Knowledge that Transforms

This article presents a study on the theory versus practice in risk analysis in decision making in the U.S. There appears to be substantial conflict between the decision processes used by actual decision makers and existing utility theory. The conflict seems to center around the inability of classical utility theory to deal effectively with situations where one or more contingent outcomes for a project are lower than some critical amount. Existing theory, therefore, incorrectly models practice. Contributing factors in the apparent conflict may be internal inconsistency and a tendency decision makers have to be more averse to risk at the time of actual choice than their pre-decision statements would indicate.

This article presents a study on selected items of information and their disclosure in annual reports in accounting in the U.S. This study has presented the results of a mailed questionnaire survey of financial analysts which sought to determine the relative importance of 38 selected items of information. The extent of disclosure of the 38 items was then measured for a sample of annual reports from 88 small and medium size companies. The results indicated that many of the items were inadequately disclosed in the sample and that the correlation between the relative importance of the items and the extent of their disclosure was small. On the basis of these results, the writer has concluded that an opportunity exists for an expansion of the extent of disclosure in the annual reports of small and medium size companies.

Presents information on a study which described how mathematical models may be useful to controllers and auditors in designing and evaluating internal control systems. Internal control procedures; Application of the model in auditing; Problems in the implementation of the models; Conclusions.

This article focuses on a study that examines issues related to the efficiency of subject surrogation in accounting research. Frequently, researchers interested in empirical research encounter difficulties in gathering data for two main reasons: the reluctance of many executives to provide the needed cooperation and the relatively high cost of conducting field studies. Consequently, accountants were persuaded to use students as substitutes for businessmen. This substitution has created a troublesome issue in research methodology: the reasonableness of subject surrogation in making decisions. Since the surrogation issue has not been settled and given a disposition towards a positivist's approach to surrogation, an attempt was made to evaluate the reliability of the surrogation process by analyzing differences in decisions rendered by actual decision-makers and by student surrogates in a particular decision situation. The article also consists of a report on the study and the results, the claimed contribution of which is supplying an additional evidence on the reasonableness of surrogation.

This article focuses on how the autonomy of auditors in the performance of their professional duties has always been considered a cornerstone of the profession. In this respect, auditing is similar to other professions. There is a feeling, however, that the autonomy of auditors is being undermined. This is shown by the many rulings of professional bodies on this issue, the elaborate rules of conduct designed to strengthen autonomy, the many articles in professional journals devoted to this subject, and even by the coining of a special term to denote this problem: "independence." The purpose of this article is to explain why the independence issue has become so central in auditing, to indicate possible methods of dealing with this problem, and to suggest a framework for their evaluation. Auditing is defined as an examination intended to serve as a basis for an expression of opinion regarding the fairness, consistency, and conformity with accepted accounting principles of statements prepared by a corporation or other entity for submission to the public or to other interested parties.

The article discusses integrating computer-oriented material into accounting courses, including the auditing course. An auditor's responsibilities within an organization force a need to work with the computer in new and changing ways, and this element should be incorporated into auditing instruction. Because of their increasing ease of use, usage of generalized computer audit systems (GCAS) has increased dramatically. An auditing student should understand the fundamental concepts of a GCAS and the potential of this new tool for the auditor.