Musings on Accounting Research by Steve

Home » 2018 » August

Monthly Archives: August 2018

On vacation – more by steve returns next week

Who was missing at AAA???

Interesting observation about International Reception at AAA – the relatively low numbers of European academics compared to previous East Coast conferences. Indeed, maybe it was me, but the international reception seemed a lot emptier than in previous years and the room was certainly not any bigger. It as the same room we were in six years ago! I wonder why? ( tongue very much in cheek).

For experimental researchers ( edited)

Imagine – Bob Libby, Lisa Koonce, Kathryn Kadous, and two “other guys” (i.e. I cannot spell their names but Ryan and Scott are first names) on a panel discussing process variables in experimental research.  Furthermore, the AAA was videoing the session for ye old website!!!

It was a wonderful session overall. Lisa basically made the case for replications, whether they be done within or across papers to rule out boundary conditions, alternative explanations, etc.  In other words run more experiments if the finding is important to ensure you have the “right” explanation/theory.  the two guys ( Scott and Ryan) made the case for understanding what statistics can and cannot do and gave one of the best explanations I have heard for differences in purposes between OLS, two stage least squares and causal or structural models.

However, we had a little over generalization on the panel based on a paper I had not thought about in years Nisbett and Wilson 1977 that was situated in the middle of the verbal process tracing debate with the later Nobel Winning economist Herbert Simon.  The message of Nisbett and Wilson was that verbal protocols cannot give us insight into cognitive processes that operate at the unconscious level.  Very good point and totally correct – and the panelist was totally correct up to this point.  The overgeneralization was made by the remaining panelist – that we cannot verbalize anything about processes.  Indeed, at one point it seemed like she was saying asking people how they do or see things is just junk data.

Sorry, forty years of research since then have fleshed out Nisbett and Wilson a fair bit and to say that there are no times that people can report on the processes in their judgments is a gross oversimplication.  Certainly when it comes to automatic processes of expert accountants, it might be unreliable to ask them about the factors at affect their routine judgments; but then the simple solution is to study those in the midst of learning how to do the task. There they have to cognitively think about how to do it if you want unconscious process data that Is a place to start as for those folks it is still conscious (I did this in Salterio 1994 with audit managers learning to find precedents). Furthermore, Nisbett and Wilson is located in the unconscious processing or automatic processing realm – System 1/heuristics/peripheral route depending on your dual processing theory of choice – not the System 2/systematic/central route decisions.  So again, it all depends on your definition of “process”.  If you are focusing on automatic processes – she is right.  Anything else – not so right!!!

so great panel – lots of good thought’s but evidence based researchers need to consider carefully not to overgeneralize.

It’sssss backkkkkk – the conceptual framework

While I Knew in principal that both FASB and IASB were playing around again with a ( they like to call it THE – that is a socially constructed notion) conceptual framework I did not know they were taking themselves so seriously. In a speech to the American Accounting Association Christine Botosan (CPA, CA the hidden Canadian on FASB ) gave a talk at the plenary session on the moves Being made toward a new internally consistent deductive conceptual framework to guide standard setting. If she said it once she said it four time “internally consistent deductive framework” would almost solve all ills and that relevant information had to have priority as relevance trumps all in decision making.

First, there is no behavioural evidence I know of that says relevance trumps every other dimension of decision making. Certainly white noise and not relevant information would at best be neutral however in financial accounting we are dealing with trade offs along degrees of relevance as it is rare that a piece of information in it the normal range considered b standard setters is clearly white noise or not relevant.

Second, is it better that each investor access future uncertainty (and here I an focusing on the classic distinction between risk and uncertainty) based on reliable information about the present state of affairs instead of having one potentially more relevant future oriented information data point provided by experts that the investor does not appreciate the degree of uncertainty about that number? The hubris around much of Accounting in this area is that it thinks we are dealing with ” risks” rather than uncertainty.

The wisdom of the crowd when accessing an uncertain future event is generally at least as good as the best expert wisdom and often better according to a long line of research. Anyhow I am ramblings but now you know it is really back!

AAA – the broom closet with no room for brooms

About a decade ago if you had held a panel session on qualitative accounting research at the AAA you could have held it in a broom closet with room left over. Today over 100 folks came to a panel discussion at the AAA on quality in qualitative research! Even better was the fact slightly less than half the room had done it and nearly 100% were interested in doing so!

Most of my readers are familiar with my views on research diversity and the need to use the most appropriate methods to identify and address practice issues. Field research enhances your engagement with the field of practice ( however you define practice). And with doctoral programs like Georgia, Illinois, UMASS Amherest all recently graduating PHD’s with this method in their toolkit, we may be on the verge of the breakthrough I have long advocated for in the USA. Further the placements of those students has been stellar Emory, WISCONSIN, Northeastern, and more.

This combined with the first qualitative interview paper being published in TAR in the last 30 years coming this fall, along with the combined survey interview research being done by Shiva Rajgopal (Columbia) and Michel Clements (Texas) and others in financial accounting published in JAE and JAR means the ” big 6″ Accounting journals ( however you define them from among TAR, CAR, AOS, JAE, CPA, JAR, MAR, AAAJ, AJPT, RAST) have all published such research in recent years – many with multiple articles!

And that’s the way I see it at the first day of work at the AAA.

The day before the deluge

Setting here in hot and muggy Washington DC after doing my first event of the AAA.  The joint journal editors/publications committee meeting.   One of the key messages is that there is a strong likelihood of a major disruptive event in academic publishing over the next X years, where X is a small number greater than 6 months and less than 60 months.  I think most editors in the room were oblivious to this trend or the potential importance of it to academic publishing. But then again, as the old saying goes “it is hard to remember the objective was to empty the swamp when you have alligators biting your butt!”  I will let you make the analogy.

What would this event be? It will be likely to be around the integration of data sets, analysis code, video technology and a change in the publishing platform of record – the traditional PDF file towards a technology that easily integrates these other aspects.  Hearing this I am glad that my current research team is working on a video version of our latest research – on audit research knowledge transfer to standard setters.  I thought it would be a good means to communicate our message to the standard setting community but it may indeed become part of the version of record of our final article if these trends move as fast as expected.  Hope to unveil the video by mid-September!!!

Cross blog promotion – audit knowledge transfer

A few months ago I wrote about being invited to write a blog entry for the European Accounting Association’s Accounting Research Centre blog.  So when the first paper from our research program on audit knowledge transfer to standard setters was accepted at Accounting Perspectives, I thought that given the peer review “okay” it was time to further announce the program.  So if you want to have a high level review of what we are doing on audit knowledge transfer to standard setters – see the EAA’s ARC! (or type into your browser

And to satisfy my funders – this research was sponsored in part by Canada’s Social Sciences and Humanities Council of Canada (grant # 430-2015-0155) – the SSHRC.

%d bloggers like this: