Positive Accounting Theory (PAT) is universally acknowledged as one of the most important theories in the accounting theory research. It is worth noting that Chambers had raised an idea that “PAT is responsible for turning back the clock of research 1000 years.” From my perspective, I agree with the criticism of Chambers about the negative effects of PAT.

In the first place, Positive Accounting Theory is not value-free as it was based on the assumptions that all action is driven by self-interest. According to the Agency Theory, which PAT is originated from, it shows the great impact of self-interest. With the development of growing markets and economics, the Agency Theory states that there exists a “price protection”. In other word, when the agents perform services and delegate decision-making authority of principal, they might accept a contract detrimental to them or having limits on them. With a consideration of not undertaking the opportunistic loss of company, the limits might protect their actual income or benefits. In a word, the incentive of self-interest is considered as a prerequisite of the theory and could not be eliminated or mitigated by effective methods.

Secondly, Positive Accounting Theory is considered to be too negative and simplistic a perspective of human kind. It assumes that individuals will always act in an opportunity manner to the extent that these actions will increase their wealth. Political Cost Hypothesis illustrates that large firms rather than small firms are more likely to adopt accounting practices that that reduced reported profits. By manipulating numbers to reduce profits, large firm might reduce attention from tax departments and avoid more regulations against them. They do not want to be accused of manipulation or monopoly. Large firms, such as mining companies, might even consider environmental costs by accusing