ACCOUNTING THEORY AND CURRENT ISSUES (SM14)

Introduction:

Positive accounting theory is most popular and worldwide accepted theory of accounting. It is a scientific accounting theory shows the empirical relationship. Due to its most concrete scientific approach, it is accepted by everyone. The main focus of criticism in this theory is the acceptance and its implications. The theory is based on certain assumptions. This accounting theory is developed by Watt and Zimmerman on some specific assumptions. Therefore, the theory is having some positive aspects and some negative aspects. Both the areas, based on the article are explained in the study. ‘Qualitative' and ‘Quantitative' research areas of positive accounting theory are assessed on the basis of the article. The process of alteration of a specific accounting theory and the potential role of measurement is also evaluated in the study. In order to make a judgment of positive accounting research, the main areas of the article are focused correctly and make a reason based justification.  

Summary:

The article has discussed the positive accounting theory and its successful implementation. Due to its scientific application, it is currently in the practice. It is used for getting the accurate result. The logical factors which are essential for accounting theory are considered properly. But it is having some limitations.  The theory has become unable to fulfill all scientific objectives as the applicability is wide range. The main aim of the study is to make a comprehensive discussion of the article in which research work is framed and limitations are discussed regarding positive theory of accounting. In the article, hypothesis testing has been made and how analysis is made through testing that is highlighted. On the contrary qualitative analysis, areas are also focused. The right side and the drawbacks of the article are made in the study in order to evaluate the overall outcome. Qualitative techniques can give good result that is highlighted in the article and in quantitative approach, emphasis is made on measurement. The existing assumptions can be changed by new one. As per article, the ultimate contribution is Kuhn's normal science approach is more acceptable than the Zimmerman's theory. Whether it is correct or not, that interpretation is made here.

Research Question:

The researcher has classified the world into two categories. The one side does not follow researcher’s imagination and the other side follows their imagination. Only normal people can get the true and fair information about the events of the world. Maximum experts believe that quantitative interventions can only give the proper result regarding the research project. But, qualitative methods are also acceptable. So, quantitative as well as qualitative both the techniques are explained in the article. Popper's approach in the statistical hypothesis testing is followed. A quantitative model is explained to judge the competency of the management. Numerical figure can give an absolute result only. So, the quantitative technique which is mentioned in the article is having limitation for assessing the management strength of the organization.

Comparison of different model is also needed for identifying the relative performance. The management issues regarding the payment of audit fees have been identified with the quantitative model. But quantitative model can give good outcome for proper judgment. It is more logical. The constraints of the analysis have been already highlighted in the article. The real world event is completely different from some mathematical model. So, the numerical test cannot give the proper outcome. There are different statistical methods which are normally applied in the research work to get concrete result. Optimization is the essential work of any research work (Balakrishnan, Watts & Zuo, 2016). In positive accounting theory, efficient market hypothesis and CAPM model are also considered. The researcher is absolutely correct that only quantitative technique cannot give full result. 

The main focus of hypothesis is to calculate the numeric value i.e. measurement is more essential than the testing. On the contrary, it must be considered that capital asset pricing model is worldwide accepted model of computing the cost of equity because it considers some important factors (Gaffikin & Aitken, 2014). So, positive accounting theory is really having a remarkable contribution towards the accounting. There is no way of evaluating any result whether it is true or false except replication of the work. The testing which is used in the research process that must be worldwide accepted. The statistical model gives concrete result on the basis of variance and the sample size. The article has made a study of current practice of research in respect to the accounting. So, different models are highlighted to show the positive and negative parts. The research work has focused on the main area by literature review accurately. Kuhn's explanation of normal science has been highlighted in the article. Watt and Zimmerman have claimed their accounting theory as ‘Positive’. Research work in respect to make a theory is very much comprehensive which is shown correctly as per review of literature. The qualitative research work is also explained in the paper. Qualitative work can give most valuable result than the quantitative research if it is done with proper logic. For forming theory, qualitative work is most essential. Accounting theory formulation and positive accounting theory are having a slight difference. The theory of accounting provides specific guidelines in respect to the practice. So, qualitative experiment can give correct result in formulating accounting theory.

Theoretical Framework:

The positive theory is largely accepted. The research has been done on this positive theory to make a normal explanation of behavior of human beings for accounting rules and regulations settings. Different statistical techniques are used for making a standard level of theory. But, sometimes quantitative methods cannot give the actual result. Statistical methods can provide proper result if information is collected accurately (Miller & Power, 2013). Different shortfalls of current accounting practices are mentioned in the article considering the epistemology and ontology of the positive research. Every theory is having some drawbacks and on the basis of the shortfalls new theories are formed. Positive accounting theory is really a good concept for accounting practices but due to worldwide access to the positive theory, it is has faced some limitations (Christensen, Nikolaev & Wittenberg-Moerman, 2016).

In this respect, normal science approach has been highlighted in the article. As per research paper, normal science approach is having a vital impact in positive accounting research. The main objective of the positive accounting theory is to supply a ready solution to solve the puzzle with fewer barriers. The successful research can be made by developing the existing model properly and unnecessary or irrelevant assumptions must be avoided. The positive accounting research only makes the emphasis on scientific efforts. The logical factors are considered properly in scientific theory. If there is no empirical relationship, the theory cannot be accepted. This is a continuous process which can be maintained by developing different assumptions (Beattie, 2014). Management strength and weakness measurement regarding audit work are shown in the article with a mathematical model. The positive and negative effects of the model have been shown. Sometimes different assumptions may not be accurate. So, some models cannot interpret properly. In order to get right result, correct assumptions are needed. Positive concept of accounting which is running all over the world is having some issues. These can be eliminated by making change in the framework of the theory. For this reason more and more research work is needed.

Only current issues of accounting practices are exerted in the article. In accounting, the research work is having a specific structure. The author will first develop a model regarding accounting practices and then he will gather information for testing purpose. So, the analytical model needs some specialized activities. If testing is not accurate, then it is difficult to frame a theory correctly. In accounting research work, measurement is treated as vital part. Replacement of past study is the normal thing of any research work. In accounting research, for determining the actual result and exploring the constraints of applicability of findings of previous research replication is done. The research work actually reveals the requirements of positive accounting theory for making the effective contribution towards the respective field. Highly vulnerable models are to be considered for proper testing. Ad hoc quantitative models are main drawbacks of positive research of accounting. This problem must be overcome by adopting remedial steps. Functional characteristics are important for social system of positive accounting research. Instability of social system does not hamper the strategy of betterment (Baxter, 2014).

Significance and Limitations:

The current scenario regarding positive accounting theory is really important to know for getting an overview in respect to the world wide acceptance of the theory. A specific qualitative and quantitative model of formulating any decisions is needed to be modified. In dynamic business, world demand is always changing (Hunton, Neidermeyer & Wier, 2015). As per present demand different model must be established. So, development of any theory is a continuous process. In order to eradicate the limitations, up gradation is essential. A positive theory of accounting is having the remarkable contribution. It can give concrete outcome regarding any problem. However, evaluation is essential in order to moderate any system. Improvement needed to cope with the changing environment.  Positive accounting concept follows observation process. So, hypothesis testing is most important part of positive accounting research work (Easton & Monahan, 2016). Different positive and weak points of accounting research work are highlighted in the topic which helps in identifying the negative areas. The article is really helpful for making further research work with respect to the positive accounting theory. Basically, system changing indication is given in article which is needed to be considered very seriously. Presentation of the actual issues in respect to the accounting theory is really helpful for making modification.

From the literature review of the article, it can be said that different experts model are discussed in the paper to show how techniques are used in evaluation or decision-making process and what is the main limitation of a specific model. The author has used ‘Quantitative' and ‘Qualitative' both the interventions to make this analysis. The importance of qualitative analysis is needed to be explained more that the quantitative technique. In case of accounting theory formulation, qualitative methods adoption is a vital area.

For providing guidelines in different practical issues theory is essential. For specific rules and regulations, different practical issues are essential to identify. Accounting practices cannot be done properly if there is no appropriate theory. For solving new issues new framework is required to be made. The positive accounting theory drawbacks are acknowledged by the author properly but if the article is prepared on the basis of comparison of the normative theory of accounting, it becomes most effective research work. The author has made right theoretical conclusion from the research work, but the main limitation i.e. lack of comparative study with normative theory reduces the significance the article. In this respect, it can be said that, the normative approach is also essential for accounting practices. Both the theory must be taken into the consideration properly, so that it can be helpful to construct new areas of accounting (Chatfield & Vangermeersch, 2014). If a set of framework does not maintained, it is too difficult to face practical accounting issues. The researcher has made the analysis of hypothesis testing and has highlighted the proper areas of limitations. If research models cannot be developed properly then it cannot give fruitful results in research activity.

Conclusion:

Every research work is done to identify some problems and solutions are given regarding limitations. In the article, the shortfalls of models to conduct the research work are shown in a systematic manner. So, in this respect it is very good research work. But this project can be modified in a different manner. Positive accounting theory is really well accepted and it is required to be improved effectively. The article says about numerous problems of current accounting issues. The importance of normative theory must be considered here because it is very much helpful for making standards of accounting correctly. So, further study can be made in respect to positive accounting research work to get a more useful result.