A tale of two communities: why the profession and academia need each other
Lisa Evans and Mario Abela, members of the ICAS Research Panel, highlight the benefits of academic research and the importance of liaison between academia and the profession.
The pace of change in business is unprecedented as we enter the fourth industrial revolution. Meanwhile, the accounting profession is being challenged for its:
- alleged complicity in corporate scandals
- support of a model that protects the welfare of narrow groups of stakeholders
- lack of recognition of the intangible nature of modern business activities
- failure to promote long-term investment.
As a profession, our R&D locker is empty as we have neglected the creation of new knowledge and innovation on a number of fronts, and debates that have been running for decades remain unsolved.
This includes, for example, agreement on what constitutes profit, assets and the divide between debt and equity. Increasingly, policymakers have introduced disclosures in the management report which both preparers and auditors are struggling to make meaningful for capital providers.
Academic research once played an active role in the debates but now finds itself on the periphery.
Rethinking the role of academic research for the profession
In this article, we re-think the role of academic research in helping practitioners understand and respond to the challenges being faced by business today.
What is academic research? How does it differ from, for example, market research, or research associated with consultancy? While there are similarities, and all have their place, certain qualities favour the use of academic research as opposed to non-academic research.
Academic research is typically distinguished not only by its independence but also the rigorous review process it undergoes, and accordingly it is well-equipped to challenge the status quo.
It aims to develop new knowledge and understanding; it is rigorous and impartial and aims to contribute to the development of theory as well as practice.
Because the universities or the researchers themselves carry the largest part of the real cost of research, such research is usually excellent value for money for grant providers.
To be published involves a scrupulous and often lengthy review process, with usually several rounds of revision, and high rejection rates. This process can take time but it serves to ensure the quality and rigour of academic research.
However, unlike research in the natural sciences, accounting research is not well funded. Grants from public bodies are harder to obtain – anecdotally assumed to be the contrary because accounting and finance research should be funded by a wealthy profession.
Grants from professional bodies and similar sources however usually cover only a fraction of the real costs of the research.
Because the universities or the researchers themselves (by working outside ‘normal’ hours) carry the largest part of the real cost of research, such research is usually excellent value for money for grant providers.
High-quality education needs high-quality research
But beyond this simple cost-benefit consideration, why is research of value to a profession – specifically the accountancy profession?
To address this question, we may ask another one: what distinguishes a profession from other forms of occupation, such as trades, industries or crafts?
Among others, one key defining feature of a profession is its foundation on an academic knowledge base. This involves research and teaching, which in turn should be informed by research.
As is also the case for the older, high-status professions of medicine and law, prestige and credibility are founded on high-quality education and on knowledge that goes beyond the technical.
Research, including both applied and basic/theoretical research, are therefore closely linked to the essence of a profession.
If we are to thrive as a profession we need to invest time and resources into understanding practice and developing new knowledge.
Impartiality and rigour
Because accounting research is not and has not been well funded, practitioners have lost the advantages of having a strong foundation in research.
However, from a practitioner’s perspective, academics are trusted third parties who can provide insights by applying rigorous methodology.
Some accounting policy questions require a level of impartiality that cannot be ensured by members of the accounting profession alone. Without such impartiality, politics come into play and make biased evaluations inevitable.
Academics are able to tackle such questions in a way that is independent of vested interests.
Take as an example of the argument that the levels of concentration by the Big Four in the audit market are too high.
Does this result in reduced competition (a likely response by a member of a non-Big Four audit firm) or reflect better technology and audit quality that are not available to smaller audit providers (a common response by members of Big Four auditors)?
Both arguments have some merit, but which group of firms we ask will, to a large degree, determine the answer we get. Academics are able to tackle such questions in a way that is independent of vested interests, so that policy decisions are made on the basis of rigorous and unbiased analyses.
Any potential conflicts (such as funding provided by interested parties) are disclosed.
Embracing research to forge a new path
In spite of this, professional accountants and standard setters are often unsure about using academic research for fear of picking a study that is subsequently undermined by other research.
Professional users may be uncertain of the weight they should attach to different studies.
In addition, articles published in academic accounting journals may be perceived as impenetrable to non-academic readers.
As the state of academic knowledge in accounting and related fields advances, some research will inevitably involve technical, conceptual and/or mathematical analyses.
Like accounting treatments for complex activities or transactions, these can be inherently difficult to communicate to all users.
Academic research is the profession’s R&D locker, where myths can be dispelled, and given sufficient time and resources, new thinking can emerge.
Nevertheless, there are many reasons to develop and preserve a strong relationship between academic and professional accounting communities.
Interesting and important accounting questions often arise from practical problems, and engagement with research is an opportunity for practitioners to participate in early discussions during the development and implementation of regulation.
Professional accountants can also provide unique and rich access to data that academic researchers cannot obtain by any other means.
Perhaps more important still is the fact that academic research is the profession’s R&D locker, where myths can be dispelled, and given sufficient time and resources, new thinking can emerge.
Raising the bar for practitioners
We can continue to point out the differences between practitioners and academics and perpetuate the pervasive view that accounting research is of marginal interest to practitioners.
Alternatively, we can step away from decades of analysing the ‘problem’ and push forward to working out the solutions by raising the bar and getting serious about the profession’s need for research and development.
In summary, the research-practice gap has been much discussed for decades and is attributed to incentive systems for research, a communication gap, a perceived irrelevance of some academic research, and a concern that accounting research takes too long.
In spite of this, academic accounting research continues to make useful contributions to policy and practice, and there is unquestionably scope to develop and preserve a stronger relationship between academic and professional accounting communities.
In fact, rarely has there been a better time for the two communities to work together.
Readers interested in a more extensive discussion of the issues covered in this article are referred to:
Fulbier, R.U., HITZ, J. and Sellhorn, T., 2009. Relevance of academic research and researchers' role in the IASB's financial reporting standard setting. Abacus, 45(4), pp.455-492.
Leuz, C., 2018. Evidence-based policymaking: promise, challenges and opportunities for accounting and financial markets research. Accounting and Business Research, 48(5), pp.582-608
McLaren, M., 2018. 'Evidence-based policy-making': a practitioner view. Accounting and Business Research, 48(5), pp.609-611.
Papers in the 2012 Special Issue on the Effect of Accounting Standards, Accounting in Europe, 9(2).