Knowledge that Transforms

Reviews the book "Behavior of Major Statistical Estimators in Sampling Accounting Populations," by John Neter and James K. Loebbecke.

Reviews the book "The External Audit," vol. 1, "Concepts and Techniques," vol. 2, "Organization and Procedures," by R.J. Anderson.

The goal of this study is to investigate the incremental information content of the 10-K (i.e., the information content of the data which are contained in the 10-K, but which are not included in the annual report) from a market perspective. This objective was accomplished by examining aggregate market reaction to the 10-K via several statistical procedures. Each of these procedures appears to imply that the market, in the aggregate, uses the incremental data in the 10-K in setting equilibrium security prices and, consequently, that this data set possesses information content.

Discussion regarding whether to require management to make earnings forecasts public has been based, in part, on the existing evidence concerning published management earnings forecasts. This article evaluates certain attributes of forecast firms in an effort to determine whether currently produced forecasts are representative of what might be produced by all firms if forecasts were mandatory. The results of the various tests all suggest that previous research findings may not provide a sound basis for a policy decision on forecasting.

Reviews the book "Die Waehrungsumrechnung im Internationalen Konzernabschluss," by Wolf Tietze.

Reviews the book "Management Accounting and Control of Data Processing," by Richard L. Nolan.

Liability valuation in an exit-price accounting system is an unsettled issue even though the subject has been extensively debated. In this article, a theoretical structure, based on Sterling's wheat trader model, is developed to show that market prices should be used. The assumptions of the wheat trader model may be restrictive, but they will be later relaxed in this paper to show that the conclusions are more widely applicable. Chambers's arguments against the use of market prices are examined to show that they do not invalidate the conclusions. This paper concludes with the suggestion that, if market price valuations of liabilities were generally adopted, a ratio of current interest cost to equity could be used as an alternative performance measure to the traditional debt to equity ratio.

The article reports on the process of editorial review. It is the object of this article to describe and explain the reviewing process and to comment on the points of particular sensitivity. Except when associate editors are involved, the entire review process is conducted anonymously. Many reviewers prefer not to know the author's identity, and authors sometimes believe that factors attendant to their identity may serve to prejudice the reviewers. Apart from the design of the process itself, much of which is inherited from one's predecessors, the two most critical decisions are the choice of the reviewers and the editorial decision to be made on the basis of the reviewers' analyses and recommendations. Reviewers serve in an advisory capacity to the editor. It is important to emphasize that it is the editor who decides on a manuscript. It is to be hoped that the editor will be guided in the great majority of instances by advice furnished by the reviewers. But the responsibility for making sound editorial decisions is necessarily his, and it must be understood that he may disagree with their counsel. In such circumstances, he may seek advice from still other reviewers until he believes that a particular course of action deserves his support.

Relevant costing and incremental analysis are often-used decision-making tools. Irrelevant costs are excluded from any incremental decision-making problem because they are supposed to have equal effects on all the available alternatives. This paper demonstrates that when utility analysis is introduced, and when uncertainty exists, the "irrelevant" items may become relevant as the decision-maker's perspective shifts along his preference function. This phenomenon is especially true when large dollar "irrelevant" items prevail. The problem is further compounded when deciding the proper datum for the utility function and for the various costs and revenues.

Reviews the book "Fundamentals of Management Accounting," by Robert N. Anthony and Glenn A. Welsch.