This article presents a question paper prepared by the auditing section of the American Institute of Certified Public Accountants (C.P.A) for November 1964 Uniform C.P.A. examination which held on November 5, 1964.
The auditing section of the May 1965 Uniform Certified Public Accountants examination was given on May 13, 1965 from 8:30 to 12:00 noon. The first section of the examination consisted of six questions, all required; the second section contained two questions of which the candidate was instructed to answer the one of his choice.
The purpose of this article is to outline some significant changes which have occurred during this period with particular reference to the accountant's duties arising from the Companies Acts in Australia. A recent survey of members indicated that about 21 per cent of the society members are in public practice or employees in public practice, while 3,300 of the members of the Institute of Chartered Accountants are in practice. So there would be approximately 8,500 members of the various professional bodies engaged in public practice. While the majority of accountants are affiliated with one or more of these bodies there remain a number outside. In the public practice area these persons are pre-dominantly involved in certain classes of taxation return preparation, the uniform companies acts. Under the Australian Constitution the Commonwealth Parliament can legislate only on matters expressly delegated in the Constitution. The powers of the Commonwealth with respect to companies are incomplete and the framing of companies legislation has remained a matter for the States.
This paper is devoted largely to matters of concern to accountants. While this project is related to the works of several researchers who have been primarily interested in the valuation of securities or in the financing of corporations, it differs from these in that it tests funds flows, it utilizes the discounted value of stocks, and it is based on a sample from a more heterogeneous population. Monetary assets and liabilities are commonly measured by one of the three most relevant techniques, thus minimizing the obvious deficiencies in their measurement. Nonmonetary assets, on the other hand are usually shown at original money cost and nonmonetary liabilities at original money receipt. This practice is most frequently encountered with respect to inventories of commodities and depreciable plant assets. "Deferred credits" liabilities payable in nonmonetary goods or services are customarily measured at original money receipt rather than by a forward looking technique. These are the measurements that limit the usefulness of the earnings and book value data that depend on them.
The article focuses on recommendations made by the 1964 American Accounting Association Committee on Courses and Curricula--Electronic Data Processing. The committee recommended that at the undergraduate level, accounting students should be exposed to electronic data processing in stages. Added emphasis should be placed in the accounting systems course on logical information flows and on multi-dimensional information requirements rather than on the form and content of specific accounting records. At the master's degree level, the student must have at least the same proficiency as an undergraduate, but hopefully it will be at a more sophisticated level. At the doctoral level, accounting systems instruction is a distinct subject-matter area, as are accounting theory, internal accounting, taxes and auditing. A doctoral degree presumes at least a sound foundation knowledge in each of the broad accounting areas, with a high degree of expertise in the candidate's specialist area. The committee also recommended that substantial attention should be given both by individual schools and by the American Accounting Association, to the need for a re-orientation of accounting toward an analytical approach rather than one which is mainly descriptive.
The article presents two break-even models with assumptions stated and justified with respect to the realism of cost and market structures for typical firms. Break-even points and the maximum profit production level are determined, using differential calculus. For each model an exhibit is presented that reflects the relationships of revenue, cost, and profit at various production levels. Employing differential calculus techniques to break-even analysis permits most realistic assumptions for revenue and cost functions than is permitted under traditional "linear simplification" break-even analysis. Total revenue for the firm is determined by demand for the firm's products. Differential calculus may be used to calculate break-even points for curvilinear revenue and cost functions. Also, by determination of first and second derivatives, it is possible to find the level which will provide maximum profits for the firm. Linear break-even analysis suggests there is only one break-even point and the analysis does not provide for determination of the sales level which provides maximum profits. Beyond a certain level, however, total costs may exceed total revenue.