Coefficient and Accounting Conservatism

Question: Discuss about the Coefficient and Accounting Conservatism. Answer: Introduction Positive accounting theory is a major concept discussed by Watts and Zimmerman. The article by Paul considers positive accounting in a research program whose primary objective is to develop a causal explanation of the human behavior in various accounting setting. This paper has five sections, namely: the summary of the article, the research question, the theoretical framework, the significance and limitations of the report, and a conclusion. The brief focuses on the articles main argument, its aims, its findings, its theoretical arguments, and contribution. The research question identifies the articles hypotheses, discusses its value in a wider research project, and explains whether and how it has deviated from the review.The theoretical framework identifies and discusses the theoretical substance of this investigation that leads to the research question. This research paper also discussed the limitations of the theory and methodology used, whether Paul acknowledged them, whether he drew theoretical conclusions from the research that would be justified by the method used and how the limitations influences the aim of the article and the contribution it makes to the positive accounting. Summary of the Article In this article, Paul examines the positive approach that has applied to accounting research. He acknowledges the fact that positive accounting research is part of a wider scientific research, which helps one to understand the cause and effect relationships. For instance, people would use accounting to understand why a particular decision was made and what impact the decision will have on the company. Paul also tends to expose the deficiencies in the way positive accounting research is done, which would prevent it from making a meaningful contribution to the wider project. He examines this concept by looking at the auditing literature. The main aims of this critique are to determine the cause and effect relationships of positive accounting research, to examine the positive approach that has applied to accounting research, and to identify and expose the deficiencies in the auditing literature. My findings are that events have a cause-effect relationship, which is beyond an individual' s control. I also found out that one can find information about these developments through observation as human minds act as a mental model and therefore maps the causal processes in their minds. The contribution of this critique is to explain more about positive accounting research. Research Questions The article has four main hypotheses. The first theory acknowledges that there exists a world, which is not in our imagination. This implies that we did not make them up, and they are not subject to the control of our desires, which is based on the stoicism and the Epicureanism philosophy . For example, how an accounting transaction may occur or how an audit opinion may be is nothing beyond our control but we should accept the outcomes as they are. This hypothesis has not flawed from the literature review, as various philosophies would agree that the world is subject to what we can control and what we cannot control. The second hypothesis as considered by Paul acknowledges that have causes which are part of the world that is, they are not random are because of something beyond our control and intervention. This implies that the events that happen are caused by something that human beings cannot control. This hypothesis has not flawed the literature review as stated by various stoicism and the Epicureanism philosophy as every decision that has been made by firms has been caused by some action that they can control, or that is past their control. The third hypothesis acknowledges that it is possible for people to obtain reliable information and facts about events in that imaginary world by the use of observation. This, however, does not imply that one will not be mistaken in his or her observations, only that the remarks are not entirely unconnected to the imaginary world. This hypothesis has also not deviated from the literature review, as through observation, one can be able to obtain the necessary information. The final hypothesis acknowledges that the aim of the inquiry is to use the observations to improve the understanding of the imaginary world that is what caused the events in that world. Here, Paul explains that human beings seek mental models, which map the processes that that world. Theoretical Framework Paul in his article in his research found out that events are caused by the control of non-worldly beings such as gods and spirits. However, he did not come to a conclusion which beings are responsible for what happens in the world. Anaximander of Miletus was the first person to argue that the world was driven by what is under our control rather than supernatural causes that is what is not in our control. The sophists had a distinct view. For example, Gorgias, a sophist, argued that nothing exists; if it existed, then a person would know of it, and if someone knew of it, he could not communicate it. Apparently, the sophists had a different view from what Paul was arguing. The hypotheses stated by Paul are consistent with the religious belief in that the notion that the world might be rationally comprehensible has gained real traction in the last few centuries. According to Paul, a Being created the world under some causal rules. However, if that Being controls the world to change the results for the advantage of His followers, then this inquiry will fail when it comes into contact with events, which are inconsistent with the usual causative rules. The intellectual program that Paul describes is the scientific research agenda in accounting known as positive research. In his article, Paul explores how the scientific research program is being applied in accounting and suggests that it has been ineffectively implemented. The accounting phenomena as studied by the scientific program are caused by rational self-interest among parties who form either an express or an implied contract. This encompasses the accounting choices by managers, reporting and pricing decisions by the auditors, decisions that involve setting of standards by regulators and politicians, as well as expert advice in various institutions. These areas state that decisions made by various people such as managers, auditors, regulators, institutions and politicians have a causal and effect relationship. Various literatures also attempts to determine the information of accounting used by shareholders in their decisions that led to the development of internal controls in uprising corporations, that is, what caused to the adoption of those systems. These scientific approaches assume that human beings are rational regarding the positive accounting theory. Some research, therefore, discuss the behavior in these settings without assuming the behavior of individuals. For example, how auditors make their judgments or give a qualified or unqualified opinion, how managers use to conduct a performance evaluation, how the different ways used to present accounting information affect the ability of users to absorb it, and how those managers persist in a decision that they have mistaken and wrongly given despite accounting feedback showing their mistake. He concludes by saying that any investigation that tries to understand the causes of an accounting phenomenon qualifies to be called positive accounting or scientific research accounting research. The Significance and Limitations of the Article The importance of this article is that it explains more about the positive accounting research in that it explains the resultant of a decision such as the cause and effect relationship of events. Despite, it has some limitations. They include the casual construction of theoretical models to be tested, a lack of interest in the parameters, undue reliance on the logic of the research question or hypothesis testing, insufficient replication, and the using theories to examine the qualitative data rather than as explanations. This means that Paul has successfully acknowledged these limitations in his article. He concludes by offering several suggestions for positive research. First, one needs better theoretical models. He states the current models are highly specified and highly vulnerable. Second, better measurements need to be used so that theoretical models can be rigorously tested. For instance, if a measure of audit has been found to be reliable, it should be used in all new studies. Third, focus should be shifted away from the testing of hypotheses to parameters estimation. The main aim would be to compare the confidence intervals of the parameters with their predictions and determine whether the result is statistically significant. Fourth, Paul discovered that data should be archived to record measurements of important aspects. Finally, he determined that there is a need for a wide replication to be able to determine whether the conclusions made are valid, if the measurements made accurate, and to explore the applicability of the research findings. These theoretical conclusions are therefore justified from the methodology. Positive accounting research has a positive contribution to offer to the accounting discipline. However, its main findings comprise statistically significant but uninterruptable coefficients. The applicability of this positive research, therefore, is assumed rather than evidenced. This implies that since the results have not been tested, positive accounting research has minimal contribution, if any, to the accounting discipline. Conclusions In conclusion, Paul study was mainly about the positive accounting research. His aim of publishing the article was to assert that decisions made a causal and effect analysis and those they are caused by factors that are not in our control. For instance, the fact that an auditor may give a qualified opinion is not beyond the company's control. He also came to a conclusion that one can gain the required information through observation. Finally, my critique has an impact in that it has enabled me to understand the concept of positive accounting research and the cause-effect relationship of events. References Ball, "Accounting informs investors and earnings management is rife: Two questionable beliefs,"Accounting Horizons27, no. 4, 2013, P.847-853. Retrieved on 13 December 2016. Ball, S. P. Kothari, V.N. Valeri, "Econometrics of the Basu asymmetric timeliness coefficient and accounting conservatism,"Journal of Accounting Research51, no. 5, 2013, P.1071-1097. 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