THE USE OF PROTOCOL ANALYSIS IN ACCOUNTING

The primary objective of accounting is to provide information that helps decision makers make better decisions. Yet knowledge about how accountants and other professionals make decisions is limited. This article examines verbal protocol analysis, a methodology that uses detailed process information to model decision making behavior. There are many protocol analysis techniques, with different ways to collect data and different ways to analyze it. The selection of a particular technique depends on the specific research objectives. The article concludes with an illustration of a detailed protocol analysis study and a discussion of its results.     

AN EXPERIMENT IN THE USE OF DATA ENVELOPMENT ANALYSIS FOR EVALUATING THE EFFICIENCY OF UK UNIVERSITY DEPARTMENTS OF ACCOUNTING

One problem in evaluating the efficiency of public sector organisations is the lack of a single index of efficiency, such as profit, by which a significant element of aggregate performance of each organisation can be assessed. This article examines the potential of using data envelopment analysis to overcome such a problem in the context of an area of much current concern in the UK, namely that of assessing the efficiency of university departments. The methods involved are, however, equally applicable in other countries or in a wide range of public sector bodies. Data envelopment analysis was introduced to the accounting literature by its inventors, Charnes and Cooper (1980), but accountants generally seem to have overlooked its existence. This article aims to stimulate a greater interest in the technique and a widespread examination and evaluation of it in a variety of contexts.     

A NOTE ON THE USE OF REGRESSION ANALYSIS IN ACCOUNTING: COPING WITH MULTICOLLINEARITY*

A major obstacle to the effective utilization of regression analysis in accounting practice and research is the presence of multi-collinearity. This paper analyzes the impact of multicollinearity on ordinary least squares (OLS) estimation, and describes a recently developed estimation procedure, ridge regression analysis (RRA), that offers the possibility of improved coefficient estimation. An auditing example is provided comparing the results of OLS to those of RRA.     

THE IMPACT OF ACCOUNTING RESEARCH ON FINANCE

This paper assesses the impact of accounting research on finance using citational methods and content analysis. The data are 715 articles published in seven finance journals. In contrast to previous research of the influence of finance research on accounting, the results show relatively little impact of accounting research on finance. The limited impact of accounting on finance is principally provided by four accounting journals and a small group of accounting authors. The impact found is often the result of bridging papers, in which either finance articles have accounting authors, or vice versa. These results suggest a substantial disregard of ostensibly pertinent capital-markets accounting research by finance scholars. The reasons for finance’s disregard of this work, whether for reasons of perceived value, quality, or for other reasons, is unclear. However, it is apparent that accounting capital-markets research is not as influential in finance as might be expected.     

THE ORIGINS OF PRUDENCE IN ACCOUNTING

The paper attempts to explain the historical reasons for the dominance of the prudence concept in financial accounting by tracing the history of its meaning up to the end of the nineteenth century. Prudent accounting represented the elaboration by the accounting profession of a distinctive competence@8ithe determination of distributable profit@8iwhich enabled it to appear as the ally and advisor of large investors and management against “speculators”, thereby ensuring an equal return for equal capital. Prudence was crucial to the accounting profession in regulating the social relations of capital     

THE SIGNIFICANCE OF AMBIGUITY IN ACCOUNTING AND EVERYDAY LIFE: THE SELF-PERPETUATION OF ACCOUNTING

This research study seeks to demonstrate accounting's autopoietic capacities in social enactments of change such as a preferencing tribal-based corporatisation. The paper, through a form of critical ethnography, underscores the argument that accounting self-reproduces through a complex interplay between: (a) the political effecting of ambiguity in a controversial and sensitive policy of change; (b) assumptions about accounting's ability to reduce ambiguity; and, (c) the inherent ambiguities in the accounting language. The research suggests that in order to be more appreciating of accounting's self-reproducing capacities, we need to be more conscious of the interplay between the politics of ambiguity in society and the aesthetics of ambiguity in accounting. In the process, the paper highlights the general applicability of accounting as an act of self-replication, and the way in which perceived “meaningless[ness]” and time “eating” notions of accounting, ironically contemplate more of it.     

THE ROLE OF TIME SERIES ANALYSIS IN STUDIES OF ACCOUNTING POLICY CHOICE: A COMMENT

The study by Anderson and Zimmer [1992] of goodwill accounting policies uses a pooled time series experimental design. This approach can add substantially to our understanding of accounting policy choices, but not in the manner used by Anderson and Zimmer. Where accounting policy choices are believed to be independent from one period to the next, then a time series approach can greatly enhance our ability to capture the influence on such policy choices of changing circumstances, more so than a simple cross-sectional test. Conversely, if accounting policy choices are not independent between periods, pooling over time can overstate significance levels of statistical tests. The nature of Anderson and Zimmer's data makes the impact indeterminate. However, even under an extreme assumption, pre-regulation evidence remains significant at conventional levels.     

HUMAN RESOURCE ACCOUNTING: A CRITIQUE OF RESEARCH OBJECTIVES FOR THE DEVELOPMENT OF HUMAN RESOURCE ACCOUNTING MODELS

This paper attempts to place a broad perspective on the problems of HRA by arguing that its objectives are wider than appear to have been admitted. Such is the importance of HRA for problems as disparate as economic efficiency, organisational effectiveness, and social effectiveness that it must become a subject in its own right with its own methodology and measurements. Many conceptual and measurement problems have not yet been adequately treated. The imediate objective of research should be a rigorous testing of the validity of the assumptions that have hitherto been relied on. Ce papier cherche à donner une vision globale des difficultés que rencontre la ‘Comptabilités des Ressources Humaines’, tout en désmontrant que les objectifs de celle-ci sont plus éstendus qu'on a voulu le reconnaftre. Face à des problèmes aussi divers que le rendement économique, l'harmonie des structures et le bien-être social, la ‘Comptabilités des Ressources Humaines’ prend une telle ampleur qu'elle ne peut que devenir une branche spéscifique revendiquant alors sa propre mésthodologie et ses unités de mesure. De nombreux problèmes concernant concepts et ésvaluations n'ont pas encore été traités de manière appropriée. Le premier objectif des recherches devrait consister en un examen profond de la validité des hypothèses sur lesquelles on s'est appuyées jusqu'ici. Dieser Beitrag versucht eine breite Perspektive auf die Probleme von Human Resource Accounting (HRA) zu werfen, indem behauptet wird, dass ihre Ziele weitreichender sind als scheinbar anerkannt worden ist. Die Wichtigkeit der HRA bezüglich Problemen, die so verschiedenartig wie ökonomische, organisatorische und soziale Leistungsfähigkeiten sind, spricht für die Entwicklung einer neuen, ganz selbstständigen Disziplin mit ihrer eigenen Methodik, Masse und Messungen. Viele begriffliche und Messungsprobleme sind noch nicht ausreichend behandelt worden. Das nächstliegende Forschungsziel solte eine strenge Prüfung der Gültigkeit der Annahmen sein, auf die man sich bisher verlassen hat.     

EXAMINING THE PRACTICAL RELEVANCE OF PUBLIC SECTOR MANAGEMENT ACCOUNTING RESEARCH

Concerns exist that practical relevance is becoming devalued as accounting scholars respond to signals about what sort of research ‘counts’. We categorize public sector management accounting papers in six leading journals according to two criteria: the practical orientation of the research objective(s), and whether the conclusions communicate issues of practical relevance. The findings reveal that most of the papers are directed towards understanding or critiquing the use of management accounting techniques, while other practically oriented research objectives are largely absent. Although half of the papers identify practical research implications, few suggest guidelines for practice. Reflections are offered on the role of leading journals in shaping how practical relevance is valued in accounting research.     

ACCOUNTING FOR RESEARCH AND DEVELOPMENT EXPENDITURE: AN ANALYSIS OF THE ROLLS ROYCE RB.211 PROJECT

There is evidence that standard setting bodies see the promotion of uniformity of accounting practice as a major objective in setting accounting standards. However, recently issued standards in respect of the accounting treatment of research and development costs allow corporate managers considerable choice in accounting for these costs. An examination of the circumstances surrounding the development of the RB.211 engine by Rolls Royce Limited during the years 1967-70 is undertaken to determine the extent to which different practices may be employed in accounting for research and development costs under the U.K. and International accounting standards. Evidence adduced from this examination suggests that the management of Rolls Royce Limited could have complied with the requirements of these accounting standards and still have been free to expense or capitalise the costs incurred on the RB.211 project.     

VOLUNTARY DISCLOSURE OF ACCOUNTING RATIOS IN THE UK

This paper investigates whether the voluntary disclosure of ratios in corporate annual reports can be explained by agency and signalling theory. The two theories are discussed and the applicability to explaining ratio disclosures considered. Drawing on agency and signalling theory, seven hypotheses are tested using data collected over five years, for 313 UK companies. More specifically, associations are considered between ratio disclosure and the following characteristics: company profitability; return on investment; gearing; liquidity; company efficiency; size and industry. The paper finds some evidence of an association between ratio disclosure and company performance, size and industry. The implications of these findings are considered and areas of further research discussed.     

THE ROLE OF INFLATION-ADJUSTED ACCOUNTING DATA IN CORPORATE RISK ANALYSIS: AN EMPIRICAL INVESTIGATION*

Both in the U.S. and abroad, certain large companies are required to report accounting data adjusted for the effect of changing prices. This study investigated the role of such adjusted accounting data in corporate risk analysis. Loan decision situations were constructed for a firm whose income from continuing operations reported in accordance with Statement of Financial Accounting Standard No. 33 (SFAS 33) was drastically reduced. Questionnaires were mailed to 1,050 randomly selected bank lending officers (BLOs) in 240 banks in 40 states and the District of Columbia. A group of BLOs received no SFAS 33 data and served as a control. While most of the responding BLOs did not seem to use SFAS 33 data in making their decisions, those who reported that they used such data reached significantly different decisions from those of the control group. More specifically, the users evaluated the firm twice as risky and recommended significantly lower loans than the control group with respect to both short-term and long-term loans. Furthermore, the users spent significantly more time in data analysis and decision making than the control group.     

CHARITY ACCOUNTING: AN EMPIRICAL ANALYSIS OF THE IMPACT OF RECENT CHANGES

Since the early 1980s attempts have been made to reduce the diversity in accounting practice and improve the quality of the published financial statements of charities. Two major events in this process were the publication of the original Statement of Recommended Practice (SORP) 2 in 1988 and its revision in 1995. Changes have been predicated on the dominance of the user-needs model and it is argued that inconsistencies in the financial statements of charities and the adoption of dubious accounting practices make it difficult for users of charity accounts to understand (and therefore use) the information provided. This paper presents the results of an empirical analysis of 151 financial statements of large fund raising charities in England and Wales as a basis for identifying the impact of both the original SORP and the revised SORP. The study's main conclusion is that charity accounting has improved significantly since the 1980s (where improvement is seen in terms of increasing compliance with recommended practice) and it is suggested that the impact of the revised SORP, like the original SORP, is likely to be major although not immediately so.