Deck 2: Accounting Theory Construction

Question 1

Applying a scientific approach to accounting is an attempt to make scientists out of accounting practitioners.

Answer 1

False

Question 2

Normative theory researchers in the 1950s and 1960s concentrated on deriving a single measure for assets and a correct profit figure,even though there was no agreement on what constituted a correct or true measure of value and profit.

Answer 2

True

Question 3

Mautz and Sharaf,in 1961,attempted to generalise the existing auditing literature and provide a comprehensive theory of auditing.

Answer 3

True

Question 4

The research question that is most unlikely to be tested using positive methodology is:

A)Which firms are more likely to use straight-line depreciation rather than diminishing-balance depreciation?
B)How do changes in tax rules affect firm's leverage position?
C)Are firms with more intangible assets more likely to repurchase their shares?
D)Is the quantitative data derived from given sets of operations based on an overall accounting theory,useful to users of financial statements?

Question 5

The psychological pragmatic approach differs from the descriptive pragmatic approach in that under the psychological approach,the users' response to accounting information is observed rather than the accountants' behaviour.

Question 6

Which of these statements is a criticism levelled at syntactic and semantic accounting theories?

A)There will be a great number of accounting techniques which are different but still acceptable under general accounting principles of practice
B)The assumptions underlying the theories were rarely subjected to empirical testing
C)The theories developed are not prescriptive,that is they do not guide accounting practice
D)It does include an analytical judgement of the quality of an accountant's actions

Question 7

Recent experimental auditing research has found a negative link between the size of audit firms and the quality of audits performed,i.e.the larger the firm the poorer the audit.

Question 8

Positive and normative theories are mutually exclusive;it is not possible for the theories to complement each other.

Question 9

The concept of realism under the decision-usefulness approach asserts that for an accounting theory to be valid it must hold as a description of the reality that underlies the accounting phenomena.

Question 10

Under the naturalistic approach to research an appropriate research methodology is case studies.

Question 11

Under the Morgan and Smircich classification,Category 1 assumes that the world is unstable and that individuals do not share a common understanding of how the world works.

Question 12

The naturalistic approach to theory development looks at specific situations to understand what is happening in that particular situation - generalisability is not an underlying concern.

Question 13

The main difference between normative and positive theories is that normative theories are descriptive whereas positive theories are prescriptive.

Question 14

The descriptive pragmatic approach to accounting theory construction is a deductive approach as it is based upon continual observation of accountants in order to copy their accounting procedures and principles.

Question 15

Concentrating on decision theories and testing them on large samples of people overcomes a major criticism of which of the following approaches to accounting theory construction?

A)The positive approach
B)The psychological pragmatic approach
C)The naturalistic approach
D)The descriptive pragmatic approach

Question 16

Which of these is not an assumption used in normative theory construction?

A)Financial accounting is useful for making economic decisions
B)There are multiple available profit measures
C)Markets are inefficient and can be fooled by 'creative accountants'
D)All of the above are not assumptions used in normative theory construction

Question 17

The criticism of traditional historical cost accounting that is based on a Popperian approach to science is:

A)Accounting reports prepared using traditional historical cost accounting may have perfect syntax but little value in practice
B)The existence of accounting doublethink
C)Many of the propositions of historical cost accounting are not falsifiable
D)All of the above

Question 18

The statement that is false is:

A)Normative theories rely on both semantic and syntactic approaches
B)Questionnaires are often used by positive theorists to test accounting hypotheses
C)Naturalistic research starts with an accepted theory and when an anomaly occurs a new theory is developed to explain it
D)Normative theorists hold the assumptions that accounting should be a measurement system and that there is only one unique profit measure

Question 19

Results from naturalistic research may be more difficult to generalise compared to results from scientific research.

Question 20

Which of these is not a criticism of the descriptive pragmatic approach to theory construction?

A)It does not allow for accounting techniques to be challenged
B)Some of the users of accounting information may be illogical in their responses
C)The focus is on the accountant's behaviour not on measuring the attributes of the firm
D)There is no assessment of whether the accountant reports in the way he or she should

Question 21

Briefly outline developments in auditing theory associated with i.the normative era,and,ii.the positive era.

Question 22

"Most researchers now accept that the most appropriate approach depends on the nature of the research question being considered".J.Godfrey,et el,'Accounting Theory',7^th Ed.p.5.p.30.Compare the scientific method with the naturalistic approach to accounting research.

Question 23

The following research methods are used by naturalistic researchers,except:

A)Case studies
B)Experience of events
C)Syntactic model formulation
D)Exploration by flexibility

Question 24

A comparison of scientific and naturalistic research

Which word/phrase should be inserted in position 5 in the table above?

A)Exploration by flexibility
B)Piecemeal advancement of knowledge
C)Reality is objective and concrete
D)Ontological Assumptions

Question 25

A comparison of scientific and naturalistic research

Which word/phrase should be inserted in position 2 in the table above?

A)Exploration by flexibility
B)Piecemeal advancement of knowledge
C)Reality is objective and concrete
D)Accounting is constructed reality

Question 26

"The main difference between normative and positive (accounting)theories is that normative theories are prescriptive,whereas positive theories are descriptive,explanatory or predictive".J.Godfrey,et el,'Accounting Theory',7^th Ed.p.29.
Explain and discuss the quotation.Include in your answer an opinion as to whether the two approaches are compatible or incompatible.

Question 27

The statement concerning Mautz and Sharaf's work on auditing theory in the 1960's that is not correct is:

A)They attempted to provide a comprehensive theory of auditing
B)They believed that in essence auditing was a practical exercise
C)They developed eight postulates as a foundation for the theory of auditing
D)The concepts they developed are embedded in current auditing standards

Question 28

Which of these is not a typical approach to testing hypotheses under positive accounting theory?

A)Questionnaires
B)Surveys
C)Taking output data of specific accounting systems to determine whether the data helps users to make the right decisions
D)Testing the assumed importance of accounting outputs in the marketplace

Question 29

Which of these is the epistemology of naturalistic research?

A)Reductionism
B)Laws capable of generalisation
C)Holistic
D)Testing of individual hypotheses

Question 30

Which of these is not a criticism of the historical cost accounting theoretical model?

A)There is no independent,empirical operation to verify the calculated outputs such as 'profit' or 'assets'
B)Poor syntax whereby different types of monetary measures are added together
C)Many hypotheses associated with the model are unable to be tested as per the falsificationist approach
D)All are criticisms

Question 31

Which of these arguments describes the symbolic interactionists' view?

A)Behaviour will always conform to a set of behavioural rules
B)People form their own separate impressions through a process of human interaction and negotiation
C)Reality is a concrete structure
D)Outcomes of decisions and actions are highly predictable

Question 32

Explain and discuss the criticisms of historical cost accounting for poor syntax and semantic deficiencies.In your discussion refer to counter arguments that have been raised in defence of these criticisms.

Question 33

A comparison of scientific and naturalistic research

Which word/phrase should be inserted in position 10 in the table above?

A)Exploration by flexibility
B)Piecemeal advancement of knowledge
C)Reality is objective and concrete
D)Accounting is constructed reality

Question 34

A comparison of scientific and naturalistic research

Which word/phrase should be inserted in position 3 in the table above?

A)Exploration by flexibility
B)Piecemeal advancement of knowledge
C)Reality is objective and concrete
D)Accounting is constructed reality

Question 35

The scientific approach to accounting research assumes there is an absolute truth that accounting should achieve and that accounting practitioners should become scientists'
Explain why both parts of this statement are misconceptions.

Question 36

Which of these arguments is not a criticism of scientific method?

A)Results from scientific-based research are difficult to generalise
B)Hypotheses are based on the use of share market prices or surveys which are remote from the world of practitioners
C)Large-scale statistical research tends to lump everything together
D)Hypotheses are not commensurate with the concerns of many individual accountants