Knowledge that Transforms

This article examines the fundamental ethical rule in tax practice at the level of personal ethics in the U.S. in 1966. This rule states that the tax practitioner must allow the client to make the final decisions. The practitioner has no right to substitute his scale of values for that of the client. Beyond that, the practitioner must recognize a positive responsibility not to provide false or misleading information to the government. This responsibility is imposed on him by Circular 230 and by the Code of Professional Ethics of the American Institute of Certified Public Accountants.

The article reviews the book "The Politics of the Budgetary Process," by Aaran Wildavsky.

The article focuses on intermediate accounting. A case study is presented wherein the variations in the value of the smelter is used to reinforce the logic of the accountant's concepts of verifiable objective evidence and cost as a measure of value. In 1953, the U.S. government entered into a long-term contract with Nickel Smelting Co. for the development of a substantial nickel deposit owned by it, but heretofore unused. Under the terms of the contract the company was to build the smelter with capital funds advanced by the government. The smelter was built during 1953-54, and began producing in quantity in 1935. Initial construction costs were $21,000,000, and an additional $1,800,000 was spent during 1955-56 for replacements and improvements, all of which were capitalized. After making all the calculations it was concluded that at least eight different values, ranging from zero to $15 million were identified. These differing values indicated why many accountants consistently adhere to recorded cost, with all its weaknesses, and to verifiable, objective evidence.

Reviews the book "Tax Basis for Managerial Decisions," by Robert S. Holzman.

The article highlights that there is a definite need for an evaluation of current accounting thought concerning systems and accounting systems instruction. First, the accounting profession should recognize that more is encompassed by management information systems than the accounting system. Recognition of this fact leads to important implications for the training of accountants as "systems men." The educational requirements of the "systems man" can be met currently with an interdisciplinary curriculum of courses drawn from various disciplines, one of which must be accounting. Second, if the courses in the curriculum are taught by those trained to do so, the much-discussed problem of accounting faculty capabilities in the systems area is not as serious as we are led to believe. Finally, members of the accounting faculty need to communicate more freely with their colleagues in non-accounting areas and to develop an understanding, if not a proficiency, in those subjects which complement the traditional accounting systems course.

The article reviews the book "The Value of Information in the Audit Reports of Finnish Companies," by Reginald Jägerhorn.

The core of the working capital concept has been subjected to considerable change over the years. A few decades ago the concept was viewed as a measure of the debtor's ability to meet his obligations in case of liquidation. The prime concern was with whether or not the current assets were immediately realizable and available to pay debts in case of liquidation. In applying this measure a one-year period was frequently used to classify assets and liabilities as current. That is, current assets were those realizable and current liabilities were those due within one year. The focus of attention in recent years has shifted from this liquidation point of view towards the "operating cycle" point of view. This view emphasizes the ability of the firm to pay its maturing obligations from the funds generated by current operations. The article discusses question related to analysis of working capital and the presentation of the amount of working capital at a particular point in time to indicate a rough measure of the "margin or buffer" presently available to meet currently maturing obligations and the presentation of the flow of working capital for past periods and the expected flow covering future periods.

Reviews the book "Cost Accounting for Management," by W.A. Terrill and A.W. Patrick.

Reviews the book "Accounting for Management," by Eric L. Kohler.

Reviews the book "National Association of Accountants on Direct Costing: Selected Papers," by Raymond P. Marple.