Reviews the book "Peat, Marwich, Michell & Co., 85 Years," by T.A. Wise.

Reviews the book "Accounting for Managers and Investors," by Michael H. Granof.

A contingent claims valuation model is used to estimate the values of a sample of convertible bonds and to partition those values into their debt and equity portions. The model and market values of the bonds are compared and model estimates are found to be approximately unbiased relative to market values, with about 90 percent of the values within ten percent Of market values. The average equity values of the convertible bonds are found to constitute 16.7 percent and 18.4 percent of the book and market values of the bonds, respectively. When leverage and dilution measures for the sample are restated by excluding the estimated equity value of convertibles from debt, differences are small on average, but for some firms they are substantial. A comparison of reported earnings per share (EPS) with EPS using model equity values reveals that model EPS differs cross-sectionally from both primary and fully diluted EPS but is much closer on average to primary EPS. The findings of the study provide reason for optimism regarding applications of contingent claims models to practical valuation problems, particularly with regard to more meaningful measures of dilution of earnings and leverage.

Reviews the book "Current Cost Accounting: Its Concepts and Its Uses in Practical Terms," by Christina S.R. Drummond and Allan D. Stickler.

During its study of the auditing profession, the Cohen Commission received some practitioner inputs which suggested that "one of the causes of the discontinuity between accounting theory and practice is that students graduate from accounting programs with no understanding of the mechanics of how an accounting system operates and what the related documentation looks like" [AICPA, 1978, p. 177]. Thus, the question is raised as to whether accounting curricula are providing students with sufficient knowledge about the form and function of the various documents, records, journals, and ledgers used by enterprises to conduct and to record the results of business activities. The implication of the CPA inputs to the Cohen Commission efforts is that a lack of such knowledge can be a deterrent for auditing students in understanding the concepts of audit program development and evidence collection procedures. This paper reports on a Systems Understanding Aid that has been designed to address students' need for additional knowledge about basic accounting system documents and records. The Aid was administered to students and evaluated for effectiveness. Student testing of the Aid has shown it to be an effective pedagogical supplement to the accounting curriculum.