Knowledge that Transforms

This article presents response of the author on comments made by scholar Stephen E. Leob on the paper "The Auditor-Firm Conflict of Interests: Its Implications for Independence" that was published in the October 1974 of the periodical "The Accounting Review." In his comment on the article, Leob has raised two issues. The first concerns the behavior model of independence. He argues that this model is lacking because it concentrates only on the economic power aspect while it does not give recognition to all the variables that may affect an auditor in such circumstances. Second, he makes a specific suggestion for improving the model. He introduces the three factors used by scholar Jerome Carlin to explain the behavior of deviant attorneys and suggests that by using the Carlin model one can perhaps obtain a more realistic view of the auditor's reaction to client's pressure and economic power. The authors argue that Loeb's criticism of their model is unjustified. It results from a failure to realize that in an earlier article they were not concerned at all with predicting the behavior of individual auditors when subjected to client's pressures. In that article, the authors dealt with a different problem, namely, explaining why the independence issue has become so prevalent in the auditing profession.

This article presents the authors' reply to their criticism of an article written by Joshua Ronen related to transfer pricing and divisional autonomy, published in an earlier issue of the journal "The Accounting Review," as of April 1975. In their criticism, the authors were interested in bringing some of the suggested transfer pricing systems into a common perspective in such a way that it would facilitate interrelating these systems and would avail a comparative analysis of the extent to which the main goals of transfer pricing can be achieved. In this article, first the authors shall reconcile their terminology with the one used in the transfer pricing system. Second, they will paraphrase the seven steps provided by Ronen, which he claims to be a summary of information flows in the system. This paraphrasing will be short of complete reproduction only because of the needed consistency in the terms used. Finally, the authors will analyze these steps in light of their criticism and Ronen's comment. The conclusions, which are not different from those stated in the criticism, will be embedded in the analysis.

This article presents the authors' views on the criticism of their article which evaluated human resource valuation models and presented a new model based on the actuarial concept of homogeneous group and Markov analysis, published in an earlier issue of the journal "The Accounting Review." It is important to note that there are two kinds of products for two K-element column vectors, namely, the scalar product and the vector product. According to the authors, it should also be noted that the scalar product of two column vectors is a column vector, but the vector product of two column vectors results in a scalar. The authors feel that a scalar product is more appropriate, and their equation is preferable to the one suggested in the criticism of their article. The accuracy of a solution depends on two components, namely, the accuracy of the model's parameters and the accuracy of the computational procedures. In the human resource valuation model, two groups of parameters used are, the rank transitional probabilities and the economic values of unit period of service. All these have to be estimated statistically.

This article focuses on an article written by Bikki Jaggi and Hon-Shiang Lau, published in an earlier issue of the journal "The Accounting Review," as of April 1975. Jaggi and Lau had evaluated human resource valuation models and presented a new model based on the actuarial concept of homogeneous group and Markov analysis. The purpose of this article is to review briefly Jaggi and Lau's model and to suggest an alternative formulation of it that requires fewer calculations while avoiding the issue of materiality. The objective of Jaggi and Lau's model is to determine the economic value of the services that will be rendered an organization by its current employees. To accomplish this objective the model incorporates data on the historical movement of groups of employees within an organization into a rank transitional matrix and uses this matrix to predict the career movements of similar groups currently within the organization. The value of the services an organization's current employees render in a future period is computed by multiplying the model-determined estimate of the number of current employees that will be in each service rank in that period by the value of the services an employee in each rank renders the organization.

Presents a reply to Imhoff's commentary on the study of the extent to which firms appear to smooth reported income, or practice income smoothing. Objective in the paper; Selection of discretionary expenses; Comments on Imhoff's discussion of the accounting implications of the manipulation of income; How smoothing affects the value of the firm.

This article discusses the role of accounting history in the study of modern business enterprise. It is well known, of course, that typical manufacturing firms of the mid-nineteenth century specialized mainly in one activity: that of transforming raw materials into finished products. These manufacturing firms necessarily relied for non-manufacturing services upon outside companies that specialized, as did they, primarily in one operation. For example, the manufacturer depended upon wholesale suppliers and commission merchants to provide raw materials and to sell finished goods to the final customer. One new method for controlling and coordinating company procedure was an innovation commonly called "the unitary form of organization." The unitary form of organization also involved the design of complex accounting systems to carry out assessment, operations, and planning throughout the firm. Du Pont Powder Co. exemplifies the early use of accounting data for management control in vertically integrated industrial firms.

Presents a study which developed a procedure for approximating the distribution of profit in a Cost-Volume-Profit (CVP) model using a log normal approach. Overview of the Jaedicke-Robichek model; Log normal model for CVP analysis; Comparison of normal and log normal models.

This article presents a study conducted to compare published accounting research and qualities of accounting faculty and doctoral programs. Recently, two studies have been published in which accounting departments were ranked according to some perceived criterion of excellence. Neither of these studies described the criterion of excellence to be utilized in the development of the rankings; rather they allowed the respondents to use their own subjective criteria. Objective criteria would be preferable as a basis for assessing the quality of the various accounting departments. One such criterion is the amount of research which is attributable to each department, and an indicator of research output is the number of articles published in the accounting journals. The results of this study are subject to several limitations. The study only analyzed the research which has been published in four accounting journals, one of which is published by the University of Chicago. No attempt was made to evaluate the effect of differences in the sizes of accounting faculties or doctoral programs.

Discusses the theory of evidence in the theoretical foundations of auditing. Relationship between propositions and evidence in auditing; Reasoning process in auditing in terms of the evidential relationship; Determination of a proposition in a detailed audit; Probabilistic consideration of heuristic reasoning.

This article is concerned with the problem of improving the quantity and quality of learning that takes place as a result of accounting courses and programs. The approach taken is to focus on the improvement of learning transfer, which complements other, more prevalent approaches to the problem of improving learning in accounting. The first section of the article, discusses some of the advantages of focusing on learning transfer. Section two of the article is a synthesis of the relevant research studies and findings that pertain to the improvement of learning transfer in accounting. It is a relatively comprehensive discussion of learning transfer which includes familiar examples from accounting. Then, some important implications of learning transfer for accounting instruction are described in section three. These implications pertain to the design and implementation of accounting courses at all levels of instruction. One advantage of focusing on learning transfer is that transfer is a fundamental result to be achieved in almost all learning, especially in professional disciplines such as accounting. The content, sequence of presentation, and method of learning can be expected to influence the extent to which learning is transferred.