CONTEMPORARY ISSUES IN ACCOUNTING

Contemporary Issues in Accounting

Contemporary Issues in Accounting

People have curiosity over the world, including information such as how it operates. The information derived from the world can affect people's behaviour. This also holds true in the financial world. However, there has been debate about the approaches that can be taken to increase the understanding of the world. In accounting, the traditional scientific approach, which has enjoyed its monopoly for a long time, is attracting extensive criticism, especially from those who propose an alternative approach (the critical approach). This essay will compare and contrast these two approaches and discuss how they are utilised for accounting research.

The scientific approach (also known as the positivistic approach) differs from the critical approach significantly in the ontological aspect. Positivists hold the idea that truth is out there to be discovered. For the critical approach, accounting should not be perceived as something objective or indicative of what the real world is (Hooper, Davey, Liyanarachchi & Prescott, 2008). The information collected by positivists from studies can disclose what is found to be right in the sampled population but the information should not be extended to cover a wider range of conclusions. Besides, the world is multifaceted. What appears to be right on one dimension might not be the same in another dimension. Positivists present the idea that information collected is adequate for reaching conclusions, but the critical approach does not consider this adequacy as the strength of the conclusions but as the cause of conclusions' fallibility (Humphrey & Scapens, 2007).

The impact of social domination provides a strong argument against the notion that accounting is not a natural or precise science. The critical approach has also attacked positivism on the drawbacks of the statistical methodology it has developed and relied on. However sophisticated the methodology or the research instrument is, positivism is to varying degrees yielding to researchers' subjective analysis, management of interpretation of data (Fleischman, Radcliffe & Shoemaker, 2003). Researchers' understanding and definition of subjects and terminology might also be different (Tinker, 2005). In other words, findings released by the scientific approach are informative to some extent but not entirely reliable. Needless to say, statistic tools are valuable when subjects can be quantified. Economic activities cannot be quantified all the time (Fleischman et al, 2003). For example, it is unlikely to quantify the impact of the agency cost on accounting figures. The quantification of some elements which are not easily measurable makes the research methodology controversial and unconvincing.

In addition to theoretical and subjective matters, the critical approach also suggests that the scientific research undervalues or omits the effect of cultural factors, economic factors, political factors and other external forces that mould accounting practices (Humphrey & Lee, 2007). There are two implications for the critical approach's emphasis on the contextual factors that have a bearing on accounting-related research. The first implication is that the contextual factors, which are complex and ever-changing, account for why accounting is malleable rather than ...