This article focuses on the usefulness of a flow chart conceptualization method for better interpretation of auditors' reports on financial statements. Here, the authors have developed a flow chart that covers most reporting situations confronted by certified public accountants. The purpose of the flow chart is to provide students of auditing with an easy to understand logical model of the major reporting possibilities. A definitive understanding of related sections of the "Codification of Statements on Auditing Standards, Numbers 1 to 7," however, requires careful reading and study; the flow chart presented here is not intended to relieve students of that task. It is suggested that, if sufficient evidence is obtained through alternative auditing procedures, there is no significant scope limitation, and the report need not be modified from the wording of an unqualified opinion. If part of the examination is made by other auditors, the principal auditor may issue an unqualified, an "except for" qualified, or a disclaimer of opinion. After making any necessary inquiries, if he or she is satisfied with the professional reputation and independence of the other auditor, the principal auditor normally should render an unqualified opinion.

Donald R. Lessard, The Determinants of Common Stock Returns Volatility: An International Comparison: Discussion, The Journal of Finance, Vol. 31, No. 2, Papers and Proceedings of the Thirty-Fourth Annual Meeting of the American Finance Association Dallas, Texas December 28-30, 1975 (May, 1976), pp. 751-752

T his paper analyzes optimal formation of rational expectations where information is costly to obtain to utilize. Under these conditions, expectations normally formed by an estimator will be intermediate between those based on all available information and those which are optimal extrapolative predictors. 1 Since the costs of information are likely to vary less than the value of information, this model can explain systematic differences in expectations in markets, such as, labor, for which the value of accuracy of expectations differs between or among buyers and sellers. Similarly, expectations about the same variable may differ between markets where arbitrage is also costly. Section I extends a model due to Theil toanalyzetheeffectsofcostlyinformation. Illustrative applications are discussed in Section II .

This paper analyzes optimal formation of rational expectations where information is costly to obtain to utilize. Under these conditions, expectations normally formed by an estimator will be intermediate between those based on all available information and those which are optimal extrapolative predictors.1 Since the costs of information are likely to vary less than the value of information, this model can explain systematic differences in expectations in markets, such as, labor, for which the value of accuracy of expectations differs between or among buyers and sellers. Similarly, expectations about the same variable may differ between markets where arbitrage is also costly. Section I extends a model due to Theil toanalyzetheeffectsofcostlyinformation. Illustrative applications are discussed in Section II.