Raaj K. Sah, Joseph E. Stiglitz; The Quality of Managers in Centralized Versus Decentralized Organizations*, The Quarterly Journal of Economics, Volume 106, Iss

We examine empirical implications of models of differential information that formalize the following intuition: securities for which there is relatively little information are perceived as relatively more risky because of the greater uncertainty surrounding the exact parameters of their return distributions. The implication that beta risk for low information firms should decline as information increases is confirmed with several data sets. We find such a decline over the first several periods subsequent to initial public offerings and initial listings. There is also an abrupt risk decline at the first annual earnings announcement.

Compares the accounting education with the practice of public accounting. Description of the working environment of practitioners; Information on the academic environment of professors and students; Factors that complicate the student's transition from school to practice; Contents of a professional education; Directions for accounting education.

Reviews the book "Operating Budgets," by William J. Vatter.

The purpose of this article is to note some of the problems the authors faced in their recently completed study of financial reporting for diversified companies. This was their first substantial experience with empirical research and in the completion of that experience they met a number of problems which were new to them. As empirical studies in accountancy are somewhat rare, they have the impression that perhaps others will find these problems novel also and may find some benefit in an explanation of their solutions to them. Thus they seek to share their research experience and hope that others will do the same. Combining a controversial subject, a matter of such sensitivity as the extent of external financial reporting, and a wide participation on the part of financial executives and financial analysts in answering questionnaires, assured them of substantial active interest in the progress and conclusions of this study. Another term for this is "pressure," and they felt this on a number of occasions. However, there is no defense against pressures quite as effective as confidence that one's own position is soundly supported by adequate evidence, the kind of evidence that `an empirical study supplies. Finally, and this may be more closely related to the topic of investigation than to the nature of the research itself, this study included far more variables than they were accustomed to working with at one time. They do not, in any sense, intend to leave the impression that they feel they have the final answers to such problems, rather their thought is that free exchange of experiences and opinions may help each of them to better undertake future studies.

The purpose of this article is to suggest an outline for a body of theory, within which the auditor would find guides that stimulate the exercise of judgment in program planning, rather than mechanical aids that suppress this judgment. Fundamental to the formulation of such guides is an understanding of the concept of a minimum audit program, which the auditor adjusts to meet the weaknesses of a specific internal control situation. Comments concerning the necessary judgment process by which internal control is evaluated effectively suggest that over-all appraisal of internal control must be replaced with precise analysis. The article says that in analyzing internal control, the auditor must deal with specifics, not with generalities. The auditor must determine whether specific weaknesses exist, the irregularities thereby permitted, and the specific modifications of his program called for by these conditions. In this way many of the problems associated with the over-all, more subjective approach to internal control evaluation would be eliminated.

The article presents a question paper prepared by the Board of Examiners of the American Institute of Certified Public Accountants and was presented as the first half of the examination in accounting practice on November 6, 1957. The candidates were required to solve all problems in four and a half hours. The total weight assigned to this section of the examination was 50 points and the examiners point out that the suggested time allowances are approximately proportional to the point value of the various problems. The time allowances for doing different questions are also suggested. One of the problems was based on 3 partners who joined with initial investment of $20,000, $30,000 and $50,000. There was no provision in their original agreement as to sharing profits, but the agreement did provide that each partner would be entitled to $3,000 salary as a distribution of profits. At the end of the financial year, it is required to review their books and records and to advise them of their proper capital balances.