The path leading to a degree with a major in accounting is a rugged one at best. Obstacles are to be encountered at every turn. Many an eager student has dashed confidently down this path only abruptly to encounter a sizeable obstacle known as partnership dissolution resulting from the admission of a new partner. Managerial Accounting as a course of study represents a recent addition to the accounting curriculum of many schools of higher education. The addition of this course reflects the current demand for an approach to accounting that emphasizes the utilization of accounting data for management planning and control. At the present time many accounting departments are in the process of reevaluating their entire accounting curriculum to determine to what extent present offerings may continue to serve their traditional purpose as well as fulfill the need for an approach which takes into greater consideration the managerial aspect. The non-accounting major terminates his study of accounting with the Managerial Accounting course. The accounting major, almost without exception, takes the same Managerial Accounting course as the non-major which means that he takes the course between Introductory Accounting and Intermediate Accounting.

We construct a model of an exchange economy in which agents trade assets contingent on an observable signal, the probability of which depends on public opinion. The agents in our model are replaced occasionally, and each person updates beliefs in response to observed outcomes. We show that the distribution of the observed signal is described by a quasi-nonergodic process and that people continue to disagree with each other forever. These disagreements generate large wealth inequalities that arise from the multiplicative nature of wealth dynamics, which makes successful bold bets highly profitable.

Using Bayesian methods, we estimate a nonlinear DSGE model in which the interest-rate lower bound is occasionally binding. We quantify the size and nature of disturbances that pushed the US economy to the lower bound in late 2008 as well as the contribution of the lower bound constraint to the resulting economic slump. We find that the interest-rate lower bound was a significant constraint on monetary policy that exacerbated the recession and inhibited the recovery, as our mean estimates imply that the zero lower bound (ZLB) accounted for about 30 percent of the sharp contraction in US GDP that occurred in 2009 and an even larger fraction of the slow recovery that followed.

Governments implement wealth transfers with different policy goals and distribution methods. Prior research examines the timing (lump sum/periodic) of transfers but fails to simultaneously consider payment delivery method (standalone/combined with other income). Based on the behavioral life-cycle model, we predict payment timing influences how recipients spend government transfers, but that this effect is muted when the transfer payment is combined with other income. In contrast to prior research, our experimental findings provide theory-consistent results and suggest recipients of a periodic transfer spend more of the transfer than recipients of a lump sum transfer, but only when the transfer is standalone and not combined. Our findings help to explain theory-inconsistent results of prior research and extend the literature on the behavioral life-cycle model and mental budgeting. Moreover, our results suggest policymakers can intentionally structure the distribution of government transfers to encourage household spending or saving consistent with policy goals.

Regulators and researchers express concern about auditors who leave their firms for employment at their clients, due to lingering relationships which might represent a threat to audit quality. These relationships could negatively impact audit quality through undue influences of the client personnel on auditor judgment. We examine how these relationships influence novice auditors during evidence collection. Understanding the effects of alumni affiliation on evidence collection is important because undiscovered issues at this phase may go unaddressed, potentially hurting audit quality. Contrary to most research findings, we find that alumni affiliation can benefit the audit by increasing auditors’ evidence collection. However, we also find, when auditors become depleted, the benefits of alumni affiliation actually reverse, as auditors overrely on the relationship, leading them to prematurely cease evidence collection. These findings have implications for both practitioners and researchers. Data Availability: Data are available from the authors upon request.

In this study, we consider how the accumulating nature and income direction of audit differences influence negotiated audit adjustments. We test our expectations by constructing dyads consisting of experienced auditors and financial officers, allowing them to interact via a web-based instrument. As predicted, based on expectancy violation theory and consideration of negotiation leverage, these audit difference characteristics alter the behaviors and negotiated outcomes of our participants. Specifically, dyads determine smaller adjustments when audit differences accumulate over time. Analysis of auditor-client expectations and dialog suggests the leverage of the negotiators impacts the arguments used and the persuasiveness of those arguments. Dyads also produce smaller adjustments when an accumulating audit difference increases, rather than decreases, income, due in part to clients successfully using conservatism as a persuasive argument to convince auditors to concede. Our method provides insight into how these effects occur and how the social process can alter auditors' pre-negotiation expectations.

We examine whether PCAOB inspection reports increase auditors' litigation risk. We find that inspection reports with audit deficiencies are positively associated with the number of lawsuits subsequently filed against the inspected auditor. These results are strongest when client-level lawsuit-triggering events have already occurred and when PCAOB inspection content is arguably more persuasive. Importantly, these results pertain exclusively to triennially inspected audit firms for which the set of other publicly available signals of audit quality is limited. Furthermore, we do not argue that inspection reports in isolation trigger lawsuits. Instead, once events such as restatement announcements or bankruptcies create the potential for legal action against the auditor, inspection reports provide a public signal about past noncompliance with auditing standards. This signal likely increases lawyers' perceived strength of case against the auditor before the lawsuit is filed and before lawyers have access to the audit workpapers.

Research documents that firms shift operating expenses into income-decreasing, but not income-increasing, discontinued operations. We argue that valuation considerations explain this asymmetric result, as acquirers are likely to value the earnings of income-increasing discontinued operations more highly than the earnings of income-decreasing discontinued operations. Using a large sample of hand-collected data, we show that pre-tax earnings and operating expenses are significantly more value-relevant for income-increasing discontinued operations, supporting our economic explanation for why firms do not shift operating expenses into income-increasing discontinued operations. Additional analysis shows that in situations where managers are constrained from shifting operating expenses due to valuation concerns, they shift tax expense (an expense that is less value-relevant) from continuing operations into income-increasing discontinued operations. Overall, we conclude that valuation considerations constrain firms from shifting operating expenses into income-increasing discontinued operations, but do not constrain firms shifting tax expenses.

The question we address is whether mandated disclosure about dispersion of nonfinancial asset values can provide information relevant to assessing firm risk. Using a sample of Canadian oil and gas (O&G) firms between 2004 and 2011, we find that the difference between the disclosed 10th and 50th percentiles from the O&G reserves distribution, which measures dispersion of the distribution, is positively associated with future total and idiosyncratic equity return volatility, systematic risk, and credit risk. We also find that disclosure of increased reserves dispersion is associated with weaker stock price reactions to increases in reserves and with increases in bid-ask spreads, both of which indicate the disclosures convey information about risk associated with reserves. Additional tests reveal little evidence of managerial opportunism in the reserves disclosures. Taken together, our evidence suggests that quantitative disclosures about the dispersion of nonfinancial asset values can provide information relevant to assessing firm risk.

We investigate whether PCAOB-identified audit deficiencies lead to higher audit fees or turnover likelihood for clients of Big 4 auditors. To examine this, we identify areas of GAAP related to PCAOB deficiencies for each auditor. We then use textual analysis to identify how important the deficiencies are to clients to measure each client's exposure to deficient auditing. We find that this measure positively relates to audit fees and that this association is moderated by client bargaining power. Auditor turnover is also higher when deficiency exposure is high relative to what it would be for peer auditors, but we only observe this relation for smaller clients and do not find it is affected by client bargaining power. Finally, we find that companies switching Big 4 auditors tend to select an auditor resulting in lower deficiency exposure. These results have implications for understanding how PCAOB inspection reports affect the market for audit services. JEL Classifications: M41; M42. Data Availability: We obtain all data from publicly available sources.