The article reviews the book "Accounting: A Management Perspective," by Lyman A. Keith.

Reviews the book "Auditing the Performance of Management," by Leo Herbert.

Reviews the book "Accounting for Managerial Decision Making," by James Don Edwards, Roger H. Hermanson and R.F. Salmonson.

Reviews the book "Managerial Accounting: An Introduction to Concepts, Methods and Uses," by Sidney Davidson, James Schindler, Clyde Stickney and Roman Weil.

Reviews the book "Effective Use of Statistics in Accounting and Business," by John B. O'Hara and Richard C. Clelland

Reviews the book "Managerial Statistics," 2nd ed., by Kermit O. Hanson and George J. Brabb.

This study examines whether clients' business strategies are a factor in determining the occurrence of financial reporting irregularities and the level of audit effort. We use the organizational strategy theory of Miles and Snow to develop a comprehensive measure of business strategy using publicly available data. We find that Miles and Snow's Prospector strategy is more likely to be involved in financial reporting irregularities and generally requires greater audit effort. The business strategy measure also appears to capture client business risk and provides incremental explanatory power beyond the individual measures of client complexity or risk used in traditional audit fee models. We contribute to the literature by constructing a replicable business strategy measure and identifying organizational business strategy as an important ex ante determinant of financial reporting irregularities and levels of audit effort. Our results suggest that investigating how audits can be improved to reduce financial reporting irregularities among Prospector clients is an important area for audit practice and future research.

THE possibility that there is a limit to the total tax burden which an economy can bear receives considerable public and professional attention from time to time, but few attempts have been made to examine this problem systematically. Presumably, this is a reflection of the fact that economists generally believe there is no single, immutable limit. However, Mr. Colin Clark has developed the bold generalization that there is a critical limit to taxation which is approximately the same for all nontotalitarian countries in time of peace. Although Mr. Clark first presented his thesis over six years ago in an article in the Economic Journal, it did not gain widespread public attention in the United States until late I950 when he summarized his views in a brief popular article published in Harper's.' Mr. Clark recently reaffirmed his views in a letter to the Joint Committee on the Economic Report.2 It is, therefore, timely to examine Mr. Clark's thesis and the statistical evidence which he presents to support it. Mr. Clark's thesis is that inflationary forces come into play when the tax burden (including federal, state, and local taxes) exceeds 25 per cent of the national income.3 This figure was derived from an analysis of data covering several countries for various periods. The limit is acknowledged to be approximate and should certainly be written 24-26 if not 23-27. 4 Beyond 27 per cent, there is a high degree of probability that inflation will materialize. The process may take as much as two or three years to work itself out. In his I945 article, Mr. Clark explained the limit primarily on the basis of the political argument that there is a transfer of allegiances by influential elements of the com munity toward inflation when taxation reaches the 25 per cent level. Since certain items of government expenditures, such as interest on the national debt and Civil Service salaries, are fixed in money terms, government expenditures are likely, during an inflation, to rise less than the general price level and national income Thus, the real burden of government expenditures may be reduced by inflation. As Mr. Clark puts it:

Two well-known stylized facts on earnings management are that the earnings surprise distribution has a discontinuity at zero, and that positive earnings surprises are associated with positive abnormal returns. We link these two facts in a model of the earnings management decision in which the manager trades off the capital market benefits of meeting earnings benchmarks against the costs of manipulation. We develop a new structural methodology to estimate the model and uncover the unobserved cost function. The estimated model parameters yield the percentage of manipulating firms, magnitude of manipulation, noise in manipulation, and sufficient statistics to evaluate proxies for identifying firms suspected of manipulation. Finally, we use the Sarbanes–Oxley Act as a policy experiment and find that by increasing costs, the Act reduced equilibrium earnings management by 36%. This reduction occurred despite an increase in benefits, consistent with the market rationally becoming less skeptical of firms that just meet benchmarks.