Auditing, Sampling, Substantive test, Receivables

In addition to the recent interest of the Securities and Exchange Commission, executive forecasts of earnings have received a considerable amount of attention in the academic literature (Basi, Carey, and Twark [1976], Lorek, McDonald, and Patz [1976], McDonald [1973], Copeland and Marioni [1972], Kapnick [1972], Daily [1971]). Much of this attention has focused either on the absolute or relative accuracy of such forecasts or on the ethical, legal, and practical problems of publishing and reviewing executive forecasts of earnings in external accounting reports. One aspect that has not been adequately considered is investor reaction to executive long-range forecasts of earnings. The purpose of this study is to investigate the information content of voluntarily disclosed long-range earnings forecasts by executives by determining security return reactions to a sample of such forecasts that were reported in the Wall Street Journal. The inclusion of management estimates of future earnings in annual reports is advocated on the assumption that such forecasts contain information, of interest to investors or other persons outside the firm, not otherwise publicly available. Not only do executives have information about internal and external factors expected to affect future operations and earnings, but they also exert considerable effort evaluating these factors and their impact on prospective operations in the normal planning function. Consequently, executive forecasts of earnings might be of inter-

Bruce R. Neumann, An Empirical Investigation of the Relationship between an AID Hospital Classification Model and Accounting Measures of Performance, Journal of Accounting Research, Vol. 17, No. 1 (Spring, 1979), pp. 123-139

[This paper considers a problem faced by players who are involved in a sequence of games: not necessarily the same games, not necessarily with the same opponents, and not necessarily under conditions of complete information. The players are assumed to act in response to stationary Markovian hypotheses which they form about the actions of their opponents. Conditions are explored which require that these hypotheses be correct on average and that the players actions be optimal in response to their hypotheses.]

Jerome B. Baesel, Garry R. Stein, The Value of Information: Inferences from the Profitability of Insider Trading, The Journal of Financial and Quantitative Analysis, Vol. 14, No. 3 (Sep., 1979), pp. 553-571

The purpose of this paper is to provide evidence on the following question: Are there more banking offices available per person to furnish consumer and business services in branch banking states than in unit banking states? This question is a central part of a broader issue of what limitations should be placed on the ability of individual banks to branch. Indeed, in a recent review of the literature dealing with the branching question, and prepared for the Senate Banking Committee (McIntyre Committee), Guttentag [8] stated: “One of the most pervasive arguments for branch banking is that branch banks provide more office facilities than unit banking.” Yet the available evidence on the question is sparse and existing research contains methodological difficulties which make the findings of questionable value.

J. Clay Singleton, Joseph R. Lauer, The Implications of Recursiveness in Capital Markets--Theory and Empirical Tests, The Journal of Financial and Quantitative Analysis, Vol. 14, No. 1 (Mar., 1979), pp. 59-76

William R. Russell, Tae Kun Seo; Diversification Theorems for Subsets of Risk Averters, The Review of Economic Studies, Volume 46, Issue 3, 1 July 1979, Pages 5