In the anti-intellectual climate prevailing in most Western countries, anyone talking about theories is immediately open to ridicule. Theorists are considered to be out-of-touch. It is as though no theory has ever informed the world of medicine, astronomy or even accountancy. The social world consists of theories and little else whether it is a theory of a good citizen, father, mother, brother, accountant, auditor, administrator, lawyer, public interest, democracy, freedom, justice  or anything else. Anyone studying accountancy and business is  expected to think critically about accounting and business practices and the social context of  business.

This article will show you how to

• Evaluate theories
• Link theories and evidence

The critical understanding of theory is encouraged by all good educational programmes.  The intention in this article is to answer various questions which accounting students frequently ask about theories and evidence.

WHAT ARE THEORIES?

Before you can think critically about theories, you need to be clear in your mind what a 'theory' is.  The term 'theory' is used in everyday language in a variety of ways.  It is sometime used as meaning 'explanation', 'insight', 'underlying logic', something 'academic' or rather 'distant from the facts'.  In informed circles, the term 'theory' is used in a specific way to mean a particular way of conceptualizing business/accounting and its relationship with organizations and society.  Each theory attempts to put some element of accounting/business into a wider social and political context by relating it to other things.  All the time we are trying to find patterns of association and to link them together in a coherent way.

Building a theory always involves the process of abstraction.  What we are trying to do is to identify key relationships in society - relationships with a general applicability.  This means selecting and prioritizing what are taken to be important aspects of society and in consequence some of the detail gets lost.  This requires that an attempted gain in broad understanding of how business/accounting works needs to be balanced against some loss of detail.  As a result our abstract notions may not hold up in every detailed circumstance, though they will (we hope) provide a 'guide' to what is generally true.

Abstraction, though, is only one part of theorizing.  To be successful as an explanation, theories must also adequately explain the real world.  That is they must be sufficient in scope to bring together general processes and specific events.

DO THEORIES CHANGE?

Perhaps the single most important thing to stress about theories is that they are 'conceptualizations'; they are a particular view of events and how they link together.  This means that all theories are open to debate and argument.  Theories are also connected with power positions in society. Just think about the life and work of Galileo who contrary to the estbalished church norms argued that the earth orbits the sun. He was punished.

As there is no single explanation of social change.  Theories are continually being debated and adapted.  When an interesting idea is put forward it is usually subjected to detailed examination and debate.  There may be attempts to extend it to cover other relationships.  Gaps in the argument may be highlighted.  There may also be criticisms from those with different (competing) viewpoints.  In this way a complex process of evaluation, debate, modification and reformulation is brought into play.  Where possible we want you to take part in this process.  Theories should not be accepted at face value but should always be interrogated.

There is another reason why theories change.  Theories will change because society itself is continually changing.  As society changes, so does its character.  New features and anomalies will emerge which require interpretation and explanation. These cannot always be answered by existing theories and as a result new theories will emerge.

DOES CONSENSUS MEAN THAT NO NEW THEORIES WILL BE NEEDED?

All ideas are potentially open to argument but this does not mean that there is necessarily disagreement at every level of understanding.  For some 'big' issues the evidence is almost overwhelming.  It would be difficult to argue with the view that accounting practices are now to be found in commercial and non-commercial organisations.  Similarly, it would be difficult to argue with the view that accounting has undergone some major changes since the 1970s.  There is general agreement that both are important topics.

The identification of consensus issues does not mean that there is little to debate.  There is agreement only over the fact that they are important topics.  Arguments remain over their explanations and implications as people disagree on which aspects to emphasise and how to cite their arguments towards different kinds of evidence.

HOW CAN A THEORY BE EVALUATED?

In order to evaluate theories you will need to consider a number of (interrelated) questions about both the theories themselves and the evidence on which they are based.  Here are some questions which you may find useful as a general checklist of points to cover:

1 What question(s) is/are being addressed?

You can only assess the usefulness of a theory when you understand the question(s) being addressed.  So check that you understand exactly what the theory is attempting to do.  If possible, try to write out what each theory is trying to do in your own words.  Using familiar words and thinking things out for yourself should register the theory more clearly in your mind.

Often you will find it easier to build up your understanding in stages.  One way to do this is to think about the different concepts which are emphasised in that theory.  Most theories cover a range of basic concepts so it would be helpful to try to list them.

Once you have identified the relevant concepts, start to think about their meaning and how they relate together.  Try to define them in your own words and try to link together pairs of concepts in a single sentence.  By using these concepts for yourself you should be able to build up a clearer understanding of what the theory is trying to do.

2 What assumptions does the theory make about the world?

You also need to think about any assumptions made in the theory.  The development of a theory involves the selection and prioritisation of particular aspects of society, and this also means making assumptions about other aspects of society.  All theories involve 'simplifications' of one kind or another, and where possible they should be noted, particularly if they appear significant.

It is important to remember, though, that such assumptions won't necessarily invalidate a particular theory.  Given the complexity of the 'real world' it is necessary to hold apart different aspects of society and to study their detailed relationships separately.  A theory will attempt to lay bare some key social process, but this does not mean that one is able to cover every last detail.  For example, theories about accounting change (say price level accounting) probably will not be able to take into account minute details relating to economic, cultural, political and social change affecting investors, employees, creditors, government and other stakeholders.

Assumptions do not derive just from the prioritisation of particular aspects of society.  There are also underlying assumptions linked to the way people perceive how society works and changes over time.  As noted above, in this course we argue that theories are a particular way of conceptualising things.  So we are stressing the importance of 'views' and the fact that different people will perceive the social world in rather different ways.  This, of course, does not mean a 'free for all', since the very way that we think about the world (or accounting) is always constrained by available forms of knowledge nad knowledge is always related to power.  Sometimes you can place a theory within a broad 'system of thought' (Marxist, Foucaldian, Critical theory, interpretative, pluralist, etc.) but in many cases you will find that a theory sits uneasily within a single broad grouping.  Often there are other 'cross cutting' divisions and viewpoints to consider.

This means that you need to be as specific as possible about the particular viewpoints involved.  Don't be satisfied with a simple categorisation of theories.  Try to delve a little deeper.  Labelling a theory as 'Marxist', 'Foucaldian' or 'pluralist' or 'political economy' is a useful start but it begs a lot of questions because each covers a wide range of ideas and related traditions.

Finally, it is worth stressing that theories themselves often do not disclose their underlying assumptions of society.  Often it is left to subsequent evaluations.  Often you will find that theories which are offering competing explanations will try to lay bare and criticise the assumptions of others, as well as putting forward alternative ideas.

3 What framework of enquiry underpins the theory?

You may find it helpful to think about the different traditions of research, particularly in relation to time scale and the methodology used.  Unfortunately such information will not always be available, but when it is, you may find it sheds light on the theory itself and its intended function.  One research tradition is to examine the overarching (longer-term) relationship in society and to examine evidence in a rather abstract manner.  Here the concern is not with actual events but with possible relations in society.  Marx's ideas on social class or Adam Smith's ideas on the market are cases in point.  These theories do not try to explain specific events, and it is important to recognise this.

Many of the theories you will be considering in this course focus on the short to medium term.  That is, they are seeking explanations of changes that have occurred in recent years.  They might refer to the emergence of standard-setting bodies, accounting regulations, the interventions of the state, or the public's understanding of corporate reports.  Here it is helpful to identify two further traditions of research, this time linked to methodology.  One approach is to start with specific concrete examples and trace through the relationships in these particular cases.  Here the intention is first to identify specific causal links and then seek general explanations.  Only after the individual relationships have been set out and examined will attempts be made to pull things together with a more general explanation.

Not all explanations are developed through detailed case study research.  An alternative method of research is to concentrate on large sets of data and to try to identify general patterns from them.  This research design (often in corporate finance studies or questionnaires about 'user' understanding of financial reports) often uses quantitative methods and looks for 'statistically significant' associations.  The end product is some generalised 'explanation' of the data which appears to have some wider applicability, but which may attract criticism from other types of explanation for its lack of detailed explanatory underpinning and penetration.

When you come to examine individual theories you will often find that they cannot easily be categorised in such general terms.  Many theories include elements of more than one tradition.  Simple pigeonholing of theories is often inappropriate.  Nevertheless, it may be possible to identify the underlying research tradition(s) used and this may help you to assess the effectiveness of the theory.

4 Is the theory coherent?

Another related question you might ask yourself is whether the theory has been developed logically and coherently.  That is, do all the stages of the explanation make sense?  Theories should be able to link their general explanations to particular events using a set of clear connections.  There should be no gaps in the argument.

Theories that are criticised for not showing all the links in their argument are sometimes referred to as 'reductionist'; that is, they are viewed by other explanations as reducing or oversimplifying some of the relationships involved.  Whether or not a theory has coherence can be a matter of opinion.  A theory's coherence will depend in part on your conceptualisation of these different research traditions and their relative effectiveness.

5 What kind of evidence does the theory appeal to?

Theories are usually selective in focus and appeal to different types of evidence, so examining the kind of evidence used may help shed further light on their character.  Some clarification of the kind of evidence used, and the way it has been viewed, should assist your evaluation of a theory.

HOW DO  THEORIES  RELATE TO EVIDENCE?

All theories are about explaining the real world.  There are two elements to this skill.  First, you should be able to illustrate (and to assess the validity of) theories using a range of examples.  These examples can be drawn from the articles appearing on this web site.  Secondly, we want you to be able to analyse recent changes in accountancy/business in a way which is informed by theoretical understanding.  again the articles on this web site will help you to do that.

WHY IS THE RELATIONSHIP BETWEEN THEORY AND PRACTICE NOT PERFECT?

Two  issues are imporant.  First, theories attempt to identify patterns and associations in things that are, in one way or another, distinctive, and which are linked to a set of unique circumstances.  Relationships and their outcomes are forever changing.  Given the complex and changing interrelationships of various factors it is hardly surprising that these theories do not mesh exactly when applied to the real world.  That is, the particularity of events over time and space make it difficult to develop meaningful theories.

There is, though, a more fundamental reason why theories can only approximate to reality.  It is linked to the inherent nature of theories.  Theories are our thoughts on the real world; they are conceptualisations, and as such they are always fallible and open to revision.  They can never mirror the world in a simple one to one correspondence because we do not share the same perceptions and experiences.

HOW DO WE GET EVIDENCE?

Theories require evidence of one kind or another.  This evidence can be drawn from
many different sources and can be both quantitative and qualitative.  Quantitative data are useful because they may allow observations to be compared and general trends to be observed.

Evidence does not have to be quantitative.  Qualitative evidence is also of crucial importance in the development of theories.  Some evidence can not be quantified and some is best left unquantified.  A case study can provide depth to study in a way that quantitative data, however useful, may not.

The issue then is one of breadth versus depth.  Quantitative evidence makes it possible to compare observations, but it is unable to provide a detailed understanding of events leading up to those observations or their consequences.  Conversely, qualitative evidence can provide this depth, but it is difficult to make direct comparisons and build up a more general and representative picture.  What evidence you choose should take account of these basic differences.  Indeed, the kind of evidence selected may be reflected in the kinds of questions that a theory addresses.

At some point, you will want to consider what evidence there is for a particular theory.  You might start by setting out the particular example(s) from which the theory was developed.  You might then be able to track down whether the theory has since been applied to other examples by other researchers and with what success.  You may also wish to relate it to your own examples and experience.  That is, you may wish to show that the theory is applicable to a range of evidence.

Do not concentrate only on 'successful' applications.  You also need to reflect upon examples (or parts of examples) which do not seem to fit the theory.  It is important to consider both sides when weighing up a theory's adequacy.

You may also find it useful to distinguish between what evidence a theory can explain and what evidence a theory wants to explain.  For instance, some so-called 'competing theories' may in fact be addressing slightly different kinds of question.

Theories then are usually selective in the evidence they appeal to.  They may approach the same general topic in different ways using different kinds of supporting evidence.  Or the same framework of enquiry may be applied to different evidence to produce different results: the time period may change, or the geographical area or scale may change.  As the evidence changes there may also be changes in explanation.

You should use evidence to argue not just for or against existing theories, but also go further.  As you become more confident you may be able to use evidence to develop and refine existing theories or to build up your own interpretations.

If you are to use and interpret the evidence for yourself you will need to think actively about causality.  Finding the cause of something means asking 'why it happens?'.  If
you want to develop a theory to explain changes in the use of accounting information by companies it is important to trace through some of the causes that produced these changes.  This means unpacking the relationships element by element, and then gradually building up a more general understanding of links involved.  It also means recognising that all potential causes may not have the same impact, but will depend on the actual conditions present.

Not all research attempts to obtain a causal fix in such a clear and detailed way.  An alternative approach to using evidence was outlined above.  This approach starts with large amounts of data, often presented as a table or map, and tries to identify common features and meaningful patterns.  You may wish to use evidence in this way and the approach is quite acceptable.  But if you do this you should be aware that it may be less easy to established causality.

IS THE EVIDENCE VALUE FREE?

One tradition in accounting/business is to stress the search for scientific and objective knowledge, where the emphasis is on the world 'as it is' with only one true interpretation.  Thus the idea that accounting is somehow 'neutral' or value free is very deeply ingrained in accounting thought.  But it is completey untrue. Think about the word 'neutral'. Is it value free? The answer is 'No'. The language that we use is already pregnant with historically articulated meanings and struggles. It is not possible for us to understand, describe and explain the world without some values. The way that we see the world may depends upon our social position, age, gender, class and many other things. We cannot just access the world in some unproblematical way.  Observations have values and judgements attached to them.  They must be perceived and this involves conceptualisation.  We may see the same things but we will often view them in slightly different ways.  No matter how long your stare at a stone, it will not yield its meanings.  But in some situation, it can seen as a boundary, a marker, a missile, an ornament and so on.  When you come to examine and weigh up 'the evidence' for yourself, it is important that you recognise that there are interpretations bound up with it.

SUMMARY

1. Theories are particular ways of conceptualising society.

2. Theories change in the light of critical debate and because society itself is changing.

3 . When evaluating theories you should consider:

• the question(s) being addressed and the key concepts identified;
• any assumptions made, both practical and in underlying viewpoint;the framework of enquiry used: the time-scale involved, the research methodology employed etc.;
• the theory's coherence;
• the kind of evidence appealed to.

5. Theories are not borne out by all the evidence.  Fundamentally this is because of the inherent fallibility of theories and the fact that they are conceptualisations.

6. Sources of evidence can be both quantitative and qualitative.  These sources position the theory to questions of breadth and depth respectively.

7. Theories are selective in the evidence they explain.  Competing theories may vary in the question(s) addressed and the kind of evidence they attempt to explain.

8. Evidence is a key element in the building, as well as the arguing out, of theories.

9. Evidence itself is not value free; it must be perceived and this involves conceptualisation.