The article presents the financial reports of the American Accounting Association for the year ended August 31, 1972, containing audited data presented in the format recommended by the Executive Committee.
The article presents the author's response to a commentary on input-output analysis for cost accounting, planning and control. The author relates that the commentary's writer talked of the cost allocation model when referring to the use of a system of linear equations to represent apportionment of costs among interacting departments. The author said that it is not clear to the commentary's writer how the term model can be applied in such case. He explains that it would seem that the linear system itself could be termed a model, independently of the use to which it is put.
The article presents the author's views on the concepts of information value, in reference to an article written by Theodore J. Mock for the October 1971 issue of the periodical "The Accounting Review." The author says that Mock attempted to extend the theoretical work of information economics from a decision value focus into model and feedback information value. The author adds that Mock's definitions of information value add nothing new to the theoretical work of information economics. Furthermore, the measure of information value that has been previously developed in information economics subsumes the measures of Mock.
The article explores the problem concerning income tax carryforward benefits arising from net operating losses. The theoretical construct underlying income tax allocation is the matching concept. However, conservatism takes precedence over matching where tax benefits stemming from loss carryforwards exist, except in the case of virtual certainty of realization. But carryforward benefits are a valuable asset. They can be realized through profitable operations or sale of the firm. When accompanied by the presence of deferred credits stemming from accelerated tax depreciation, conservatism relative to carryforwards becomes even more arduous.
The article focuses on the trends in education for auditors. At professional meetings in which "trends" are discussed, there exists a tendency to embrace all new and emerging ideas as being good and to pay scant or little attention to those things which have withstood the test of time. The course in auditing should continue the development of these past few years with its movement toward a conceptual treatment of auditing subject matter and less emphasis on procedural and technical matters. Audit procedures and methodology can be taught more effectively in the in-house programs of the larger firms or in the professional development programs sponsored by the state societies. In addition, procedural matters can best be learned on the job. The fact remains, however, that instruction in auditing too often stresses audit procedures and techniques; this results in an inadequate student understanding of audit theory, concepts, and underlying logic, areas which in any event are better suited to college instruction.
This article presents information on the results of a survey which reflects the views of practicing auditors on the issue of appropriate content for a second course in auditing at the university level. The results of the survey constitute some thoughts on an appropriate direction for auditing and professional education at the graduate level. A questionnaire was sent in batches to participating coordinators in 19 offices representing 16 different CPA firms in Texas. These coordinators distributed the instrument randomly to their respective audit staff personnel. In the analyses of responses which follow the mean importance response was used to rank the topics in order of descending importance, educators may thus be able to compare their judgments with the opinions of practitioners. The mean time assignments for each topic may give educators a starting point for design of the desired auditing course. For purposes of this study, the desired course was viewed as being a part of the fifth year of accounting study by reason of its coverage of material beyond the introductory theory and elementary principles of auditing.
The article reviews the book "Accounting in Business Decisions: Theory, Method, and Use," third edition, by Homer A. Black, John E. Champion and Gibbes U. Miller.
The article comments on the use of fourteenth-century financial statements for teaching accounting. Historical source materials have long been recognized and appreciated as a learning tool in the social sciences. They help to explain the development of concepts, the reasons for their development, and alternative solutions to a variety of problems. Furthermore, the traditional emphasis on skill training in American accounting education left little room for and did not encourage experimentation with historical materials for educational purposes. The term "reserve" itself, is used rather loosely as an expense on the Profit and Loss Statement and as a liability on the Balance Sheet, leading to the conclusion that it means no more than an estimated amount; it is not used here as a precise technical term for an account with a specific function within a double entry framework. Although the pool of ready-to-use source materials is still somewhat restricted, there are books available containing anthologies of limited scope from which materials can be drawn for classroom use. Quite obviously there is some work to be done; but there is also an opportunity for extending the scope and for enriching the quality of accounting education.
The article examines the usefulness of financial ratios to investors in common stock. It was assumed that the formation of expectations about future rate of return rankings was significant to investors. Thus, the explanatory relationships found to exist between financial ratios and rate of return on investment in common stock were tested for ability to predict rate of return rankings. By moving from unadjusted rate of return to market adjusted rate of return, strong evidence of a market effect on the rate of return yielded by a common stock was found.