Knowledge that Transforms

Decision making, Verbal protocol analysis, Decision processes

Auditing, Auditor judgement, Review process

This study employs an alternative stochastic model which offers important advantages over those proposed by Cohen and Pekelman, and Biddle and Martin. Rather than optimizing with respect to a single order-up-to level determined at the start of each year, the model permits a second order at year-end. This achieves greater descriptive validity by allowing intrayear (as well as interyear) cost changes and additional purchases after demand has been assessed. More important, there is a greater sensitivity to the effects of tax incentives on year-end procurement decisions and a smaller likelihood of year-end stockouts (which unrealistically affect tax incentives by drastically altering inventory cost structures). As a result, the model is uniquely suited for an examination of optimal choices among alternative inventory costing methods and the optimal ordering policies under each. In this study we extend the model to include not only LIFO and FIFO but also AC, a method not previously considered in order quantity models.

Bruce Bublitz, Thomas J. Frecka, James C. McKeown, Market Association Tests and FASB Statement No. 33 Disclosures: A Reexamination, Journal of Accounting Research, Vol. 23, Studies on Accounting Earnings and Security Valuation: Current Research Issues (1985), pp. 1-23

Earnings announcements, Information content, Size effects, Disclosures

Complexity has been linked to the quality of an income tax system (Dean, Keenan, and Kenney [1980]), including its possible influence on the system's ability to generate revenues (New York State Bar Association [1972]). Given the IRS' recent estimate that $81 billion in annual revenue is lost through noncompliance (IRS [1983, p. 21]), the question of whether tax complexity has a significant effect on taxpayers' reporting positions is a potentially important issue. Complexity represents but one strand in a web of interrelated factors and propositions influencing compliant tax reporting in a democratic society. Nevertheless, it has been singled out as a factor affecting compliance and a study of its effect thereon can be viewed as one step in an ongoing program of study of noncompliance. This study involved two distinct phases. The first phase was devoted to obtaining operational definitions of tax complexity, using multidimensional scaling. These definitions of tax complexity were then used in the second phase of the study to test for potential effects of complexity on reporting position selections in four different tax situations. While phase 1 is critical to phase 2 of my study, this paper highlights the results of the latter. Details of phase 1 can be obtained in Milliron [1984]. In section 2 I discuss previous literature involving tax complexity. Section 3 provides an overview of the methodology and the research issues studied. Sections 4 and 5 describe the data collection procedures

Research Methodology, Event studies, Multivariate regression model, Asset pricing

Financial reporting, Information asymmetry, Principle-agent model

Methodology, Exact distributions of test statistics

Charles R. Ransom, The Ex Ante Information Content of Accounting Information Systems, Journal of Accounting Research, Vol. 23, Studies on Accounting Earnings and Security Valuation: Current Research Issues (1985), pp. 124-139