Knowledge that Transforms

This article illustrates graphically various aspects of the scope paragraph of the audit report. Firstly, what was examined, that is the scope of the examination is determined by the client before the engagement starts. The client may want only an examination of cash, inventories, receivables, fixed assets, or some combination of these; or he may want a detailed examination of the balance sheet accounts as of the year-end and the related income, expense and surplus ac- counts for the year then ended, as indicated in the quoted paragraph above. Secondly, standards of audit performance. The quality of work performed is referred to here and this quality is determined primarily by the accounting profession through the medium of general acceptance. Finally, amount of work done by auditor. This concerns the amount of work the auditor must do to satisfy himself to render an opinion concerning the financial statements of accounts audited (which is the subject of the opinion paragraph).

According to the author, the topic to which he addresses himself is a challenging one. It is of paramount importance to all concerned with a vital segment of our system of higher education and the continued advancement of the dominant social and economic institution, the business corporation. The author approaches the subject with humility. The author hopes that this paper will serve as a catalytic agent encouraging others to think deeply and perceptively on the role of business schools in a changing environment, and subsequently that faculty of business schools will forget their vested interest and act to make modem education for business the vital force required in the dynamic world economy. Within the business schools one need also to utilize the integrated systems approach that has characterized post-war management. Too often today there is no integration of different functional subject matter. Each discipline is frequently taught as though other business areas don't exist, or if they are recognized, they are assumed to be peripheral. The false barriers of subject matter specialization by traditional functional business areas must be breached; the areas must be integrated into a related systems approach.

This article focuses on the role of certified public accountants (CPA) in management services. Demands on businesses have multiplied over the years as a result of the changing nature of competitive markets, rapid developments in technology of production equipment, availability and increased use of high-speed computers, expansion of knowledge in almost every field of learning, and a constant increase in the number, variety, and complexity of laws affecting business operations. Yet, in spite of all the encouragement given by professional organizations, the cries of business managers for more help and the cold statistics on the volume and lucrative rewards of the consulting business, many CPA have apparently not entered this field nor are they relatively frequently called upon by firms seeking consulting services. Some CPA firms are very active in rendering management services, but the number of firms who are is quite small. Further- more, revenue received by a CPA for management services is a very small portion of the total annual fees of $550 million paid by businesses for consulting work, as well as a small percentage of the total revenues realized by a CPA.

Reviews the book "Accounting for the Flow of Funds," by Hector R. Anton.

Reviews the book "A Tentative Set of Broad Accounting Principles for Business Enterprises," by Robert T. Sprouse and Maurice Moonitz.

ONE of the most striking features of present accounting literature may be said to lie in the growing interest paid to the mathematics of variance analysis. This development began in 1953 when Gilbert Amerman published his very famous article on the subject. The variation analysis may be easily tied to an effective budgetary control system by comparing the standard and actual costs of a period with the corresponding budgeted costs. On these lines it is possible to discern the influence that important activity and production mix variations had on the direct materials and labor costs. The analysis of manufacturing overhead variances must be made by cost centers or departments. There are six systems of variance analysis that are of practical and/or theoretical importance, all of them showing the same net variance between actual costs and standard costs of the actual production. The standard variable overhead rate times the difference between the actual hours of the period and the standard hours allowed for actual production may be called the excess hours controllable variance. In some textbooks this difference between the variable budget allowance for standard hours and actual hours is called "efficiency variance."

Reviews the book "The Investment, Financing, and Valuation of the Corporation," by Myron J. Gordon.

This article provides information about professional examination of accounting. The following problems were prepared by the Board of Examiners of the American Institute of Certified Public Accountants (C.P.A.) as the first half of the C.P.A. examination in accounting practice on May 13, 1964. The candidates were required to solve problem one through four and either five or six. Time allowances were assigned as per the problem. Some of the questions were, John Andrews is a principal partner in two separate partnerships, A and B, Partnership A's fiscal year ends June 30 and Partnership B's ends September 30. As partner, Andrews' share of the partnerships' taxable income for the fiscal years ending in 1963 was $8,000 and $20,000 respectively. Andrews, who reports on a calendar year basis, would report taxable income for 1963 from partnerships of, five options were provided, out of which one was correct. Another question was, in computing the taxable income of a partnership for 1963 a deduction is allowed. Five options were provided for the same.

Reviews the book "Cost Accounting Principles and Managerial Applications," by Gerald R. Crowningshield.

Reviews the book "Elementary Accounting ," 3rd ed., by Arthur W. Holmes, Gilbert P. Maynard, James Don Edwards, and Robert A. Meiter.