Accounting Theory
Michelle_Michy
L8-TraditionalMainstreamMethodologiesinAccounting.pptxTraditional/Mainstream Methodologies in Accounting
Unit 8
ACC3135: Accounting Theory
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Lecture outcomes:
Exploring Traditional/ Mainstream Methodologies in Accounting
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What have we learnt so far?
Some key ideas concerning the knowledge base in accounting.
WHY?
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The point of this is that we want to move onto an exploration concerning how and why we go about generating knowledge in accounting and what is it used for.
(Remember after all, there is the claim that accounting doesn’t have a knowledge base).
In the next couple of lectures of will be exploring the function of accounting
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Research and what purpose does it provide in society.
Starting point for today is knowledge:
We saw that knowledge is a problematic concept that knowledge can be obtained from a variety of sources such as memory, reason, faith, etc.
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The next step was to explore the two main approaches to gathering knowledge (or problem solving). The two together were called Induction. They were made up of the Inductive and Deductive approaches.
The inductive approach relies on observations of the empirical world, these are then used to form explanations and theories about what has been observed.
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The deductive approach can be said to involve the development of a conceptual and theoretical structure prior to its testing through empirical observation and measurement.
(see the Induction diagram)
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Process of Induction
Deductive
Inductive
Source/Reference: Trochim, W.M.K., (2020). Research Methods Knowledge Base. [online], Conjointly, Available at: < https://conjointly.com/kb/deduction-and-induction/#:~:text=In%20inductive%20reasoning%2C%20we%20begin,some%20general%20conclusions%20or%20theories. > [Access 07 September 2020].
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The difference between the two is that:
Facts acquired through observations lead us to theories and hypotheses (induction). Often called hypothesis generating.
With deduction (logical reasoning) we accept or reject hypotheses. We look at the consequences of the theory, and we gather
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facts to confirm or disprove the hypothesis. This acceptance and rejection then helps to explain or predict and is often called ‘hypothesis testing’.
The whole process could well be a cycle. With induction we generate a theory which is consistent with these facts and perhaps can be called the first step in scientific methods (hypothesis generating).
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The deductive method looks at the consequences of these new hypotheses and then confirms or disproves the hypothesis relationship among variables that have been deduced from propositions or earlier theories (hypothesis testing).
Can be considered to be a continual refining process of knowledge.
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There is a huge debate over the relationship between data and theory. The main point here is to understand what you are trying to achieve, as this will ultimately direct the type of research design and methods you should use to acquire knowledge.
There are two main traditions or approaches in research and these are called paradigms.
Philosophy of Research
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What is a paradigm?
‘It is philosophical system whose core assumptions or beliefs about the world are shared by a large number of scientists and which contains a number more or less compatible theories, models or methods’.
These are two paradigms: these are the ‘positivist’ (or traditional /mainstream approaches) and the ‘phenemologist’
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Positivism
Paradigms or approaches (critical /interpretative).
Assumptions:
The world is external and objective
The observer is independent
Science is value free (association with quantitative methods, and numbers, statistics too).
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But is this possible?
Some researchers became unhappy with the above assumptions and began to question whether it is entirely possible to carry out research along the above lines. Thus the second paradigm emerged.
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Phenomenology
Assumptions:
World is socially constructed and subjective, thus only given meaning by humans.
The observer is part of what is being observed.
Science is driven by human interests.
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Qualitative methods are more likely to be used, but can also use a mixture of qualitative with quantitative methods to establish different views of the same phenomena.
So which approach do we use in accounting and accounting theory generation (research)?
Traditionally and historically people who did research in accounting used the ‘positivist’ approach, many still do today, but there is
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Wide acknowledgement that there are some problems with the assumptions behind it. I.e can people be objective etc. therefore, this lead to an increase in research being undertaken utilising the phenomenology approach.
The article by Chua (Check ACC3135 reading list) discusses the problems with the ‘Positivist’ approaches which have been used in accounting to generate knowledge.
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The article by Hines explores the notion of ‘Falsificationism’. This has also been a method put forward by Karl popper which depends upon the point that the falsify of universal statements can be logically deduced from singular statements. If this approach is useful, then science can progress. (This article is related to notions of induction see the diagram – slide 8).
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The main problems with induction is that theory guides observation and experiment.
For example, if you go out collecting observations on something you will need some kind of theory to structure your observations. Due to this problem, another way of thinking came into existence, ‘Falsificationism’ by Karl Popper
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Falsificationism admits that observation is guided by theory, denies the supposed truth basis of observation, admits theories are prior to observation.
Theories therefore are viewed as tentative (mere guesses which are up for experiment) accounts of the universe which are up for testing.
Falsificationism
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Rigorous testing should lead to the abandonment of theories which fail experimental method.
SCIENCE PROGRESSES BY TRIAL AND ERROR.
A THEORY MAY NOT BE TRUE, BUT IT IS THE BEST WE HAVE.
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BUT IT IS POSSIBLE TO ARRIVE AT FALSITY.
‘The falsity of universal statements can be deduced from suitable singular statements’, this is the basis of falsificationsim’.
Science under this idea is seen as a set of tentative hypotheses, which must be falsifiable. i.e. there exists a logically possible observation statement that is inconsistent.
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With a hypothesis.
The statement must be of a form which is falsifiable.
A STRONG theory lays itself open to being falsified; the more precise it is the easier it is to falsify, but if it can not be proved false, then the theory is strengthened.
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A BOLD hypothesis is one which provides many opportunities for being falsified. The precise speed of light is highly falsifiable.
Can you think of any examples from accounting?
If a theory can not be falsified, then progress is allowable. Falsificationsim becomes a way of achievement in knowledge.
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But there are problems with falsificationism, see your articles.
Therefore, what we can see emerging are different approaches for gaining knowledge and for generating theories.
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