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 Investigation Exhibit 6-1 Laboratory Experiments I ncludes simulations –Data are collected on the bases of manipulated stimuli –Researcher has good control over data –Data analysis: Descriptive Inferential

Methods of Investigation Exhibit 6-1 Survey Questionnaires –Data collected via Mail, , web-site –Researcher does not have good control over data –Popular method nevertheless –Data analysis: Descriptive Inferential

Methods of Investigation Exhibit 6-1 Archival Studies: –Past Data from archives –Researcher does not have control over data –Rich data nevertheless –Data analysis: Descriptive Inferential

Methods of Investigation Exhibit 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 Investigation Exhibit 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 Investigation Exhibit 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 Investigation Exhibit 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 Process Exhibit 6-2 The steps to apply research methods Sequential and concurrent application Some steps can be avoided if knowledge already exists

The Professional Research Process Exhibit 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 Process Exhibit 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 Process Exhibit 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 Process Exhibit 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