Knowledge that Transforms

Reviews the book "CPA Review Outline," by Emerson O. Henke and Walstein Smith.

The development of generalized computer-audit programs makes an important contribution to the further advancement of the public accounting profession. as it builds a favorable image of the profession, reduces audit time for clerical operations, reemphasizes the importance of professional judgment, instills self-confidence into auditors, and attracts more well- qualified personnel into the profession. To allow auditors of tomorrow an opportunity to appreciate the potential of generalized computer-audit programs, the author has prepared one such program, dubbed as AUDIT-AID. The use of AUDIT-AID has indicated to students the significance of professional judgment, the importance of review of internal control, and the place of computers in auditing.

The article examines the rationale of the proposed expansion of data used in external reporting. A new approach to external reporting has emerged in the recent accounting literature. Much of the accounting research over the past several decades has emphasized alteration or augmentation of reported data within the confines of the historical cost model. Financial decision-makers have access to a wide range of data. Government and business periodicals provide an abundance of information regarding macro-environmental events such as the state of the economy and factors relevant at an industry-wide level. Expanding the range of data provided is viewed as a means of overcoming the limitations of contemporary reports without necessitating detailed knowledge of user decision models. Social psychologists differentiate human information processing structures by their degree of concreteness. It was suggested above that the actual financial environment confronting the statement user is complex. Such inherent complexity necessitates simultaneous analysis of many variables in order to establish the expected future financial impact of a given series of observed events. This position is predicated on the assumption that detailed information about user decision models is needed to support the choice of a particular measurement model.

Inventory should be valued either at net realizable value or at replacement cost, and that the choice between these two measures should depend upon the nature of the constraint which limits the level of activity of the firm holding the inventory. In the usual case, where sales are limited by demand rather than supply and where selling price exceeds replacement cost, the value of inventory to the firm owning it is equal to its replacement cost. Where the level is controlled by supply rather than demand e.g., where production capacity is the limiting factor, it is net realizable value which represents the value of inventory to the firm and which should, therefore, be used as the accounting measure. Net realizable value is also the appropriate accounting measure when it lies below replacement cost. The value of inventory to the firm will now be investigated more rigorously with the aid of the duality theory of linear programming. For completeness, we shall consider, in an appendix, certain knife-edge cases not previously discussed, such as the case where net realizable value exactly equals replacement cost, or demand exactly equals supply.

Reviews the book "Cash Management: Methods and Models," by Yair E. Orgler.

Reviews the book "The Allocation Problem in Financial Accounting Theory," by Arthur L. Thomas.

The staff of the Air Force Accounting and Finance School decided to explore the use of programmed instruction in teaching certain basic accounting procedures to their young trainees. This school was interested in investigating programmed instruction in terms of its effectiveness and as a possible means of reducing the required training time while maintaining the desired quality of learning. The purpose of this article is to describe the study designed to evaluate the programmed materials developed. While this course was more technical in nature than the modern college accounting course, still as a rather well defined controlled experiment, the experiment should also be of interest to college instructors. This study was conducted at a Department of Air Force technical training school, which has the responsibility of training personnel in the area of governmental accounting procedures. A programmed textbook was developed specifically for the experimental unit of instruction and consisted of two volumes and an Answer Panel. It was written only after the objectives of the unit had been formulated in student behavioral terms and the criterion test developed.

Reviews the book "Contemporary Accounting and the Computer," by Leonard W. Hein.

The charge of the committee was to propose objectives for research in accounting history, develop guidelines for the teaching of accounting history in undergraduate and graduate courses and provide a forum (perhaps a roundtable at Association conventions) through which those interested in the teaching or research of accounting history could hear papers and exchange ideas. Accounting history is the study of the evolution in accounting thought, practices and institutions in response to changes in the environment and societal needs. It also considers the effect that this evolution has worked on the environment. While the committee believes that a separate course on accounting history should not be required at either the undergraduate or graduate level, such a course should be available as an elective at the graduate level. Doctoral candidates should be required to demonstrate an appreciation of the historical dimensions of current thought, practices and institutions, either by written or oral examination.

Reviews the book "Organizational Planning and Control Systems," by James C. Emery.