Positive Accounting Theory Model of Human Behavior

Question: Describe about the Positive Accounting Theory for Model of Human Behavior. Answer: Introduction to the Article The article is an attempt by author Paul V Dunmore to highlight how the attempt by Watts and Zimmerman to stake a claim on Positive Accounting Theory is half an attempt. The paper in details considers the positive accounting approach in a broader sense. It helps in developing explanations of human behavior in the field of accounting. The field of positive accounting theory intends to predict the real world events and then equate them in the form of accounting transactions. The overall intention of this theory is to predict the policies which an organization should adapt considering the events the organization which it might face. The aim established by the critique here is to figure out in what other capacity positive accounting research can be used in other research field. Summary The term Positive accounting theory has been virtually undertaken by Watts and Zimmerman. They have written three different papers in this field under different years. However the author of the paper wants to highlight that concept of theory is much broader than what the three papers speaks of. Watts and Zimmerman has conceptualized that accounting policies are adopted by organizations in conjunction with the self-interest of the parties which get into such contracts. This can comprise not only the accounting decisions taken by the manager, but also the reporting methods and pricing strategies adopted by the auditors of the company. However difference or the limited range offered by Watts and Zimmerman has been criticized by the author of the paper (Zimmerman, 1989). As started earlier concept of theory is much broader than what than what the papers written by them talks about (Baboukardos, 2016). The human force which works in the field acts rationally and not only sort the methods as suggested under Positive Accounting Theory. The author highlights how, Fukuyamas model of human behavior stands correct in the field of accounting too. As per the model rational human beings take correct behavior oriented decisions around 80% of the time. The author of the paper stand corrected and states that the quantitative (80%) is not defensible. However the number is still strongly representative of the fact that human behavior is rational most of the times. Some of the things which the author of the article highlights using rational behavior approach are: Managers have effectively used discretion in performance appraisal of the people Employees have used different ways in presenting information so that all stakeholders can absorb it Managers also tend to stick to their decisions even if the accounting information system shows that there has been a mistake in the same These examples do not form a part of exhaustive list, however the positive research program is not limited by this approaches towards Positive Accounting Theory. The author also talks about relations of positive research theory and its implications on the hypothesis testing. Positive research generally limits the data that are supportive of the alternate hypothesis. In hypothesis testing, since the research is conducted by an individual who has his/her own biases. This is the reason with positive research approach there are chances that data related to alternate hypothesis is minimized. This is the reason when positive research approach are used one should suspect the result which has been established. In some kind of research where the problem keeps changing from one time frame to other, this fact does not matter. Since the results dont have any particular framework to deal with, the researcher will not be able to establish any bias using positive accounting approach. This is how th e author of the paper is critical on the positive research approach. However on the flip side author also highlights that the positive accounting approach contributes a lot to the overall scientific endeavor. The positive accounting research approach helps a lot in understanding the human behavior and how the whole theory settles across the paradigm of accounting. The author is critical of the inferential problems that occur due to positive accounting research and what is to be done to correct the anomaly. The positive accounting approach should itself be so positive that it identifies the gap which exist in the process and evolves over a period. The approach has not evolved and there has been no changes in way it was perceived once it came into the system. The author in this paper also tries to illustrate how the process can be more effective and that is where the title of the paper also justifies what it intends to say (Baboukardos, 2016). The paper also talks about what is the requirement of a successful research program. This is the final part of the paper which talks about all aspects of the research program and what are the possible ways to make it successful. The first demand that the author raise to fully utilize the positive research theory is the proper usage of theoretical models. One need to take a lot more out from the theoretical model and then use the Popperian approach in the positive accounting theory model. The researcher who does this must have a huge expectation of failure and then the same must be used to improve the whole area of study. The author of the paper also talks about how one should insure that proper mathematical testing is done for any such theoretical model. The second thing which the author suggest is the use of analytical modelling to test the final proof of concept. It is a well-known assumption that in the world of accounting, the people who build the model and the one who provides t he data to test the assumption are the same person. This is the reason why in case of analytical model people tend to be different and hence establishing the proof of concept is considered to be easier. The third point which the author wants to highlight is the fact that the focus should be on proper measurement and not on the testing only. If the data that comes out of the system is properly measured, the model can be verified meaningfully. This is the reason the stress should be on proper mode of measurement and not on testing only. The final point which the author talks about is that of replication. If there is any error in the final outcome, one should keep on replicating the inputs and again perform step 3 of proper measurement. If one keeps replicating they will be able to visualize how at times sampling error can lead to problems. Research Questions The Article raises few research questions. As per analysis the research questions raised in the article are: Can the positive accounting approach be applied to different fields? Is the positive accounting approach limited to the idea shared in three papers by Watts and Zimmerman? How different positive accounting approach is to the positive research approach? What are the advantages of using positive accounting approach in any particular corm of research? What is the limitations of the positive accounting approach when adopted in hypothesis based research? How can one efficiently improve upon the limitations of the positive accounting research when doing any hypothesis based research? Theoretical Framework The article draws a lot of information from the existing literature in the field. However the article does not limit itself on the literature, it creates a situation under which the alternate approach are also evaluated. Positive accounting research is a big research area and the author also tries to link it with the overall positive research theory. The paper creates a framework by first evaluating the existing literature and then highlighting his concerns. Once the concerns and the context of such concerns are established the author tries to highlight with example what can be a better approach in handling the whole field of positive research. In one case the author even explains how the positive accounting theory should evolve as physics and keeps changing every time a new fault is identified. Significance and Limitations of the Article The article is very significant as it shows that one should limit the positive accounting research approach just by what was written by Watts and Zimmerman. The articles tries to carry forward the approach in all the fields and justifies that the scope of the positive accounting theory should not be limited to one field (Baboukardos, 2016). The approach is very well built and due to rational behavior of human species the approach is applied across all form of research. The paper also highlights critical shortcomings of the whole system around which the positive accounting theory is designed. One cannot do hypothesis based research with a bias and then expect fare results from the same. The positive accounting approach bias can led to false outcome of the whole research process. The article is limited to the fact they dont discuss any critical approaches adopted historically on the positive accounting approach. It has been seen historically that teams have been very critical of the approach too and have adopted normative approach (Baboukardos, 2016). Too much of discretion on human behavior can also lead to chaos in the whole system. This is where the papers fails to evaluate the other approach and check the kind of findings the normative approach brings on the table. The whole paper would have been more complete in the sense if the normative approach and the supportive literature against it are also discussed objectively. Conclusion The article is well established and the presumption that Positive Accounting Theory can hold ground in more situations. However the applicants of the theory must be cautious when they are using it in carrying out an extensive kind of research. The author has thoroughly critiqued the theory of Positive accounting and its application areas. However the author has not compared the same with the Normative theory and that is one of the prime reason why paper fall shorts in achieving its objective. The author is critical of the inferential problems that occur due to positive accounting research and what is to be done to correct the anomaly. The positive accounting approach should itself be so positive that it identifies the gap which exist in the process and evolves over a period. The paper also talks about what is the requirement of a successful research program. This is the final part of the paper which talks about all aspects of the research program and what are the possible ways to mak e it successful. References Baboukardos, D., Rimmel, G. (2016). Positive Accounting Theory Ball, R. (2013). Accounting informs investors and earnings management is rife: Two questionable beliefs.Accounting Horizons,27(4), 847-853 Bonin, H. (2013).Generational accounting: theory and application. Springer Science Business Media Christensen, H. B., Nikolaev, V. V., Wittenberg?Moerman, R. (2016). Accounting information in financial contracting: The incomplete contract theory perspective.Journal of Accounting Research,54(2), 397-435 Glover, J. (2014). Have Academic Accountants and Financial Accounting Standard Setters Traded Places?.Accounting, Economics and Law Account. Econ. Law,4(1), 17-26 Watts, R. L., Zimmerman, J. L. (1986). Positive accounting theory Watts, R. L., Zimmerman, J. L. (1990). Positive accounting theory: a ten year perspective.Accounting review, 131-156