Knowledge that Transforms

The article discusses some behavioral considerations and auditing education implications of the auditor-auditee relationship. A major part of the problem in auditor-auditee relationships seems to be related to the specific nature of the auditors' activities and how these activities are perceived by both parties in the relationship. Over the years the authors have encountered a number of auditing situations, either in organizations of which they have been members or in their roles as consultants to management, which point out the difficulties frequently encountered in attempting to build successful auditor-auditee relationships. The student can be provided with useful tools to apply in the experiential phase of development which occurs as he or she actually is practicing as an auditor. It seems reasonable to argue that one of the important aspects about auditing relates to the nature of the human environment in which the auditor functions. Understanding the dynamics of human relationships is one of those areas connected with auditing that can and should be taught within a university.

The numerical analysis proposed serves to ascribe variations in the relative reliability of a set of measurements to measurers, rules, lack of relevance and users. The relative influence of these sources is called a bias, and the technique of analysis of variance, in part, permits the various biases of these four sources to add to a reliability measure. The analysis and commentary have regarded the influences of these sources simply as biases. Nothing pejorative is attributed to the term "bias." It simply refers to the relative influence of one source (or subset of that source) of variation. The various biases then are reordered in several ways to define and describe the interrelationships between accounting conventions such as uniformity, conservatism, relevance, objectivity and reliability. Indeed, the analysis suggests that these common accounting conventions are based on the biases proposed. Research into the relative size of such biases, using the methodology put forward, should serve to direct corrective attention to those biases which seem to be most material and which, if reduced, are most likely to improve decision making.

Reviews the book "A Brief Introduction to Managerial and Social Uses of Accounting," by Robert G. May, Gerhard G. Mueller and Thomas H. Williams.

Reviews the book "Information for Decision Making--Quantitative and Behavioral Dimensions," 2nd ed., edited by Alfred Rappaport.

Reviews the book "Certified Public Accounting: A Sociologist View of a Profession in Change," by Paul D. Montagna.

This article focuses on the accounting significance of current cost and present value in the measurement of a firm's economic income. Practical difficulties have led to a search for surrogate measures of income and this search is aimed to identify that information capable of providing users of accounting statements with the best means of estimating the firm's value and changes in that value. Current cost income has been suggested as a surrogate for economic income. In a perfectly competitive economy, this surrogate relationship is based on the equality of the components of replacement cost income to their corresponding counterparts within economic income. The marginal present value of a particular fixed asset depends upon a host of factors, such as, the discount rate, the length of time over which the asset is to be used, and the state of the firm's complementary equipment and capacity. Given these factors, the marginal present value of an asset changes with variations in the level of investment. The marginal present value of a one-unit increase in the number of assets purchased depends on: the marginal productivity of the additional asset; the marginal revenue the firm would obtain by selling this additional future output; and the marginal operating cost the firm would incur by utilizing the additional asset.

Reviews the book "Accounting Principles for Management: An Introduction," 2nd. ed., by Robert E. Seiler.

Discusses a study on the accounting practice and education problems in developing countries which was conducted by the American Accounting Association's Committee in Accounting in Developing Countries. Comments on accounting education in developing countries; Limitations of the study.

Cost accounting topics continue to be a significant portion of the accounting practice and accounting theory parts of the Uniform Certified Public Accountant examination. This paper summarizes the cost accounting problems and questions in ten examinations during 1971 to 1975. Two earlier studies summarized the periods 1956 to 1965 and 1966 to 1970, they are referred to where interesting comparisons occur. Cost accounting is defined broadly, including cost determination, control and the use of accounting information for decision making purposes, however, questions dealing purely with inventory valuation, average and lower-of-cost-or-market, have been excluded. More specifically, the included topics are, basic knowledge of cost accounts and overhead costing, process cost accumulation procedures, by-products and joint products costing, budgeting for planning and control, standard costing, direct costing, inventory control, including economic order quantity and reorder point problems and models, breakeven, cost volume profit, differential cost analysis, linear programming and matrix algebra methods, other quantitative areas, for example, the calculus, learning curve, queueing theory, probability theory, statistical analysis and capital expenditure planning, evaluating and control.

Discusses the report of the Committee on Accounting for Social Performance of the American Accounting Association which explored the state of social accounting in the United States in 1975. Analysis of the practices in accounting and the reporting of corporate social performance; Investigation of corporate charitable contributions; Issues concerning the place of social accounting in accounting education.