Abstract Bayesian statistical sampling procedures for auditors have the potential to improve audit efficiency by decreasing the sample size required to achieve a desired reliability for the auditor's statistical conclusions from the sample. The increased efficiency is obtained in the Bayesian approach by formally including the auditor's subjective prior estimates (e.g., error rates) in the sample evaluation. The Bayesian method in effect provides a formal analytic procedure for including much of the auditor's informal information about an audit population together with the information obtained from the sample. This thereby reduces the sampling required to achieve desired reliability for statistical statements about the audit population. The program is in conversational mode, so that students with little knowledge of computers can use it to understand the potential of the Bayesian approach in audit sampling. The introduction provided by this program can help the student learn that computer routines easily put complex mathematical methods within the reach of audit practice.

Abstract The article informs that the purpose of this research was to obtain empirical insight into the concept of materiality in external reporting by constructing a mathematical model to describe the way in which a sample of knowledgeable individuals believed materiality judgments ought to be made. A set of 30 hypothetical cases was developed as an experimental instrument. Each case involved either a gain or loss on a noncurrent asset, a change in accounting principle or an uncertainty. In order to insure face validity the cases were developed to conform with parameters estimated from 103 actual financial reporting situations. The 30 cases were administered in a field experiment to 18 partners in national public accounting firms and 15 securities analysts. These subjects were instructed to categorize each case as requiring three alternative types of disclosure. By using the subjects' evaluations as a criterion and the 8 materiality variables as predictors, a multiple discriminate model was developed and validated that replicated the judgmental process of the subjects with 63% accuracy. The model was 84% accurate in discriminating between immaterial cases and material cases.

Abstract Reviews the book "The Auditor's Reporting Obligation," by D. R. Carmichael.

Abstract The article focuses on management representation as the first step towards independent audits of management. Economist Robert W. Clarke developed a rational case for extension of the Certified Public Accountant (CPA's) attest function in corporate annual reports' and economists Harold Q. Langenderfer and Jack C. Robertson presented a theoretical structure for independent audits of management. These authors pointed out the demand for additional information about management and managerial activities and suggested forms of attest extension and management auditing as potential approaches for satisfying this demand. Langenderfer-Robertson perceived management auditing in the context of independent audits of management representations in relation to the widely accepted use of the term management audit to describe evaluations or audits for management. According to Clarke, the term independent audits of management representations was used to connote an attestation context of auditing whereby credibility is added to the representations made by one party to another through the expert opinion of an independent third party.

Abstract This article presents information on the results of a survey which reflects the views of practicing auditors on the issue of appropriate content for a second course in auditing at the university level. The results of the survey constitute some thoughts on an appropriate direction for auditing and professional education at the graduate level. A questionnaire was sent in batches to participating coordinators in 19 offices representing 16 different CPA firms in Texas. These coordinators distributed the instrument randomly to their respective audit staff personnel. In the analyses of responses which follow the mean importance response was used to rank the topics in order of descending importance, educators may thus be able to compare their judgments with the opinions of practitioners. The mean time assignments for each topic may give educators a starting point for design of the desired auditing course. For purposes of this study, the desired course was viewed as being a part of the fifth year of accounting study by reason of its coverage of material beyond the introductory theory and elementary principles of auditing.