Applied Research in Financial Reporting: Text and Cases

Chapter 6

Methodology of Professional Accounting Research

Chapter Topics

• Importance of Research Methods

• Methods of Investigation

• The Professional Research Process

• Communication Skills for Accounting Research

• An Example

Importance of Research Methods

• Data mining/analysis is becoming increasingly more important

• Accountants can perform many of these for which they have specialized knowledge

• Easy-to-use statistical packages

Methods of InvestigationExhibit 6-1

• Laboratory Experiments Includes simulations– Data are collected on the bases of

manipulated stimuli

– Researcher has good control over data

– Data analysis:• Descriptive

• Inferential

Methods of InvestigationExhibit 6-1

• Survey Questionnaires– Data collected via Mail, e-mail, web-site– Researcher does not have good control over

data– Popular method nevertheless

– Data analysis:• Descriptive• Inferential

Methods of InvestigationExhibit 6-1

• Archival Studies:– Past Data from archives– Researcher does not have control over data– Rich data nevertheless

– Data analysis:• Descriptive• Inferential

Methods of InvestigationExhibit 6-1

• Data Base Search:– Past Data from data bases– Researcher does not have control over data– Rich data nevertheless

– Data analysis:• Descriptive• Inferential

Methods of InvestigationExhibit 6-1

• Library Search:

–Review of prior work

–An integral part of other research

–Synthesis of prior findings

–See Appendix 6-A for an example

Methods of InvestigationExhibit 6-1

• Analytical Modeling:

– Symbols and mathematical conventions

– Logical arguments (deductive reasoning)

– Logical arguments (inductive reasoning)

– Used to create basic knowledge

– Method of analysis depends on the source discipline (e.g., mathematics, philosophy)

Methods of InvestigationExhibit 6-1

• Field Research/Case Studies– Direct search of information in the field– Popular in managerial accounting and auditing – Need to have specific objective to avoid aimless,

albeit interesting, search– Efficiency is key, otherwise cost can be

prohibitive– Synthesis is needed for analysis (e.g., case study

research)

The Professional Research ProcessExhibit 6-2

• The steps to apply research methods

• Sequential and concurrent application

• Some steps can be avoided if knowledge already exists

The Professional Research ProcessExhibit 6-2

• Step 1: Identify and refine the problem– Isolate from all other problems (i.e., ensure

internal validity)– Flowcharting may be needed to isolate various

issues related to a complex problem

• Step 2: Specify objectives of the research for each problem or issue that is identified in Step 1.

The Professional Research ProcessExhibit 6-2

• Step 3: Develop a set of key words for literature and data base search

• Step 4: Identify viable alternative courses of action or hypotheses

• Step 5: Determine the consequences of the alternative courses of action– Quantitatively, if possible,– Judgmentally, otherwise

The Professional Research ProcessExhibit 6-2

• Step 6: Collect evidence– Use the key words for literature search– Use appropriate research method for the problem

under study– Use heuristics and strategies (e.g., analogical

reasoning)• Step 7: Summarize and synthesize evidence

• Step 8: Choose appropriate course of action based on a discussion (or analysis) of the evidence

The Professional Research ProcessExhibit 6-2

• Step 9: Develop a detailed implementation plan

• Step 10: Communicate precisely and accurately– More on this in the next section

• Step 11: Proper filing for future reference– Cover sheet to give a summary of the research

issue, method of investigation, and results

Communication Skills for Accounting Research

• AICPA’s Criteria for Effective Writing (Exhibit 6-3):– Coherent Organization– Conciseness– Clarity– Use of Standard English– Responses to the Requirements of the Question– Appropriateness for the reader

Communication Skills for Accounting Research

• An Example of Good vs. Poor Writing (Exhibit 6-4):– Use the direct style– Use the narrative/descriptive style– Use good punctuation– Be constructive and pleasant– Get to the point quickly– Make it clear what needs to be done next

Communication Skills for Accounting Research

• Research Report Format (Exhibit 6-5):

– The Quick reference Section:

• Transmittal letter

• Title page

• Table of Contents

• Executive summary

Communication Skills for Accounting Research

• The Details Section:

– Introduction

– Literature Search

– Method

– Findings

– Conclusions

Communication Skills for Accounting Research

• The Supplements Section:

–Illustrations

–Appendices

–List of references

–Endnotes or footnotes

An Example

• Appendix 6-A: Stock Option Accounting: The Exposure Draft That Made the FASB (In)Famous– No transmittal letter or title page (to save

space)– Begins with Content and Executive

Summary – Has supplemental exhibits