Accounting Theory And Current Issues For Positive Accounting Theory

Article Summary

Discuss about the Accounting Theory and Current Issues for Positive Accounting Theory.

Paul V Dunmore for the Massey University, Wellington situated in New Zealand propounded the article “Half a Defense of Positive Accounting Research” of which the critical evaluation is done in the current study. Herein, this research paper an optimistic approach is followed towards the accounting research. A wider review of the intellectual project is made to understand the significance and drawbacks of positive accounting research. The article purpose is to draft a casual description of human behaviour in different account settings. The goal of conducting current literature analysis is to determine the article significance in the field of positive accounting. To uncover the facts an initial summary is specified aiming at main arguments of the article. Furthermore, to develop a deeper understanding of the literature of review research question and theoretical framework is specified in the report. Lastly, to derive a valid conclusion the importance and limitation of the article will be evaluated thoroughly.

The concept of “Positive Accounting Theory” is considered to be a vital segment of the academic accounting research that aims at evaluating and forecasting the current practices in accounting. The research is in direct contrast with the normative standards of accounting, which is more focused onto the description of optimal accounting standards. The report explores on how the accounting is applied and recommends the deficiencies in its implementation that leads to overall program ineffectiveness. Half a Defense of Positive Research has specified ways in which it can enhance the positive accounting for promoting the optimal practices, which can be adopted by individuals. The aim of the positive research is to not explore the implications and experiences rather its purpose is to explore the causation. There is a detailed examination done on the ontology and epistemology of positive research and determines what falls short in the current practices of accounting research. The key argument stated in the article is whether positive accounting seeks better theoretical models, which are highly precise and susceptible. Further, stating that the inappropriate progress in a positive accounting is because of the ad hoc quantitative models that are abridged to mere statements of the probable sign of the relationship between two variables. The other elaborated models that occurred from analytical research is unstructured, which makes it difficult to operationalize the same in a suitable manner.

Further, there is impelling need for a better measurement that shall help in rigorously testing the theoretical models. The accounting concepts are to be diligently operationalized to upkeep the interesting key concepts that fruitful and important for the businesses. The policy makers are required to draw their focus onto considering the requisite functional forms, which can help in forming a better linear relationship with the already existing concepts of accounting. The Paul V Dunmore showcase the formation of a reliable study to gauge a concept that can be considered as standards for further studies. Thus the approach will help in promoting enhancements within the standards and prevent reinvention of measures for each study.

Research Question

Next, is there is a need for a shift of focus far from the hypothesis testing to estimate the parameters. The confidence intervals for parameters must be compared with the theoretical prediction of such parameters or pick from other studies any comparable measurement. To check whether the result is significantly zero is to check whether the confidence interval comprises of zero, but nonetheless, measured confidence interval shall comprise of significant extra information that the real test does not proclaim.

Moreover, the need subsists to archive data of measurement of the significant concepts those that are made to test theory and those that contribute to the archive. Lastly, a need for extensive replication is done for validating the hypothesis testing confirming to the accurateness of measurement.

The current article is based on the Positive Accounting research and thus below following research questions are stated:

• To make a successful positive research program what measures are required to be taken?
• What ways are there for analytical modelling?
• What models of vulnerability are required to tested rigorously?
• Whether it should focus on the measurement than testing?
• What is the viability of current results to explore the parameters of applicability of past findings?

The literature review states the key limitation in performances of positive accounting research, which obstructs it from delivering a complete participation in a wider based project. The key requirement for a valid qualitative research is that the overall concepts maintain the level of testing further to restrain their applicability in research (Creswell, 2013). These theories are required to be formulated through a test against each other to draw a valid conclusion. The requirement for a detailed repetition of research may occur to confirm with the conclusion derived from the different testing of hypothesis.

A paradigm shift is also required for further developing a conceptual framework. The shift is marked from theory testing to an evaluation of the basic conceptual outlines of research. To perfect an accounting research, it is important to use enhanced measurement tools. Furthermore, the models should be advanced for forming the base of hypothesis testing. Models framed should be flawless checking that there is no environmental vulnerability subsisting.

The criticism framed in the articles is as follows

S.NO.	Statement criticised by Paul V Dunmore
1	Positive Accounting does not serve any remedy as it states what shall happen rather than what ought to have happened. It does not fulfil the key aim of accounting theory.
2	The positive accounting theory is not free from the value as it focuses on explaining what people shall do disregarding the fact that what are they actually needed to do.
3	The theory makes an assumption that every management and stakeholder action are built on the basis of their self-interest with key goals to enhance their own wealth without looking on the adverse aspects.

As per the Kuhn (1970), description of “normal” science adequately gets in tune with the positive accounting research rather than actual science. Positive accounting research has worthy contribution to serve a wider understanding of human behaviour due to its distinctive setting and specific range of behaviour that accounting embraces. Kuhn also argues that a model is replaceable only when it no longer supports the concept of normal science. For some reasons it has been proclaimed that the social system is not steady but an adoption of the modified system shall help in suiting the advanced knowledge thus not leading to any severe crises. Further, Kuhn uses the notion of a disciplinary matrix for suggesting the positive research through an example that can be used for solving all puzzles, irrespective of the contribution in its social system.

Theoretical Framework

The positive accounting theory was almost patented by the Watts and Zimmerman (1990, 1978 and 1986) nonetheless their contribution can be seen really narrow in comparison to the wide-based concept of positive research. Many other aspects of accounting research are not determined by the theoretical model. The aim of accounting research is for extending the base of understanding and application of different theories in accounting research. It is important to ascertain a better approach for validating the finding of this research.

The research article propounded by Paul V Dunmore has a significant contribution to serve for deeply understanding the social context of human behaviour. It is due to the unique setting that is being used in this research to ascertain the specific range of behaviour which accounting comprises of. Provided the fact that research paper shall assist in policy makers to use the research for the future development of the theories working onto the existing disadvantages in the models of positive accounting. The theoretical inferences made by Paul V Dunmore for the research analysis viable as it is suitably sustained by valid fact and justifications.

Yet there is also a significant limitation in the analysis section. In the current practices, the key output comprises of statistically important coefficients, but the interpretation does not serve the connection suspecting the measurement that is inconsistent with the theories and sample which are not challenged and whose applicability is not verified rather presumed. According to Flick (2015), the tools and models that are supposed to be employed for a comprehensive analysis must be adequate for the objective of study otherwise it shall affect the validity of study adversely because of inadequacies.

Limitation and benefit are specified in the study but are not completely clear from the reader’s point of view. There are suitable constraints identified in the study affecting the research validity, which question the reliability of its use for future studies.

Conclusion

The current literature concludes that the article has presented a wide data on how the positive accounting research is essentially practised. The study states that there is a lot more development needed to enhance the rigorous theories and most of these have failed when tested. The current article states suitable finding and allow the reader to draw valid inferences from the hypothesis testing. Through this aspect, there shall be confirmation of accurate measurement by which researcher can investigate the boundaries of research findings of the study.

References

Creswell, J.W., 2013. Qualitative inquiry and research design: Choosing among five approaches. Sage.

Flick, U., 2015. Introducing research methodology: A beginner’s guide to doing a research project. Sage.

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.