Knowledge that Transforms

Abstract Reviews the book "A Manager's Guide to Computer Timesharing," by Timothy P. Haidinger and Dana R. Richardson.

Abstract Reviews the book "Information Systems: Theory and Practice," by John G. Burch and Felix R. Strater.

Abstract Accounting students at both the beginning and advanced levels sometimes have difficulty in mastering the concept of reporting the financial position of two or more companies on a consolidated basis. The purchase method, with concepts such as goodwill and minority interest and the pooling of interest method, for which varying relationships between the total par or stated value of the shares issued by the acquirer and the total paid-in capital of the company whose shares are acquired require alternative treatments, cause many students some consternation. Often, these techniques are not mastered by students because there is too much data to be processed at one time. Students are expected to manage the numerical complexities as well as to grasp the theoretical concepts using a single illustration. To alleviate this problem, models reflecting consolidation at acquisition were developed as a means of focusing on concepts involved and have been used in the classroom setting with some success. The principal advantage of these models is that they are succinct, that is, concepts are presented in a small amount of space, in a short period of time and can be presented independently of numerical data.

Abstract The auditor's real and perceived independence and autonomy in the performance of the attest function seems universally accepted as a desirable attribute. This study utilizes interpersonal exchange theory to consider in detail some of the factors which may affect the relative power of the auditor to maintain independence in an auditor-firm conflict situation. The term "auditor" refers to a professional accountant who is hired by a company to perform an audit and render an opinion on statements to be provided for a third party. The specific conflict situation occurs when the auditor and firm do not agree on some aspect of the performance of the attest function. Under these circumstances, the firm may attempt to influence the manner in which the attest function is conducted. The firm, in attempting to influence the performance of the attest function, may pressure the auditor to take an action that violates acceptable auditing standards, including the rendering of an inappropriate opinion. Compliance with the firm's demands may lead to violations of professional standards which the auditor wishes to avoid. Failure to comply with the firm's demands may result in sanctions by the firm, including the possibility of termination of the engagement. The equalization of power between the auditor and the firm, resulting in a symmetrical power relationship, could lead to mutual accommodation.

Abstract The article focuses on acceptance sampling plans for auditing. The interest in statistical sampling among accountants has become more pronounced and has broadened from problems of acceptance sampling to include techniques of statistical estimation. The paper contains a brief review of concepts, design and construction of both single sampling plans (SSP) and sequential sampling plans and presents a new cost optimization model with illustrative results for selection of the least-cost sampling plan. Throughout the paper, authors assume that the population is large relative to the sample size. Acceptance sampling consists of drawing samples or groups of samples from a population, examining these for properties of interest and finally, reaching some decision based upon the sample results. Elements of an acceptance-sampling plan are the method of sampling, the sample sizes and the appropriate decision rules for reaching some decision. The simplest acceptance sampling plan, an SSP, consists of the selection of a random sample of N items; the determination of the number of errors or defectives; and comparison of this quantity, with a previously determined acceptance number, or rejection number.

Abstract The purpose of this article is to provide a content profile and a question index of the Certified Management Accountant (CMA) examination. A content profile of the first four CMA examinations 1972-1975 is presented in the article. This profile is broken down three ways, by subject area, by topic within managerial accounting, the subject area being given the most coverage and by topic within financial reporting, the subject area being given the second-most coverage. The ten subject areas in the profile were identified by integrating typical business administration curriculum formats and course descriptions with the reading list and topical coverage outline distributed by the Institute of Management Accounting. Questions are classified into subject areas and into specific managerial accounting and financial reporting topics on the basis of their content and context and the degree of sophistication indicated by the unofficial answers. Percentages in the profile reveal the average relative emphasis given to the subject areas and topics. Calculations are based on the suggested maximum number of minutes allotted to questions according to the examination instructions. Optional questions involving two or more subject areas are assumed to be selected with equal frequency in each subject area.

Abstract This article focuses on various concepts of equity and cites a study of the discrimination in the federal income tax rate structure. Given these three conflicting views of equity in the federal income tax rate structure, the taxable incomes of the spouses were allowed to vary from $1,000 to $40,000 in $1,000 steps. Then the tax burdens for all such combinations under the 1975 tax rate schedules for single and married taxpayers were computed. Only the impact of the federal income tax rate structure was considered in this study. The primary causes of distortions between singles and married that have been ignored were the maximum standard deduction, the low income allowance, exemptions for children, and child care deductions. It was noticed that when equity was defined as having economic units with equal incomes be taxed equally, a burden on single taxpayers emerged. The tax burdens for the lower income levels have been entered on the appropriate intersection to provide some guideline for the locus of the zero tax burden curve in the obtained graph. It is concluded that the tax rate structure has very different implications for taxpayers depending on their taxable incomes.

Abstract Reviews the book "Information Systems for Management Planning and Control," by Thomas R. Prince.

Abstract This article focuses on the effect of chance variation on revenue and cost estimations for break-even analysis. Break-even analysis consists essentially of examining the relationship between revenues and costs. The regression models use historical data to predict future revenue-volume and cost-volume relationships. The model, suggestively, is good if the environment does not change. The break-even analysis based on estimated revenue and cost functions, therefore, is subject to chance variation. The purposes of this article is twofold: first, to demonstrate the determination of the chance variation in estimated revenue and cost functions, and second, to illustrate how the chance variation associated with revenue and cost estimations affect the results of a break-even analysis. According to the author, regression analysis can be a helpful tool for predictions of future revenue and cost if fundamental assumptions in the model are satisfied. The most important assumption of regression analysis is that the historical relationship between the dependent variable and independent variable will persist. Therefore, one of the problems of using regression analysis is that the future relationships may not coincide with the relationships indicated by mathematical equations derived from historical data.

Abstract Reviews the book "Accounting: An Introduction," by Charles J. Woelfel.