Knowledge that Transforms

Reviews the book "Standards of Education and Experience for Certified Public Accountants."

Abstract This article discusses about some common misconceptions relating to accounting education. There has been a considerable amount of discussion during the past several years concerning accounting education. Some notions advanced have been based on misinformation or misunderstanding. Others have resulted from a lack of knowledge of some of the factors present. Some of the misconceptions are concerned with the general nature of accounting education, some consider suggested objectives or specific proposals, and some relate to the teaching of accounting. Probably the most common misconception today is that the study of accounting should blindly follow the same pattern as the study of some other professional field such as law or medicine. A second popular misconception, is the notion that accounting majors have had practically no courses other than accounting. A third area of confusion, is that employers are anxious to have accounting majors that complete a five or six year program before seeking employment. Many so-called problems are being posed today which many pessimistically portray as insurmountable. If the experiences of the past are indicative, it can be expected that changes which evolve, will represent continued progress and that accounting education will keep pace with the increasing responsibilities assigned to it.

Abstract The following problems were prepared by the Board of Examiners of the American Institute of Accountants and were presented as the first half of the examination in accounting practice on November 7, 1956. Saner, Mansville & Johnson, Certified Public Accountants, 1010 Fidelity Building, Richmond, Virginia, file theft Federal partnership return of income on the cash basis and use an August 31 fiscal year. Listed below are balances taken from the firm's general ledger (which is maintained on the accrual basis) as of September 1, 1955, and August 31, 1956. Mr. Doe, a real estate operator, owns several office buildings and wishes to diversify his holdings. He has an office building which he constructed in 1946 which has appreciated substantially in value. He has received an offer from Mr. Roe to exchange his equity in two apartment buildings for Doe's equity in the office building. In June 1955 the Hot & Cold Co. sold 50 air conditioning units for $200 each. Costs included material costs of $50 a unit and direct labor costs of $30 a unit. Overhead was computed at 100% of direct labor cost. Interest expense on a 4% bank loan was equivalent to $1.00 a unit. Federal income tax at a 30% rate was equivalent to $15 a unit.

Reviews the book "Price Level Changes and Financial Statements: Case Studies of Four Companies," by Ralph Coughenour Jones.

Abstract The major problem confronting accounting education in the next decade and a half is almost certain to be that of developing adequate teaching staffs. That this need for accounting teachers will develop is incontrovertible. Securing this number of new accounting staff members in the next fifteen years is certain to be a most formidable task. The staff problem is one of the major concerns of this American Accounting Association, and a new committee of the Association is studying the problem. An indication of the importance attached to the problem is the fact that all members of the committee are either past presidents or current or past vice presidents of this Association. Another suggestion, non-financial in nature, that has sometimes been put forth for dealing with this impending crisis involves a relaxation of the emphasis on research and publication by staff members. Only in the research program of the university scholar is there likely to be sufficient emphasis on basic and long term factors as opposed to short-run and applied considerations.

Abstract The article presents a comment on an article by Professor Marvin Tummins which discussed the manner in which the Poisson distribution can be used by auditors as an aid in test checking. After explaining how to read the table of the Poisson distribution, the author goes on to discuss the analysis of a random sample drawn from a lot under three sections, procedure for rejection of hypothesis, procedure for acceptance of hypothesis, and evaluation of indefinite sample result. Professor Tummins has performed a useful service in calling attention to the potential usefulness of the Poisson distribution for certain checking purposes. However, there are two comments that must be made of Tummins' approach. The first point is that Tummins seems to suggest that an acceptance sampling approach can be used in the actual auditing process. There are many problems raised by such a general approach to auditing, as has been amply demonstrated by R. J. Monteverde. The second comment, then, on the Tummins' paper is that the trial and error method that is suggested is much too awkward.

Reviews the book "Modern Mill Controls," by Norbert Lloyd Enrick.

Abstract A topic which has of late been receiving attention from accountants is that of their legal responsibility, not only to clients but to third parties, the client's creditors and stockholders in the U.S. The purpose of this article is to discuss some of the characteristics of reported third party actions against accountants. All these actions were brought at common law and were instituted by third parties seeking to recover in damage losses supposedly sustained as a result of a contended proper reliance upon the independent accountants' allegedly negligent or fraudulent misrepresentations. It is not the purpose of this article to discuss the development of the common law principles governing third party actions against accountants, but a brief statement of these principles may facilitate an understanding of a portion of the material, which follows that, in general, the major principles are accountants may not be held liable to third parties for negligence, and accountants may be held liable to third parties for fraud.

Abstract The article presents the 1957 statement of accounting and reporting standards. An attempt to describe, discuss, or explain the 1957 version of "Accounting and Reporting Standards for Corporate Financial Statements" in the relatively short period allotted to it on this program is almost surely doomed to failure. The 1948 statement, like the 1957 statement, represents a logical development in a continuing evolutionary progression. The second point that is mentioned is that people considered the efforts of the accounting associations and conclusions equally valid with those of previous committees. Those already familiar with the 1951 statement might answer this in a variety of ways. To some it is a disappointment; it does not go nearly as far as they would like. To others, it is a radical departure from the position taken on favorite subjects in past statements. Probably to no one is it the bright flash of revealed truth for which hope springs eternal. At one time or another, the 1948 statement has been criticized on the grounds that it did not give a direct answer to the permissibility of two important accounting practices, direct costing and the accrual of income tax adjustments. The 1957 statement takes a firm stand in opposition to direct costing because the omission of any element of cost in arriving at an inventory valuation is not acceptable.

Reviews the book "Production, Forecasting, Planning and Control," 2nd ed., by E.H. MacNiece.