Knowledge that Transforms

Reviews the book "Users' Guide to Computer Crime: Its Commission, Detection and Prevention," by Stephen W. Leibholz and Louis D. Wilson.

Reviews the book "The Accounting Profession," by John W. Buckley and Marlene H. Buckley.

The article is concerned with improving the utilization of accounting information in prediction situations. In this context improvement is defined in terms of an increase in prediction accuracy. If adequate criterion information is available, increase in prediction accuracy may be "directly" assessed by measuring the correspondence between criterion values and predictions of those values. The article recognizes that there are at least two approaches to improving prediction accuracy. The first approach is to improve the data which are supplied to decision-makers and used as a basis for predictions. The second approach is to improve the way that predictions are made on the basis of whatever data are used. The author presents evidence from the psychology literature that individuals may usefully be replaced by their models in prediction tasks, and he also discusses the reasons for this situation. He presents evidence from the management literature which leads to the same conclusion and discusses implications for accounting of these findings.

Reviews the book "Computer Accounting Methods," by Gregory A. Cook, Barbara J. Wade and Clark C. Upton.

The article provides information on a report about financial statements issued by the Study Group of the American Institute of Certified Public Accountants. The report focuses on a relatively unified set of objectives for financial reporting. It offers authoritative recognition of useful concepts that the profession has been reluctant to accept in the past. It also dispels tendency to deny the responsibility of accountants for the value of information contained in financial statements. The group asserts that the basic objective of financial statements is to provide information useful for making economic decisions.

The article examines several aspects of the relationship between accounting earnings and stock prices. The author discusses the market reaction to accounting changes and whether any non-reported earnings measures have a higher association with stock prices than the reported measure. insurance stocks. The topic of insurance stocks is of added interest to the accounting profession as considerable resources have been devoted to analyzing two issues in the insurance industry, that is, the measurement of underwriting earnings and the measurement of capital gains and losses on marketable equity securities. The article also provides some evidence on the marketable securities issue. One argument against the inclusion of annual capital gains and losses in the income statement, rather than a separate surplus statement, was that the income statement alternative "may be a damaging factor to the orderly functioning of the stock market" and may cause "the stock of the company to decline when it should not." The evidence in this article suggests there is a small likelihood of such consequences.

This article discusses the dilemma that exists in the classification of the receivable in a lease transaction. The current portion of the receivable may be thought of as the discounted value of the payment to be received within one year ($83,333), or the amount by which the principal of the receivable will be reduced during the year ($40,188). Combined with scholars Michael L. Fetters and Steven D. Grossman dilemma, the authors note four possible ways to report on the Statement of Financial Position. In all four methods the total receivable is the same ($299,060), but there is a significant difference in the Current Asset section. Methods 1 and 3 treat the lease receivable as if it were comprised of five separate notes with staggered maturities. Methods 2 and 4 treat the lease receivable as though the firm had loaned a single sum, $299,060, and any payments will be applied first to interest, on the outstanding balance, then to reduction of principal. Thus, the payment received at the end of period 1 would be composed of principal of $40,188 and interest of $59,812.

Reviews the book "Contemporary Auditing Problems," edited by Howard F. Stettler.

This article presents response of the author on comments made by scholars Jack Hayya, William Ferrara, and Erwin Saniga on the paper "Extending the Applicability of Probabilistic Management Planning and Control Models" that was published in the January 1974 issue of the periodical "The Accounting Review." One of the main points in the comment seems to revolve around the contention that recent advances in nonparametric statistical tests and the corresponding computer routines have made obsolete the use of Tchebycheff-type inequalities in probabilistic models. There are at least two possible reference points for defining the term obsolete. First, the term can be defined by referencing to the current level of technological feasibility, that is, what does one knows about the problems and techniques under consideration from a purely technological standpoint. Hayya and others are correct in stating that great advances have been made in the area of nonparametric statistics and the related computer routines. These advances have extended the technological feasibility of applying probabilistic planning and control models.

The article examines the use of an accounting information system for evaluating the success of an organization. A descriptive model of the relationship among classes of variables affecting performance, the use of information, and action is described by the author. Performance is expected to be influenced by a number of variables which are likely to have a low correlation with performance. Performance is expected to be influenced by a number of situational and personal factors based on the results of several past studies of sales force performance. The organization involved in this article is a major California bank with more than 200 branches in the state. Branch banking in California is unique; there is fierce competition even for retail business which is usually ignored by commercial banks in other states. The bank is a major user of computers and has a number of information systems producing reports for distribution to branch management. Interviews were held with members of the information systems department staff to select reports which have managerial significance, that is, which provide information beyond routine operational data.