This paper presents a quasi-Bayesian model that generates a discrete posterior probability distribution on the expected total error in a population for any dollar unit sample and any given discrete or continuous prior probability distribution on the expected total error in a population. The model can be used with any sample size and any number of overstatements and understatements. In addition, it is the only dollar unit sampling evaluation procedure that can use data on the proportion of total dollars of each tainting found in the sample or known or assumed to exist in the population. Comparisons of the proposed and multinomial upper bounds are presented. These comparisons strongly suggest that the proposed model is a reasonable approach for evaluating dollar unit samples even if an informative prior probability distribution on the expected total error is not available.

This article presents a series of short cases, taken from the human information processing research literature in auditing, which can be used as supplementary teaching material in undergraduate and graduate auditing courses. The purpose of the cases is to illustrate to future auditors some of the subtle judgmental biases that can adversely affect their judgments and decisions. Use of such materials should constitute one step toward a more effective integration of teaching and research in auditing.

The primary reason for writing the manuscript, "A Quasi-Bayesian Audit Risk Model for Dollar Unit Sampling" was to: (1) present a model which could provide auditors with a complete posterior probability distribution on the amount of error in an account instead of just a single measure of the ultimate risk like an upper bound and (2) compare the Quasi-Bayesian measure of ultimate risk with other measures of ultimate risk. The question of how well the different measures of ultimate risk are integrated into an overall audit approach is left for future research. The respondent's comments defend his firm's overall audit approach, but fail to address the audit risk formula, which his firm uses. The manuscript intended to question the validity of the audit risk formula rather than his firm's audit approach. The reason for comparing the Quasi-Bayesian audit risk model with the audit risk formula in statement on auditing standards was to demonstrate, from a Bayesian perspective, that the audit risk formula considered by itself can significantly understate the ultimate risk of failing to detect a material error.

The article presents the author's opinions on an article by Karl E. Weick, published in the April 1, 1983 issue of the periodical "Accounting Review," which argued that stress is an important accompaniment of corporate accounting practices. That article by Weick was titled: "Stress in Accounting Systems." Weick's main thesis seems to be that bad times generate more questionable accounting practices than good times, the reason being that bad times create more stress, and stress has a negative effect on the soundness of accounting practices. Perhaps this is so. However, there appears to be at least one alternative and equally plausible explanation. During bad times, the set of distinct decision alternatives available to managers is more limited, both because the resource base is typically smaller and the opportunities to employ resources are usually narrower. Since one dimension of a decision alternative is the accounting treatment to be followed, the best overall alternative in bad times may well involve a more "questionable" accounting method than the accounting method associated with the best overall alternative in good times.

Reviews the book "Accounting Estimates by Computer Sampling," 2nd ed., by Maurice S. Newman.

Reviews the book "Statement of Financial Accounting Standards No. 5: Impact on Corporate Risk and Insurance Management," by Robert C. Goshay.

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.

The article presents information on two recent publications related to accounting. "Evaluating Accounting Controls, A Systematic Approach" is designed to provide how-to guidance in a special evaluation of internal control. After an introduction, the next three chapters consider organizing the evaluation, evaluating the control environment, and evaluating the controls in the accounting system. This accounting system evaluation is based upon seven key applications including sales and accounts receivable, cash receipts, purchasing and accounts payable, cash disbursements, inventories and cost of sales, and financial reporting. Sample completed forms for purchasing and accounts payable are presented. "Financial Accounting Standards Board (FASB)--Summary of Activities--July 1973-March 1980," presents a summary of pronouncements, including exposure drafts and research reports, issued by the FASB to date. The publication is organized by type of pronouncement, and within each type summaries are in chronological order of issuance.

Presents an obituary for Frank Sewell Bray, a chartered accountant who died on January 29, 1979.

The article presents a reply to the comments made on a study about the observed association between the pollution control records of companies from the pulp and paper industry and their financial indicators in stock investment decisions. The author first dealt with the fundamental misinterpretation of the purpose of his study. Then, he made some general remarks about the extreme view of research. And finally, he made comments on some of the issues raised with respect to the validity of his study and the relationships among variables said to be implied.