Knowledge that Transforms

Reviews the book "The Auditors Study and Evaluation of Internal Control in EDP Systems."

Reviews the book "Market Value Methods for Intercorporate Investments in Stock, Accounting Research Monograph No. 2," by Reed K. Storey and Maurice Moonitz.

Reviews the book "Replacement Costing: Complying With Disclosure Requirements," by Melvin C. O'Connor, Rita C. Grant and Harold M. Sollenberger.

Reviews the book "Interdisciplinary Dimensions of Accounting for Social Goals and Social Organizations," edited by Howard W. Melton and David J.H. Watson.

Reviews the book "Financial Reporting by State and Local Government Units," by Sidney Davidson, David O. Green, Walter Hellerstein, Albert Madansky and Roman L. Weil.

This research was designed to evaluate the potential independence problem posed by CPAs who accept employment with ex-client firms. First, CPA firm data concerning how frequently auditors actually leave public accounting to accept employment with client firms is reported. Next, the reactions of selected users of accounting data and CPAs to a hypothetical case are studied. The case is designed to permit the impact of two variables on perceived independence to be evaluated: (1) the time lapse between auditing and working for a client firm; and (2) the rank of the ex-auditor. The results revealed that the perceived severity of the independence problem was different for the two groups, and that the time and rank variables significantly influenced the responses of both the users and the CPAs.

Reviews the book "Intermediate Accounting," by Donald E. Kieso and Jerry J. Weygandt.

Reviews the book "Public Budgeting Systems," 2nd ed., by Robert D. Lee and Ronald Johnson.

Reviews the book "Social and Business Enterprises: An Introduction to Organizational Economics," by Jonathan S. Boswell.

In the January, 1977, issue of "The Accounting Review," detailed flow charts to assist in the computation of earnings per share (EPS) was presented. Intent was to provide an organized and understandable approach for teaching a complicated topic to students who often become hopelessly confused by the many details and computations required. The purpose of the present note is to point out that an important potential complication concerning the modified treasury stock method of handling options and warrants has been ignored, and its omission may lead to erroneous EPS calculations. The complication involves the use of the 20 percent test, and which options and warrants should be considered in making this test. The first test specifies that all options and warrants are to be combined and the total tested to see if the shares that could be issued through exercise exceed 20 percent of the shares outstanding. When the shares that would be issued through the exercise of all options and warrants do not exceed 20 percent of the outstanding shares, the regular treasury stock method is applicable, and each series of warrants and options would be considered individually for its dilutive effect.