Knowledge that Transforms

Abstract This article presents a list of books on accounting, published in the January 1988 issue of the journal "The Accounting Review." The book "Successful Corporate Turnarounds," by Eugene F. Finkin, presents approaches and actions necessary for successful turnaround. Another book "Management and the Audit Network," by Philip Kropatkin, depicts the corporation as a network and focuses on the functions of the internal/external auditor and accountant. The book "Worldscope Industrial Company Profiles," presents corporate financial data on over 3,000 industrial companies in 18 industries of 24 countries, including the U.S.

Abstract Reviews the books "Classifying and Coding for Accounting Operations" and "Decision Support Systems for Management Accountants," by Germain Boer.

Abstract Reviews the book "Accounting Principles for the Autonomous Corporate Entity," by Henry P. Hill.

Abstract ABSTRACT: This research presents some descriptive evidence of how auditors perform analytical review in a complex and realistic task setting. Specifically, the research investigates how auditors who differ in terms of experience, design and conduct analytical review and revise audit programs in light of their analytical review judgments. To accomplish this purpose, a comprehensive case was administered to four auditors who performed the task while thinking aloud. The results show that both managers and seniors identified the crucial audit problems embedded in the case. However, there was little evidence that analytical review provided a basis for reducing the extent of planned substantive audit procedures even in audit areas where reduction seemed to be warranted. Also, several important behavioral differences were observed in the information acquisition and decision behavior of the managers and seniors. Some of these differences are consistent with differences found in studies of physics experts and novices can be attributed to constructs in human memory and reasoning research. Interestingly, the protocols produced almost no evidence of the use of probabilistic reasoning (e.g., Bayesian inference) by any of the auditors. However, there is evidence of their use of the kinds of reasoning processes being proposed and evaluated in artificial intelligence research.

Abstract ABSTRACT: A principal-agent relation is analyzed where the agent chooses an unobservable effort level and an observable level of utilization of a resource supplied by the principal. When the agent has private information about the usefulness of the principal's resource, it is shown that the optimal compensation function must include the resource level as an argument. That is, some form of "cost allocation" appears to be part of the optimal solution to the principal's problem. Further analysis shows that standard cost allocation techniques (where the agent is allocated more costs if he or she uses more of the resource) may not be efficient in motivating the agent's choices. In some circumstances, it may be optimal to pay the agent more if he or she used more of the principal's resource.

Abstract Reviews the book "International Aspects of Segment Disclosures: A Conceptual Approach," by Lee H. Radebaugh.

Abstract ABSTRACT: This study develops a model to explain student examination performance in the first college-level financial accounting course. A multiple regression analysis explains 54 percent of the variance in examination performance and indices of aptitude and effort account for the majority of the variance explained. However, high school and previous collegiate performance, as well as previous specific and related academic experience, each account for a significant portion of the variance in examination performance above that explained by aptitude and effort. Discrepancies between the results of the present study and other published findings are discussed.

Abstract ABSTRACT: This Small Sample Study describes and Illustrates two types of discrepancies that can occur between the change In certain balance sheet amounts as derived from comparative balance sheets and the change that is reported in the funds statement. Four possible causes for such discrepancies are discussed and disclosure policies that would help to overcome some possibly serious reporting deficiencies am suggested.

Abstract Previous studies examining internal accounting control judgments have found an inconclusive association between auditor consensus and auditor experience. The present study suggests that an association between judgment consensus and situational experience may be confounded because of the tenure of an auditor with the same audit staff group and/or superior. The adaptive behavior in an organizational relation suggests that judgment consensus among subordinates should increase (i.e., become more congruent) as the subordinate has greater interaction with the audit staff group and/or superior. As support for these expectations, an experiment was conducted using auditors of a state auditor's office. The results indicate that consensus among staff auditors increased as the length of time that staff auditors had been associated with the same audit manager increased, but did not increase based on the length of time that the auditors had been with the state auditor's office.

Abstract Reviews the book "Accounting and Financial Reporting in Japan," edited by Frederick D.S. Choi and Kazuo Hiramatsu.