Professional Documents
Culture Documents
Mattessich Richard (1972)
Mattessich Richard (1972)
Mattessich Richard (1972)
l\lethodological
Preconditions and
ProblelTIs of A General
of Accounting
HE last
fifteen years of accounting
history seem to be part of a transition period replacing the loo:oe traditional approach
hy mun: rigufous methods .. \lthough spanning oyer consideralJle
time this transition continues, most likely
transgressing
into the eighties, and promises to cause a major break in the evolution
of our discipline. A change of spirit, much
more than computerized
technifjues, is the
main force behind this trend. The distinction between
'\'hat I call the modern,
rigorous or generalized approach,
on one
-;Ia~<-;~il(lthe loose traditinnal
or particlIlarizeda[>proach:
on"the ;)-tll;;:;5 st~i:;'1a~,[Tzed--by-tilCtonowing
five points:
'~1.
Formulation
and utilization
oi well
terms and empirically llleaningful
concepts versus employment
of vaguely
II tkscribeu
cxpressions :lnd nUllllpcraLiona[
~oncepts.
'\,1'1'''' 2. Adapt:J.tion of general scien tilic tools
'1 ",':d .. ,and methods
irom mathematics,
philoso'JJl4~" "~'.,,1' phy, economics and the behavioral
sci;1 \
ences to accounting
theory versus par\ticul.ar~za tion and u tiliza tion o.f a n:l rrowly
speCialized conceptual
framework.
\
3. Orientation
toward specific accounting and management
information
models
y
for specific objectives
versus dogn;alic
acceptance
of a unique, overall or undefined purpose.
c
~J
Theory
~lI,~~gt~l.
~Th;;tlTii:;
shlluld
hi:
done
Ihn>1lgh
syslematic
ksting
and by means or all
inslrunll'lllal
theory
COIl\\lH:nSllr;t!e 10
ueeds as wdl as scientific meallS al Illlr
disposal, hardl)' appears to h<: an unreasonable quest.
(;).1.
TER~lli':I)\.I)(;IL\L ;\,,(J
CO:--:CI':I'TU,\L
!)IFFICULTIES
f)t/iJIcd
I'aslls
Uwlcjilled
Terms
Traditional
~\l'coullting, as must uLhn
acadl'mi(' disciplines, partly borrows ,'011I'l:pls i rlJlll lIei.~hburing (lisciplillcs
;tllIl
l':lrtly <T(;tlCS its OWll \'OllClVtn:l! aj'\':Iratus. Yet, a(:!'ounting thl:ordicians
rar<:ly
make all drortlo
indicale dearly whidl of
their terms are primitive (hence borrowt.:d
from outside) and which are derived from
these primitives
by means of nominal
delinitiolls
within the accounting
theory
proper. This vagueness is one reason why
the boundaries
of traditional
accounting
theory and its subareas are blurred and
2 A strict distinction
between a "specific model" mentioned under (3) and an "isolated particularized model"
mentioned under (5) ou~ht to be made. \Vherea5 the
former is cmbedded in a theoretical framework and thus
has common bonds with other specific models, lhe particularizcd model lacks lhis connection and is theoreti
cally isolatcd.
> "As we shall see in some detail, applied research has
the advanta!;c of bein!; able to formulate criteria of its
own efftciency in terms of the objectives for which the
problem is being investi!;ated. Because of its lack of
specific objective5, pure research cannot formulate such
criteria as explicitly," Russell L. Ackkott, SciwtiJic
ill el/lVd-o/Jtimi=ill~
A ppliai Researc!/ [)ecisions (John
Wiley & Sons, Inc., 1962), p. 24. Also "In scicnce,
whether pure or applied, a theory is both the culmination of a research cycle and a !;uide to further research.
In applied science theories are, in addition, the basis of
systems of rules prescribing the course of optimal practical action," Mario Bun!;e, Scientific Research II -Th4
Search (or Truth (Springer Verlag Co., 1967), p. 121.
-f1)72
orc
he-
-(1-
\-
1\
-, is
ms
'<hie
!gh
yan
to
-'Jur
ea-
1\
\1
"
.!
I
I
I
I
Ii
1l'r
;Ilnei
Iy'
"f
",d
." ,rn
l~tl
,ry
hy
ng
nd
tD-
:1,'1"
l;lr-
-rtie
"'~13.S
its
!he
.,f
",:ldl
(C,
n:l
.:h.
:"f
;lC-
rh~
I.
Co 1/((' pts
\Vhen-as a ddinilion
is a n!:lIi"nship.
between tt.TlllS or I,d wn:n a krill alld its
constituents,
an intcrpret;tlion
is a rebtiol1ship uclwt:t:n a phenomenon
(iact or
idea) and the term (symhol) reprcsenting
it. General concepts require specitic anti,
in many cases, empirical intl'rprclations.
In accounting,
uniortunately,
thc dis[inction bclween
inlt:rprcled
and llilintnpreted concepts is even more nl.'glecled
than that between detined and urrdciined
terms_ COllccptS like income, ~:'c(/lth, ~'(I!/le
lllld -measure Ilre treated as tllO/lr)1 they 7:!ere
'well interpreted
COl/ecP/s, hut at !lest an
interpretation
is merely implied, and in
the case of scholarly controversies
the two
opponents
often imply different
interpretations, usually without rcalizing it.
In this regard the example of the prohahility concept offers a valid analog frolll
which accountants
can learn much. For
considerable
time hot controversies
were
fought over the question
whether
probability is an objective-empirical,
an objective-formal,
or a subjective-empirical
:l'o'h"/I,l
fjdta
('ollceptl/llli:a-
Systematic
attempts
to <Teate a series
of clearly delined tll1inlcrpn:kt1
concepts
of the major accounting notious and alternative inkrprctalions
(for specilic or standardized nl'eds) of l';lch cOllcept have not
LJeen made in our discipline. But in an informal, vague and incomplete manner such
interpretatioJls
han; becn customary
in
traditional accounting for a long time. One
could wl'l! argue Ih;tt the acquisition cost
basis, the market
value basis and the
present value basis are nothing but "interpretations"
of a general
unintcrpretecl
value concept.
Hut the essence of the
Illdhodological
achiev('llH'nl
of distinguishing hetween uninterprdcd
and interpreted concepts and theories (calculi) lies
, ..f ((ollllting Terminology Bullciill No. 1 (American
Institute of Certified Public Accountants,
1961), p. 9.
6 See Mario
Bunge, SciOli/fie Research I-The Search
for System (SprinF;cr Verla!; Co., 1967), p. 428.
JIathcmatical
OF SCIEKTIFIC
and Ecollomic
METHODS
COlltributions
techniqu
of these
known, J
and sum
a metho
ingly we
foHowiof
investm(
studies t
network~
.,: tion and
statistica
. informat
,j
.i
I
Prcsen
. ,
tions are
:ipplicati
tional ac
rived fro:
merit
to
by meal
fundamel
interpret
broader:;
words i~1
.'
..
;"11
lffiportan
theory e:;f
radiC3l,'i
stil(itI~
quenct$.
h}"C~
lir.g. an.ii
. .Bienn:m
~'
r.:-tz , .~
Ct'n~~
pfO.l.dt:,
Thc!4t
of~
&rtidef;
a '"0..u 'It:
~,e .,_:;~
u;t"Il~
('<~
a:~~f!!
U:~~
es from
ctively,
tion in
-mation
tematic
:.12 Such
oththe
~rpreted
rules of
I1dstancational
as glamt might
us of'aclopz ,vas,
,e-, l-aanimals
'stem of
)classes) ,
;cctions),
it should
to proof a few
and subETllODS
'Iribl/tiolls
transition
pting ecolL,thods or
".truction 'and
-Uuly 19iO),
'Ory
and' Re-
ilY;'
i
REytEW
effcctive
,./. Scc 'also
ilcory of Acetober 19iO),
~Jl accounting
't idem. "On
'HE ACCO~T-
_. ____
. _T ______
i
i:
i
become an indispensable element in the
design of a general theory bf accounting,
even where no actual double classification
is practiced.
. f
Apart from these methodological aspects
which have been treated extensively clsewhere,18 the more algebraic aspects of this
new paradigm have inspired a series of
exciting accounting contributions on mieroeconomic input-output. models, their
theory and further generaliiation. Starting
from the interindustry model and the insight that Leontief's basic idea of t'llterdependent commodity
transfers between
production areas- need not be restricted to
!he macro-economy, several authors made
significant contributions by applying matrix algebra to traditional cost accounting,
budgeting and other areas.19
Linear programming, simulation and
computer applications in several respects
are related to the research area indicated
in footnote 19. They, too, constitute a
comprehensive body of mathematical studies that greatly contributed to more rigorous analytical thinking in accounting.
Both linear programming and the matrix
calculus are part of linear algebra, and
although the matrix application of accounting is strongly oriented toward allocation procedures, it too may be geared to
planning and budgeting, like linear programming and systems simulation.20 Thus
a peculiar feature of our "transition
period" is the milch stronger orientation of
accounting tOLI.!ardprojectio ilS of future c(:onomic et'ellts. Traditional accounting did
not lack this element (already iifty years
ago did 1\'leKinsey lay the foundations to
a systematic and comprehensive business
budgeting),21 but during these live decades
budgeting has never been more than a side
issue of minor importance. Even today
some experts wish to exclude budgeting
from accounting proper. But it is this neg~
leet of budgeting which has deprived traditional account1l1g of its ~nost important
"~-I
-.
MattI
Cff
ing ar
made
to prt
Green
that I
tive a
aecou
rect,
they
,!
abili~
predi<
assun:
other
Greet
that I
pothe
hypo!
plied
ment4
whicl
testin
this Ii
Sta
of in.'
enh::.
rese;
trUJ.l1
distiL
sufis
(esPO
ing);
bt.hz,
lioOt
tian~
..
.. ,:l,~;
:cocml
'i !:it!
'OtW;
'How
lcd if
n the
deand
~that
)loralS, by
1t
in-
c1omildget',llyticaJ
)ie uoiss (ller:\llllca~J-:VIE\V
.IIlS
'''d
'I 0,
>-if and
'l'Ot;~"T-
:-lanes,
!";ltinn:'
(,\()-.1.\;
,'/'",1;.11,
. 1%7)
Icntcr, pp.
, 'utput
," Ma1l-
l.t~l\r
,'a lion."
';0.1-508
III
!,untin~J
1,EVU':\V
"Some
,;>roduc!
;:ltlU"rr
'rechno"is and
t'ccrnher
,\hmccl
lOses in
'Ill-:
Acl\ll; B.
:-Iodcl:
;) l~~t),
~i
h,
,del and
,!(':-;Tt~G
"g appli,rnblems
:HI that,
,e"r pro- '
!'apl~n
VIa
.CLva~"T-
'lCCCHlnl-
1 uy the .
,ends to
li"liiiiiil~IW5liiij':'
iii?i-lilim.iiE7iiMliIiiil1i-iii-ii1--
111easurement
Theory
considerahle
"pace f"r
Illl-
SvstelllS,"
1 he
('lllllltliltIT
'rifF
discussion of "The
I a'vin-," pp, S;
I'bhllill!:
('11
;\(,cllllntlU~.~
alld
.\IIfq::-';"'I~(:
{{EVil':\\'
SlIl>l'll"Il:"tto'Vol.
Ih. 1'171. "-'l'licitly !,oints lIut wilh
re":tru to traditional uccountill::: (in contrast to modern
ac~ounting) that "the inform:ttion was not d~signed for
pl:tnnin::: purposes nor nece<s:lnly for measunn::: performanc~ a~aingt or~ani7.:tlionaJ
objcctivC5," p_ 291.
" i\l. N. (;rcenhall"The
('lcdictive-AI,ility
Criterion:
TIs Relevance in Evalu:Ltin~ .\ccountinl; Data," Abacl/s
(June 1'.171),1'_ 6_
. .
14The essence of these ills/rumental
IJ)'po/lteses IS ,!lscussed in detail in Richard :\l:tttessich,
hIS/mlllcl//ill
Rt:IJ,5<Jllil/g alld lJecisillll .')ystel~ls-A_ Jf e/IJodology o/litc
Admil/;strcttive i/lld otlter A pplted SCiences. forthcomml!;.
~5 Joel
Dean, J[a'wgcrial 1':coJlomics (Prentice-Hall,
Inc., 1'1.11), and J. Johnston, Statistical Cost Analysis
(:\lcGraw.llill,
Inc., 11)60).
:. See especially G_ A_ Felthanl, "The Value of Informalilln "TilE ACCOUNTING
REVI};W (Octoher 1963), pp.
(>i';'1--96;Baruch Lev, ,I ,'c01I-11/illg
lIllIllll/orma/ion
Theory
American t\cclluntinJ.( '\S50C_, 1')(,1)); G. A. Feltham and
J- S. Demski, "The Use of l\lntle15 in Information Evaluation," TilE ACCOUNT1:-lG REVIEW (October 1970), pp.
68-1--96' N. C. Churchill, G. A. Feltham, T. J. Mock,
T. R. Prince, H. M. Sollenherger, F. Kaufman, "Report
of the CnmmiUce on An:Ol!nlin~ and Information Systems," TilE ACC0UNTlIW RE\'IEW-Supplement
to Vol.
46, 1971, PI'. 289-350, T. J. :'-fock, "Concepts of Information Value and :\ccountin:-:," TilE i\CCOU:ITING lZEVIF.W(Octoher 1970, PI'. 765-78.
71 For example,
Rooert E. Jensen, "A Cluster A~aly.
sis Study of Financial Performance of Selected Busmess
I'irms," TilE ACCOUNTING REVIEW Uanuary 1971), pp.
36-56, and many others .
S. S. Stevens, "On the Theory of Scales of Measurement," Scieltce, Uan.-July
19,16) pp- 677-80 and many
suhsc'luent
articles;
C. H. Coomhs,
"Theory
and
l\letho<ls of Sociall\easuremcflt,"
in Research IIfethods
i1l the Behavioral
Seiwas,
cd. oy L. Festinger and D.
Katz (Dryden Press, 1953); C. H. Coombs, H. Raiffa
and R. M. Thrall, "Some Views on Mathematical
Models and Measurement Theory," in Decision Process,
-----~':':
. ::_.::_.;'I:;,:-:.:;:;
m"lill.~Tl~;:,,;:;~;i~i:
.i~l:
t'f~',1';)1
-31:.;
';!
Stevens'
scales were fIrst applied
to
accounting in 19S9~9 and further concepts
of modern
measurement
theory
(e.g~,
"measurement
by fiat") w~re introduced
to accounting
in subsequent years.30 Some
authors,
like nierman,31 recognized
the
significance
of these new measurement
concepts at an early stage, but, in contrast
to the mathematical
developments
(mentioned in the preceding subsections),
accountants in general only slowly absorbed
these ideas. Among the sixteen papers on
accounting measurement
presented at the
1965 Seminar on Basic Research in ACCOUliting Measurement32
there was only a single
one33 quoting Stevens' work ane! mentioning explicitly its accounting
applications.
Although today this conceptual apparatus
is more frequently referred to by accountants,3! I have the impression
that miJre
widespread
and profounder
familiarity
'with it could avoid many misunderstandings still occurring in our litcrature.35
In
addition,
it would help synchronize
accounting literature with management
science and the scientific approach in general.
But instead
of following
this modern
trend36 several accoun tants concerned with
measurement
theory clung more to traelitiona I ideas or tried to develop their own
new measurement
concepts for accounting
(i.e., retrospective,
contemporary
and prospective measurement)
.37Suchexpforations,
of course, should not be rejected and may
have a double justification:
On one side it
might be that some measurement
concepts
peculiar to accounting arc needed; on the
other side these newly developed concepts
may \VeIl stimulate
measurement
theory
in general and find broader acceptance,
provided they are in tune with the general
trend.
Bclza~,ioral Research
Accounting,
conceived as a normative
discipline, cannot rely on formal proposi-
II~; IW~
~,
I
/.;:
.....;;.~t
.t>~~
'~:,,::i:';
';il~~I,
.,'
I
"hJ~;;:;'
n
:'1
f:! !
.
.~Ii
r,I!
'III
t~tyi";'
b.~ilnf.:,,.mrl'
~esi~~
aceounlintii'lM
~1.:e~::E
.~ ..'..
,:
L'i'I
bii\ioritP
~1:i/
f\lID .
,''l
iS~'tties,: dW~~j
books ~U{ L.'
J' 't " .,.:;.
~
wn ten, and at
This border ;l%,,(':
is subject t<J:::.:I.
argument is nol
b~h;l\ioral acco
faulty or sup.
havioral rcsear
accountall ts t
'havioral
scienl
about methode
the lack oi suf
ha vioral re;:c;lI
tants. Further
to draw theu
counting has I
can be no dou
inquire in to tv
and economic
and into the
the users of ae
less unanimit,
question whe
into the bcha
counting 5t:1.t\
into the Leha
A further is
arises from it:
and concerns
"The ideal we
tions of accOl:
of economics
to express thl
terms of PSj
:l\Jattessich;
~lethodologicfd
I'rccondi t ions
j
i
:orn
nce
oral
g to
ljses
!SIlOS,
ds (If
\lfch::and
l7.a;;I,
, und
I:liche
>!n'
::tl
" ,;nd
;, Pl'
-,
.lng,
i;.
:-:,,1(tll,
crican
'~~port
- :\lealllt
to
':ham'rnond
;tlion"
~tsure
ii, Pl'.
111111cr-
-n.~l"nt
,rther
Valua
-:\pril
"l and
~ugust
.t~r
S
:J!J
:ental"
,rlance
"II her.1 nll'a'fy:ue
'with
, cment,
oj
';.t~"""'~~ise
ld
,"<1-">Uf(ell
the
t:asure,lJ Vol.
which ultimately
shoulll fit into a more
general framework.
'
The emergence of this "behavioral
accounting"
indeed is one 'of the'main
features of our transition
period. Although
Argyris
undertook
highly
original
behavioral studies in budgeting38 as long as
twenty years ago, it prob~bly was Stedry's
award-winning
dissertation3D
which gave
the signal to the new trend of looking at
accounting
from a behavioral
point of
view. Especially
since the middle of the
sixties, dozens of accounting
papers and
books with behavioral
implications
were
wrilten40 and anthologies were compiIcd ..1l
This border area still is in its infancy and
is subject to many controversies. The chief
argument is not so much bunched
against
behavioral accounting as such, but against
faulty
or superficial
applic;ltion
of be
havioral research within this area.4~ Nonaccountants
trained
thoroughly
as behavioral
scientists
occasionally
complain
about methodological
deficiency as well as
the lack of sufficient generality of the behavioral research carried out by accoulltants. Furthermorc
the question of where
to draw the boundaries
of behavioral
accounting has been left unans'wered. There
can be no doubt that this subarea should
inquire into the sociological, psychological
and economic foundations
of accounting,
and into the related bekwioral
traits of
the users of accounting iriformation.<l3 But
less unanimity
exists with regard to the
question
whether
it also should inquire
into the behavior of the, producers of accounting statements
anci! systems or even
into the behavior of accounting
II/corisls .
A further issue of behavioral accounting
arises from its interdisciplinary
character,
and concerns
the problem of reduction:
"The ideal would be to express the foundations of accounting measurement
in terms
of economics and administrative
behavior,
to express the foundations
of the latter in
terms of psychology
and sociology, the
foundations
of these again in terms of
biology, then in terms of chemistry, and
finally in terms of physics."-14
But at present, we are far away from
such an ideal, and there are dangers in
present attempts
to reduce accounting to
morc "eknwntary"
foundations.
As de-,
sirable as this reduction and integration
would he, it cannot be donc unless: the'
pertinent
"laws" of the more basic disciplines are perfectly understood and as long
as the causal connections
bctween
accounting
phenomena
and the "laws" of
these basic disciplincs havc been fully disclosed. As long as this is not the case, accountants
must do what the chemists did
before the periodic table could be explained
in terms of subatomic particles; they must
construct
self-contained
theories on the
basis of what is known to them. Then
slowly, step by step (with the progress of
their own discipline as well as that of the
more basic disciplines in which accounting
is embedded)
they will be able to extend
their theory by reducing it to explanations
in more basic terms. I do not think that
2. C. Argyris, The Impact of Budgets on People (Controllership Foundation,
1952).
2' Andrew C. Stedry, Blld~d COIl/rol and Cost BeITorinr (Prentice-Hall,
Inc., 1960).
We may refer to a comprehensive pertinent bibl
i ography recently arranged by E. H. Caplan, J. C.
llirnberg, T. J. Burns, J. J. Cramer, T. R. Dyckman,
W. N. Gentry and R. J. Swieringa for the "Report of
the Committee
on Behavioral Science Content of the
Accounting Curriculum,"
TUE ACCOUNTINGREvIEWSupplement to Vol. 46,1971, especially 1'1'.260-84. Thus
further detailed citations seem to he superfluous.
:
William J. Bruns and Don. T. DeCoster, cds., Ac
counting and lis Behavioral Implications (~IcGraw-Hill
Co., 1969); John W. Buckley, cd., Contemporary AccOlm/ing
and Its EllvirolllllCltt (Dickenson
Publishing
Co., Inc., 19(9), Section 7, "Accounting and Behavioral
Science," I'p. 399-445.
<Z Don
DeCoster and K. V. Ramanathan,
"The Influence of Indi\'idual
DilTerences, Task Attributes, and
Control System Characteristics
on Goal Setting and
Goal Accomplishment
Behavior,"
Seattle, 1971 (Mimellgraphed),
also raise this kind of criticism in the first
part of their paper.
<J See Michael
SchilT and A. Y. Lewin, "The Impact
of People on Budgets,"
TilE ACCOUNTING REVIEW
(April 1970), Pl'. 259--68.
'
Report of the Committee
on Foundations
of Accounting Measurement"
(1971), p. 48.
.. ,. --=,
;~11.b
!!
;~T;r:
',' ., _ If
~latt~~.:~=
this could he done by accountants conjecturing their own sociological, psychological or economic postubtes on a wholesale basis. The foundations of the more
basic disciplines must be worked out in
earnest search by their own experts. Only
then may accountants borrow them and
try to add their own modest contributions
to these parental disciplines. "Starting
with grandiose synthetic Yie"'s instead of
working in a piecemeal analytical way, is
characteristically nonscicn titie .".15
In concluding this section, I would like
to ~mphasize that the adaptation of scientific methods to accounting, so far, pre--lorninantly sterns from "mathematical
accounting." But "management scientists
and systems analysts during the last dec-"
ade have gained two important insight{:,
(1) that epistemological research is indi~ll
per{sable for probing the fundamentdl
problems of the management
sciencd~
and (2) that model building, especially tl~e
construction of systems, may impart ne~v
vistas to epistemology ... also, accoU11tants must determine which accounting
systems should be accepted for a specific
situation and which are not applicable.
These central questions concerning the
theory and practice of accounting ultima tel)' belong to the science of knowledge."4s Thus, in their fascination with
mathematical techniques, accountants seem
to have neglected important philosophic
.aspects. Yet, there is growing awareness
that this situation has to he remedied, and
recent A.-\:\-research reportsl~ and articles
indicate that accountants are perceiving
the most critical spots within those epistemological issues.4S The remaining part of
this paper shall outline the major problems
to be soh'cd in this area.
f1;)
SPECIFICATION
OF OBJECTIVES
~e
need for different accounting models
could not remain unperceived in tradi-
culty...
to
. ';~';~I~jfP
fC1i!t )....J;ii:
_:Ii
oy clinging to thc:i
purposc accountin
these pessimists"ai
of acadenlic acc6ui
t,o predominantly
\\rho assume a '111
view, bclicvc that
culty of a: problerr
a challenge than
able number of
seem to :be unc{
perhaps not reee
involved.) If op
because account~
stuck in the dilel
tives and detern
for a spe~ific pur
lenge with. mal
systems experts
The most pr<
problem still see
a limited numb"
poses (tax acco
istic accounting
control, long-n
decision-making
rent operations i
from which a
purposes may I
concepts and ~
quircd for diff
purposes respec
previously men
hensive taxono
concepts. Henc
a taxonomy ,vo
to a Izierurclzy 0
The difliculty
variety of concept
aware that throu
ferent method; 01
terpn:tatiolts of t
I
culty to formulate
~o
specific ~eell-defi:llf.1L/2.1J.J:.=.may comc into being. If olle adJ~ to this three differcnt valuation methods, thcn I'.'e attain, preII specific set of
cisely spcaking, as much as !line different interIt)' 20U!f~,L
pretations of income and of capital. But we know
-This
task seems so diiTlcult that many
that thcre exist more than three depreciation and
experts deem it hopeless, and seek refuge
valuation methoJs, and also that, many more
by clinging to the ill-defined uni- or multifactors beyonJ depreciation anu valuation methods atTect thc conccpts of income anu capital.
purpose accounting system of the pasL If
The hYI"'I hest's of rt'alizat iOIl, classification,
these pessimists arc right, then the future
data-input, duratiou and relevance arc just as
of academic accounting would l,e restricted
indi~l",nsahle for a precise interpretation of thcse
to predominantly
legalistic is,;ues. Thost:
two cuncepts as are ueprcciatioll (i.c., allocation)
who assume a more optimistic
point of
anu valuation_ From all this might result a huge
maze of subconcepts or interpretations, the use
view, believe that the high degree of rliftloi
\,'hidl Ill;ty lIot illlllll"liiatelyI'e obviuus.
culty of a problem shoulJ rather constitult:
But it has to bc pointcd out that these concepts
a challenge than a deterren t. (.-\ considerdo not come into being throu;;h the suggcstion to
able number
of accountants.
however,
],uild a hil'rarchy of concepts_ These concepts
seem to be uncommitted
in this regard,
ha ve beclI exislill,~fur consiuerahle time in the ac
counting literature, sincc one actually operatcs
perhaps not recognizing the crucial issue
with many of those cumbinatiuns. Thus ou, suginvolved.) If optimism
is justified,
it is
gestion docs not so milch aim toward the creation
because accountants
;lre not the only om's
llr in\Tn t i, In of these cltlll'Olll-q>lshu t towanl
stuck in the dilemma of idl'ntifying ohjt;,-making them aware and sy,;tematizing thcm.'o
tives and determining
the optimal model
for a specilic purpose; they share this chalHut the problem of specifying objectives
lenge \vith management
scientists
and
is not only tied to that of a conceptual
systems experts in general.
hierarchy, it is no less closely related to the
The most promising approach
to this
ability of testing whether a purpose has
problem still seems to be the acceptance
of
been fulJilled by a specilic (information)
a limited number of typical standard pursystem.]
n this an:a accountants
have
poses (tax accounting,
commercial-legalgrea~ly benefited
fro~ inform~t.ion
eco(I
nOllllCS and mad\.: llll:lr own onglllal conI'stl'C accountilllTb' short run l)l'lnllill
'b
,111
I 'I
.
.'
.
control,
long-run
planning,
inyeslment
n )UllOn-a
further reason for optimIsm.
T'
\f1-
Jut
"C
cch
, III
_,ull
~Ir-
'-of
.he
decision-making,
decision making in current operations including personnel policy)
from which a larger number
of sul>.
,.,
.-purposes may I)e derIvnl.
:-'Int"e
dllkrent
concepts alld subconcepts
would be required for different
purposes
and subpurposes respectively, we come back to the
previously mentioned need for a comprehensive taxonomic
syslt:m of accounting
concepts. 1knce Ihe construction
Df such
a taxonomy w0111d ha \'e t D Iw do~-wlv Iit,d
to a hierarchy of objccli,'cs.
The difliculty of such \lndertakin~ lies in the
variety of concepts and siluali'llls. \\""l>llght tll he
aware that through the al'plicllion of llIree dif.
ferent methods of depreciation three dilTerent interpretations of thc incomc and capibl cllncepls
(Lj)TESTI~G J\rANAGE:\IE~T
P
[C'
11 ,)(,<IT(
hFOR~IATION
SVSTE;\IS
['"
of
Tlllnj'!n
'j
Of
'j,~
..,
I csll/If'
Systematic
testing
procedures
arc
crucial clement in any scientificapproach.ol
\crilic.atioll
ill :\c("()lIntitl~,"
p. 1-13,;ts~("rt that l' ... only
Inil1illlal
alh:nliol1 lIa~ becOl1 ~ivcn to fpH::-;tioll~ of t'r,ifi~
(:rltiOll.
or fluor'! 'i.'ll/idalio1t ....
But no scriou$ atH
till'
pertinent
CtJIlc1u5ilJu:
The cogmtlve sciences must test hypotheses and theories bv means of verification
and refutation; whereas the applied sciences ought to test the efticiency, relevance, reliability or other properties of a
normative theory, or a system, or a machine by a variety of means. }'Jechanical
devices, like motor cars, are tested in many
,'/aysand with respect of many properties.
Some or all of these properties (price, relative gasoline consumption and other econpmic aspects, motor strength, acceleration speed, sturdiness and further safHv
features), or their combinations, are tlle~
compared from model to model, and co'mPilred with an "ideal pattern" determined
by the intended usage. Only then a correct
c~oic,e for the appropriate purpose cani be
nlade. Most readers are quite familiar ,,;ith
this kind of "testing" from their experience:
in buying various gadgets. Although hccounting models or information systdms
ate more than mechanical devices, th'ere
elm be little doubt that they too belong to
the realm of applied science, and thus are
subject to similar principles of testing.
Obviously, this testing can span a wide
spectrum of rigor, from the most informal
estimation of certain properties to highly
sophisticated measures; hut the marc complex an information system is, the less
satisfactory "'ill an informal testing procedure be. Thus, under consideration of expensive computerized
information svstems, considerable thought will have to' be
given to the procedures of testing and,
above all, to the principles underlying
them. In the pure or cognitive sciences
these "principles" are thoroughly examined in epistemology (the science of knowledge) . We too are concerned with a kind of
knowing, namely with the question "IIow
do we know when a system is satisfactory
or optimal?" Therefore, there is no reason
why this branch of philosophy cannot aid
us in our undertaking. It is true that so far
no epistemology of the applied sciences
pp.31-36.
au
fOnn:i~'
m"
tern.1
the~l!
tion~'
wheth&t"""
...,.,.~
~or wheth;
~e
'.
sam~'inf:
'''nlll~. H'1i
1nmany:
;t'termin!
he co~t f"'"
'.W
'il
:flusiv~:~c.i~.
.'
":lr ..:.~.fi.'.t~.
tion. Recent "st,l'.
nomics h~ve~~
formulation of ie~
lern, tO~l~hin~i'~
and . mana eDi,a,
.'
;:, .. g ~
analys~~.i'fhu~ac
to be aware ohi
:.'" kind odesearch'
tion to put its
text. Thhm~
one sidc,'to relab
more traditional
and on 'tile other
sophie roots of
Information
tion as a resour
and related fea
natural exteasic
theory which, an
to improve prior
additional info
former into post
ian approach).
much is this
worth?" alread)
theoretical issu
, elaboration. Fel
an exciting con
operational info
accounting situ[
, specific model s'
plifying assuror
signed for imme
practice. N evert
the best exampl
l~
r;
.1
I
r
i
,I
i
1
crucial is an awareness of the value of information procured by the pertinent system. Without some notion of the hCI1l't":t,
the cost and the net value of the infUl:mation created, it is,neither possible to test
whether this information is worth creating,
nor whether another system could create
the same'information more efTlciently. As'
in many other cases of systems'; operation, ,
the cost of doing !iO is relatively 'easy to de-,
termine-at
least compared to the often'
elusive benefit of gross value of information. Recent studi~s in information economics have contributed toward a rigorolls
formulation of several aspects of this problem, touching the very core of iccountillg
and management
information systems
analysis. Thus accountants not only have
to be aware of the present stages of this
kind of research, but should be in a position to put its results into a broader context. That means they should be able, 011
one side, to relate these new insights to the
more traditional aspects of their discipline,
and on the other, to understand,the philosophic roots of these insights.
Information economics regards information as a resource having a value, a cost
and related features.S3 This branch is a
natural extension of statistical decision
theory which, among other things, attempts
to improve prior probabilities by means of
additional information,
converting the
former into posterior probabilities (Bayesian approach). Thus the question "lIow
much is this (additional)
information
worth?" already looms in m:my decision
theoretical issues, even without further
elaboration. Feltham and ])emski;'" made
an exciting contribution by constructing
operational information models adapted to
accounting situations. Even the applied or
specific model still has to make many simplifying assumptions and is harcily dcsigned for immediate application in actual
practice. Nevertheless it constitutes one of
the best examples of serious accounting re-
Observe that sensitivity analysis is asking cssentially the same type of questions about information that were considcred informatiun economics.
However, sensitivity analysis is a more ad hoc
way of asking these questions. The basic rcason
for the more ad hoc approach is that mathematical models usually assume that the parameter
predictions are deterministic whell, in fact, they
are uncertain. Recognition of this uncertainty incrcases the complexity of the models and the
resultinR increase in the cost of solution may not
bew~ted.GI
~
theory approach to the 'luantifii$ ha~cd upon the prcnli:;l': that, for
:tlly
plohkul. there arc :t cerlain IHuuber of possil,le
;tn,;wers to which plohabitilics may be allachcd. When
inforlll:ltion ahoutthe problem is receiv<;d, the original
probabilities
un<!erl;o transformation,"
Baruch Lev,
.recoll"till!: alld hzformation
Theory (AAA: Studies in
'\ccounlin::; Research, 1969), p. 1.
.1 The solution proposed bv Theil as well as Lev, to
introduce "artificially" probabilities by assi~ninp; them
to individual asscl items on the arbitrary basis of the
\"alu<;ralio of lhe pertinent assel which it has in proportiou to lhc balance shecltot:tl, is the attelllpt o[ a compromise .
Emery, pp. 98-107.
.0 By up dating or procuring information quickly the
value of this information can be greatly enhanced in
somc but not in all cases. See "Advances in Fast Response Systems," [<;f>P-AlIalyzer (Fehruary 1'>67).
Gerald A. Fcltham, A Theorclieal
Fratn~J.'OTk for
Evalllali"g CI"!IIges ill A ee01t1lli"R I llformatioll for J[ anagcrial Decisions. Mimeographed Dissertation (lJerkeley 1967), especially Chpts. V-VIII.
.1 TIlE ACCOUNTING REVIEW-Supplement
to Vol.
46 (1971), p. 307.
Cltttlll
or infotlnalinn
rcsc;lrch.
but abll
put great
cmph:tsi::;;
no the
31.
" R. }'httessich,
"Towards a General and Axiomatic
Foundation of Accountancy,"
..1ccollllting Reserclt (October IOS,), pp. 328-55; idem., .lcrotin/illl; t1Jld Alltllytical
JJ d/wds (I~ichard D. Irwin, Inc., 1%1); idem., f)i~ wissOlsclwftliclim
(;It"IIIl<l~m des /{cclinIlJlgso,esClls
(Berte!SInann liIli\Trsital"tsverl;l1.~,
1<)70).
'" John E. BttUerworth and Berndt A. Sigloch, "A
Generalized
}'Iulli-Stagc
Input-Output
"'lode! and
Some Dcrived Equivalent Syslcms," TilE ACCOUl\TI:-;"G
],EVIE\V (October ['Ji!),
PI'. 700--16.
" See John E. Butterworth,
"Thc ,\ccounting System
as an Information
Function," Working Papcr Ko. 90,
Faculty of Commcrcc and Busincss Administration,
(Univ. of British Columbia, 1(71), to be published in
lOllT/wl of Acrowrti>:g Rescarch (1972).
.t
at
-r ~
1\1 t tcssich:1\1
than
prob:lriety
,I two
,', ns
\ltions
. The
"lll.'fal
,;,ems
'ecifjc
f\'dion
r;mgh
atives
'It1rtly
lion).
, most
,iated
~e
\lleir
it' as" :IIlJ
,:; for
.:nt
l'll
ts at
~ of a
!
radi-
if)
so.
:rulld-
:ption
'g 111ld
.; the
;;\tion
I:.:ciJic
many
c;ht to
'lIlting
dis:~~s
con:""ding
!!2--I03.
;lion of
"O(
'
I
clhodologiCal
Precondi
lions
~--1t
i.
calculi74 of accounting, but they are meaningless unless at least provisions for possible interpretations are made (as pointed
out such provisions were mad~ in Accounting and Analytical M etlzods ani:! more elaboratelyin
Die wissenscJzaftli~lten Grulldlagen desReclwungs7.!.'esens).
I'i :
.:_~,~,,,,,,,-.~--~~
"Without interpretative
rulcs, a theory would reduce to an uninterpretcd
calculus which points to
nothin~ heyond itscif. It would hc as cmpirically irreievant as the gallle of chess!' C. J" \fasscy, "Professor
Samuelson on Theory and Rcalism: COlllment:' JlmcriC,II< Icconomic
Raiic:v (Dccember 1'1(5), p. t 159.
Circularity for examplc would hc involved in thc
following situation: (I) The gcneral theory and analytical defmition stipulate the basic assumptions (conditions), (2) the basic assumptions detemline the specific
system, and (3) the gcneral thcory is vcrified hy testing
whcllH'r Ihc specific syslcms fulfill the condilions stipu
lated in the analytical defmition. The al.l.cnlivc read
will have noticed that my s\l~geslion for verification
f
the general theory is radically different from this ci uhr one, uccause the formcr depends vn the fulfillm
lof
u-ell-defined factllal purposes by lite interpreted sy ems,
whereas the latter merely hillges 011 the ouserv' ee of
JclinitiOllal condition;.