Knowledge that Transforms

Annual report, Disclosure, Field dependence, Field independence

* Assistant Professor, University of Florida. author wishes to thank Professors Bodenhorn, Greenball, and Livingstone of Ohio State University for their valuable comments on an earlier version of this paper. This paper is part of Gerald L. Salamon, Comparison of the Accounting and Internal Rates of of Firms With Nonnegative Growth Rates and Infinitive Lives, unpublished Ph.D. dissertation, Ohio State University, 1971. 'R. S. Carlson, Measuring Period Profitability: Book Yield Versus True Yield, unpublished Ph.D. dissertation, Stanford University, 1964. M. N. Greenball, Appraising Methods of Accounting for Accelerated Tax Depreciation: A Relative Accuracy Approach, Journal of Accounting Research (Autumn 1969), pp. 26289. G. C. Harcourt, The Accountant in a Golden Age, Oxford Economic Papers, March 1965, pp. 66-80. J. L. Livingstone and G. L. Salamon, Relationship Between the Accounting and the Internal Rate of Measures: A Synthesis and An Analysis, Journal of Accounting Research (Autumn 1970), pp. 199-216. E. Solomon, Return on Investment: Relation of Book Yield to True Yield, Research in Accounting Measurement, ed. R. K. Jaedicke, Y. Ijiri, and O. Nielsen (Menasha, Wise.: American Accounting Association, 1966), pp. 232-44. 2 scope of this investigation will be restricted to the research which is cited in footnote 1. In order to avoid the frequent repetition of several authors' names we will use the term prior to denote that group of researchers whose work is cited in the footnote 1. 'Ezra Solomon, Alternative Rate of Concepts .. ., op. cit., p. 68.

Jarrod W. Wilcox, [Discussion of a Prediction of Business Failure Using Accounting Data]: A Reply, Journal of Accounting Research, Vol. 11, Empirical Research in Accounting: Selected Studies 1973 (1973), pp. 188-190

There now exists a relatively large body of literature dealing with statistical sampling in auditing. This literature is mainly classical, in the sense that the auditor subjectively specifies desired confidence intervals1 and confidence levels as the basis for designing his audit sample.2 In specifying a confidence level, the auditor should take his evaluation of the adequacy of the firm's internal control into account, i.e., better internal control allows a lower audit size and enables the auditor to accept the resulting lower level of confidence in his estimates. However, no formal mechanism exists for linking the auditor's prior assessment of internal control and his sample design. Rather, this is left to the auditor's judgment.3 The lack of such a mechanism is a major defect of the classical approach to statistical sampling in auditing.

Historic cost, Market value, Replacement cost, Inventory

In this paper, I provide some evidence concerning the relationship between financial information and a firm's entry into a capital market. The main assumption underlying this study is that corporations will be motivated to upgrade their financial disclosure in order to obtain scarce money capital as cheaply as possible.' To assess the relationship between disclosure and capital market entry, I selected the entry of an enterprise-investor into an international new issues market. My reason for this choice was simply that a firm would be expected to make its security issues relatively appealing during entry in order to attract support from an audience which possesses alternative outlets for their savings.2 The demand for information would appear to be even stronger in an international setting where investors are often unacquainted with the relative merits of foreign borrowers.3 The effect of

Philip J. Harmelink, An Empirical Examination of the Predictive Ability of Alternate Sets of Insurance Company Accounting Data, Journal of Accounting Research, Vol. 11, No. 1 (Spring, 1973), pp. 146-158

Estimation Problem, Cost allocation, Internal rate of return, Price-level Problem

In this paper we report some additional evidence regarding the effects of alternative inventory accounting techniques on the decisions of laboratory subjects. Briefly, we have attempted to incorporate various factors within the experimental design which may aid us in interpreting the findings from such laboratory experiments on the effects of alternative accounting techniques. At the outset, we wish to clarify our views about the entire issue of how accounting procedures may affect resource allocation decisions. First, there is an impressive body of evidence supporting the efficient market hypothesis in the assessment of the impact of new information on the prices of securities in capital markets.1 At the aggregate level, there is little reason to believe that the market is fooled by different accounting methods.2 However, the available evidence on the efficient market implies nothing about the ability of individual decision-makers, such as managers and credit officers, to adjust accounting reports across different valuation techniques. Individual decision-makers are our only concern. Granting this orientation, there is still some doubt about the implications of the findings of experimental studies like ours concerning the whole issue of alternative accounting techniques. As an example, suppose subjects-especially students-favor as an investment a firm which reports

Accounting changes, Discretionary accounting decisions, Management turnover, Earnings management