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Running head: POSITIVE ACCOUNTING THEORY

Positive Accounting Theory
Student’s Name:
Instructor’s Name:
Institutional Affiliation:

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POSITIVE ACCOUNTING THEORY

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Introduction
The accounting environment is one in which causes of human behavior may be explored
to great and complex organizations where face-to-face interactions are mostly replaced by lesspersonal or completely impersonal systems of information for decision making
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Ideally, positive accounting research is part
of the wider intellectual project of scientific research whose intention is to understand the causeand-effect relationships in the region under study
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The assessments discussed includes an analysis of Watts and Zimmerman's
positive accounting theory
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The need for studying accounting methods
arises out of the need to establish the means by which an organization gets to select the financial
accounting technique or financial reporting activity to adopt
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Nevertheless, the principles are quite useful in the fact that they offer new challenges to
researchers as they seek to understand how accounting institutions undertake their activities
especially those regarding the nature of accounting technique
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From the article, it can be noted that the real purpose of positive accounting

POSITIVE ACCOUNTING THEORY

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research may be quite different especially when the social system is not well-designed for
contributing to the scientific research project
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To achieve the aim, the paper was organized into various section and subsections which
helped vividly analysis the underlying topic
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The next section involves
summarizing the article which in this case included outlining the main argument in the article as
well as listing the arguments and contributions of the article
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In the fourth part,
the theoretical framework was outlined and reviewed intently
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In this case, the constraints of the positive
accounting theory (PAT) was discussed as well as how the restrictions affected the study
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The
last section involved summarizing the main points after which implications of the paper was
discussed
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Positive accounting research is one among many of the wider intellectual
projects of scientific research which is aimed at advancing knowledge on the cause-and-effect
relationships in the area being studied
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The conventional accounting approaches are naturally prescriptive and were composed of
a dominant part of accounting research
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The two articles spark criticism
of three different positions
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Watts and Zimmerman responded to
theses critiques in their 1990 article
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Historical analysis of the
positive accounting research shows that the positive aspect of the Watts and Zimmerman
approach is more rhetoric than methodology
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The article was mainly based on the positive accounting theory which was put forward by
Watts and Zimmerman
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The bonus plan interpretation, on the other hand, is one in which managers of firms
with bonus plans are more likely to utilize accounting methods which boost the cash flows of the
company in the present period as well as in the foreseeable future
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The size of the company happens to be a significant
proxy variable attracting political attention
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Summary of the article
Ideally, the research question addressed by the paper aims at reviewing the issues
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The
assessments discussed includes an analysis of Watts and Zimmerman's positive accounting
theory
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Ideally, the main aim of the paper was to examine the positive approach
to accounting research
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To obtain positive results through the use of Popperian approach, there is need to demand
more of our theoretical models
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Kuhn's
description of normal science is best suited to active accounting
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There is need to test competing theories against each other rather than treating a single
method as an unproblematic and sufficient lens through which to examine a set of data (Kuhn,
1970)
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Moreover, another limitation is
that though an actual research is utilized in accounting, it appears to be mostly incapable of
attaining the scientific objectives
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However, a better approach would be to determine how much heteroscedasticity
would invalidate the primary test findings and estimate the confidence interval for whether the
actual amount is less than this
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If the option is weak
(positive association), it may be consistent with several theories (Hannam, 2009)
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However, according to (Hodge, Kennedy, Maines,
2004), statistics hypothesis testing but an estimation
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The Choi equation was given by F(r,k) = k – k2/4(1-p)RL
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However, it is wise to note that developing analytical models is a
specialized activity and the formulation of such standards is not usually presented as part of
empirical papers
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Thus, the research paper used the Choi model
and incorporated two concepts which were audit complexity as well as the strength of the legal
regime
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In the choi

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model, it was represented by kq where k is the complexity of the review while the q is the
quality
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(2007); Simunic (1980); Choi et al
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It appeared that there was a
substantial publication bias in measurement except when attached to a theory
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According to the article, though positive ontology and epistemology may not be
correct, they are neither illogical nor absurd
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A
single theory cannot be falsified by any observation
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According to Fogarty & Markarian (2007), observations
cannot be explained do not falsify any theory although they may be inconsistent with one or
more theories
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According to Popper (1959), the logic behind accepting the theories has evolved over
centuries
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Unless someone invents a theory which competes
with general relativity which is consistent with all of the observations where general relativity
already works, and which correctly explains the track of the argument, then general relativity
will have been falsified (Fisher, 1955)
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Models should also be tested
as accurately as possible
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The core objective of the paper was aimed at examining the positive
accounting theory in a broader case of a research program focused on the development of causal
explanations of human behavior in accounting setup
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This critique aims at reviewing the issues and
the validity of the discipline with the sole intention of bringing out its full potential
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Nevertheless, there is also need to shift the focus away from the testing of hypothesis
towards estimation of parameters
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There is also need for data archives of measurements of important concepts both those
that have been made to test particular theories and those that has been done to contribute to the
archive
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Those measures become both
resources for and constraints upon future theoretical advances
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Thus, undoubtfully enough, the positive research program is
much broader than positive accounting theory
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-H
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-B
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, Simunic, D
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(2009)
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The Accounting Review, 84 (5), 1429-1463
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F
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Radical developments in accounting thought
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DeAngelo, L
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(1981)
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Journal
of Accounting & Economics, 3 (2), 113-127
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, 1955
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Journal of the Royal Statistical
Society Series B 17 (1), 69-78
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J
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(2007)
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Issues in Accounting Education
22 (2), 137-161
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(2009)
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Icon, London
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D
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J
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A
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Does search-facilitating technology improve
the transparency of financial reporting? The Accounting Review 793), 687-703
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T
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Y
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T
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The association between audit firm tenure and
audit fees paid to successor auditors: Evidence from Arthur Andersen
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Kuhn, T
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(1970) The Structure of Scientific Revolutions, 2nd Edition
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Laughlin, R
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Empirical research in accounting: Alternative approaches and a case for
\middle-range" thinking
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Lee, T
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The editorial gatekeepers of the accounting academy
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Popper, K
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(1959)
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Routledge
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A
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The pricing of audit services: Theory and evidence
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Sokal, A
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(1996)
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Philosophy and Literature, 20
(2), 338-346
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L
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L
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The demand for and supply of accounting theories: The
market for excuses
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Watts, R
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(1978)
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The Accounting Review, 53, 112-134

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