Reviews the book "Investment Risk & Uncertainty: A Practical Approach for Australian Companies," by P. Spry-Bailey.

The purpose of this article is to suggest an outline for a body of theory, within which the auditor would find guides that stimulate the exercise of judgment in program planning, rather than mechanical aids that suppress this judgment. Fundamental to the formulation of such guides is an understanding of the concept of a minimum audit program, which the auditor adjusts to meet the weaknesses of a specific internal control situation. Comments concerning the necessary judgment process by which internal control is evaluated effectively suggest that over-all appraisal of internal control must be replaced with precise analysis. The article says that in analyzing internal control, the auditor must deal with specifics, not with generalities. The auditor must determine whether specific weaknesses exist, the irregularities thereby permitted, and the specific modifications of his program called for by these conditions. In this way many of the problems associated with the over-all, more subjective approach to internal control evaluation would be eliminated.

Reviews the book "Stabilized Accounting," by Henry W. Sweeney.

The article focuses on the differences between commercial and institutional accounting. Increasing importance of the role of higher education in the economy have provided a challenge to all members of the accounting profession. Much of the theoretical knowledge relative to commercial accounting practice must be reassessed when accounting for institutions of higher education. There is truly a separate and distinct set of generally accepted accounting principles for colleges and universities. At the same time, it is interesting to conjecture that as more emphasis is placed on the idea of dollar's worth for each dollar spent by colleges and universities, and with such measurement devices as performance budgeting, these non-profit organizations may be moving toward profit and loss applications. Meanwhile, as large business enterprises become more service oriented, they appear to be assuming trusteeship aspects similar to those in institutional accounting. Just as it may be true that institutional accounting can benefit from commercial accounting, the reverse is equally likely.

Reviews the book "Intermediate Accounting--Comprehensive Volume," by W.E. Karrenbrock and Harry Simons.

Reviews the book "1954 Guidebook to California Taxes with Special Emphasis on Relationship to Federal Taxes," by Russell S. Bock.

Reviews the books "Monetary Policy for a Competitive Society," by Lloyd W.Mints; "Federal Reserve Policy-Making: A Study in Government Economic Policy Formation," by G.L.Bach.

[Previous research demonstrates that "brand name" (e.g., Big Eight versus non-Big Eight) is a factor affecting audit prices and auditor selection. As a quality surrogate, brand name reflects differences between auditor size categories in concern for reputation (DeAngelo 1981b) and the ability to withstand client pressure (Goldman and Barlev 1974). It has not, however, been demonstrated that these features characterize quality differences within an auditor size category. Although tests are difficult without a direct measure of quality, recent announcements by the General Accounting Office on CPA quality in governmental audits indicate a need to determine the factors that affect quality differences within auditor size categories, which is the subject of this study. Audit quality is defined as the probability that the auditor will both discover and report a breach in the client's accounting system (DeAngelo 1981a). Two explanations for variations in audit quality involve reputation and power conflict. Because an incumbent auditor captures client-specific quasi-rents, there is incentive to lower audit quality to retain the client. However, audit firm size is a moderating effect since a large client base allows a concern for reputation to remain more important than retention of any given client. The expectations are that (1) audit quality decreases as auditor tenure increases and (2) audit quality increases with the number of clients. In power conflicts, the client can exert pressure on the auditor to violate professional standards, and a large, financially healthy client can exert greater pressure with a threat of replacing the auditor. However, the established review of audit results or audit working papers by third parties can increase the auditor's ability to withstand client pressure. The expectations are that (3) audit quality is negatively related to the size and financial health of the firm and (4) audit quality improves when the auditor knows work will be subject to review by third parties and that sanctions for poor quality work will occur. This article presents the results of an investigation into the determinants of audit quality provided by small, independent CPA firms in Texas on audits of independent school districts. The study analyzes quality control review (QCR) findings to obtain a relatively more direct measure of audit quality. Between 1984 and 1989 the Audit Division of the Texas Education Agency (TEA) conducted 308 QCRs. Numerical scoring of 232 QCR letters of findings represents the measure of minimum audit quality and the dependent variable in the regression analysis. Explanatory variables associated with reputation effects, power conflict effects, report timeliness, audit hours, and reported breaches were obtained from TEA sources. The major finding of the study is that audit quality definitions (DeAngelo 1981b; Goldman and Barlev 1974) considered descriptive among audit size categories are sufficiently robust to explain quality variations within an audit size group. The results also confirm earlier studies relating audit quality to audit report timeliness (Dwyer and Wilson 1989) and actual audit hours (Palmrose 1986, 1989). We conclude that audit hours is a suitable surrogate for audit quality when direct measures are unavailable.]

Prediction 18 one of the most important aspects of investment decision making. This study provides evidence that investors' predictive earnings judgments can be systematically Influenced as a consequence of the combined effects of "output interference" and "availability," and that the use of financial accounting information in the prediction process seems to provide limited benefit in terms of reducing this effect. Output Interference Is a psychological concept that Implies that whatever is thought about first interferes with, and thus inhibits, later thoughts about an Issue. An availability-based prediction strategy is one in which the decision maker uses the relative number of pro versus con masons generated, and/or the ease with which such reasons can be generated, as cues in judging the likelihood of future events. Fifty-eight Investors participated in an experiment that demonstrated that the order in which they considered opposing arguments regarding the possibility of reaching a specified level of earnings had an impact on both their ability to generate supporting and opposing masons and their subsequent probability judgment that earnings would actually reach the specified level. The outcome for which the Investors were able to generate the most supporting masons was judged more probable, investors were able to think of more reasons supporting a particular outcome, not because there were more such reasons in the objective environment, but rather as a consequence of output interference. The systematic effect on judgment, although perhaps slightly reduced, persisted when investors had access to financial statements while considering the company's earnings prospects.

[A general prediction from the economic theory of tax reporting is that taxpayers will report more income as the tax rate increases, but the related empirical evidence has been mixed. We conducted an experiment to examine whether taxpayers' responses to a tax-rate change depend on both economic effects and perceptions of horizontal and exchange inequity. Our findings reconcile the previously inconsistent empirical results by identifying conditions under which perceptions of inequity drive taxpayers' reporting decisions. In summary, subjects reported less (more) income as tax rates increased (decreased) when they were inequitably treated relative to others, but not when they were equitably treated relative to others.]