Applied Research in Financial Reporting: Text and Cases

1. Applied Research in Financial Reporting: Text and Cases Chapter 6 Methodology of Professional Accounting Research

2. Chapter Topics • Importance of Research Methods • Methods of Investigation • The Professional Research Process • Communication Skills for Accounting Research • An Example

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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)

10. 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)

11. 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

12. 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.

13. 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

14. 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

15. 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

16. 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

17. 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

18. Communication Skills for Accounting Research • Research Report Format (Exhibit 6-5): • The Quick reference Section: • Transmittal letter • Title page • Table of Contents • Executive summary

19. Communication Skills for Accounting Research • The Details Section: • Introduction • Literature Search • Method • Findings • Conclusions

20. Communication Skills for Accounting Research • The Supplements Section: • Illustrations • Appendices • List of references • Endnotes or footnotes

21. 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