Reviews the book "Quantitative Methods in Budgeting," edited by C.B. Tilanus.

audit function as it usually relates to public companies culminates in the expression of an opinion on the fairness of the financial statements of an organization. This opinion concerns the financial statement totals, as well as the individual account balances that comprise them. Net income, net assets, and total current assets are examples of aggregated amounts that are often as important as or more important than the accounts comprising them. In addition to this type of aggregation, individual statement amounts - such as cash, accounts receivable, and inventory - are aggregations of related general ledger accounts. Even the individual ledger account may be an aggregation of different groups of elements. These groups may be defined on the basis of a characteristic of the elements. For example, the inventory account may consist of many types of units. Also, the audit sampling process itself may result in a classification system for individual ledger account elements. For example, stratified sampling might be used to preclassify elements by reported dollar amounts. Because of these facts, the auditor should relate his statistical sampling process to testing for fairness of reported amounts at all levels of aggregation. AICPA Auditing Standards Executive Committee recognized this necessity of considering the aggregate effects of statistical testing in its Statement on Auditing Standards: The upper precision limit for errors in an individual substantive test should be established so as to be consistent with the overall audit objective to obtain reasonable assurance that the financial statements taken as a whole are not materially

The article focuses on the decision flexibility of decision makers, which is an alternative decision criterion. In complex decision situations, organizational decision makers often are required to elect and implement a specific decision alternative, so that over time the organization best moves towards its goals. Best may depend upon realization of anticipated states of nature and availability of future decision alternatives. When there is risk involved in either the availability of future decision alternatives or occurrences of states of nature, maximization of expected payoff might be used to guide the selection of a particular decision alternative. However, in environmentally dynamic situations, decision makers may seek an alternative criterion, which authors call decision flexibility. A flexible decision is one, which maximizes the probability of achieving a managerially selected output cutoff. A number of researchers found that in complex decision situations, decision-maker selections differed from those, which would be selected using the expectation model. In an attempt to understand the variation between results of the model and the observed decision behavior, utility theory and subjective probability estimation have been introduced into the expectation model.