Introduction
This generation is living in the information age. The process of generating and disseminating knowledge is central to the proper functioning of society today (Guttal 2007). All professions and academic disciplines are under constant pressure to generate and disseminate information. In this regard, it is very important to have a philosophical basis for the development of knowledge. This paper presents an inquiry into the philosophical approaches suitable for research in Accounting and Financial Management. The motivation for the work arose from the desire to uncover the suitable philosophical approaches available to researchers in Accounting and Financial Management. This project seeks to prove that Accounting and Financial Management are wide fields. Therefore, the research philosophy chosen by researchers should conform to the specific situation and objectives of the research project. Researchers in Accounting and Financial Management should have a flexible approach to research. For the purposes of this paper, Accounting refers to all efforts geared towards the development of financial reports (Dodge 1997). Financial Management in this work is the administration of financial resources (Dodge 1997). It is important to establish working definitions for these terms to facilitate the credible handling of the research question.
Scope of Accounting and Financial Management
Accounting as a profession has a very long history dating back to the early civilizations of humankind. As soon as wealth creation became part of human society, the need to measure value arose. This led to the establishment of rudimentary accounting models. In the modern world, Accounting is central to the operations of businesses. Accountants produce “books of accounts” for businesses of all sizes (Meredeth & Mantel 2011, p. 44). Accountants also develop and manage budgets for their organizations. Their role is very critical for profitable operations.
Financial Management is wider than Accounting, although it includes Accounting. Financial Management is not limited to people with financial training. It is an effort that brings together all the players in organizations that have a role in generating income or incurring expenses on behalf of the firm. An accountant is a specialist who understands numbers. Financial managers are generalists who examine the implications of those numbers and develop strategies to ensure that the business remains profitable (Pilarski 2007).
Typically, organizations employ accountants to keep track of the numbers and to report on the financial health of the organization. On the other hand, financial managers create strategies to maximize income and manage expenses in the organization. In this sense, the role of financial managers is strategic.
Research Needs in Accounting and Financial Management
The need for research in both Accounting and Financial Management arises from several areas. First, the technological revolution that began in the second half of the twentieth century in the area of computing is leading to new possibilities in the areas of Accounting and Financial Management (Haddon 2004). Software developers keep producing more powerful Accounting and Financial Management software. There is a need to keep reviewing the gaps in the process and the efficiency of new systems to enable firms to take advantage of technology in Accounting and Financial Management.
Secondly, the emergence of global firms has led to the globalization of Accounting and Financial Management. The challenge that many firms are facing is that different countries have different Accounting standards (Dodge 1997). This means that multinationals often need to present their accounts in more than one system depending on their countries of operation. Research is necessary in this case to enable these companies to handle all their Accounting needs in a cost-effective manner.
The third reason that necessitates research in Accounting and Financial Management is that the legal frameworks that govern Accounting and Financial Management keep changing. At any point, there is always a gap between legal requirements and compliance. Research is important to help determine the implication of changes in the legal environment in Accounting and Financial Management.
The fourth reason for research in Accounting and Financial Management is a fraud (KPMG 2003). With the growth in international trade, new opportunities for fraud have also emerged. Research is necessary to keep ahead of financial crimes. Research can help to unearth loopholes created by the adoption of new Financial Management systems, as well as new trends and techniques used to defraud firms.
Nature of Data in Accounting and Financial Management
The justification of the need for research in Accounting and Financial Management leads to the question of the nature of data available for research in Accounting and Financial Management. Researchers usually use different types of data for research in Accounting and Financial Management. The first source of data available to researchers is monetary data from regulators. Central banks, tax authorities, and capital market authorities regularly release data and policy directives to inform the public on the performance of financial markets and to give direction to the players in the industry. The data include interest rates, currency fluctuation, and changes in the taxation regimes. These regulators and authorities present the data in tabulated form. Some of them also issue policy guidelines. In research terms, most of the data given by monetary authorities are in a quantitative format.
Researchers in Accounting and Financial Management also use data from internal and external fraud detection investigators (KPMG 2003). Fraud data usually show the trends and techniques fraudsters use to target firms. In this regard, fraud reports include a mix of qualitative and quantitative data.
Another important source of data for researchers in the financial reports. Every year, each company must present a financial report to its shareholders. Public companies usually avail these reports to the public. Researchers who want to determine market trends on various issues can collect these reports and develop comparisons and analyses to predict market trends. This data is usually in a quantitative format.
The fourth source of data for researchers in Accounting and Financial Management is from computer-based Financial Management systems (Denegri-Knott, Zwick & Schroeder 2006). Many companies today use computers to track their expenses and to manage their finances. In this regard, researchers can access the data to investigate trends or weaknesses in Financial Management practices.
In conclusion, it is clear that most of the primary data available to researchers are in a quantitative format. There is little information to explain why certain trends appear. In this regard, researchers should adopt research philosophies depending on the objectives of a specific research (Bryman & Bell 2011). The philosophy chosen by a researcher who wants to explain why certain financial ratios vary regionally can vary greatly from a researcher who wants to understand what motivates fraudsters in a certain region.
Survey of Research Philosophies
The goal of the discussions presented above on the nature of Accounting and Financial Management was to develop a strong foundation for the discussion on the choice of research philosophy in Accounting and Financial Management research. The literature reviewed in regards to research philosophies revealed that different authors have different preferences regarding the presentation of research philosophies. In fact, their presentations varied too much because of inherent differences in their own philosophies. Saunders, Lewis and Thornhill (2009) had the clearest review of research methodologies for the purposes of this. In this regard, this work adopted their format. Research philosophies have three dimensions. These three dimensions are epistemology, ontology, and axiology.
The main concern of epistemology is to determine what constitutes “acceptable knowledge” in a field of study (Saunders, Lewis & Thornhill 2009, p. 4). To some researchers, facts are the only way of understanding phenomena. Such researchers will only use observable phenomena as input for their research processes. For instance, a researcher studying the extent of fraud in a certain corporation will rely on the data that clearly shows that fraudulent transactions took place. A researcher who believes that the only way of investigating an issue is through reliance of sensory perceptions and mathematical methods is a realist (Yu 1998). On the other hand, some researchers would prefer to look at issues that are not necessarily sensory-based but are nonetheless present. For instance, a research into what motivates fraudsters will aim at uncovering the motivation for fraud. Such a research process would aim at finding out issues such as the attitude of workers towards fraud. In this case, the researcher is not satisfied with factual presentation or sensory perceptions. This researcher believes that reality exists in the mind. Such a researcher is a positivist (Saunders, Lewis & Thornhill 2009). The third epistemological stance on research is interpretivism. This stance comes from the belief that business research is too complex for simple reduction of phenomena into absolute rules (Creswell 2008). In addition, interpretivism brings human actors to the centre of a research process. In this sense, it encourages empathy in research (Saunders, Lewis & Thornhill 2009). The researcher needs to get into the lives of the respondents in order to perceive reality from their perspective.
The second dimension of research philosophies is ontology. Ontology refers to the “nature of reality” in the view of a researcher (Saunders, Lewis & Thornhill 2009, p. 10). The main impact of the ontological leanings of a researcher is that it determines the basic assumptions made in a research process. The two main ontological positions in research are objectivism and subjectivism (Eriksson & Kovalainen 2008).
The import of objectivism is that it removes the players from their reality. It assumes that reality exists apart from the players. A case in point is the role of an accountant. An accountant usually works based on accounting standards, and follows a fixed set of rules and regulations. In this regard, any accountant will handle an Accounting job in the same manner. This shows that the actual person actually doing the Accounting job is separate from it.
On the other hand, subjectivism starts with the assumption that the actors are important in a process. The activities of the actors play a huge role in the result of the process. Using the same example of an accountant working in a firm, a researcher with an inclination towards subjectivism will take an interest in the attitude of the accountants, their work habits, and their views about the company. The assumption here is that while the Accounting profession relies on fixed standards, the individual accountants have a say on what they actually do. This results in variations in the results of the work.
The third dimension of research philosophy is axiology. Axiology refers to the value system of a researcher (Curasi, Hogg & Maclaran 2001). All researchers have value systems that influence how they conduct research. These value systems may be different from their ethical obligations. All researchers must adhere to a common ethical code that cuts across their research discipline (Schellenberg 1996). However, there is no requirement that holds all researchers to a common set of values. The role of axiology in research philosophy is that it helps a researcher to determine what is important in a given research process.
The nature of research problems in Accounting and Financial Management, as well as the nature of data available to researchers must lead to the conclusion that the most suitable epistemological stance for a researcher in this field is realism. Many aspects of Accounting and Financial Management rely on fixed processes and procedures. Therefore, it is possible to find objective reality by studying the trends and patterns presented in hard data. The only exception in this case is in situations where the research problem requires more than hard data to unravel. For instance, research dealing with questions of behaviour and attitudes require philosophical flexibility.
The most suitable ontological stance for research in Accounting and Financial Management is objectivism. The reasoning behind this choice is also the nature of tasks associated with Accounting and Financial Management. It is far easier to develop a research project based on an objective standpoint because of the standardized Accounting practices. The same exception given in the discussion of the epistemological position of a researcher applies. In short, provided the research project is not looking at human behaviour, the best ontological stance is objectivism, while the most suitable epistemological stance is realism.
Strengths of Realism and Pragmatism
The main advantage of realism is that it is practical for use in research. Realism relies on observable evidence (Moisander & Valtonen 2006). Therefore, it is easy to show how a researcher arrives at a set of conclusions. It is less prone to controversy because it provides the possibility to replicate the results. For instance, a research into the occurrence of fraud will give the same results regardless of the person who carries out the research, provided all the researchers use the same methodology.
The strength of pragmatism is in its focus on workability and results. A dynamic business environment requires a pragmatic approach because this approach provides flexibility to practitioners. In research, pragmatism tends to yield practical and workable results (Corson, Heath & Bryant 2000). The end results of research should be the application of the knowledge generated. Pragmatism is also ideal for developing standards. It makes it possible for researchers to avoid entanglement to narrow viewpoints.
Weaknesses of Realism and Pragmatism
The main weakness of realism is that it tends to omit the role played by human actors in a specific business situation. Variances in business systems arise from variations in the actions of human actors (Dodge 1997). For instance, an accountant that fails to follow normal procedures can facilitate fraud. It is impossible to know whether such failure to adhere to the guidelines is the result of wrong intent, unplanned omissions, or incompetence. As such, realism can fail to produce the evidence needed to address the situation.
The most notable weakness of pragmatism is that it is impersonal (Eriksson & Kovalainen 2008). When a research process uses the pragmatic paradigm, there is a risk that the conclusions developed will not take care of the human actors in the process. Research may show that a company will perform better financially if it lays-off some of its staff. In this case, a pragmatist will advocate for the implementation of such measures, regardless of how it would affect the staff. Such a move can lead to loss of brand reputation, as well as loss of human resource capacity.
Conclusion
In conclusion, the need for research as a source of knowledge in Accounting and Financial Management exists because of various environmental factors. Based on the research conducted on the choice of an appropriate research philosophy, it is clear that no single philosophy that can meet all the Accounting and Financial Management research needs. The research also showed that most of the data available for review in Accounting and Financial Management research is mainly quantitative in nature, which means that it has a natural fit with quantitative research. Therefore, the most fitting research philosophy for research in Accounting and Financial Management is realism. This comes from the need to base business decisions on hard data. However, this does not mean that researchers should ignore the human element in research.
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