Reflections on the State of Accounting Research and the Regulation of Accounting

Abstract

I have two separate but related topics to cover today. The first is a critical appraisal of the state of accounting research, and the second is an analysis of current trends in the regulation of accounting practices and where they are leading us.

Research in accounting has been (with one or two notable exceptions) unscientific. Why? Because the focus of this research has been overwhelmingly normative and definitional. As a result, the field has produced remarkably little theory or evidence bearing on positive issues. I am not claiming that accounting lacks theories. Quite the contrary; accountants promulgate theories (Edwards and Bell [1961], Sprouse and Moonitz [1962], Chambers [1966], ASOBAT [1966], Ijiri [1967], Sterling [1970]), as rapidly as the SEC increases disclosure requirements. But in accounting the term theory has come to mean normative proposition.

I do not intend my emphasis here on positive analysis to imply that normative issues regarding what should be are unimportant. Neither academics nor professionals, however, will make significant progress in obtaining answers to the normative questions they continue to ask until they make a more serious attempt to develop a body of positive theory. It is in this sense that I believe much of what is classified as accounting research is useless. The dearth of positive theory explains the almost complete lack of impact of normative accounting research on professional practice. Furthermore, the belief held by many professionals that the new Professional Schools of Accounting will somehow improve accounting research, itself implies a disappointment with the payoffs from past accounting research. This failure has not been quite as dramatic in the managerial accounting area where issues such as capital budgeting and transfer pricing have received considerable attention.