1. Gray, et al. (1987, P.66) make the following statement in relation to research based on the inductive approach (that is research based on observing particular phenomena): Studying extant practices is a study of what is' and, by definition does not study what is not or what should be'. It therefore concentrates on the status quo, is reactionary in attitude, and cannot provide basis upon which current practice may be evaluated or from which future improvements may be deducted. With the above comment in mind, do you consider that research based on induction is useful for improving the practice of financial accounting? (10 Marks) 2. Critically evaluate the claimed precyclical role of fair value accounting. How persuasive are arguments that fair value accounting's Riggslicality should reduce the use of fair value accounting? (15 Marks) 3. Zhang (2008) argues that if a borrower adopts conservative accounting methods then this will reduce risk exposure of the lender and will lead to reduced interest cost for the borrower. What is the basis for this argument? (10 Marks) 4. If an organization's management considered that the organization might not have operated in accordance with community expectations (it broke the terms of 2 its social contract), consistent with legitimacy theory, what actions would you expect management to undertake in the subsequent period? (15 Marks) (Total: 50 Marks) 1. Gray, et al. (1987, P.66) make the following statement in relation to research based on the inductive approach (that is research based on observing particular phenomena): Studying extant practices is a study of what is' and, by definition does not study what is not or what should be'. It therefore concentrates on the status quo, is reactionary in attitude, and cannot provide basis upon which current practice may be evaluated or from which future improvements may be deducted. With the above comment in mind, do you consider that research based on induction is useful for improving the practice of financial accounting? (10 Marks) 2. Critically evaluate the claimed precyclical role of fair value accounting. How persuasive are arguments that fair value accounting's Riggslicality should reduce the use of fair value accounting? (15 Marks) 3. Zhang (2008) argues that if a borrower adopts conservative accounting methods then this will reduce risk exposure of the lender and will lead to reduced interest cost for the borrower. What is the basis for this argument? (10 Marks) 4. If an organization's management considered that the organization might not have operated in accordance with community expectations (it broke the terms of 2 its social contract), consistent with legitimacy theory, what actions would you expect management to undertake in the subsequent period? (15 Marks) (Total: 50 Marks)