study for more alternatives to draw a better outcome and understandability. The measure concepts are executed and the analysis progresses from one variable to testing of a linear relationship. Due to this the other alternative are also looked after and all the parameters are being covered. Resulting to which it open the ways for disciplined accounting study which shall be analyzed by accuracy of measurements. There would be overall of accounting system leading to a better ability to predict.

This is the summarized form of the study which elaborates the current status of positive accounting study and how it can be utilized to achieve higher benefits.

 

Research Question

As it is rightly that to better understand someone’s situation you have to step in to their shoes that is one have understand their situation. Therefore the question analyzed in the study is whether there any rationale behind the actions of auditors. They there is this variation in the amount of their audit fees, why do they initiate a complete audit in some not in all, so on and so forth? The question raised in the research is further tested using the hypothesis method which looks for and against the condition as to say null hypothesis and alternative other hypothesis. There are numerous questions which need attention to be solved, analyzed and verified. Various methods are also needed for such kind of questions.

The min of such testing is to prove that null hypothesis is false and the results calculated are largely dependent upon the sample selected for testing. The technique used for the study that is sampling plays a major role in it. The high level of misspecification leads to Type I error. This is like a questionnaire filled by the auditor during the audit period as the working paper requirement. They do this without actually analyzing the relevancy and validity of the audit paper under the review process. In the similar way the outcome of the hypothesis need not to be correct or close to the reality as it led us to doubt the actual facts and figures which appear to be contrary from the results so obtained. It would not be wrong if called that the values of hypothesis are very feeble in positive accounting study.

As a part of literature review, the paper is being set to analyze that whether the qualitative and quantitative expression of positive accounting study are tested properly using the appropriate methods. This needs to be determined in order to fetch the results. Arguments for and against the notion are being discussed with the critique stating a major and definite position to prove the case that looking theories succeed is almost like a surprise.

 

Theoretical Framework

The auditing and accountancy profession is also needs to be carried out in accordance with the set of rules and regulations like accounting standard, statutory requirements, taxation and deviation from these, if any shall also attract prescribed penalties. This practice is exercised so that a certain set of standard is created for all and there would be less chance of error. But despite of these control checks, there is a variation in the action of the auditors as they perform audit and hence there is mandatory need to study and analyze the same.

Auditors are also human beings and this factor attracts the discussion to the concept of difference between rationality and independence of thoughts. Both the factors have their determining role. As the human mind is always occupied with some thoughts due to which the person may react with biasness in some situations, for instance a client who belongs to the same race might cause biasness in other person’s mind. Hence, the whole course of action is influenced by these two factors.

Thus, stating that the theoretical framework of this paper is research on the nature of human and analysis of the methods used for the research. The behavior of human is most important aspect and need proper attention so that it does not affect the framework. In hypothetical situation, it is assumed that the sample which is chose represents the population on a whole. To analyze this situation in real world, all the different aspects and possibilities shall be listed down and it shall verified that the sample contain at least one possibility from the real world situation. There are infinite alternatives and hence, this might lead to blunder because cross checking each and every situation is practical not possible at all.

But it is sad to state that the statistical methods have their own set of limitations therefore this type of qualitative testing is not carried out. Another difficulty is that the hypothetical situations dos cover the aspects of only one sample and assume that it is same for the rest but in real world, the audit might be governed by more than one aspect at the same time.

 

Significance and Limitations of the Article

The article has made a significant impact by opening up with the issues and loopholes in the current working environment. Even if it is partially effective but it has led to encouragement of more quality output to put in this direction. Such kind of articles should be published to create ways for more study that shall undertake with improvement with each level of study. The result so attained from the hypothesis proves that the nature of human is rational. The study is with a scientific view which states that humans take time to making important decision and the think before they judge.

The article limits in a way that it has focused more on the critical part leaving the other and it would have provided examples with the circumstances so faced in order to make the study more resourceful. The article also shows that the existing theories are fair and applicable though its applicability has change in time being, also new theories have been generated which are not tested. The presence of such framework and theories indicates that theories generate from time to time.

As process of accounting is subject to certain set of limits and measurement errors, statistics shall be used but again the results can influential in a negative manner as every situation faces different kind of conditions. Sample plays ha valuable condition as it represents the whole population. However, judging the whole population on the basis of a sample and giving results on that basis is yet another issue.

 

Conclusion

The conclusions that the positive accounting study is currently unable to achieve its expected  goal and objectives due to which more reliable, systematical and conceptual approach shall be undertaken. This has encouraged the use of vulnerable and analytical modeling. The process of more and more repetition encourages rigid testing which is able to give a successful answer for the positive accounting research program. There are restrictions in every field but these restrictions can be used as a benefit and can be converted in opportunities to create a sound theoretical framework. This can be seen as a light and the end of the tunnel. Moreover new and upgraded techniques are needed within a gap of time to enhance the validity of the study and make it adaptable according to the conditions so defined. Therefore positive accounting study needs up gradation in order to provide better results with relation to the current situation.

OR

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