[Watts and Zimmerman [1978] tested their theory regarding management preferences over accounting standards using submissions on the General Price Level Discussion Memorandum. We first replicate the Watts-Zimmerman study using the same sample and then compare these results with identical tests based on a larger sample comprised of Exposure Draft submissions. Several biases are identified in the Watts-Zimmerman test procedures. When corrected, the theory's classificatory power deteriorates significantly on both the DM and ED samples. Alternative measurements of the predictor variables are introduced, as well as additional tests, in an attempt to improve the theory's performance. However, the theory's performance remains unimpressive.]

The impact of accounting earnings data on bond price behavior is examined for 85 bond issues over the period 1968-1972. Essentially, the study's results indicate that for convertible bonds, certain inferences drawn from stock market research may be extrapolated to this segment of the bond market. That is, accounting data appear to have information content for this market. The study's results concerning nonconvertible bonds indicate that accounting earnings data is incorporated in prices of nonconvertibles, but in a more diffused fashion.

Reviews the book `A Review of Japanese Management Accounting Literature and Bibliography,' by Takeo Yoshikawa, Falconer Mitchell and Jim Moyes.

Reviews the book `Future Events: A Conceptual Study of Their Significance for Recognition and Measurement,' by Todd Johnson.

Reviews the book `Research Method and Methodology in Finance and Accounting,' by Bob Ryan, Robert W. Scapens and Michael Theobald.

Reviews the book `Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports,' by Howard M. Schilit.

Provides an overview on the use of laboratory market experiment in auditing research. Concerns regarding the experiments and generality; Alternative approaches to characterizing equilibrium.

This article explains the rationale of controlling the risk of a type II error for substantive tests in auditing. The risk of attesting to a materially misstated amount is defined in one of two ways depending on the combination of decision strategy and sampling plan in use. When employing difference estimation, the auditor makes an interval estimate of the amount of error in an account balance. If the upper precision limit is less than the amount considered material, the book value is accepted. Here the risk to be controlled is one minus the confidence level employed, i.e., the probability of a Type I error. The more popular strategy, at least as far as textual treatments are concerned, involves making an interval estimate of the audited value of an account balance and accepting the book value if it falls within the interval. The audit examination is quite analogous to the quality control example. If an auditor accepts a book value only if it falls within his interval estimate of the "true" value, the adverse consequences of a Type I error are primarily the costs of extended audit procedures.

Watts and Zimmerman [1978] tested their theory regarding management preferences over accounting standards using submissions on the General Price Level Discussion Memorandum. We first replicate the Watts-Zimmerman study using the same sample and then compare these results with identical tests, based on a larger sample comprised of Exposure Draft submissions. Several biases are identified in the Watts-Zimmerman test procedures. When corrected, the theory's classificatory power deteriorates significantly on both the DM and ED samples. Alternative measurements of the predictor variables are introduced, as well as additional tests, in an attempt to improve the theory's performance. However, the theory's performance remains unimpressive.