Abstract This study examines the effect on audit staff performance of different assignment strategies. There is a review of the theoretical models and related empirical evidence for performance in a sequence of assignments, and data from 573 staff evaluation forms for two offices of large public accounting firms are analyzed. The review and analysis show some evidence that there is a lapse in performance over time for audit staff at the senior level if the seniors are assigned consecutively within a particular industry, while no lapse in performance is observed for those seniors who are rotated among assignments in different industries. These findings are generally consistent with the research findings in interference theory--a theory which attempts to explain certain kinds of verbal learning behavior.

Abstract The article is based upon the apparent reasonableness of solutions of the Ijiri-Kaplan (I-K) model for a set of data obtained from a financial institution and a Tuscon office supply company. To demonstrate the usefulness and validity of a model should, in fact, require some evidence that the use of the model will, in some way, generally improve audit decision making. In order to assess the potential for the model to improve audit decision making, certain important issues regarding audit sampling objectives and related measurement problems need to be clarified. First, there is a problem in how an error is defined for the model. For example, the I-K model is defined only for errors which have a dollar impact on an account balance. Further, the I-K model makes no allowance for qualitative differences among different errors. For example, one single extension error, say, in preparing an invoice would be of much less significance for the auditor than would be a single extension error in pricing inventory which might signal multiple errors of the same type.

Abstract ABSTRACT: This paper brings to the accounting literature the results of recent research from other disciplines on a measure called duration and examines its potential usefulness in capital budgeting decisions. Duration is defined as the number of periods which elapse before the average present value dollar is received from a stream of cash flows. In this paper, the authors define duration and describe its major attributes. Its potential for assessing the risk of changes in required rates of return and the risk of illiquidity are then explored in a capital budgeting setting.

Abstract Reviews the book "Behavior of Major Statistical Estimators in Sampling Accounting Populations," by John Neter and James K. Loebbecke.

Abstract Falk and Heintz have proposed a scalogram technique to rank industries according to risk as reflected by financial ratios. The present paper examines some problems which need to be resolved before this technique can be used. First, the F & H selection of ratios is somewhat subjective and is not supported by tests for validity and reliability. And because of the confounding effects of changing economic conditions, the difficulty in obtaining a unique observable concept for industry risk, and because of measurement problems, it may be infeasible to assure an adequate degree of validity and reliability for this ranking technique. Also, some of the ratios selected by F & H may have high inter-correlation with other F ratios, thus implicitly adding greater weights to some of the ratios. Moreover, the F & H technique may be biased because of the selection of a different number of significant digits for two of the ratios. F & H have not offered any supporting reason for either of these sources of bias.

Abstract 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.

Abstract Reviews the book "Accounting for Overheads: Critique and Reforms," by Michael Bromwich.