Knowledge that Transforms

Abstract ABSTRACT: The purpose of this exploratory research is to assess empirically the potential usefulness of municipal accounting data for explaining voting decisions. The economic theory of voting behavior forms a conceptual foundation for examining the utility of accounting information for discriminating between mayoral election results. A stepwise discriminant analysis was used to develop multivariate models that distinguish between samples of cities clustered into three homogeneous groups on the basis of socio-demographic attributes. The dependent variable for the discriminant analysis was the outcome of elections for mayor in 113 cities with populations exceeding 25,000 in 1977, and the independent variables were municipal accounting ratios. Statistically significant discriminant functions were produced which correctly classified a greater-than-chance percentage of the election outcomes. These results suggest that municipal accounting numbers may provide useful information for explaining voter behavior since they measure the effects of municipal policy decisions consistent with voter assessments.

Abstract ABSTRACT: Estimating market values of assets in absence of an observable market price is a problem that arises often in accounting practice. Examples in the areas of taxation, capital budgeting, current cost accounting, and accounting for leases are discussed herein. A usable valuation scheme for such assets is derived from a modification of the popular two-parameter capital asset pricing model. Indirect empirical evidence is presented which suggests that the valuation scheme yields superior predictions to two competing schemes which have been advanced in the literature: indexing and earnings capitalization. In addition, limitations of the valuation scheme are discussed.

Abstract ABSTRACT: While accounting historians agree that cost accounting is a consequence of the industrial revolution, they have not thoroughly explained the economic consequence of the industrial revolution which prompted manufacturing firms to develop actual cost accounting techniques in the nineteenth century. This paper presents an explanation for the rise of nineteenth-century cost accounting which supplements the traditional view that increased use of fixed capital and the resultant need to account for costs of long-lived assets prompted industrial accountants to graft cost accounts onto the double-entry system. The study concludes that not only changes in the temporal structure of their costs, but also changes in the way they organized economic activity, explain the conditions which prompted manufacturers to develop cost accounting procedures for gathering financial information needed by managers.

Abstract ABSTRACT: Recent challenges of the audit independence assumption have impelled the accounting profession to consider ways of improving the credibility of audit reports. This study examines the perceived effects of competition, MAS, audit-firm size, and tenure on the risk that audit Independence may become impaired. Factorial analysis of variance techniques are used to analyze judgments obtained in an experimental task from four subject groups (a) Big Eight partners, (2) partners from local and regional CPA firms, (3) commercial loan officers, and (4) financial analysts Results indicate that audit firms operating in highly competitive environments, firms providing MAS, and smaller audit firms are perceived as having a higher risk of losing independence. An audit firm's tenure with a given client is not significant. Though perceptual differences exist between the groups, an overall analysis ranks competition as the most important factor, followed by audit-firm size and MAS.

Abstract ABSTRACT: This study investigates how differences in corporate-level budgeting systems are related to corporate size, diversity, and degree of decentralization, and how different choices in system design and use are related to organizational performance and manager motivation and attitudes. A model was developed from related findings in research in accounting and organizational behavior, and the expectations in the model were explored with data gathered from 19 firms in the electronics industry. The results generally support the model. They show that budgeting, as part of the corporate control strategy, is related to the corporate context. Larger firms tend to make relatively high use of more formal administrative, as opposed to interpersonal, controls. In all firms, the more formal and elaborate budgeting processes are generally received well by the managers, but in larger firms they appear to be more positively linked with performance.

Abstract ABSTRACT: In 1978, the Securities and Exchange Commission issued its final requirements concerning the disclosure requirements of companies that change their auditors. Along with a filing requirement for an auditor change, companies were also required to enumerate and describe disagreements they may have had with their CPAs on accounting and auditing issues in the 18 months prior to the change. To provide evidence on the existence and degree of market impact of these disclosure requirements, the behavior of stock prices of a sample of companies that switched auditors and a matched pair of control companies that did not were analyzed. Results of the study appear to be inconsistent with the SEC requirement for companies to enumerate and describe disagreements with their auditors. For the general event of auditor changes, there seems to be negative market reaction around the time of the switch; however, there is some difficulty in interpreting the motivation for this reaction.

Abstract ABSTRACT: This study examines the role of the personality variable, locus of control, as a moderator of the relationship between budgetary participation and managerial performance. The results of a laboratory study employing two separate subject groups--undergraduate accounting students and managers from a large manufacturing company--show a statistically significant interaction between participation and locus of control affecting performance. Budgetary participation was found to have a positive effect on individuals who feel they have a large degree of control over their destiny ("internals" on the locus of control scale), while having a negative effect on those individuals who feel that their destinies are controlled by luck, chance, or fate ("externals" on the locus of control scale). The results are discussed and possible applications in the areas of job redesign and personnel selection and placement are considered.