The article presents comments of the author on the article "Theory Versus Practice in Risk Analysis: An Empirical Study," by Willis R. Greer. In his Greer, claimed to show a conflict between utility theory and actual decisions made by representatives of twenty-seven Fortune 500 firms. Although the article provided an interesting analysis of firms' decisions, it seems misleading in two important respects. First, the hypothesis tested by Greer is quite different than the hypothesis that he suggested he was testing. Second in contrast to his claim of a substantial conflict between the decision processes used by actual decision makers and existing utility theory, the data give fairly good support to the counterclaim that the decision makers in his study tend to be expected utility maximizers. The latter point already has been discussed by scholar C.G. Hoskins and Greer and scholar Ted D. Skekel. More is said about this later in this comment. The interpretative problems with Greer's original article appear to arise from the author's conception of "existing utility theory." This conception is tied to a mean-standard deviation trade off model.

Reviews the book "Management Accounting: A Decision Emphasis," by Don DeCoster and Eldon Schafer.

The notion of a revolution in accounting is taken from Thomas S. Kuhn's "The Structure of Scientific Revolutions. His thesis is that science does not progress through accumulation. Rather, a series of tradition shattering revolutions occur in which one time-honored scientific theory is rejected in favor of another incompatible with it. The new theory, or set of ideas, is unique in that it is not derived from the previously accepted dogma. It is seldom or never just an increment to what is already known and in the process of moving from the old set of ideas to the new, the community of scientists Follows a number of identifiable steps namely, recognition of anomalies, a period of insecurity, development of alternative sets of ideas, identification of schools of thought, domination of the new practices or ideas. The first step is a precursor to the whole process, it initiates the period of crisis which follows. During that period, scientists become increasingly dissatisfied with the existing theoretical framework and a search for alternatives begins. Therefore, the second and third steps are mutually interactive. As dissatisfaction grows, the search for alternatives gains impetus, as alternatives are discerned and discussed, the dissatisfaction is heightened. Schools of thought emerge and one set of ideas gradually gains ascendency over alternatives.

The article presents a simple graphical illustration for the maximum tax on earned income. Internal Revenue Code, section 1348 stipulates that the maximum rate of taxation of "earned income" shall be 50 percent. In spite of the relative simplicity of this concept, students often experience difficulty understanding computations required to accomplish the objectives of the section. Standards texts, though yielding descriptions which are clear and accurate, are not particularly helpful to the student attempting to conceptualize the procedures. A simple graphical presentation, can make obvious the logic underlying computations. Of course, the contribution of this graphical approach is that the significance of the third step in computations just described becomes apparent. Only in this manner is it possible to easily compute the tax on the "unearned" portion of taxable income, since it is desired to tax this income at the same marginal rates which would have been applied had section 1348 not been invoked.

Bayesian statistical sampling procedures for auditors have the potential to improve audit efficiency by decreasing the sample size required to achieve a desired reliability for the auditor's statistical conclusions from the sample. The increased efficiency is obtained in the Bayesian approach by formally including the auditor's subjective prior estimates (e.g., error rates) in the sample evaluation. The Bayesian method in effect provides a formal analytic procedure for including much of the auditor's informal information about an audit population together with the information obtained from the sample. This thereby reduces the sampling required to achieve desired reliability for statistical statements about the audit population. The program is in conversational mode, so that students with little knowledge of computers can use it to understand the potential of the Bayesian approach in audit sampling. The introduction provided by this program can help the student learn that computer routines easily put complex mathematical methods within the reach of audit practice.

Reviews the book "Computer Audit Guidelines."

This article presents a commentary over an article by James E. Parker, previously published in the July 1975 issue, related to comparability and objectivity of exit value accounting. Parker reported the results of an experiment designed to assess the comparability and objectivity of exit values relative to historical cost values. In the experiment, twenty-six exit values obtained for one 6-year-old calculator were compared with the adjusted historical-cost-based values for twenty-six different calculators. The author of this article comments on the adequacy of the experimental design and suggests alternative procedures which may have validated further the experimental results. According to the author, Parker did have a valid test of objectivity for exit values, but not for historical cost values. In effect, Parker ended up with a valid objectivity measure for exit value and a valid comparability measure for historical cost. By using invalid measures of objectivity for historical cost and invalid measures of comparability for exit value, bias was introduced to both the objectivity and comparability analyses.

The article focuses on the differences in value systems between university students in the United States. These are university students who are interested in pursuing accounting as a career choice and those students who are not interested in such a career choice. Differences in value systems are tested using the Rokeach Survey of Values. Significant differences are found on these eight variables: a comfortable life; a world of beauty (negative); wisdom (negative); ambitious; clean; imaginative (negative); family security; and responsible. The eight differences have construct validity based upon prior research in this area. However, results are inconclusive as to whether accounting majors in fact, do, have different value systems from other university students. Anthropologists have found that even the most primitive cultures have elaborate ethical systems which delineate proper and improver behavior. Throughout most of history the study of values was dominated by the religious leaders of a culture.

The article focuses on computer-assisted instruction (CAI) for elementary accounting. CAI materials for a two-semester elementary accounting course are being developed at the University of Illinois at Urbana-Champaign. The intent of the present paper is to report the progress of CAI, which has potential for great effectiveness in accounting education in anticipation of avoiding unnecessary duplication of costly effort in this area and to present results of a controlled experiment conducted during the Fall 1973 semester using the completed materials developed for the first semester, accounting principles course. One of the major advantages of materials developed in this project is their adaptability to improvement. This paper presents a discussion of objectives of the project, CAI system used, the approach taken and the experience to date in achievement of objectives. Objectives of the project, started in June 1972, include improvement of instruction in the elementary accounting sequence at the University of Illinois.

While the basic question that Professors S.H. Kratchman, R.E. Malcolm and R.D. Twark (hereafter referred to as K, M and T) sought to explore is of central importance to accounting research, it appears that the methodology employed to address this issue strongly impacts upon their findings. The limitations of an ill-defined and conceptually lacking method of "current" value leads to a meaningless hybrid. The failure to properly adjust liabilities to reflect changing market rates clearly distorts the balance sheets and, hence, the performance measures utilized, i.e., return on assets and return on equity. The statistical tests are inappropriate for the null hypothesis implied by the basic research question K, M and T pose. The net result of these compounding limitations has been depicted partially in revised sets of performance measure ratios-sets which vary dramatically from K, M and T's results. These conditions all point to one inescapable conclusion; i.e., the aggregation of these limitations is of such unknown magnitude that without a complete replication, any and all interpretations K, M and T offer must be held suspect.