Research Methodology in Accounting: Papers and Responses from Accounting Colloquium II

by Robert R. Sterling
Review by: Orace Johnson
The Accounting Review, Vol. 48, No. 2 (Apr., 1973), pp. 471-473
Published by: American Accounting Association
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Book Reviews
understandingof when the technique is an appro-
priate means of valuation. In addition, it would
permit the use of problems throughout the text
requiringapplications of present value techniques.
In summary, the current edition of this text is
considerably improved over the previous edition.
The author presents thoroughly the status of cur-
rent accounting practice incorporating the latest
pronouncements of the AICPA. Accounting proce-
dures are clearly illustrated. This edition includes
more accounting theory and will at least make the
students cognizant of the major theoretical issues.
Although accounting theory is not explored in
depth, the thorough presentation of procedures
should permit the instructor to devote more class
time to an examination of the basic theory.
NORBERT C. TERRE
Associate Professor
of Accounting
University of Missouri-St. Louis
ROBERT R. STERLING, Editor, Research Meth-
odology in Accounting: Papers and Re-
sponses from Accounting Colloquium II
(Lawrence, Kansas: Scholars Book Co.,
1972, pp. viii, 163, $8.75).
The "Report of the Committee on Research
Methodology in Accounting" was distributed to
all members of the American Accounting Associa-
tion in THE ACCOUNTING REVIEW, Supplementto
Vol. XLVII (1972), pp. 399-520. The commit-
tee charge was "to prepare a report which identi-
fies, explains, and illustrates the various method-
ological approaches which are appropriate for re-
search in accounting." (p. 398) Instead of issuing
a common report, the eight committee members
prepared separate papers from eight different
points of view on eight dissimilar topics.
Before the Supplementwas published, the eight
papers were presented at a colloquium May 6,
1971 sponsored by the University of Kansas
School of Business and the Arthur Young Foun-
dation, with the committee chairman as host. He
has now edited this volume containing the com-
mittee papers plus seven critical responses and
two other papers written especially for the collo-
quium.
The chairman's paper was the "Introduction"
to the committee report (Supplementp. 401-
407), the host's "Introduction" to the colloquium,
and the editor's "Introduction" to this book (pp.
1-7). The chairman-host-editor writes (p. 406
and p. 6) "I prefer to expose and examine dis-
agreements rather than to conceal them with deli-
cate phraseology." Such precedent makes my re-
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471
view task easier than it would be if the primary
concern were tender courtesy.
Without the 36 pages of non-committee mate-
rial this book, in my opinion, would have no ex-
cuse for being, since AAA members already have
the committee report. Therefore I shall comment
first on editorial considerations and then on the
nine colloquium presentations not otherwise read-
ily available. In summary, excellence of the latter
compensates for defects in the former. But why
should such lovely gems of thought be given such
a tawdry second-handsetting?
This book makes unexpected and unwarranted
demands on the reader's sight, memory, inference,
and inquiry. It employs about 8pt type, and some
readers may need a magnifying glass. Visually, it
is not a pleasure to read.
In the Supplement, AAA gave blanket autho-
rization (p. v) to reproduce the report "for com-
plimentary distribution for classroom use or other
educational purposes." This book, so far as I
could find, does not mention either prior publica-
tion in the Supplement or authorization by the
AAA to reproduce. I carefully compared the two
versions of the committee reports. I infer that
this book's copy is except for titles, a cut-and
paste-and-photo-reducetransformation of the Sup-
plement report.
Furthermore, fair disclosure would require that
each of the eight reprinted items be separately
and fully cited as to Supplement source. The edi-
tor's preface should have named the AAA com-
mittee members and explicitly identified the edi-
tor as committee chairman. Instead, such details
were left to the reader's memory or inference or
curiosity to look up matters not properly refer-
enced.
The preface or the footnotes to each of the pa-
pers should have given biographical information
for each author. We are told only the organiza-
tional affiliation. At least the academic disciplines,
current responsibilities, and previous accomplish-
ments should have been given, especially since
some of the authors were from outside account-
ing.
Since the "Introduction" was part of the com-
mittee report, it, too, should have had a formal
response. A formal response would surely have
spoken to the desirability of issuing separate pa-
pers instead of a common report and to the fail-
ure to emphasize the difference between "method"
and "methodology."
The chairman succeeded admirably in handling
eight different points of view in the committee
report. The host succeeded admirably in choosing
respondents with nine different perspectives. The
472
editor succeeds admirably with 17 different pieces
arranged, in the most stimulating sequence.
The brightest gem in the new material is placed
exactly in the middle of the book. Number 9 by
Kenneth D. Mackenzie is intriguingly titled, "A
Datum Are a System." In it he comments on the
committee paper by John W. Dickhaut, John Les-
lie Livingstone and David J. H. Watson. "If one
strips their paper down to its fundamentals, their
discussion on surrogation is actually a method-
ological exposition of a concept of data and the
conduct of experiments.. .. Techniques of experi-
mental design and analysis do depend upon the
prior agreement of theory, systems of measure-
ment and the methodology of collecting and pro-
cessing of data." (p. 92)
This last sentence seems to be the major theme
with variations running throughout the various re-
sponses to the very dissimilar committee papers.
It is present:
1. when Ferdinand K. Levy elaborates his view
that William H. Beaver's efforts are "scholarly
but excessively narrow" (p. 39). "The point is
that reduced form models are of little use in tell-
ing accountants what type of reporting and an-
nouncements are needed to assure efficiency in re-
source allocations. What is needed is a set of
structural equations." (p. 42);
2. when Thomas H. Williams chides Edwin H.
Caplan for having "overstated the merits of em-
pirical research, as well as the limitations of what
he describes as 'theorizing.' "(p. 54);
3. when Peter Caws endorses the plea of Yuji
Ijiri for the "contrapositive method" in account-
ing research, which Caws says is "a plea, in fact
for specification of the circumstances under
which certain conclusions are drawn or interpreta-
tions made." (p. 73);
4. when Robert S. Kaplan contends that Mi-
chael S. Scott Morton "confounds whatever points
he wished to make by not emphasizing the unique
features of interactive processing (vis a vis com-
puters in general), by not distinguishing between
accounting and decision making or management
in general, and finally by not being explicit in the
type of research effort he was advocating." (p.
122);
5. when Lyman W. Porter praises John Grant
Rhode for developing a bibliography of "basic
references concerning data collection instruments
and techniques" (p. 133) and then cautions re-
searchers about pitfalls in research design (p.
134);
6. when Philip H. White analyzes the "highly
subjective" inquiry of Edward L. Summers into
conditions favoring research. "A general weakness
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The Accounting Review, April 1973
of . . . [his] method is that various items are rep-
resented as single entities, whereas they are cate-
gories which include several cases of quite differ-
ent kinds." (p. 154). Summers' omission of the
library from the environmental elements affecting
research "provokes serious doubts about the na-
ture of accounting research and even accounting
knowledge which it would be comforting to have
set at rest!" (pp. 154-5) Indeed, "the concept of
the environment is not considered or even the ra-
tional of the selection of the nine environmental
elements."
From my own personal view, this comment by
White could be expanded as a criticism of the en-
tire committee report and of the colloquium re-
sponses. The ideas of class membership and of
taxonomic rigor were rarely even hinted at except
by implication.
The progression of thought on research meth-
odology in accounting is almost Hegelian (i.e.,
thesis -> antithesis). I say "almost" because the
final two papers are by C.P.A. practitioners, Er-
nest L. Hicks and Philip B. Chenok. For them re-
search methodology seems to be primarily infor-
mation retrieval, deductive inference, and logical
consistency with authoritive opinion. Intellectu-
ally those activities are very different from form-
ing and testing general hypotheses.
The practical (as opposed to philosophical)
"synthesis" is that everyone should go on doing
his own special thing. That resolution brings us
full circle back to what the chairman-host-editor
urged in his "Introduction." "Thus, the 'data
grubbing' of the empiricist, the 'abstract meander-
ings' of the mathematician or logician, and the
'idle dreaming' of the theorist are all appropriate
methods." (p. 5) (Should the word be "meth-
odologies"?)
But the issue is not whether "we must tolerate,
if not encourage, a variety of research questions
from a variety of disciplines utilizing a variety of
methods by a variety of specialists" (p. 5, em-
phasis added). The issue is whether accounting, as
a methodology in search of a positive science (or
a practice in search of a normative justification)
can develop enough general theorists to save the
profession from bottlenecks, blood clots, and fra-
ternal bruises.
There's a time to specialize, and a time to inte-
grate. As the chairman noted (p. 6), the commit-
tee report failed in the latter. The colloquium re-
sponses revealed that failure in nine little gems of
thought.
However, they are small and just semi-precious
gems. The real stuff is in the library. Any ac-
counting teacher or practitioner who is interested
Book Reviews
in Research Methodology (those two words are
all of the title that appears on the outside of this
book) should read in the philosophy of science,
perhaps starting with some of the citations in the
committee papers and colloquium responses: au-
thors such as Abraham Kaplan, Thomas Kuhn,
Michael Polanyi, Carl Hempel, Karl Popper,
Wesley Salmon, Mario Bunge, C. W. Churchman,
E. A. Singer, Immanuel Kant, David Hume, et al.
Then, since the reprint of committee reports is,
by implication from the uncited authorization,
available for "complimentary distribution," you
should write for your free copy, expecting to be
billed only for the 36 pages of new material. If
not return the book and the bill, go to the library
and start your reading with Kenneth D. Mack-
enzie and F. Hutton Barron, "Analysis of a Deci-
sion Making Investigation," Management Science
(Dec. 1970), pp. B226-241.
ORACE JOHNSON
Associate Professor of
Accounting
The Ohio State University
W. L. C. WALLACE, Accounting Implications
of Federal Tax Reform: A Research Study
(Toronto: The Canadian Institute of Char-
tered Accountants, 1972, pp. 104, $4.50).
Canada's tax reform legislation, enacted in De-
cember 1971 and effective in 1972, contains a
number of tax concepts which are new to Cana-
dian tax law. Many of these concepts have signifi-
cant accounting implications.
The Accounting and Auditing Research Com-
mittee of the Canadian Institute of Chartered Ac-
countants, the body responsible for authoritative
pronouncements on accounting matters in Can-
ada, initiated the writing of this book as a re-
search study project in 1971 to encourage further
study and discussion.
The objectives of the study as stated in the
Foreword are: "to identify the accounting and re-
porting problems inherent in the changes in the
Canadian federal tax system; to evaluate each
such problem and analyze alternative treatments
relating thereto, including the theoretical and
practical reasoning underlying each; and to offer
a solution for each such problem in the context of
effective financial reporting."
Wallace, working with an advisory group of
two other practicing chartered accountants and a
tax lawyer, does an outstanding job of reducing
the very complex provisions which give rise to
the accounting problems to language and descrip-
tions anyone can understand. To one who has
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473
read the tax provisions, as this reviewer has, this
is a major accomplishment and one which is es-
sential to the reader for full understanding of the
discussion and conclusions which follow.
His analyses are in depth and his conclusions
well reasoned as one would expect from a person
of Wallace's broad background of knowledge and
experience.
The new tax law will give rise to a greater num-
ber of differences between accounting and tax in-
come, some permanent and some timing. The tax-
ing of capital gains, for instance, will give rise to
permanent differences as only one-half of a real-
ized capital gain is taxable and then only to the
extent that the gain has accrued from valuation
day in December 1971 to the date of disposition.
Other differences will arise from the ability to
amortize one-half of the cost of goodwill and cer-
tain other purchased intangibles and the require-
ment to pay tax on a portion only of the proceeds
of sale of such items.
Wallace concludes that existing tax allocation
rules can be applied once these differences have
been identified.
Private corporations are required to pay taxes
on different types of investment income which
are refundable provided specified conditions are
met. Most of these constitute an advance pay-
ment of tax on behalf of shareholders and are re-
coverable by the corporation on the payment of
dividends or on the application of losses against
the investment income otherwise subject to the
special tax.
Wallace reasons that these taxes are not a
charge against income; they should be carried as
a receivable only when an amount can be ex-
pected to be recoverable as a result of the corpo-
ration's normal dividend policy; otherwise they
should be shown as a deduction from sharehold-
ers' equity. Where conditions have been met enti-
tling the corporation to a refund, the amount
should be shown as a current asset, or applied to
reduce any current liability for taxes.
Another form of refundable tax relates to the
Canadian-controlled private corporation which is
entitled to the "small business deduction." When
a corporation has benefited from this deduction,
which is effectively a rate reduction, it must ei-
ther pay out sufficiently of its earnings in divi-
dends or employ them in expanding its active
business; otherwise it must pay a special tax on
an "ineligible investment." This tax will be re-
funded on disposal of the ineligible investment or
on the payment of dividends. The tax can be lost
if the corporation ceases to be a Canadian-con-
trolled private corporation.