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Transcript of Acc3110 lec8 20091
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1ACC 3110
ACC3110:
Financial Accounting Theory
Lecture 8
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Lecture outcomes:
Exploring Traditional/ MainstreamMethodologies in Accounting
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What have we learnt so far?
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Some key ideas concerning the knowledgebase in accounting.
WHY?
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The point of this is that we want to moveonto an exploration concerning how andwhy 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 beexploring the function of accounting
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Research and what purpose does it providein society.
Starting point for today is knowledge:
We saw that knowledge is a problematicconcept that knowledge can be obtainedfrom a variety of sources such as memory,reason, faith, etc.
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The next step was to explore the two mainapproaches to gathering knowledge (orproblem solving). The two together were
called Induction. They were made up of theInductive and Deductive approaches.
The inductive approach relies onobservations of the empirical world, theseare then used to form explanations andtheories about what has been observed.
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The deductive approach can be said toinvolve the development of a
conceptual and theoretical structureprior to its testing through empiricalobservation and measurement.
(see the Induction diagram)
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The difference between the two is that:
Facts acquired through observations leadus to theories and hypotheses (induction).Often called hypothesis generating.
With deduction (logical reasoning) weaccept or reject hypotheses. We look at theconsequences of the theory, and we gather
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facts to confirm or disprove the hypothesis.This acceptance and rejection then helps toexplain or predict and is often called
‘hypothesis testing’.
The whole process could well be a cycle.
With induction we generate a theory whichis consistent with these facts and perhapscan be called the first step in scientificmethods (hypothesis generating).
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The deductive method looks at theconsequences of these new hypotheses andthen confirms or disproves the hypothesis
relationship among variables that have beendeduced from propositions or earliertheories (hypothesis testing).
Can be considered to be a continual refiningprocess of knowledge.
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There is a huge debate over the relationshipbetween data and theory. The main pointhere is to understand what you are trying to
achieve, as this will ultimately direct thetype of research design and methods youshould use to acquire knowledge.
There are two main traditions or approachesin research and these are called paradigms.
Philosophy of Research
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What is a paradigm?
‘It is philosophical system whose coreassumptions or beliefs about the world areshared by a large number of scientists andwhich 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 withquantitative methods, and numbers,statistics too).
.
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But is this possible?
Some researchers became unhappy with theabove assumptions and began to questionwhether it is entirely possible to carry outresearch 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 beused, but can also use a mixture of qualitativewith 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 didresearch in accounting used the ‘positivist’
approach, many still do today, but there is
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Wide acknowledgement that there are someproblems with the assumptions behind it. I.ecan people be objective etc. therefore, this
lead to an increase in research beingundertaken utilising the phenomenologyapproach.
The article by Chua (page 20 in handbook)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 statementscan be logically deduced from singularstatements. If this approach is useful, thenscience can progress. (This article is related tonotions of induction see the diagram).
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The main problems with induction is thattheory guides observation and experiment.
For example, if you go out collectingobservations on something you will need
some kind of theory to structure yourobservations. Due to this problem, anotherwas of thinking came into existence,‘Falsificationism’ by Karl Popper
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Falsificationism admits that observation isguided by theory, denies the supposed truthbasis 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 fortesting.
Falsificationism
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Rigorous testing should lead to theabandonment of theories which failexperimental method.
SCIENCE PROGRESSES BY TRIAL ANDERROR
A THEORY MAY NOT BE TRU, BUT IT IS THEBEST WE HAVE.
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BUT IT IS POSSIBLE TO ARRIVE ATFALSITY.
‘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 oftentative hypotheses, which must befalsifiable. I.e there exists a logically possibleobservation statement that is inconsistent
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With a hypothesis.
The statement must be of a form which isfalsifiable.
A STRONG theory lays itself open to being
falsified; the more precise it is the easier it isto falsify, but if it can not be proved false, thenthe theory is strengthened.
Chapter 3: Qualitative Characteristics
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A BOLD hypothesis is one which providesmany opportunities for being falsified. Theprecise speed of light is highly falsifiable.
Can you think of any examples fromaccounting?
If a theory can not be falsified, thenprogress is allowable. Falsificationsimbecomes a way of achievement inknowledge.