Earnings smoothing, Accounting Changes, EPS, Performance patterns

Quarterly earnings, Interim reporting, Price reaction, Volume changes

Certified public accounting is a profession whose members are independent practitioners or members of firms rendering services in three broad areas: auditing, taxes, and management services.' In order to perform effectively selected tasks, professions rely on a certain amount of autonomy given by society. Along with the privilege of autonomy goes the responsibility of self-regulation. Any profession which fails to regulate effectively the professional behavior of its members risks the loss of its autonomy.2 As a profession, certified public accounting has the task of regulating the professional behavior of its members. The objective of this paper is to report findings on the ethical behavior of Certified Public Accountants.

Income smoothing, Chemical industry, Accounting measures, Systematic normalization criterion

Linear Programming, Asset services

Earnings smoothing, Changes in accounting methods, Earnings management

In a recent article, F. K. Wright proposes a linear programming approach to the measurement of asset services.' He bases his work on the theories and shadow-pricing developed within linear programming. Similar uses of shadow prices are to be found in other papers on accounting research. Usually, in a linear programming context, one need not distinguish between the gain in having one more unit of a resource, as opposed to the loss in having one less unit. The purpose of this note is to show, by means of an example, the need for making such distinctions. I give a simple illustration and then discuss its relation to general linear programming theory and its implications for accounting research.

Foreign Income, Currency Risk, Financial Statements

Robert E. Jensen, [Observations on Jensen's Experimental Design for Study of Effects of Accounting Variations in Decision Making]: A Rejoinder, Journal of Accounting Research, Vol. 5, No. 2 (Autumn, 1967), pp. 230-251

The research reported herein was undertaken to investigate relationships between (a) security evaluation and portfolio selection and (b) alternative inventory valuation and depreciation methods in financial reporting. First, a computer simulation model of a manufacturing firm was developed. In this simulation phase, the effects of alternative methods of financial statements and related measures (earnings per share, working capital, earnings margin, current ratio, inventory turnover, and other financial ratios along with corresponding rates of change and moving averages) were investigated under a wide range of operating conditions. In the second phase, an attempt was made to measure the effects of these accounting variations on evaluations by professional security analysts. Complete prospectuses were developed for two hypothetical companies named ETX Electronic Industries, Inc. and Rayco Electronics Corporation. Financial data for the companies were generated by the computer model. Four sets of financial reports with their related measures were generated for each company for a ten-year span. Two inventory methods (lifo and fifo) and two depreciation methods (straight-line and accelerated) were used. The four different financial reports for each company resulted m sixteen combinations of financial reports for the two companies. Participants in the study received an information packet which included an introductory letter, a return questionnaire, and one prospectus for each of the companies to be evaluated. The only variation in the in-