More powerful tests of a theory of choice of accounting methods and the effect of changes in these choices on equity values are provided. The power increase comes from efficiently aggregating results across studies. One conclusion is that at least six variables common to more than one study have explanatory power. These variables are managerial compensation, leverage, size, risk, and constraints on interest coverage and dividends. Another conclusion is that the posterior probability that the theory taken as a whole has explanatory power is close to one. This conclusion includes the effect of variables that only appear in one study.

Abstract. During the past 15 years, the field of auditing has evolved as a scientific discipline. This paper discusses the continuing evolution of auditing science by identifying current megatrends in the auditing environment. These megatrends include (1) the expanding scope of attestation and related audit services, (2) new competition and mergers between accounting firms, (3) changing information technology, and (4) an emerging global market for audits. Research opportunities for the 1990s that relate to such trends are illustrated to stimulate additional progress in the field. Finally, implications for interdisciplinary research and education and training future auditors are discussed. Résumé. Depuis 15 ans, le domaine de la vérification a gagné le rang de discipline scientifique. L'auteur traite de l'évolution incessante de la science de la vérification et détermine les mégatendances actuelles dans le secteur. On retrouve parmi ces mégatendances 1) l'élargissement de la portée de l'attestation et des services de vérification connexes, 2) la concurrence inédite que se livrent les cabinets comptables et les fusions dont ils font l'objet, 3) l'évolution de la technologie de l'information et 4) un marché global en émergence pour les services de vérification. L'auteur décrit les avenues de recherche qu'offrent ces tendances pour les années 1990, en vue de stimuler les progrès dans le domaine. Enfin, il traite des conséquences en matière de recherche interdisciplinaire et de formation théorique et pratique des futurs vérificateurs.

Abstract. Although auditors often determine an upper bound on the amount of error in individual accounts, their primary concern is with the overall amount of error over several accounts. This paper presents a combined bound procedure for determining such an overall upper bound when using the moment method of monetary unit sampling (MUS). A procedure is also presented for determining optimal sample sizes over several independent accounts. The new combined bound procedure provides the moment method of MUS with the same type of flexibility that is currently available for the Stringer method of MUS. In addition, the new sample size planning procedure provides the combined moment bound with added flexibility and options that are not available when using a combined Stringer bound approach. The effectiveness and efficiency of both procedures has been investigated using 4324 separate simulation studies. The results indicate that the combined upper confidence bounds of the moment method are significantly smaller than those provided by the most attractive Stringer‐based combined bound method. Further, the sample size planning procedure can be an effective audit tool. Résumé. Bien que les vérificateurs fixent souvent la limite supérieure du taux d'erreur acceptable pour des comptes particuliers, leur préoccupation première touche le taux global d'erreur pour un ensemble de comptes. L'auteur propose un procédé permettant d'établir une limite combinée visant la détermination de cette forme de limite supérieure globale grâce à l'utilisation de la méthode des moments appliquée à l'échantillonnage en unités monétaires. Il propose également un procédé visant la détermination d'échantillons de taille optimale pour un ensemble de comptes indépendants. Le nouveau procédé de limite combinée fait appel à la méthode des moments d'échantillonnage en unités monétaires avec le même type de souplesse que l'on peut actuellement obtenir en utili sant la méthode de Stringer. De plus, le nouveau procédé de planification de la taille de l'échantillon livre une limite combinée résultant de l'application de la méthode des moments en même temps qu'il offre une souplesse plus grande et des possibilités que n'offre pas la méthode de Stringer. L'efficacité et l'efficience des deux procédés sont analysées à l'aide de 4324 études de simulation distinctes. Les résultats indiquent que les limites de confiance supérieures combinées obtenues par la méthode des moments sont beaucoup plus faibles que celles que l'on obtient par l'application de la méthode de la limite combinée, plus attrayante, basée sur la méthode de Stringer. De plus, le procédé de planification de la taille de l'échantillon peut être un instrument de vérification efficace.

Information content, Nonearning numbers, Earnings predictors, Predictive ability

Laureen A. Maines, The Effect of Forecast Redundancy on Judgments of a Consensus Forecast's Expected Accuracy, Journal of Accounting Research, Vol. 28, Studies on Judgment Issues in Accounting and Auditing (1990), pp. 29-47

Comparative advantage and the division of labor make geographic concentration of production within a nation profitable and cause many cities to be specialized in one or a few main industries. Specialized cities, however, suffer greater unemployment risk. The theory of compensating wage differentials predicts that individuals living in more specialized cities will be compensated in the form of higher wage rates. We study the effects of specialization on wages and unemployment in the United States. We find evidence of compensating wage differentials. That firms choose to locate in more specialized, higher-wage cities is indirect evidence of the gains to specialization.

Firms that alter their divisional configurations on average increase shareholder wealth. Gains appear to come from information about investment opportunities and increases in efficiency. Performance before the restructurings suggests poorly organized firms are motivated by market pressures to change their organizations. Change also occurs in healthy firms as part of the growth process. Restructuring often occurs where there is no evidence of takeover threats. While stock prices increase around the restructurings, there is a contemporaneous decline in earnings due to increased expenses. These findings appear inconsistent with the contention that the market pressures managers into focusing on short-run earnings.

Many contingent claims incorporate options on yield levels. I derive closed-form expressions for European yield-option prices using a general equilibrium model in which the underlying yield is the relevant state variable. The properties of these options differ markedly from those of conventional options on traded assets. For example, yield-call values can be less than their intrinsic value and can be decreasing functions of the underlying yield. These features have important hedging implications. I examine the empirical implications of the model using price data for the 13-week T-bill options traded on the Chicago Board Options Exchange.