Deck 2: Accounting Theory and Accounting Research

Question 1

The use of research in accounting results in the field being referred to as an academic discipline.

Answer 1

True

Question 2

Hypotheses are conclusions derived from the research process.

Answer 2

False

Question 3

A premise stating that accounting reports should be based on historical costs would indicate a normative approach.

Answer 3

True

Question 4

Deductive reasoning analyzes empirical data to make inferences about a population.

Question 5

The scientific method refers to the formal procedures used to derive the laws and principles that govern scientific disciplines, such as physics and chemistry, and is therefore not used in the published research on accounting.

Question 6

Analytical/deductive research methods are commonly used in accounting research.

Question 7

Positive accounting research attempts to explain behavioral relationships in accounting.

Question 8

Because deductive research is grounded in real-world phenomena, it can realistically focus on only a small part of the relevant environment.

Question 9

Only a few examples of inductively derived theories are present in accounting literature.

Question 10

Positive accounting research attempts to be value-free, while normative accounting research is value judgment oriented.

Question 11

Positive accounting research attempts to describe "what is" and determine how things should be.

Question 12

Inductive research in accounting can help to shed light on relationships and phenomena existing in the business environment.

Question 13

Inductive research can be useful in the accounting policy-making process in which deductive reasoning helps to determine rules that are to be prescribed.

Question 14

Normative theories contain at least one premise stating how things should be.

Question 15

Inductive approaches to accounting theory usually attempt to be descriptive.

Question 16

One of the purposes of positive research is to satisfy information demand by managers, auditors, creditors, and standard setters.

Question 17

General deductive reasoning is extremely important in accounting theory and policy making.

Question 18

An important difference between deductive and inductive research is that inductive research is sometimes global in content, whereas deductive research is usually particularistic.

Question 19

Deductive and inductive research are competing approaches and may not be used together.

Question 20

An important segment of accounting theory is derived from the research process.

Question 21

Currently accepted alternative depreciation methods illustrate that accounting is closer to an art than a science.

Question 22

Information economics has relatively recently included agency theory assumptions in its analysis.

Question 23

Empirical research shows that prices of publicly traded securities react slowly and in an erratic manner to new information.

Question 24

The normative nature of the decision-model approach has led to criticism that this method is non-scientific.

Question 25

Critical accounting research assumes a sharp separation between the researcher and his or her field of investigation.

Question 26

To be useful, inductive research must be kept value-free.

Question 27

Because of the efficient-markets hypothesis, the impetus for increased disclosure with less concern for choice among accounting alternatives has grown stronger.

Question 28

The efficient-markets hypothesis states that the return of a security is based on its risk.

Question 29

Agency theory studies are always inductive.

Question 30

Accounting research of two generations ago was purely normative.

Question 31

An argument against using students as subjects in behavioral research experiments is that they are not representative of the broad population of accounting information users.

Question 32

The decision-model approach to accounting research seeks to determine what information users of accounting information want.

Question 33

Because accounting is not very much concerned with the human element, we can expect it to be more precise in its measurement and predictions than are the natural sciences.

Question 34

Much of the accounting research in the behavioral area uses laboratory subjects in carefully controlled experimental situations.

Question 35

Information economics research is usually inductive in nature.

Question 36

The decision-model approach to accounting research is normative.

Question 37

One hypothesis of agency theory is that management attempts to maximize its own welfare by minimizing the various agency costs arising from monitoring and contracting.

Question 38

Of the research methods discussed in the text, the critical accounting approach is the closest to the standard-setting function.

Question 39

Agency theory holds that management always tries to maximize the value of the firm.

Question 40

Critical accounting discourages active social roles for accountants.

Question 41

Which of the following examines or tests data, usually from a sample of a population, to make inferences about the population?

A) Deductive reasoning
B) Inductive reasoning
C) Subjective reasoning
D) Objective reasoning

Question 42

Which of the following characteristics does not apply to the decision-model approach to research?

A) It asks what information is needed for making decisions.
B) It asks what information users want.
C) It concentrates on what information is useful for particular decisions.
D) It has a normative and deductive orientation.

Question 43

Empirical research that attempts to determine why particular accounting alternatives are selected by management is an example of:

A) Normative research.
B) Deductive research.
C) Positive accounting research.
D) Analytical research.

Question 44

When the premises of a theory are constructed so that they can be tested by statistical inference, they are usually called:

A) Postulates.
B) Inferences.
C) Hypotheses.
D) Assumptions.

Question 45

Agency theory studies are a special case of:

A) Capital markets research.
B) The decision-model approach.
C) Critical accounting.
D) Behavioral research.

Question 46

Which of the following is not a characteristic of good inductive accounting theory research?

A) It must carefully specify the problem that is being examined.
B) It must be based on a hypothesis that is capable of being tested.
C) It must test the entire population under investigation.
D) It must employ the requisite tools of statistical inference.

Question 47

Which of the following statements is not true regarding the efficient-markets hypothesis?

A) It stems primarily from the discipline of finance.
B) It assumes that market prices of publicly traded securities reflect fully all publicly available information.
C) As a result of this proposition, the impetus for less disclosure with more concern for choice among accounting alternatives has grown stronger.
D) It states that the return of a security is based on its risk.

Question 48

Judging a theory by observing evidence rather than simply by its internal logic is called:

A) Subjective reasoning.
B) Inductive reasoning.
C) Deductive reasoning.
D) Objective reasoning.

Question 49

Which of the following is not true regarding agency theory?

A) It is also called contracting theory.
B) Its underlying assumption is that individuals act in their own best self-interest.
C) Few agency relationships between parties may be defined or governed by accounting numbers.
D) It is concerned with the various costs of monitoring and enforcing relations among management, owners, creditors, and government.

Question 50

The roots of behavioral research lie in the field(s) of:

A) Economics.
B) Finance.
C) Psychology and sociology.
D) Accounting.

Question 51

Which of the following statements is true?

A) A paradigm is a shared problem-solving view among members of a science or discipline.
B) In accounting, the shared paradigm has been current valuation.
C) Criticism of historical cost has increased since inflation lessened during the 1980s.
D) It appears that a scientific revolution has occurred in accounting because historical cost is no longer the dominant paradigm.

Question 52

The objective of information theory analysis is:

A) To determine how optimal contractual arrangement incentives and risk sharing can be negotiated.
B) To determine appropriate alternatives to accrual accounting.
C) To use inductive research techniques to test hypotheses regarding information usefulness.
D) To find alternatives to agency theory assumptions.

Question 53

Which one of the following statements is true regarding the decision-model approach to research?

A) A premise underlying this research approach is that decision makers may need to be taught how to use information they are unfamiliar with.
B) This approach has become more important with the rise of empirical research in accounting.
C) Some advocates of newer approaches have declared that this approach is too scientific.
D) The decision-model approach does not parallel those of standard-setters because standard-setters must cope with the politics of the regulatory process.

Question 54

Which of the following statements regarding behavioral research is true?

A) It is a normative approach.
B) The main concern of this type of research is how users of accounting information make decisions and what information they need.
C) Many studies have shown that there are no discrepancies between normative decision models and the actual decision process of users.
D) Since behavioral research is positive in approach, it is impossible to reach a conclusion regarding whether or not the usage of accounting data for decision-making purposes could be improved upon.

Question 55

Which of the following types of research can realistically examine only rather narrowly defined questions and problems?

A) Inductive research
B) Normative research
C) Deductive research
D) Nonempirical research

Question 56

Which of the following statements regarding behavioral research in accounting is not true?

A) Much of this research uses laboratory subjects in carefully controlled experimental situations.
B) This approach seeks to understand what accounting information is selected for use and how it is processed.
C) This research has found that published financial statements are not often used for managerial decision-making purposes.
D) The question of how representative student subjects are to the broad population is a problem that pervades virtually all behavioral research that uses student subjects.

Question 57

The basic set of premises in a theory are also sometimes called all of the following except:

A) Hypotheses.
B) Assumptions.
C) Postulates.
D) Positions.

Question 58

Critical accounting:

A) Developed from two other areas of accounting, behavioral accounting and agency theory.
B) Is concerned with the economic rather than social role of accountants.
C) Presumes a sharp separation between the researcher and his or her field of investigation.
D) Views accounting as having a pivotal role in adjudicating conflicts between the corporation and constituencies such as labor, consumers, and the general public.

Question 59

Which of the following statements is not true?

A) Inductive and deductive methods can be used together.
B) It is impossible to keep inductive research completely value-free.
C) Inductive approaches to accounting theory usually attempt to be descriptive.
D) Deductive research makes inferences about a population based on tests of data.

Question 60

Which of the following statements is not true regarding critical accounting?

A) Critical accountants believe that accounting should more strongly emphasize the attempt to solve broad societal problems.
B) Critical accounting researchers believe that in viewing and investigating reality, they also help to shape that reality.
C) It is the intention of critical accounting researchers to move the field into the mainstream of accounting research by adopting a conflict-based perspective.
D) In critical accounting, there is less emphasis upon historical models and more upon mathematical and statistical models.

Question 61

Empirical research is:

A) Inductive.
B) Deductive.
C) Analytical.
D) None of the above

Question 62

What is critical accounting, and in what way does it differ from all of the other research areas discussed in the text?

Question 63

In a scientific approach to accounting:

A) A great deal of latitude is allowed in measurements.
B) There is a low degree of objectivity.
C) The intention is to provide information useful for either predictive or assessment purposes.
D) The straight-line method of depreciation would always be used.

Question 64

Answer the following related to behavioral research:
a.
What is the main concern of behavioral research?
b.
How does behavioral research differ from the decision-model approach?
c.
What are some of the findings of this research?

Question 65

Describe the decision-model approach to accounting research and identify the two major decisions embraced by this approach.

Question 66

Discuss the differences between each of the following:
•
Normative vs. descriptive theories
•
Inductive vs. deductive reasoning
•
Global vs. particularistic theories
Also identify how these types of approaches relate to one another. (For example: is deductive research normative or descriptive; is it global or particularistic?)

Question 67

Which of the following accounting research areas is based on the efficient-markets hypothesis?

A) The decision-model approach
B) Behavioral research
C) Critical accounting
D) Capital markets research

Question 68

Which of the following accounting research approaches arose as a result of the perceived separation of interests in the modern corporation between management and ownership interests?

A) Capital markets research
B) Behavioral research
C) Agency theory
D) Information economics

Question 69

In which of the following research areas do researchers believe that there is not a sharp separation between the researcher and his or her field of investigation?

A) Information economics
B) Critical accounting
C) Capital markets research
D) Agency theory

Question 70

Are inductive and deductive research mutually exclusive methods? Give examples to support your answer.

Question 71

Which of the following research areas hypothesizes that management attempts to maximize its own welfare by minimizing costs of monitoring and contracting?

A) Information economics
B) Critical accounting
C) Capital markets research
D) Agency theory

Question 72

Answer the following questions regarding agency theory:
a.
What are the assumptions, focus, and hypothesis of agency theory?
b.
How does opportunistic behavior, or moral hazard apply to agency theory?
c.
How does an audit of financial statements pertain to agency theory?

Question 73

A study by Watts and Zimmerman that explored the question of how corporate management responds to new standards proposed by the FASB was discussed in the text. Answer the following questions related to that study.
a.
What was the hypothesis of the study?
b.
Describe the study and discuss its findings.
c.
Was the study inductive or deductive? Explain.
d.
Discuss the criticisms that have been directed at the study and the implications of those criticisms.