Quarterly earnings, Predictive ability, Time-series, Goodness-of-fit

Abstract ABSTRACT: Problems with the performance of U.S. manufacturing firms have become obvious in recent years. Japanese and Western European manufacturers are able to produce higher quality goods with fewer workers and lower inventory levels than comparable U.S. firms. The ability of foreign firms to become more efficient producers has gone largely unnoticed in the education and research programs of many U.S. business schools. A much greater commitment to understanding the factors critical to the success of manufacturing firms is needed. While an understanding of the determinants for successful manufacturing performance will require contributions from many disciplines, accounting can play a critical role in this effort. Accounting researchers can attempt to develop non-financial measures of manufacturing performance, such as productivity, quality, and inventory costs. Measures of product leadership, manufacturing flexibility, and delivery performance could be developed for firms bringing new products to the marketplace. Expanded performance measures are also necessary for capital budgeting procedures and to monitor production using the new technology of flexible manufacturing systems. A particular challenge is to deemphasize the current focus of senior managers on simple, aggregate, short-term financial measures and to develop indicators that are more consistent with long-term competitiveness and profitability.

Abstract The article presents the author's opinions on organization theory and auditing. The articles: "Auditing: Perspectives From Multi-Person Decision Theory," by Robert Wilson, and "Organization Theory and Methodology," by Michael C. Jensen, were published in the April 1, 1983 issue of the periodical "Accounting Review." The two articles have much in common. Both emphasize the fact that research on intra- and inter-organization equilibrium behavior is mushrooming and now able to accommodate accounting questions in a way never before feasible, or perhaps even imaginable. Wilson suggests that cost allocation may reflect rational (equilibrium) obfuscation in a financial-reporting context. Wilson emphasizes the importance of "reputation" as an explanatory variable in many economic relationships. Reputation-building is the major factor contributing to economies of scale in auditing. According to Jensen, accounting methods are chosen according to organizations' policies. The use of mathematics as a factor of production in the research process comes into the fore with Jensen's vision of two agency models.

Cost allocation, Production process costs, Joint costs, Common costs

Decision making, Human judgment, Decision aids, Opportunity costs