Investigating the Knowledge of Users of Financial Statements - Research Proposal Example

RESEARCH PROPOSAL I. Introduction Financial information is made available by publicly listed organizations through their Annual Reports. This data isimportant for many people including investors, creditors, managers, consumers, and many other users who have to make financial and economic decisions, whether in investing, loaning money, and so forth. I think that an overlooked aspect in this disclosure of public information, in the context of academic investigation, is how users make sense and make use of these data. This is the issue that I am interested in. Usually, a firm looks to the selection, classification, storage and distribution of information once it has been acted upon or changed by that institution. (Gupta 2006, p158) The available literature certainly follows this as many studies have investigated how the information is produced and accessed. The interesting thing is that while it is the specific organizations that render the value, there remains the fact that these firms may determine the worth of a body of knowledge differently than how users would see them. Ideally, the demand for financial reports exists because the reports help users in decision-making. But are financial information understood and used properly? The users, hence, and their intentions and actions, would reveal whether companies or, specifically, the accounting profession satisfy the users in the type of information they require. II. Thesis and Rationale In a perfect world, a system should have been in place that is able to deliver the right information, in the right format, to the right person at the right time. But this is not the case. My thesis is that users have different capabilities, motivations and intentions in their use of the financial information available. It must be underscored that users of financial information are a diverse lot – some are sophisticated and some are not; each has different requirements and each with backgrounds. The interplay of these variables poses several problems for practicing accountants and the way financial reports are delivered and used. There are numerous factors that influence how users understand and use financial data. And so the questions here are: do users make sense of the torrents of information they access? And, how do they use these data or whether their use of the data is congruent with their financial objectives. That is why I expect that my investigation could contribute in developing best practices in accounting, particularly in the area of reporting financial statements as well as in educating users of these financial reports. III. Research Objectives The objective of my study is to investigate the knowledge of users of financial information. Specifically, I intend to gain a deeper understanding of what users of financial statements for investment purposes understand the financial information to mean. In order to achieve this primary objective, the following secondary goals would also be pursued: Define concepts such as financial statements, the users, and those responsible for the release of the financial report. Determine how users across various backgrounds and profiles access and research their financial information requirements in the hope that this would yield patterns in the users demography; Outline examples that demonstrate the way users understand and utilize financial information; Identify problems, risks and weaknesses; and, Propose the best possible practice both on the users’ and the providers’ ends in the report and use of financial information. IV. Literature Review A good number of relevant literature on the subject are available in many accounting, auditing and investment books. For example, the outline of the users of financial information as well as their profiles and their strategies, objectives and motivations could be found in Accounting Information by Albrecht et al. (2007, p11-15) Alexander, Britton and Jorissen (2007), meanwhile, extensively examined the sources of financial information that could very well be helpful to users as much as it helped this study. (p218) Porter and Norton (2009) outlined and categorized the users of financial information and their needs on the basis of their relationship to an organization. They cited two classifications: internal users and external users. (p11-12) For example, a manager of an organization is an internal user of the financial data and that he uses the financial statement in order to decide whether to build a new plant or create a new department. Or, a creditor, as an external user, uses the financial information in order to determine the capability of an organization to pay the amount to be owed. Epstein, Nach and Bragg (2007), for their part, introduced the concept called segment reporting as the possible best practice especially in the context of educating users on how to best source and use their financial information. Here, the financial information is suggested to follow the “diversified” approach especially if the organization being talked about has diversified holding companies or conglomerates that would render the combining of the entire aggregate data from all these not helpful. (p1033) The idea is that different requirements require different information. All in all, the available literature on the subject is quite limited in the sense that very few studies are actually undertaken to investigate how users find and use information in real life. Most of the academic discussions are mostly theoretical and general in nature. This is the gap that I seek to fill. VI. Research Methodology I believe that all research depends on interpretation that is why it has many pitfalls. This problem, in my opinion, would be addressed by employing quantitative methods of collecting data, primarily with the use of a questionnaire and a set of survey questions. With standard quantitative designs there is a conscious effort to limit the role of personal interpretation for that period between the time the research design is set and the time the data are collected and analyzed. On the other hand, I also believe that qualitative method is essential to the study and that this is especially true in the case of sample selection and data interpretation. A credible study requires that persons most responsible for interpretations should be in the field, making observations, exercising subjective judgment, analyzing and synthesizing, all the while realizing their own consciousness. Particularly, wrote Anderson, the qualitative method would allow a researcher to gain a proper “feel” and “understanding” of the culture of the organization and the sentiments of the employees even if the sampling, as with the case of this study, is confined to few organizations. (p51) Specifically, this study would be conducted by comparing two cultural group-respondents, randomly selected in two different locations, in order to further highlight the differences and influences in the way users find and use their financial information. This project would survey users. It could be conducted as a comparative project, with users in China and Australia, since both countered follow the International Accounting Standards but each country has a unique social, cultural and economic profile, so that should provide a deeper understanding of this area since it should be possible to determine whether these differences impact on user understanding in a cogent way. . All in all, a systematic framework of gathering data would be developed, combining fundamental methodologies in varying degrees of emphasis. VII. Ethical Issues In regard to the issue of my qualification as a researcher, in the context of this section, I would like to state that I satisfy all the requirements in order to successfully conduct this study. In addition, I am guided by several supervisors - all of them are expert in the field. This is particularly relevant in the drafting of the research questionnaire, selecting the participants, examining data and sharing results. Furthermore, I am aware of the factors that Cottrell and McKenzie (2010) outlined that indicate the knowledge and preparedness of a researcher: I am aware of the alternative approaches to meeting the study’s objectives; I am aware of the ethical guidelines, legal requirements and local customs and norms. (p100) With this, I am stating my capacity to complete this study ethically. VIII. Work Plan (This is just a sample, you can just remove this or edit it according to your schedule.) Week 1-3: Drafting, submission, revision and approval of research proposal. Week 4- 5: Drawing up of sample and research questionnaire. Week 6 - 14: Start to conduct interviews, survey of the sample and research of other pertinent data. Week 15-17: Start and Complete Data Analysis. Week 18-20: First dissertation draft would be completed and sent out for comments. Week 21-23: Revisions and submission of final dissertation. References Albrecht, S, Stice, J, Stice, E and Swain, M 2007, Accounting: Concepts and Applications. Cengage Learning. Alexander, D, Britton, A and J 2007, International financial reporting and analysis. Cengage Learning. Anderson, V 2004, Research methods in human resource management. CIPD Publishing. Cottrell, R and McKenzie, J 2010, Health Promotion and Education Research Methods: Using the Five Chapter Thesis/Dissertation Model. 2nd ed. Jones and Bartlett Learning. Epstein, B, Nach, R and Bragg, S 2007, Wiley GAAP 2008: interpretation and application of generally accepted accounting principles. John Wiley and Sons. Gupta, D 2006, Marketing library and information services: international perspectives. Walter de Gruyter. Porter, G and Norton, C 2009, Financial Accounting: The Impact on Decision Makers. Cengage Learning. Read More