Knowledge that Transforms

Abstract Reviews the book "Understanding Accounting in Its Social and Historical Context," by Anne Loft.

Abstract Describes a model where an endogenous demand for cost reports exists, and characterizes optimal contracts. Achievement of cost report perspective; Necessary conditions for communication; Incorporation of cost reports within an optimal contract; Costs and benefits of communication-based two-period contracts.

Abstract Reviews the book `Auditing As Independent Authentication,' by Peter W. Wolnizer.

Abstract Proposes that interactions in accounting an auditing can be viewed as a large negotiation system. Overview of negotiation research; How research in accounting and auditing has implicitly addressed various aspects of negotiations; Departures from decision maker rationality which may seriously affect negotiation issues.

Abstract Examines commercial banks' and brokerage firms' claim that existing accounting rules for futures contracts increase earnings variability in the United States. Background on the SFAS No. 80 requiring banks to recognize market changes in futures contracts that qualify as micro and macro hedges; Hedging interest rate exposures; Accounting for futures contracts by commercial banks.

Abstract Reviews the report "Guidelines for Financial Reporting Standards," by David Solomons.

Abstract Comments on the article `The Effect of the Thor Power Tool Decision on the LIFO/FIFO Choice,' by R.M. Halperin and W.N. Lanen published in the April 1987 issue of `The Accounting Review.' Change in the tax law resulting from the Supreme Court's decision in the Thor Power Tool Co. v. Comm; Fisher's Exact Test; Dependency on Standard Industry Classification code 3714.

Abstract Provides evidence of the value-relevance of book values of oil and gas properties. Zero-investment trading rules; Role of the functional fixation on book values on the initial trading strategy; Book-value-induced cross-sectional variation in the inferred market values; Pricing anomaly.

Abstract A between-subjects experiment was used to examine the effects of a decision aid in the AICPA's Audit Sampling Audit Guide on the magnitude and variability of auditor sample size judgments. Audit seniors were given background case information for a hypothetical audit task and were randomly assigned to one of three experimental groups: (1) an intuitive judgment group, (2) a decision aid group who calculated sample sizes using the AICPA Guide formula, or (3) a group who provided only the formula parameters from which the researchers later computed implied sample sizes. It was hypothesized that the sample sizes of group 2 would be larger than those of group 1 (due to insensitivity to power considerations), and that the implied sample sizes for group 3 would exceed those of group 2 (due to a tendency for auditors to ‘work backwards’ toward an intuitive sample size). Both of these hypotheses were supported by the data. However, a test for differences in variability indicated that the decision aid led to a greater degree of inconsistency in sample size judgments. Results were consistent over two levels of internal control.

Abstract Reviews the book `Database of Accounting Research Search Software,' by Pacific Research Publications.