Knowledge that Transforms

Barry E. Cushing, D. Gerald Searfoss, Reed H. Randall, Materiality Allocation in Audit Planning: A Feasibility Study, Journal of Accounting Research, Vol. 17, Studies on Auditing-Selections from the "Research Opportunities in Auditing" Program (1979), pp. 172-216

Disclosures, Line-of-business reporting, Segment reporting, Risk

International accounting, Accounting principles, Environment, Financial reporting

Control data, Time-series properties, Cost variance, Time-series properties

David S. Ng, Jan Stoeckenius, [Discussion of Auditing: Incentives and Truthful Reporting]: A Reply, Journal of Accounting Research, Vol. 17, Studies on Auditing-Selections from the "Research Opportunities in Auditing" Program (1979), pp. 33-34

Transfer Pricing, Risk sharing, Uncertainty

Experiments, Investor expectation, Abnormal performance index, Residual analysis

Over a decade ago, professional judgment as applied to the determination of materiality was characterized as a black box (Bernstein [1967]). Since then a number of researchers have attempted to peer inside this black box. The objectives have been to determine how various factors affect materiality judgments and why highly trained professionals with extensive experience often reach different conclusions in similar situations. In a recent paper (Moriarity and Barron [1976]), we suggested a methodology which seems to hold promise as a means to open the black box. In this paper, we describe the next methodological step which we have taken and describe an application of the methodology. This paper may be viewed in terms of (1) the substantive questionmateriality; (2) the methodology-an application of conjoint analysis; (3) an application of judgment research; (4) a field study of audit partner judgments; and (5) a research technology having significant implications for future research on the substantive question. We believe that the primary contribution of the paper is point (5)-an illustration of a methodology having significant implications for accounting research. The field study itself provides two additional contributions: (1) it illustrates the application of the methodology to professional judgment in accounting, and (2) its findings are consistent with those of a large body of judgment research studies (e.g., Slovic and Lichtenstein [1971] and Libby

David S. Ng, Jan Stoeckenius, Auditing: Incentives and Truthful Reporting, Journal of Accounting Research, Vol. 17, Studies on Auditing-Selections from the "Research Opportunities in Auditing" Program (1979), pp. 1-24