Knowledge that Transforms

Reviews the book "Accounting Values and Inflation," by William T. Baxter.

Reviews the book "Normative Models in Managerial Decision-Making." by Lawrence A. Gordon, Danny Miller and Henry Mintzberg.

Recent research in capital market behavior has received wide exposure in the accounting literature. However, except for a passing comment by Beaver [1973], the potential importance of market efficiency in the realm of auditors' legal liability has been largely overlooked. One of the more important aspects of the professional auditor's environment is the legal system. Law, like auditing, is a malleable discipline that adapts to changing conditions. Thus, when an aspect of the environment that potentially affects both disciplines undergoes significant change, this change should be a matter of considerable interest. The impact of knowledge of market efficiency on the legal responsibility of auditors rests ultimately on the choices made by the courts. To the extent the courts are influenced by the arguments presented and by the re-examination of previous argument in light of new information, the role of market efficiency in subsequent litigation could be considerable. In a monopolistically efficient setting, the role would tend to cloud the significance of the distinction between negligence and fraud and would eliminate the need for a criterion of justifiable reliance. In both a competitive and monopolistic setting, it would narrow the class of shareholders that would be presumed to suffer damages. These are significant changes, indeed, and their effects could be far-reaching.

This article presents the text of a report by the Committee on Accreditation of the American Accounting Association (AAA) on accreditation for accounting education in the U.S. as of October 2, 1977. The Committee on Accreditation was appointed to discuss and recommend a posture of the American Accounting Association in the matter of separate accreditation of accounting programs. That the AAA representatives on any standard-setting and accrediting body participate in the preparation of and review and comment on any set of standards proposed. Further, that such standards, if finalized be approved by the AAA Executive Committee prior to their promulgation. If such standards are not so approved, the participation of the AAA in the accrediting effort should be reconsidered by the Executive Committee. The committee are cognizant of the activities of the AJCPA Board on Standards for Programs and Schools of Professional accounting. They recommend as an interim measure that the Executive Committee appoint three members as a steering group to establish contact with the AICPA Board looking towards the establishment of a more broadly based group, including representation from such of the aforementioned accounting organizations as may wish to participate, prior to the adoption of standards and the establishment of a vehicle for their administration.

Present financial statement disclosure standards require that certain items be separately classified in the financial statements and presented net of their applicable income tax. Examples of such items are the cumulative effect of a change in accounting principle, an extraordinary item and a gain or loss resulting from the disposal of a segment of a business. The determination of the income tax effect of such items is complicated when there are differential tax rates and multiple items which must be specially classified. The purpose of this paper is to demonstrate this process and to discuss the complexities that arise when the specially classified items include offsetting gains and losses.

Reviews the book 'Corporate Financial Reporting: The Benefits and Problems of Disclosure,' by D.R. Carmichael and Ben Makela.

Reviews the book "Accounting for Managerial Analysis," by James M. Fremgen.

Human information processing systems (HIPS) research has progressed to the stage of describing characteristics of decision styles. HIPS also has considered various methodologies to determine modeling techniques of individuals. This paper discusses both the decision style and decision model literature. Subsequently, an experiment which attempts to relate the two fields is conducted. The experiment presents quarterly accounting data and asks subjects to render sell-buy decisions. The decisions are modeled using multiple regression techniques and variables utilized to form the basis for comparison with decision styles. Also perceptions of decision models by subjects was elicited. The results were mixed with respect to decision style comparison but supported modeling perceptions.

To find out whether attesters and users of corporate financial reports have any consensus about the value of information included in published corporate annual reports for equity investment decisions, Professor Gyan Chandra surveyed 600 Certified Public Accountants randomly selected from employees of big eight accounting firms and 400 randomly selected Certified Financial Analysts. This article offers a different interpretation of the data reported in Professor Chandra's work. Based upon differences in the mean responses of the questionnaire, Chandra concluded that disparity between accountants and security analysts exists on the value of selected accounting information items for equity investment decisions. Authors have suggested that the observed differences may not be an indication of a lack of consensus on the value of these information items for equity investment decisions. Rather, the observed differences in the survey results may be a result of differences in the way in which these two different subject groups responded to the questionnaire.

This article presents the text of a report by the Committee for New Courses for Professional Accounting Programs of the American Accounting Association in the U.S. as of October 2, 1977. The Committee considered a wide range of possible courses in addition to those embraced by the outlines at the end of this report. Some observations are appropriate in relation to some of the subject areas. None of the proposals deals with the broad topic of income taxation. The omission of this subject area from the report should not be construed as reflecting a judgment by the Committee that the income tax area is not appropriate for inclusion in professional accounting programs or that courses currently available in this area cannot be improved or refined to meet better the objectives of a professional accounting programme. The Committee considered a number of matters that involve assuring the quality and orderly development of new courses for professional accounting programs. One concern involves incentives for the introduction of new courses. A follow-on concern involves monitoring the feedback for new courses that are implemented.