This paper provides a brief review of the salient economic, behavioral and quantitative literature in accounting and transfer pricing. Further, it relates this review to a relatively new programming formulation, suggesting the greater descriptive implications potential inherent in the new technique generalized goal decomposition programming. The paper does not develop new ideas, but attempts to relate existing material in a manner that will bring the reader's attention to the potential of the mathematical programming models in hierarchical organizations. The expanding literature in this area clearly is deserving of attention as it provides a means by which the behavioral and algorithmic approaches to resource transfer problems may be integrated. It is a step in the direction of models integration and thus, a step toward more realistic mathematical formulation of the decision-making environment. One rely on the scholar T. Ruefli model in this presentation as it provided a relatively easily explained formulation. Interested readers will find on pursuing this literature, that certain of the Ruefli limitations have been overcome in alternative algorithms.

In a recent article, Edward B. Deakin and Michael H. Granof " demonstrated how regression analysis, coupled with Bayesian statistical procedures, can be used to provide the auditor with assistance in selecting those accounts for investigation that are most likely to result in significant audit findings. The article encourages audit model development and experimentation by independent auditors with the application of these and other techniques which make use of additional information. The independent auditor's ultimate concern with respect to a reported account balance of a client, is whether it is "fairly presented." Suppose that the auditor has evaluated the design of an internal control subsystem and has conducted tests of compliance of system operation with system design. Substantive tests include analytical review of significant ratios and trends and resulting investigation of unusual fluctuations and questionable items and tests of details of transactions and balances. Without the refinement, the sample sizes required after using regression analysis to revise priors often will be substantially smaller than the 163 required under classical, unrestricted random sampling.

Presents a letter to the editor about the use of discriminant analysis as an aid to employee selection.

Reviews the book "Topics in Managerial Accounting," by L.S. Rosen.

ABSTRACT: The primary objective of this paper is to review the extant literature concerning auditing and EDP systems. We trace the flow of EDP-auditing development, note salient points of similarity and difference in techniques and relate these issues to the auditors' professional responsibilities. We hope that this will contribute to efficient consideration of the past literature by those developing an interest in auditing-EDP systems. We also hope that it will encourage efficient progress in the effort to develop new EDP-auditing research. With this in mind, we have included a short section on new approaches to EDP-auditing which presents information on systems design involvement, software standardization and formal system assertions.

[Auditors are charged with the responsibility of evaluating internal control systems. Recent advances in decision support systems indicate that the speed, accuracy, and memory capacity of computers may be used to aid auditors in this task. To test this proposition, a computer-assisted method of designing, analyzing, and evaluating internal control systems, called The Internal Control Model or TICOM, was designed and implemented. The technical manual and the TICOM software are available from the authors. This paper presents the results and conclusions of that project. TICOM is a computer-based analytic tool that aids the auditor first to model the internal control system and then to query the model in order to aid the auditor in evaluating the internal control system. TICOM is based on concepts in artificial intelligence such as knowledge representation and graph simplification. It serves (1) to describe office information systems while emphasizing internal accounting controls and (2) as an aid in control evaluation. It was found that the advantages of TICOM over traditional evaluation methods are that (1) the evaluation can be more rigorous and exhaustive, (2) the documentation of the system can be more thorough because of automated completeness and consistency tests, and (3) the modeler may probe and test controls by using the query-processing portion of TICOM.]

ABSTRACT: Auditors are charged with the responsibility of evaluating internal control systems. Recent advances in decision support systems indicate that the speed, accuracy, and memory capacity of computers may be used to aid auditors in this task. To test this proposition, a computer-assisted method of designing, analyzing, and evaluating internal control systems, called The Internal Control Model or TICOM, was designed and implemented. The technical manual and the TICOM software are available from the authors. This paper presents the results and conclusions of that project. TICOM is a computer-based analytic tool that aids the auditor first to model the internal control system and then to query the model in order to aid the auditor in evaluating the internal control system. TICOM is based on concepts in artificial intelligence such as knowledge representation and graph simplification. It serves (1) to describe office information systems while emphasizing internal accounting controls and (2) as an aid in control evaluation. It was found that the advantages of TICOM over traditional evaluation methods are that (1) the evaluation can be more rigorous and exhaustive, (2) the documentation of the system can be more thorough because of automated completeness and consistency tests, and (3) the modeler may probe and test controls by using the query-processing portion of TICOM.