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Characteristics of Errors in Accounts Receivable and Inventory Audits.

Johnny R. Johnson; Robert A. Leitch; John Neter
The Accounting Review 1981 56(2), 270-293
ABSTRACT: Auditors require empirical information about the characteristics of errors in audit populations. In this paper, the error characteristics in 55 accounts receivable and 26 inventory audits are examined. First, the error rates present in these audits are analyzed, and the balance between overstatement and understatement errors is examined. The distributions of the error amounts and error taintings are then studied, as well as the relation between error amounts and book amounts. Some major findings are contrary to auditors' expectations, emphasizing the need for replication studies to further explore this area.

The Impact of Accounting Regulation on the Stock Market: The Case of Oil and Gas Companies: A Comment.

Abbie Smith; Thomas Dyckman
The Accounting Review 1981 56(4), 959-966
This article studies the impact of accounting regulation on the stock market in the context of oil and gas companies. The issuance of the Exposure Draft was associated with a "moderate" downward revision of security prices of oil and gas firms, especially full-costers. Moreover, that the underlying market effect is of greater consequence than his tests reveal. Since substantial uncertainty with respect to the financial-statement impact of the proposed accounting change and its adoption by the U.S. Financial Accounting Standards Board and the Securities and Exchange Commission existed during test period, results understate the importance of the accounting change to the capital market. Furthermore, doubts regarding the validity of three assumptions upon which the analysis of individual stock-return behavior depends jeopardize the interpretation of results. In the light of difficulties with regard to the validity of assumptions, it appears to be crucial to investigate the robustness of his procedure over an extensive Pre-Announcement period.