Question 1

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

Accepted Answer

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Question 2

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.

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Question 3

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

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Question 4

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

Accepted Answer

Capital markets research is based on the efficient markets hypothesis, which assumes all relevant information is reflected in stock prices and therefore, investors cannot earn abnormal returns by using publicly available information. This research area aims to understand the financial reporting and stock market information effects on financial markets. Option A, the decision-model approach, refers to using mathematical models to make decisions and does not specifically rely on the efficient markets hypothesis. Behavioral research (option B) focuses on understanding the cognitive and social factors that impact decision-making in accounting, while critical accounting (option C) examines the social, political, and economic implications of accounting practices rather than market efficiency.

Question 5

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

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Question 6

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?

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a.What...

Question 7

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?

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a.What...

Question 8

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?)

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Question 9

Empirical research is:

Accepted Answer

Empirical research is based on observation, measurement, and experimentation, which leads to the formation of hypotheses and theories, making it an inductive approach to research.

Question 10

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

Accepted Answer

Agency theory is a research area that hypothesizes that management attempts to maximize its own welfare by minimizing costs of monitoring and contracting. This theory assumes that there may be conflicts of interest between the owners and the management of a firm, and that management may try to act in their own best interests, rather than those of the owners.

Question 11

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?

Accepted Answer

Agency theory arose as a result of the perceived separation of interests in the modern corporation between management and ownership interests. This theory suggests that conflicts of interest between principal (owners) and agent (management) can be mitigated by designing compensation contracts that align the interests of the two parties.

Question 12

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?

Accepted Answer

Critical accounting is based on the idea that researchers cannot separate themselves completely from their subjects of study, meaning that their own perspectives and biases enter into their analyses.

Question 13

In a scientific approach to accounting:

Accepted Answer

The scientific approach to accounting aims to provide information that is useful for either predictive or assessment purposes, meaning that the information provided must be objective, reliable, and based on measurable and verifiable data. A great deal of latitude is not allowed in measurements, and the straight-line method of depreciation is just one of many methods that can be used, depending on the specific circumstances. Therefore, B and D are incorrect, and C is the best answer.

Quiz 2: Accounting Theory and Accounting Research