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Question:

What is the Issue in Accounting Theory ?
 
 

Answer :

Introduction

This essay aims to provide a critical analysis of the article ‘Half a defence of Positive Accounting Research’ by the author Dunmore. The essay analyses the strengths and weakness of the article that intends to examine the contribution of positive accounting theory in broader research program. The article is about examining the significance of positive accounting approach in the field of accounting. It tends to highlight the deficiencies in the positive accounting approach and thus proposes the use of better theoretical concepts in accounting research. The main argument presented in the research paper is ‘whether positive accounting theory is effective in achieving scientific objectives of accounting research’ (Dunmore, 2009). The critical analysis of the article in the essay is conducted by summarising its main points, identifying research questions, discussing its theoretical framework and discussing its significance and limitations to be used in future researches.

Summary of Article

The research article aims to provide an in-depth understanding of the positive approach used in broader accounting research program. The main ideas presented by the author in the research article are centred about depicting the importance and weaknesses of the positive accounting theory. The theory was developed by Watts and Zimmerman in the year 1970 and it was based on natural science phenomena. The theory was based on natural science phenomena and thus was considered to be largely effective in achieving the scientific objectives of accounting research (Dunmore, 2009).  Accounting researches mainly involves practical testing of accounting predictions and therefore requires implementation of theoretical framework based on scientific phenomena. As such positive accounting theory was believed to be largely useful to be used in accounting researches in comparison to normative accounting theory (Ghnabari et al., 2016).

 

Normative accounting theory was based mainly on theoretical principle of accounting and has no practical orientation. On the other hand, positive accounting theory is developed on the basis of scientific principle and thus was considered to be useful in achieving practical outcomes of accounting research (Chatfield and Vangermeersch, 2014). The article, in this context, has examined the contribution of positive accounting theory in the accounting field. The article has illustrated the weaknesses of positive accounting theory and thus has proposed the adoption of better theoretical approaches in accounting research (Wickramasinghe and Alawattage, 2012). The literature review section of the article has presented the views and opinions of different authors on the use of positive accounting theory in accounting research programs. The research article has emphasised about the limitations of positive accounting theory in attaining the practical outcomes of accounting research. Thus, the article provides a solid base for future researches about analyzing and examining the usefulness of positive approach in accounting researches (Dunmore, 2009).

Research Question

The research questions of the article have been identified through critical examination of the literature review section. The literature review of the article is centred about analyzing the importance and weaknesses of positive accounting theory in the field of accounting. The article intends to provide an answer to the following question as analysed from its literature review ‘Does positive accounting theory can be applied in achieving scientific objectives of accounting research.? (Dunmore, 2009). In addition to this, the research study also seeks to address the following sub-research questions:

  • What is the importance and weakness of positive accounting theory in the field of accounting research?
  • What are the main advantages of positive accounting research in comparison to other theoretical model used in accounting researches?
  • Does there exist a need for the adoption of better theoretical model in accounting research as compared to positive accounting theory?
 

Theoretical Framework

The theoretical framework of the research article originated from the literature review section. The views and opinions of different authors about the research topic are presented within the literature review that develops the theoretical framework of the research article. The theoretical arguments of various authors emphasises on the weakness of positive accounting they that makes it relatively incapable to attain successfully the practical outcomes of accounting research. Watts and Zimmerman developed positive accounting theory and claimed it to be largely useful in testing the accounting predictions developed in accounting researches. This was due to the development of the theory on the basis of scientific phenomena as comparison to other theoretical models use in accounting that is based on theoretical principles (Rhonheimer, 2000). Watts and Zimmerman have claimed that the theory of positive accounting is based on explaining the cause and effects relationships that is essential for carrying out accounting researches. However, different authors in the research article have proposed that positive accounting theory is mainly based on value judgement. Thus, the theory seems to be inappropriate for achieving the practical outcomes of the accounting research (Burns and Needles, 2014). The different authors in the literature review section of the research article have proposed that although positive accounting theory have enhanced the understanding of various accounting phenomena but it is not useful in testing of accounting predictions (Dunmore, 2009).

The main contribution in highlighting the deficiency of psoitiev accounting theory comes from Popper’s falsification criterion. The author has proposed that the development of scientific accounting theory is based on sequence of steps that forms the basis for its acceptance or rejection. The theories developed are accepted a scientific theories if they meet the requirements as stated by Popper. The first step in the falsification criterion of Popper is observing and examining the preliminary ideas proposed from the theory. This is followed by testing the observations for analysing their scientific basis. The quantitative testing of predictions is essential for achieving reliable empirical evidences. The predictions tested need to be quantitative in nature as they are more susceptible to falsification. This is followed by testing the predictions of the new theory against the outcome achieved from previously established theories. Thus, the new theory developed is accepted as scientific if it meets all of the above stated criteria’s. The theory of positive accounting need also to be analysed and examined on the basis of all the above stated requirements to be accepted a scientific. The various authors have questioned on the acceptance of positive accounting theory on scientific basis as it is based mainly on value judgment (Deegan, 2014). The theory is mainly said to be based on rhetorical approaches and therefore its utilisation in achieving practical outcomes of accounting research is put under debate (Bazrafshan and Talebina, 2016). The author through the present article has proposed that better and improved theoretical models need to be used in accounting research programs. The field of accounting has largely been evolved since past few years and therefore the theory of positive accounting presently is not found to be suitable in achieving its outcomes. The theory should be used in combination of other theoretical approach for effectively meeting the practical based outcomes of accounting research (Dunmore, 2009).

The accounting researches are mainly carried for proposing the selection of an accurate accounting method in order to resolve a complex accounting issue. The management of large and complex business organisations usually conducts accounting research for selection of a particular accounting method to resolve an accounting problem. Thus, accurate selection of accounting method is essential for enhancing the performance of business organisations. The accounting researches mainly involve practical testing of accounting predications for selection of an appropriate accounting solution (Kabir, 2007). The theory of positive accounting thus seems to be inappropriate in carrying out practical testing of accounting predictions. Therefore, it is highly essential for researchers to use better and improved theoretical models in field of accounting that can effectively carry out practical testing of accounting predictions. Thus, the overall theoretical framework of the research article has identified and analysed the deficiencies of positive accounting theory to be used in broader research program (Dunmore, 2009).

Significance and Limitations of the Article

The research conducted in the present article hold high significance in the domain of accounting. It will provide valuable insight to the future researchers about the influence of positive accounting theory in accounting researches. The future researches can carry out an in-depth analysis about the main deficiencies in positive accounting theory. It will also be helpful for future researchers to understand the nature of theoretical models that should be used in accounting researches. The theory of positive accounting has been used in accounting researches since a long period of time. The present research study, in this regard, has undertaken an important analysis to identify the deficiencies of this theory. This will improve the scope of accounting and also enhance the quality of accounting research in future context. The development of better theoretical approaches to be used in accounting researches will help in improving the business performance of organisations. The resolving of critical accounting problem through the use of better theoretical approaches in accounting will help business organisations to improve their financial performance. Thus, the research study is highly significant and important for development of accounting field (Dunmore, 2009).

 


However, there are few limitations of the research article as identified during its critical analysis. The main limitation of the research article is that the analysis carried out is lengthy and complex. The research study has mainly incorporated the use of qualitative data in proposing theoretical conclusions. However, the overall qualitative analysis carried out in the research article is very lengthy and therefore can cause the lack of interest in readers. The readers might lose their interest as the analysis presented is not attractive for achieving the attention of the readers. The research should have involved quantitative analysis in addition to qualitative analysis for demonstrating empirical evidences against the theoretical conclusions proposed. The lack of practical evidences in support of theoretical conclusions also proves to be a major limitation of the research article. This has impacted the credibility and validity of the research study to be used by future researchers. The theoretical findings of the research study in absece of practical evidences do not seem to be reliable to be used in future research study. The future researchers need to practically test the theoretical findings proposed by the author though the research article before their use in any research study. The theoretical findings proposed are based mainly on the views and opinions of different authors and there is no incorporation of primary data that involves providing practical evidences in support of theoretical findings. As such, the personal contribution of author towards the research topic is not much as he has only emphasised on the views and opinions of other authors. Thus, these all are the limitations of the research article that might impact its credibility to be used in future research context (Dunmore, 2009).

 

Conclusion

The research article has effectively presented the deficiencies of positive accounting theory. The author has drawn the attention of accounting researchers towards use of better theoretical models for enhancing the scope of accounting research. The argument presented by the author in the research article has been analysed and examined on the perspectives of views obtained from different authors. However, the major limitation of the research study is that it is based mainly on qualitative analysis. The lack of empirical evidences in support of theoretical findings might impact its validity to be used in future researches to be held in this context. Apart from the above limitation, the research article holds high significance in contributing to the development of accounting researches. The development of better theoretical models as compared to positive accounting theory for conducting accounting research would prove o be highly beneficial in resolving accounting problems faced by businesses to  large extent.

 

References

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

Burns, J. O. and Needles, B.E. 2014. Accounting Education for the 21st Century: The Global Challenges. Elsevier.

 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.

Kabir, H. 2007. Positive Accounting Theory and Science. Journal of CENTRUM, pp. 136-149.

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

Wickramasinghe, D. and Alawattage, C. 2012. Management Accounting Change: Approaches and Perspectives. Routledge.

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