Positive Accounting Theory: A Critique

Suyash Kamal Sinha*

The primary objective of Positive Accounting Theory (PAT) is to explain as well as predict
accounting practices in contrast to the Normative Accounting Theories, which are
prescriptive in nature and which were a dominant part of accounting research till the two
controversial articles were published by Watts and Zimmerman in 1978. It was a
revolutionary idea, which raised a number of issues prompting researchers to debate the
technical issues concerning research methods, issues related to philosophy of science and
issues concerning economics-based research in accounting. This paper attempts to review
these issues and the validity of the questions raised from such issues involved. As pointed
out by various authors, there is a need to integrate the two approaches of the discipline
to evolve its full potential. The best theory or the approach emerges not in isolation, but
as a result of intense arguments, giving due weight to the others’ view point.

Introduction
Positive Accounting Research (PAR) refers to a particular mode of empirical research designed
to explain accounting practices of companies. The primary objective of PAR is the development
of a Positive Accounting Theory (PAT), which can explain as well as predict accounting practices
in contrast to the Normative Accounting Theories, which are prescriptive in nature and which
were a dominant part of accounting research till the two controversial articles —“Towards a
Positive Theory of the Determination of Accounting Standards” and “The Demand for and
Supply of Accounting Theories: The Market for Excuses” by Watts and Zimmerman in 1978
were published in the Accounting Review.
The three basic hypotheses as outlined by Watts and Zimmerman (1978) underlying PAT
are: the bonus plan hypothesis, the debt/equity hypothesis and the political cost hypothesis.
The bonus plan hypothesis is that managers of firms with bonus plans are more likely to use
accounting methods that increase current period reported income. Such selection presumably
increase the present value of bonuses if the compensation committee of the board of directors
does not adjust to the method chosen. The debt/equity hypothesis predicts that the higher the
firm’s debt/equity ratio, the more likely that the managers use accounting methods that increase
income. The political cost hypothesis predicts that large firms rather than small firms are more
likely to use accounting choices that reduce reported profits. Size is a proxy variable for political
attention. Underlying this hypothesis is the assumption that it costs individuals to become
informed about whether accounting profits really represent monopoly profits and to contract
with others in the political process to enact laws and regulations that enhance their welfare.

* Ph. D. Scholar, Management Development Institute, Gurgaon 122001, India. E-mail: sinha.suyash@gmail.com

© 2008Accounting
Positive The Icfai University
Theory: APress. All Rights Reserved.
Critique 7
 Since the publication of their papers, Watts and Zimmerman (hereafter W and Z) have
been confronted with numerous critiques and assessments. In this paper, the author examines
the critiques of PAT from various major perspectives during the last two decades. PAT is a
revolutionary idea which has raised a number of issues prompting researchers to debate the
technical issues concerning research methods, issues related to philosophy of science and
issues concerning economics-based research in accounting. The author attempts to review
briefly these issues and the validity of the questions raised from such issues involved.

Is PAT Scientific?
W and Z (1986) claim that studying accounting practices is scientific, whereas the traditional
accounting research is normative and hence non-scientific. The essence of the positive
accounting methodology seems to be that its objective is to explain and predict accounting
practices. This is distinguished from normative (i.e., prescriptive) positions, which prescribes
the contents of accounting reports. The distinction depends upon the view that prescription
requires the specification of an objective and an objective function. This leads to the claim
that positive theory is the economics-based accounting theory that evolved from the use of the
scientific concept of theory (Whittington, 1987). There are two issues involved in this assertion.
First of all, as pointed out by Chambers (1993), nature of scientific knowledge is simultaneously
positive and normative, or descriptive and prescriptive. If it is true that gases and liquids
expand on the application of heat or the reduction of pressure, it is true that one, anyone and
everyone must apply heat or reduce pressure to bring about an expansion of gases and liquids.
The former proposition in positive form and the latter in prescriptive form are logically and
practically equivalent (1993). In this sense, any classification of research into scientific or
unscientific on the basis of whether they are positive or normative is inherently erroneous.
The second issue, which is related to the first one is about the positive theorists’ belief that
science is value-free or positive and non-science is value-laden or normative (Sterling, 1990).
Sterling further points out that most scientific practices or studies are normative in the sense
that they attempt to find out whether the practices meet standards, which are almost invariably
theory dependent. Scientific theories explain and predict the natural phenomena, but one of
the function of a theory of a discipline is to provide guidelines to the practitioners of that
discipline and practitioners are sometimes studied to see if they are properly following the
dictates of the appropriate theory. Far from such studies being positive, those who are found to
violate the dictates of the theory may be subject to sanctions. Others who are found to be
ignorant of the appropriate theory may be required to remedy their deficiency by further or
‘continuing’ education. Thus, the claim that a theory should be a positive reflection of practice
instead of a normative guide for practice show a profound misunderstanding of the functioning
of the scientific enterprise and the use of its theories (1990).
In their pursuit to propagate their philosophy, W and Z have relied on a 17th century
methodological doctrine of inductivism, according to which a theory is defined as “sets of
hypotheses which have been confirmed”. According to the inductivist’s textbook tradition, a
true scientist begins with data, forms a ‘hypothesis’, tests the hypothesis and if it is confirmed,
it is elevated to the status of a ‘theory’ (Boland and Gordon, 1992). It is important to note that
the empirical studies alone providing independent and scattered results that do not fit into a

8 The Icfai University Journal of Accounting Research, Vol. VII, No. 4, 2008
framework cannot be the subject matter of a research domain of an entire discipline.
Passmore (1953) who has been cited by W & Z has made an apt remark that the ‘actual effect
of positivism in the social sciences is to lead to the production of a vast quantity of work that
boasts of being scientific but is empty and commonplace’. As pointed out by Sterling, the
accomplishments of PAT are non-existent. Instead of bringing forth interesting or unexpected
or edifying results, PAT has presented us with findings that are empty and commonplace
(1990).
The claim of PAT being scientific has been critically examined by Christenson (1983) who
argues that positive accounting theories violate Popper’s most fundamental methodological
rule: Contrary to the empirical method of subjecting theories to severe attempts to falsify
them, the Rochester School introduces ad hoc arguments to excuse the failures of their theories.
This tactic is a violation of the norms, which according to Popper (1968) must be followed if
a system of propositions is to be considered ‘scientific’. He argues that since PAT is concerned
with describing, predicting and explaining the behaviors of accountants and managers, not
that of accounting entities, the discipline should be called ‘sociology of accounting’. It is
indeed surprising that positive theories fail the test of being scientific from Popper’s
methodology, because this is what they rest upon to support their claim of scientific status
(Mouck, 1990). According to Karl Popper (1968), an inductive inference can never be complete
in and of itself because it has to be based on limited experience and the future experience may
contradict it. It is thus impossible to prove conclusively the truth of any theory. The most that
can be hoped for is to prove the falsity of theories. As pointed out by Mouck, in Popper’s
falsification philosophy of science, a theory is considered to be ‘falsified’ when a contradictory
observation statement is accepted. Popper says (1968) ‘it is always possible to find some way
of evading falsification, for example by introducing ad hoc auxiliary hypotheses, or by changing
ad hoc definition’. Mouck (1990) has pointed out that these and other ‘conventionalist
stratagems’ can always be used to try to improve the fit between one’s theory and the empirical
data. It is therefore, crucial for Popper’s falsification criteria for science that a methodological
decision forbids any attempt to protect theories from falsificationism.
Mouck (1990) has argued that appraisal on Lakatosian terms, which is considered to be a
much more realistic basis for appraisal of scientific enquiry would not deny ‘scientific’ status
to the PAT program. According to Lakatos’ methodology of scientific research program, which
is critical of Poppers’ falsification philosophy, a program would be judged as ‘degenerative’ or
‘pseudoscientific’ only if it is ‘characterized by problemshifts that are not at least theoretically
progressive…’ (Lakatos, 1970). Arguing that the three hypotheses given by positive theorists do
represent a progressive problem shift, Mouck (1990) asserts that to the extent that this represents
a ‘novel fact’ it represents ‘theoretical progress’ in Lakatosian terms. However, the conclusion
that PAT is a ‘progressive’ research program does not entail a conclusion that PAT is the only
legitimate accounting research program. Nor does it entail a conclusion that PAT is superior to
(or worse than) any research program. A research program that is currently judged to be progressive
may ultimately prove to be degenerative. Lakatos makes it clear that a methodological dogmatism
that restricts competition among rival research programs is counterproductive to the growth of
scientific knowledge. And this is where the dogmatic tendencies of the Rochester School go

Positive Accounting Theory: A Critique 9

against the Lakatosian grain. This school also exhibits a tendency towards academic imperialism,
which is clearly contradictory to Lakatos’ call for methodological tolerance (Mouck, 1990).
The contradictions inherent in the claim of positive researchers’ philosophy are apparent.
As pointed out by Whittington (1987), positive theory is not free from value judgments or
prescriptive implications. At the most basic level, the question asked (or hypothesis tested)
implies a prior view of “what is an interesting question?” and at the level of empirical testing,
value judgments can influence the choice of maintained hypothesis even if they do not explicitly
introduce an objective function, their work is heavily constrained by prior beliefs, which
determine their assumptions and the hypotheses, which they test. Chambers (1993) also points
out to this inconsistency in the theory. “The cult professes to be averse to prescription; but it
endorses, implicitly and explicitly, traditional cost-based accounting, the doctrines which are
full of unsupportable prescriptions. It lays the ground in the contracting-monitoring hypothesis
for an up-to-date and intelligible accounting, but supports conventional accounting which has
neither of those characteristics”.

Is PAT Economics-Based?
W & Z define PAT as an economics-based accounting theory. They assert that ‘the preceding
view of theory, explicitly or implicitly, underlies most empirical studies in economics’ and
also that ‘the development of a positive accounting theory places accounting in the mainstream
of economics and finance research’. The two salient features of economics-based explanations
are: (1) methodological individualism and (2) the neoclassical maximization hypothesis. ...
(While) methodological individualism is the commitment to explain every social phenomena
as being a consequence of individual decision making…. the neoclassical maximization
hypothesis goes beyond this to claim that every individual who makes such decisions, are
subjected to given constraints, exclusively to maximize his or her personal utility (or indirectly
maximizes his or her wealth to be able to maximize future utility) (Boland and Gordon,
1992). The primary question that emerges is – is utility maximization a valid explanation?
If all the human actions can be explained in terms of principle of utility maximization then
it is no explanation. There is no financial transaction, human action or interaction that does
not result in utility maximization for the concerned individuals. As pointed out by Sterling,
irrespective of whether a firm uses lIFO or FIFO, the explanation would be the same, namely,
lIFO (or FIFO), maximizes the utility of the practitioner who made the selection. The basis for
research would also be the same. It would guide the positive researcher to look for ways in
which lIFO (or FIFO) maximizes the practitioner’s utility, for example, see if lIFO (or FIFO)
maximizes reported earnings and if the manager’s earnings are tied to reported earnings thereby
maximizing the manager’s utility. … It cannot be used as an explanation because it explains
too much. Since all behavior is explained by utility maximization—the fireman will be said to
have maximized his utility by his heroic charge into the inferno to save the child and by his
cowardly refusal to enter the inferno—it in fact explains no behavior. In that respect, it is
similar to explanations that invoke fate, destiny, God’s will and the like (Sterling, 1990).
The logic seems to run like this – whatever has to happen, will happen. Any control is redundant.
Government is redundant. Let’s go back to the jungle rules, or rather beginning of civilization,
as even in jungle, there are some rules. And let’s try to explain things that are happening

10 The Icfai University Journal of Accounting Research, Vol. VII, No. 4, 2008
because of the reason that they are bound to happen. Destiny is supreme. Human action is
meaningless.
A non-nullifiable presumption or hypothesis to a research program is dogmatic. It is also
subjective as every manager has a different utility function and utility function parameters.
Moreover, an important question is how we account for the fact that all are not capable of
executing a transaction that maximizes their utility function all the time, e.g., bad purchases
that we ourselves regret later on. Is the managers’ incompetence or ignorance also be a factor
in the model? Thus, as noted by Sterling, the criticism is not that PAT is sociology rather than
accounting, the criticism is that PAT is neither sociology nor accounting. Instead it is a search
for evidence to confirm the non-nullifiable assumption that people maximize their utility
when selecting accounting practices. Worse, it tries to demolish studies of other phenomena,
thus depriving us of the knowledge of those phenomena, on the basis of the grotesquely
misguided view that science restricts knowledge instead of expanding it
(Sterling, 1990).
It is also surprising as to how W & Z have ignored the fact that their views reflect only the
Chicago School of Economics and not economics in general. As pointed out by Sterling (1990),
“W & Z identify so closely with the Chicago School that they are not aware that it is not the
mainstream of economics that a majority of economists hold opposing views. Incidentally,
PAT may not be the mainstream Chicago School economics because the divergence of views
between Friedman and Stigler has created two branches of that school and positive theory is
compatible with only one of those branches”.
The assumption of Efficient Market Hypothesis (EMH) is fundamental to the PAT.
The inspiration for their adherence to EMH and repugnance of prescription has clearly been
drawn from the Chicago School of Economics. While referring to a possibility that investors
are irrational, W & Z point out: “That interpretation is inconsistent with the EMH and indeed
economics itself because economics assumes rationality” (1986). As pointed out by Whittington
(1987), they ignore the considerable body of evidence that the EMH may not hold.…. they
repeatedly suggest that the EMH implies that the stock market can identify ‘efficient’ firms
rather than merely anticipating future market gains efficiently. They extrapolate the rather
limited aspects of the EMH, which have been tested to an assumption that the information
market is in a state of competitive equilibrium in all respects (1987). Moreover, as pointed out
by Whittington the issue of why many contracts voluntarily adopt Generally Accepted Accounting
Principles (GAAP) is worthy of further exploration. This suggests that some form of widely
agreed standard accounting information is considered cost-effective, relative to ‘bespoke’
information unique to each contract and each firm. This could be due to preparation cost but
might well also be due to information processing cost of the user (1987). Positive theorists
offer no explanation as to why accounting standards, which restrict accounting choice to just
one, reduce the firm value in a world of efficient market (Whittington, 1987). The inconsistency,
as pointed out by Chambers (1993) is that the EMH and the Capital Asset Pricing Model
(CAPM) are highly abstract constructs, devised for the abstract discussion of markets as wholes,
not for the explanation or analysis of the actions of individual investors in a less than abstract
world. Referring to why, for the valuation of inventories, some firms apply the lower cost and
market rule to items, some to inventory classes and some to aggregate inventories, why some

Positive Accounting Theory: A Critique 11

use LIFO cost and some use FIFO cost, and why some use unmodified cost, replacement cost,
net realizable value and so on. Chambers points out that some may claim that LIFO as
‘income-reducing’ is a good thing. That may be a good excuse, but it is no explanation for
LIFO is ‘income-increasing’ when prices are falling. There must be a whole battery of such
rationalizations to justify all the valuation rules mentioned. But a series of rationalizations
relating severally to specific segments of a population is not a theory (Chambers, 1993).

Does PAT have a Rhetorical Element?

Mouck (1992) has termed the positive accounting theorists to be “actually in the business of
disseminating a particular political ideology—the Chicago-style ideology of laissez-faire and
deregulation. The success of the PAT theory is not attributable to superior ideas or theories,
but it was due to the fact that it was read by an audience attuned to the rhetoric of science and
to the Reagan-era rhetoric of deregulation”. The edifice that W & Z have created as a foundation
of the theory “generates the impression that without regulation: auditors are efficient in detecting
and disclosing breaches of contract; the market for managers function efficiently in establishing
managerial compensation; managers make decisions that are efficient in maximizing firm
value; and securities markets are efficient in allocating capital among competing firms.
The obvious question then is how regulation got started. The answer, according to the PAT
story, can be found by examining the behavior of politicians. … Like all the other actors in this
story, politicians are looking out for themselves. They want to be re-elected and their chances
for re-election are improved by promoting a reputation for solving public problems and crises,
and by the granting of favors. … accordingly that regulation is a bad thing and the free market
provides the best solution for the supply of accounting information” (Mouck, 1992). As pointed
out by Whittington (1987) “the empirical evidence is for the most part, weak and inconclusive”.
What then is the credibility of the PAT philosophy? Mouck (1992) finds that the credibility
has not been achieved on the basis of demonstrated predictive capability or explanatory power.
He ascribes the rhetoric element of the philosophy to account for this credibility.
Milton Friedman won the Nobel Prize in Economics in 1976; in the same year Jensen
announced the emergence of the Rochester School of Accounting, using rhetoric s that mirrored
Friedman’s political concerns about governmental interference in the economy (Mouck, 1992).
The Republicans victory in 1980 Presidential elections also paved the way for the Reagan
Administration to carry out possibly the most far-reaching program of deregulation in the US
history. The empirical results are weak as admitted by W & Z themselves—“While bonus, debt
and political process variables tend to be statistically significant (p values smaller than 0.10),
in many studies the explanatory power (R2) of the models is low … the evidence is consistent
with the political cost hypothesis..., the result only appears to hold the largest firms... and is
driven by the oil and gas industry...” (W & Z, 1990). The PAT philosophy was successful
largely due to the fact that Friedman and Reagan provided the most congenial climate imaginable
for a theory, which advocated the total deregulation of corporate accountability, a climate in
which the PAT story could be highly successful in spite of the fact that it failed to live up to its
own methodological standards (Mouck, 1992). Mouck also notes that “to the extent that the
PAT story was successful, it was due to the fact that it was read by an audience attuned to the

12 The Icfai University Journal of Accounting Research, Vol. VII, No. 4, 2008
rhetoric of science, on the one hand and to the Reagan era rhetoric of deregulation, on the
other hand, thus allowing the lack of scientific substance to be overlooked amidst the rhetoric
of revolt against government regulation of corporate accountability”.

Element of Controversy
The positive accounting theorists have tried to radically alter the fundamental question of
accounting from ‘What ought accounting practices be?’ to ‘What are accounting practices?’
(Sterling, 1990). Sterling cautions that radically altering the fundamental question of a discipline
is a matter of utmost importance to that discipline and therefore, proposals for such alterations
require indepth consideration prior to their adoption. In that respect, the views of PAT ought
to be appreciated and intensely debated. It is true that as pointed out by Whittington, novel
approaches require time to develop and will initially have the natural defects of the prototype;
this is readily conceded and the early stages of development and improvement are described
frankly and clearly. However, there is an additional ingredient in the controversy surrounding
Watts and Zimmerman’s work. This is the single’ minded way in which they present their own
view of the subject, dismissing the priori theories of the 1960s as ‘excuses’ (1987).
Watts and Zimmerman, however, have attempted to use the authority of ‘scientific’ methodology
to legitimize their own approach to inquire and to discredit those who follow a different
approach (Mouck, 1992).
The best theory or the approach emerges not in isolation, but as a result of intense arguments,
giving due weight to the others’ view point. However, W & Z have confined the discussion on
issues that may have far-reaching implications for the discipline of accounting to their side of
the demarcation line. When challenged , the methodological issues by Christenson, Whittington,
etc., instead of responding to challenge thrown on them, they merely say that debating
methodology is a no win situation because each side argues from a different paradigm with
different rules and no common ground (W & Z, 1990).
It seems they have applied the EMH to the domain of accounting research too, as they
claim that “the methodology criticisms have failed the market test because they have had little
influence on accounting research. Researchers have not changed their approach. … (and) the
best theory is determined in a competition to meet the demand from students and practitioners
for theories that explain and predict accounting choice. It is unlikely an accounting or a social
science theory with perfect predictions will ever exist. Researchers are influenced by their
values. But, to the extent those researchers are competing to meet students and practitioners’
demand for theories, they have incentives to reduce that influence”.
As pointed out by positive theorists, accounting has been activity carried out by people and
one cannot generate a theory that predicts and explains accounting phenomena by ignoring the
incentives of the individuals who account (W & Z, 1990). True, but at the same time, there
should be virtually no restriction on research question for the plain reason that we cannot
know the benefits of knowledge until we obtain the knowledge and we cannot obtain the
knowledge until we have done the research (Sterling, 1990). As noted by Chambers (1993),

Positive Accounting Theory: A Critique 13

“W & Z affirmed that their concept of accounting theory is broader and has a different focus
from that given in financial accounting texts. But broad does not mean narrower. It is to be
expected, therefore that the scope of positive accounting theory would embrace the substance,
if not the particulars,of other expositions. In fact it does not.” Sterling (1990) also points out
that they have presented us with a well-known problem and prohibited us from solving it by
requiring that we be positive that we stop after providing descriptions of such events.

Need for Integration

The divide between the two divergent views in accounting research has been so intense and
deep that by the beginning of the 21st century, a certain disillusion about modern accounting
research can be found among accountants worldwide. The scenario has been worsened due to
the fact that neither of these extreme camps is interested in reconciliation.
However, even where a rapprochement is not possible, history sooner or later finds a synthesis
(Mattessich, 2002). Mattessich further notes that “each of the various parties have, despite
(or because) of their ‘scientific’ or ‘anti-scientific’ commitment, a political slant. While the
accounting empiricists in general lean to the right (some of them stronger than others),
the disciples of Critical Interpretive View (CIV) cover the entire spectrum on the left (from
moderate to radical). Apart from such political aspects, one may say that in one camp ‘reason’
dominates morality (e.g., by tending toward short-term profit maximization), while in the
other camp morality and a bent for the incongruous seem to dominate the reason.
Might it not be better to find a solution where reason begets morality and morality embraces
reason?” It is in this context that he suggests the adoption of a conditional-normative approach,
which is already quite prominent in economics as well as operations research.
The basic idea underlying this approach is that it states neither how people behave nor how
they should behave in an absolute sense, but how they should behave if they wish to achieve
certain ends (Mattessich, 2002). As pointed out by Mattessich, the conditional-normative
approach “can be used in a fairly neutral way. The goal is the creation of a series of accounting
models, each specifying hypotheses either tailor-made or customized (like the shirts in a
department store), offering a number of choices that depend on the client’s particular need.
This is not unlike a series of mutual funds (each with a different beta) that serve a variety of
investors with different risk preferences. Note that the requirement for open disclosure of the
‘betas’ in mutual funds and other investment opportunities is an excellent illustration of the
conditional-normative approach in finance. Such an approach can claim a considerable degree
of objectivity, partly because it openly discloses the value judgments behind each model and
partly because of the possibility of testing the underlying means-end relationship by trial and
error or, hopefully in the future, by more rigorous tools”. He further notes that in order to
conform to this approach, academics should broaden their view and realize that accounting is
an applied discipline that can be neither pressed into the Procrustean bed of a positive theory
nor treated as though it were a cultural or literary criticism, but has to be based on rational and
scientific thinking.

14 The Icfai University Journal of Accounting Research, Vol. VII, No. 4, 2008
Conclusion
W & Z have pointed towards the future research direction for PAT researchers. They note that
“most accounting choice studies attempt to explain the choice of a single accounting methods
(e.g., the choice of depreciation) instead of the choice of combinations of accounting methods.
Focusing on a single accounting method reduces the power of the tests since managers are
concerned with how the combination of methods affects earnings instead of the effect on just
one particular accounting method” (Watts and Zimmerman, 1990). They emphasize the need
for improving the linkage between the theory and empirical tests. They further note that developing
and testing alternative hypotheses for the existing empirical regularities will also enhance the
linkage between the theory and the tests.
It is also important to realize “that all theory which is not positive, in the sense of leading
to empirically testable propositions, is normative in the sense of leading to prescription
mathematics. For example, is not usually thought of as being prescriptive, despite the fact that
its essential method is deduction from assumption. Statistical techniques founded on probability
theory, which itself is a body of theory (is) based on deduction rather than empirical testing.
There seems to be no obvious reason why accounting theory should not contain a body of
knowledge based on deduction from axioms” (Whittington, 1987).
Mangos and Lewis (1995) emphasize that “adopting a socio-economic paradigm to analyze
managers’ selection of accounting practices can provide a richer, more inclusive explanation
of factors influencing information supplied to the capital markets. The identification of such
an explanation would aid managers in understanding their response to socio-economic matters
and its relationship with the value of the firm”. He argues that “social variables have an
impact on managers’ behavior and choice of accounting policy is a social act. …(and) corporate
social responsiveness as demonstrated within the content of corporate annual reports is both a
visible and measurable social influence. He further notes that “there is a likely association
between corporate social responsiveness and the accounting policy choice behavior of managers.
Such a development would assist in the breakdown of the separation of the social and economic
spheres and lead to a preliminary socio-economic paradigm”.
As noted by Christenson (1983), a useful first step would be for them to stick with one set
of phenomena until they have understood it well and satisfactorily explained it, rather than
leaping to a different phenomenal domain in each new article. Citing Newton as an instance,
he further notes that Newton himself set an appropriate example, refraining from publishing
his lunar theory for nearly 20 years while he attempted to resolve discrepancies between its
predictions and observational data. However, as noted by Whittington (1987), both the camps
need to realize that all approaches to accounting theory are, at the present time, in a fairly
rudimentary stage of evolution and desperately need further constructive development. I

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16 The Icfai University Journal of Accounting Research, Vol. VII, No. 4, 2008