Knowledge that Transforms

[Differences in faculty beliefs as to the economic function of accounting doctoral programs may contribute to the heterogeneity of educational policies and practices that exist across programs. Many accounting doctoral program policy makers appear to adhere, explicitly or implicitly, to either the "human capital" or "screening" theories of occupational licensing/certification. This study compares these two theories and evaluates the educational policies and practices they imply. The analysis suggests that, when relied upon to provide perspective in resolving policy questions, rather than in an orthodox fashion, these theories can provide useful guidance to accounting doctoral program policy makers.]

[The inability to estimate stockholder wealth effect magnitudes and hence disentangle them from changes in the stock market's assessment of the probability that a regulatory change will occur has hampered previous research in the economic consequences of accounting choices. This study measures cash flow effects independent of stock market behavior and thereby permits evidence of significant abnormal return behavior to be used to infer changes in the market's probability assessment of the imposition of a regulatory change. The study uses a seemingly unrelated regressions approach to investigate information events surrounding the issuance of IRS Revenue Procedure 80-55. Issued in late 1980, this rule stated that banks could no longer deduct interest paid on governmental time deposits collateralized by tax-exempt securities. Further, it was to be applied retroactively; and for firms in the sample used in this study, the average estimated tax liability caused by the retroactive provision was $24.2 million, or 5.6 percent of the market value of common stock. In addition to contributing to the economic consequences literature, this study also demonstrates the potential usefulness of capital market data in estimating the magnitude of probability revisions associated with IRS actions. Presumably such evidence is a relevant input in the social choice problem of whether an IRS action has imposed a "substantial impact" on affected parties.]

[The objective of this study is to examine how certain contextual factors in auditor-client conflicts affect the perceived ability of auditors to resist client pressure. A review of the literature resulted in the identification of four factors hypothesized to affect sophisticated financial statement users' perceptions of audit conflict outcomes: nature of conflict issue, client's financial condition, provision of MAS by the audit firm, and the degree of competition in the audit services market. A full-factorial, repeated measures ANOVA experiment was conducted using senior loan officers as subjects. The results indicate that a client in good financial condition is perceived as being more likely to obtain its preferred outcome to an audit conflict than a client in poor financial condition. Clients are also viewed as being more likely to obtain their preferred resolution to a conflict when the conflict issue is not dealt with precisely by the technical standards.]

[Congress introduced the first version of the minimum tax provisions in the Tax Reform Act of 1969. Congress subsequently modified the minimum tax provisions with the Tax Reform Act of 1976 (TRA76), the Revenue Act of 1978 (RA78), and the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). This study evaluates the TRA76, RA78, and TEFRA minimum tax provisions from the perspective of horizontal equity. The study is based on taxpayer data from the 1978 Individual Tax Model prepared by the Internal Revenue Service (IRS). Relevant individuals are classified into groups of equally-situated taxpayers based on expanded income. For each such group, the coefficient of variation (CV) is computed, and the three minimum tax structures are compared for their relative equity effects. The study generally concludes that the TRA76 add-on minimum tax best enhances horizontal equity.]

[This note extends the analysis of line-item error taints and error rates originally presented in Johnson, Leitch and Neter [1981] by first considering the distribution of dollar-unit taints, the relevant distribution when simple random sampling is applied to monetary units. Next, empirical evidence on the relation between the taint amount and book amount is presented. Finally, empirical findings on the magnitudes of dollar-unit error rates are provided.]

[This study applies citation analysis to evaluate the research contributions of accounting faculties, doctoral programs, and individuals to contemporary accounting research (CAR). A research contribution is measured as CAR citations to a journal article written by an accountant, and CAR is defined as all main articles published in The Accounting Review, Journal of Accounting Research, Journal of Accounting and Economics, and Accounting, Organizations and Society between 1976 and 1982. The advantages and disadvantages of the technique are discussed, and the sensitivity of the results to alternative citation measurement metrics is examined.]

[There are currently no definitive guidelines for reporting the current and noncurrent portions of lease obligations. Two possible approaches to this problem of allocation-the change in present value approach and the present value of the next year's payments approach-have been identified by Swieringa [1984]. This article addresses two aspects of this financial reporting issue. First, evidence is presented to show that the change in present value approach appears to be dominant in current financial reporting practice. Second, it is shown that adjustment of the reported financial statement numbers to those that would be obtained by the present value of the next year's payments approach does not affect the ranking of companies by a number of financial measures. These results suggest that the issuing of guidelines for reporting the current and noncurrent portions of lease obligations by the FASB is not warranted.]

[This paper reports the results of a sixth triennial canvass covering 74 doctoral programs in the United States. For the first time, six Canadian doctoral programs are included. Data are provided on universities offering doctoral degrees, degrees awarded between 1980 and 1982, candidates in coursework stage, and candidates in dissertation stage. Canadian statistics, presented in a separate section, indicate a small but growing number of candidates and graduates. Doctoral degrees granted in the three-year period by United States universities increased in each year, reaching an all-time high of 177 in 1982. Offsetting this is a forecasted decrease in graduates for 1983 and 1984. Enrollments of candidates at the dissertation stage declined by 6.4 percent since the 1980 survey. Candidates at the coursework stage declined by 4.4 percent. The national three-year doctoral output has remained in the range of 424 to 469 since 1971.]

[Baran, Lakonishok, and Ofer [1980] present some empirical evidence on the information content of general price-level adjusted (GPL) earnings relative to historical cost (HC) earnings. Their statistical tests are shown to be invalid, thus leaving unsupported their main conclusion-GPL earnings are superior. We apply an appropriate statistical test to their data and find contrasting results: GPL betas exhibit significantly better correlation with market betas than do HC betas for market value-denominated betas, but not for a non-market-denominated beta. No conclusion can be rendered on the information content of GPL earnings, and the controversy over accounting beta construction is rejoined.]

[Firms using sophisticated capital budgeting techniques (i.e., those that employ present value analysis and account for risk) should theoretically perform better than firms using naive models such as the payback period or accounting rate of return. However, previous empirical work examining this question has produced mixed results. To correct for limitations in these studies, several tests were conducted on firms that adopted sophisticated selection techniques versus a control group of firms that employed naive techniques. After controlling for differences in systematic risk, industry effects, and size, interrupted time-series tests of relative market returns were performed. Based on the results of this study we conclude that the adoption of sophisticated capital budgeting selection techniques will not, per se, result in superior firm performance. It is possible that the adoption of sophisticated selection techniques is one of many policies the firm pursues in the face of economic stress, and this, in combination with other policies, may help to bring about economic recovery for the firm.]