Knowledge that Transforms

Abstract The article discusses the attitudes of accountants suggesting that financial statements would be simpler for the financial analyst if accountants would aim their presentation toward the achievement of greatest clarity. The deferred tax balance reflects both taxes currently due but previously accrued and reported to stockholders, and accruals now reported but not currently payable. But the year to year change discloses only the net effect on the account, so, the analyst must refer to the income statement. The companies should state all accounts in order to permit a fuller reconciliation between the income statement and the balance sheet, so that the stockholder may understand what his company's statements are about. Accountants would do the security analyst a favor in developing fuller disclosure and greater clarity by providing him the idea of the company's tax returns and thus of the comparability of its earnings with those of other companies who report to stockholders on a tax-return basis. The article presents examples of the confusion of some companies reporting on a tax basis, some on a normalized basis with no indication of the deferrals, and some on a flow-through basis.

Reviews the book "The Income Tax and Business Decisions," by William L. Raby.

Abstract The article presents results of a field inquiry directed to ascertaining some of the perceptions of internal auditing held by persons who have been subjected to one or more phases of an audit process. It is part of an extensive research effort into the control functions of management, as distinguished from planning and decision making, and more particularly, into auditing as a major instrument of organizational control. The laboratory experiments on audit effects indicate that an audit can exert its influence through an audit report whose preparation is a focus toward which audits are customarily pointed, and through an auditor's actions as seen or heard about by those audited, for example, what the auditor looks at, what he ignores, what be pursues vigorously, how he behaves, etc. The interviews with 52 of the 54 individuals included in this study produced reports that allowed the content coder to classify the extent of each respondent's contact with internal auditors. Almost 75% of the respondents indicated either a neutral or a positive attitude toward the internal auditor and the internal audit.

Reviews the book "The New Deal's SEC: The Formative Years," by Ralph F. de Bedts.

Reviews the book "Principles of Auditing," by Walter B. Meigs.

Abstract This article presents information on various lawsuits related to the use of accounting statements as a means of committing business deceit in the U.S. Turning now to the individual items appearing in a balance sheet, it should first be noted that judges have had some interesting opinions involving accounting conventions in the valuation of the assets therein. One decision, for instance, stated that the integrity of a statement of financial condition should not be impeached because the firm's plant had been listed at its value as a going concern, and not at its liquidating value in the lawsuit U. S. Smelting Co. vs. Hofkin. The courts, however, were not so positive in their acceptance of cost or market, whichever is lower, in valuing assets. While one decision definitely held that showing merchandise inventory at cost when in fact the value had enormously decreased was indeed fraudulent. Another said that showing assets at cost instead of at lower market value was not fraud, where the amounts were clearly designated as cost, the court adding: The worst that can be said for it is that it is bad accounting practice. Some accountants might question this judgment. Another judge agreed with the prior decision in holding that where the inventory figures are not reduced for shelfworn and out-of-style goods, the values are untrue and can amount to fraud.

Reviews the book "Financial Accounting Theory," by Harold Bierman.

Abstract The article presents the results of a recent survey conducted among schools which have made use of television in their accounting classes. The sole purpose of the survey was to provide a useful guide in deciding what course of action to recommend in regard to television instruction in accounting at schools. The report is designed to provide a general impression of the effectiveness of televised instruction, and a starting point for those who wish to investigate further in this regard. A majority of the schools surveyed were favorably impressed. Television for the instruction in accounting appears most applicable to the first-year course. With the use of student assistants during TV lecture periods and lab sessions, the student-teacher relationship appeared adequate. The use of uniform examinations for all TV course sections was overwhelmingly preferred to other examination methods. Some amount of released time is necessary for those preparing and conducting TV classes. Some additional types of visual aids, such as a VuGraph, are necessary and desirable. Maintaining normal class size as opposed to the lecture hall type of class was generally preferred.

Reviews the book "Collected Writings of DR Scott," edited by Robert L. Kvam.

Reviews the book "Inventory of Generally Accepted Accounting Principles for Business Enterprises," by Paul Grandy.