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A General Approach to Stochastic Management Planning Models: An Overview.

John F. Kottas; Amy Hing-Ling Lan; Hon-Shiang Lau
The Accounting Review 1978 53(2), 389-401
This article presents a general framework for handling a large class of stochastic management models that includes the stochastic CVP problem and stochastic present value analysis. After demonstrating the need of more flexibility and realism in risk analysis modeling, the authors consider the "four-moments" approach in describing diverse probability forms. Next, a set of easy-to-use formulas are presented for computing the exact values of the first four moments of the model's objective variable. Finally, methods. are discussed for achieving the two most important purposes of stochastic management modeling: estimating the probability of realizing various objective variable levels and determining the expected utility of a risky project. The entire framework blends several original formulas with some well-established techniques previously little known in the accounting/management literature. Compared to other recently published approaches, this framework permits more realistic modeling, requires less computations and provides more accurate and meaningful managerial information.

A Note on the Informational Content of Corporate Annual Earnings Forecasts.

Bikki Jaggi
The Accounting Review 1978 53(4), 961-967
This study examines whether disclosure of management's annual earnings forecasts provides investors with additional relevant information for their decisions. Investors' reaction is measured in terms of changes in daily stock prices. The significance of the unexpected returns resulting from forecasts is tested under the assumption of symmetric stable distribution. Buy- and sell-short strategies have been used to calculate cross-sectional averages and cumulative residuals. The findings of the study suggest that earnings forecasts are accompanied by price adjustments on the days surrounding the earnings disclosure date, implying that forecasts disclosure may cause investors to revise their expectations. These findings, however, relate to forecasts disclosed on a voluntary basis only, and do not necessarily pertain to mandatory disclosures.

Audit Education for the 1980s.

Jay M. Smith
The Accounting Review 1978 53(2), 501-509
Audit education in the university accounting curriculum has not kept pace with the needs of new entrants to the auditing profession. This article describes an attempt at Brigham Young University to professionalize the auditing curriculum by expanding the typical one-semester auditing course to two required semester courses with an elective third course. The first course is basically conceptual, with emphasis upon the environment faced by auditors and an overview of the audit process. The second course is more procedural and emphasizes the development of audit skills. The third elective course pieces emphasis upon developing audit research skills. Learning objectives for the first two courses have been developed and are included in the appendix. Innovative audit education is needed to meet the challenges of auditing in the 1980s.