Knowledge that Transforms

Management information processing, Managerial control, Performance, Information processing

Certified public accounting is a profession whose members are independent practitioners or members of firms rendering services in three broad areas: auditing, taxes, and management services.' In order to perform effectively selected tasks, professions rely on a certain amount of autonomy given by society. Along with the privilege of autonomy goes the responsibility of self-regulation. Any profession which fails to regulate effectively the professional behavior of its members risks the loss of its autonomy.2 As a profession, certified public accounting has the task of regulating the professional behavior of its members. The objective of this paper is to report findings on the ethical behavior of Certified Public Accountants.

I only wish I could have been with you throughout the day and tomorrow but since our annual partners meeting is currently under way, I believe you will understand why this is not possible. However, it is a pleasure for me to have this opportunity to be with you tonight and to touch, at least briefly, on some important matters which are and should be of concern to each of us. The subject of accounting principles has been discussed so often over the last few years there would seem to be little more to be said. But this is not the case. The accounting profession through the AICPA has always recognized that much more remains to be said and done to answer the many critics of our present structure and methods of establishing accounting principles: Today, however, we are experiencing renewed-or entirely new-thrusts from concerned bodies outside the profession. It is unfortunate that some, if not most, of these critics have been given their arena for comments as a result of past efforts of the APB or its predecessor committee. It is equally unfortunate that some outside of the profession have been able to seize on their pet areas without our having any better defenses than are currently available. I hasten to add at this point that I do not suggest that little or nothing has been attempted or accomplished by the profession or the APB. Neither do I want to leave the impression that those who have worked so diligently over the years have given less than their best efforts or that their motives have been suspect. No one could have been expected to work more diligently or tried harder to reach satisfactory conclusions than have the members of the APB. Such problems as have existed have stemmed to a large extent from the lack of unanimity of philosophy or understanding of the general objectives of corporate financial statements, despite the fact that one of the original charges given the APB upon its formation in 1959

M. Edgar Barrett, [Discussion of Accounting for Intercorporate Investments: A Behavior Field Experiment]: A Reply, Journal of Accounting Research, Vol. 9, Empirical Research in Accounting: Selected Studies 1971 (1971), pp. 79-92

Auditing, Sampling plan, Representative sampling, Preventive Sampling

Purchase-Pooling, Income smoothing, Mergers

Capital Budgeting, Breakeven analysis

Most textbooks call convertible bonds and convertible preferred stocks hybrid securities because they have the characteristics of senior securities together with many of the attributes of common stocks. In most, if not all, balance sheets they are classified as senior securities and their claim against earnings is reported to be the coupon interest or the dividends declared.' Yet, in most cases the nominal rates of return on these securities are substantially below those of equivalent-risk nonconvertible securities. It is apparent that these nominal rates are an inadequate measure of the real cost of convertible securities to the firm.2 What then is the cost of convertibles? To what extent do published reports understate or overstate their cost? What are the important variables affecting that cost? How does the cost of debt affect earnings per share? This paper presents the results of an empirical study intended to answer those questions. It seems clear that a convertible security, either bond or stock, derives its value from the magnitude of its share of the firm's earnings, present and future. That share however is not limited to the cash payout alone; it also includes a pro-rata, per equivalent common share portion of the current period earnings retained by the firm. To the extent that earnings

Aggregation, Managerial decision making, Preference patterns, SEU Model

In recent years, several studies have appeared which provide some support for an inverse relationship between earnings variability and share price.' That is, increased variability in reported earnings, other things equal, appears to reduce the price of a firm's shares. A rationale for this behavioral phenomenon has been suggested by several accounting writers. Almost two decades ago Hepworth contended that :2