Knowledge that Transforms

Financial distress, Operating cash flows, Bankruptcy, Predictive ability

Research Methodology, Abnormal returns, Beta reliability, Information content

In order to express an opinion on the fairness of the presentation of the financial statements, an auditor collects evidence from a variety of sources. Much of this evidence is in the form of sample results that must be evaluated as to the level of sampling risk present (AICPA [1981, sec. 26]). Auditors often select and evaluate samples judgmentally rather than on the basis of a statistical method.' The assessment of risk, however, is a cognitively difficult task (Huber [1974, p. 434]), and often the results may be systematically biased (Tversky and Kahneman [1974]). It seems that there is a general problem of underutilizing or ignoring normatively

Segment reporting, Simulated mergers, Forecasting

Richard A. Grimlund, A Proposal for Implementing the FASB's "Reasonably Possible" Disclosure Provision for Product Warranty Liabilities, Journal of Accounting Research, Vol. 23, No. 2 (Autumn, 1985), pp. 575-594

William S. Waller, Self-Selection and the Probability of Quitting: A Contracting Approach to Employee Turnover in Public Accounting, Journal of Accounting Research, Vol. 23, No. 2 (Autumn, 1985), pp. 817-828

Analytical review, Diagnosis model, Audit planning, Auditing

Municipal bonds, Bond price data, Databases

Disclosures, Voluntary disclosures, Proprietary information, Regulatory changes

Financial ratios, Cross-sectional study, Systematic factors, Test of normality