This paper develops the behavioral hypotheses which underly the design, operation, and audit of internal control systems. The traditional conception of the organizational setting of the internal control system in accounting literature resembles very closely what organization theorists have referred to as the formal organization. When the traditional behavioral hypotheses are examined in the light of current thinking in organization theory, however, some doubt is cast on the validity of the traditional hypotheses. Although the traditional hypotheses are not conclusively invalidated in this paper, enough doubt should exist to stimulate formulation of hypotheses more in agreement with organizational reality.

The best available indication of the present state of college level auditing education can be deduced by considering widely used textbooks. A recent survey of textbooks used by members of the American Association of Collegiate Schools of Business revealed that the five leading textbooks are used in over eighty-seven percent of, the schools. In all of these books predominant emphasis is placed on verification of financial statement categories and a majority of the chapters are directed to serial treatment of specific general ledger accounts. Within these chapters a great deal of detailed procedural advice is given. There are certain current trends in accounting education, in addition to a preference for conceptual material, that must be considered in shaping the content of the auditing course. There is not room enough for remedial courses in the present accounting curriculum. The auditing course should not be used as a review of accounting theory, which should have been learned in intermediate accounting, and there is not time to cover many features of internal control, which are more appropriately covered in the systems course.

The article comments on the compatibility of auditing and management services. Compatibility advocates admit that the performance of management services may create pressures which threaten independence, but quickly point out that pressure exists whether or not the CPA functions as a consultant. Economic pressure is felt by the CPA to retain a client in auditing as well as in consulting. Advocates of compatibility fear that if the CPA were forbidden to perform management and auditing services for the same client this would add substantially to the cost of providing business with all the professional accounting service it needs. In other words, the cost associated with a restriction on services to ensure independence outweighs the cost resulting from a possible decrease in the utility of audited financial statements caused by an impairment of independence. Advocates of compatibility counter that no matter how influential advice is, neither the offering of it nor the acceptance of it gives the adviser the authority or the responsibility of management. No matter how much strength is accorded to either argument, the distinction between advising and decision-making is obviously a debatable one.