Financial Statements and Positive Accounting Theory

Question: Discuss about the Financial Statements and Positive Accounting Theory. Answer: Introduction Positive accounting research is a type of research that aims at shifting of the normal paradigm of dogmatic thinking. The critique aims to identify whether positive accounting research is the real thing and if so what can be done to improve it (Mouck, 1990). Watts and Zimmerman advocated the positive accounting research theory in 1978.The positive theory uses the technique of observation to base its argument as opposed to the normative theory that applies formulas. Positive accounting focuses on the actual real world transactions as well as events and tries to examine and understand how the events are accounted (Staff, 2016). The examination of the accounting methods reveal the economic consequences that might arise from using such accounting decisions, to determine measures for accounting future events. On the other hand, normative theory relies on deductions based on formulas that have been in existence. For this, reason the paper compares the old paradigm to several believes that hindered the discovery of new knowledge. On this paper, the report structure will be applied, as it is more understandable (Mehta, 2016). Is the positive accounting research approach the best? Is the research having obstacles in its adoption in various fields? What are some of the shortcomings experienced during its application? What are some of the improvement needed to perfect the positive accounting research? On the introduction part, the author highlights that the review of the theory is to expose the serious deficiencies in a way in which performance of positive accounting research practice takes place leading to the non-meaningful contribution to the wider project. The author has gone ahead to elaborate on the hypothesis by examining some recent papers. The first paper, the scientists research project, focuses on how individuals hold beliefs so close that they rarely acknowledge new ways and findings. The author continues to acknowledge the perception of sophists views urging that in order to incorporate positive accounting research, one should stop believing in normative accounting theory. This shows that the author tries to identify preconceived beliefs as one of the obstacles facing the adoption of positive accounting theory (Watts Zimmerman, 1986). The second paper, examples of positive research in accounting, the author portrays the broadness of positive accounting research and even highlight examples that are included in that type of research. Some of the examples include how managers perform evaluation systems with discretion, the different ways of presentation of accounts information affect the users ability to absorb and finally how audit experts make their judgment. The paper shows that while using the positive accounting approach there is a shortcoming as the broadness of the concept has various areas that may lead to misinterpretation (Wolk, 2009). The third paper, scientific ontology and epistemology, highlights that not all researches are positive accounting research, there is also interpretive research, which mainly answers the open-ended questions. This paper shows that the positive accounting research cannot work on its own and requires support from other research methods. To conduct a successful positive accounting research the author has highlighted three requirements as follows; the use variable models that are stringently tested the application of an analytic modeling and a shift of focus on measurement rather than testing. All the research questions formulated above lead to the issue addressed in the paper with most of them stemming from the literature review (Staff, 2016). Theoretical framework The author of the paper has adequately included materials from other sources in the way of reviewing them; disciplined framework mainly incorporates the work of others in a paper in order to lead the research in a way that it seeks to come up with a much better findings than previous researches. The frame on this paper is elaborating on why positive accounting research fails to capture the attention of its users. Moreover, the author addresses the broadness of the theory as well as the inefficiencies brought about by the broadness (Milne, 2002). The author has also reviewed the concept of the disciplinary matrix by (Kuhn, 1970) that suggests that positive research is a paradigm applied to solving accepted puzzles in social groups, regardless the social or intellectual reward that comes about from solving such a puzzle. The author goes ahead to cite ( Lee , 1997) who talks about the self-replicating elite and how there is no hope of the adoption of the new effective paradigm. This ded ucts the hypothesis of what is hindering the adoption of positive accounting research. To emphasize on this point the author has cited the well-known story of (Hannam, 2009). Hannam wrote about the theologians that refused to look through Galileos telescope as they thought it would show what is already known from the church doctrine or show something contrary to the teachings, as it had been corrupt by the devil. The papers theoretical framework has given the hypothesis concerning the positive accounting research, elaborated on the hypotheses and provided falsification and hypothesis testing. Moreover, the paper has addressed the requirements for a positive research program to ensure a successful positive accounting research process. (Hannam, 2009) Goes ahead to evaluate the hypothesis through various ways such as; Proper criterion To gather, reliable data a researcher should observe carefully and develop preliminary ideas. The idea will lead to the development of the formal theory that is in line with predictions that rely on the current empirical evidence. The predictions are then tested against new observations in cases where new and old theories conflict Falsification of the theory A theory may fail to answer the question, as other factors might be involved in the situation. The author cites the spacecraft lower speed that might be attributed to a gas leak, measurement error, outside forces pulling spacecraft or the whole theory might relatively be wrong. Qualitative positive research The aim of the qualitative positive research is to gather data to help in the preliminary understanding of the situation and what kind of questions should be developed. The logic and weakness of statistical hypothesis In general, there is a technical difficulty with the testing of hypothesis. The distribution of test statistics subjects to null hypothesis as it depends on auxiliary options. The effect of positive research program The author writes that hypothesis testing as commonly applied in positive accounting research provide weak evidence in support of the particular alternative hypothesis. Due to this, the writer suggests that much of what is claimed to be established might not be true. Regardless of all these shortcomings, the author has acknowledged that positive accounting research contributes to a wider scientific endeavor aiming to understand the human behavior and the complex setting of organizations in which decisions are highly dependent on specialized information as well as the control systems. Finally, in the conclusion part suggested the various ways in which the research requires adjustments for further improvement of results. The author ensures that all the suggestions are set at the end of the document to clearly help the readers understand the information on the paper before the final solution is presented. Significance and limitations of the article The paper written on positive accounting research is one of the papers whos information ought not to be kept on shelves to collect dust, but rather be keenly addressed as it has unearthed the dogmas that human beings seem to perceive hence limiting change. The theory purported by the paper is far much better as it involves observation of the real world, compared to the normative accounting that bases its findings on set policies (Melis, 2007). The timing of the paper is at its best, as most of the researchers need to incorporate various new ways of researching to come up with conclusive deductions, not as before where researches limited their areas of implementation like the sophist who were ignorant and the information they knew they kept it to themselves. On the other hand, positive accounting research has quit a number of limitations that make it less effective during its application. Some of the limitations include the broad concept that the specific theory e.g. how auditors make decisions, how they determine the fee and how managers justify their decisions. Another limitation is the fact that positive research on its own cannot deliver conclusive results and therefore require support from interpretive research to answer the open-end questions. The articles theoretical model so far it is not the best, and there is the need for a model that is highly specified (Kaplan Ruland, 1991). Conclusion The author has adequately criticized the positive research and highlighted all the various areas that the research fails to address Furthermore he has portrayed the dogmas exhibited by humans in the adoption of new ways. According to the author, positive accounting research is the much superior research compared to normative accounting research. Though positive research has not been widely embraced, there is still hope. To catalyze the adoption of this kind of a research, there is the need for few adjustments that will enable the research to be efficient. Some of the adjustments include; There is a need to provide better measurement methods to test the theoretical framework. This is because most researchers are mainly focused on other parameters and simply reduce the framework testing into mere statements. There ought to be a Shift of focus away from testing of the hypothesis and towards the estimation of parameters. For this reason, concepts require being operationalized with at most caution by use of proxies for other interesting concepts. Once a reliable way is established, it should be set as a benchmark for future researches and no need of coming up with new measurements for each study. Data archives of measurement to be provided for important concepts that have been made to test particular theories as well as contribute to the archive. The need for an archive is to ensure that careful measurements made by researchers get acknowledged as part of the discipline activity .These measurements prove worthy for future researches as well as b becomes a resource. Finally, there is a need for conducting numerous researches to validate the findings and hence come up with conclusive results. The replication of researches enables the validation of hypothesis testing hence confirming the accuracy of the measurement. Moreover, a test requires being carried out aiming to compare the theoretical framework against other studies to determine the reliability of the theoretical framework. References Avel, D. (2014). Positive accounting theory: theoretical and critical perspectives.International Journal of Critical Accounting, 6(4), p.396. BOLAND, L. and GORDON, I. (1992). 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