The analysis has shown that insurer investment performance parallels that of other investors; greater returns are associated with greater variability. However, with the acquisition of higher levels of investment risk insurers generally reduce the level of underwriting risk which is undertaken. Thus, insurer management apparently attempts to keep ruin probabilities within some undefinable but clearly present limits. In the process of trading off between investment and underwriting risk, a higher rate of return to net worth is sacrificed. The sacrifice of potentially higher rates of return to equity, however, does not place the insurer at a disadvantage relative to the capital market or make attractive the alternative of operating as an investment trust. Under reasonable conditions governing the risk and return associated with underwriting activities, the insurer return to net worth is in a more efficient position as the result of underwriting activities than that offered by the capital market alone. For a given risk position, the return to the insurer exceeds that available from the capital market alone. Thus, so long as marginal returns to underwriting are positive, the leveraging afforded by the expansion of premium volume produces a superior return over the traditional leveraging which might be employed by an investor in the capital market.

Reviews the book "Professional Accounting in 30 Countries."

Reviews the book "Management Accounting: The Behavioral Foundations," by J.L. Livingstone.

N 1970 Baumol, Heim, Malkiel, and Quandt (hereinafter BHMQ) published a provocative article. Their hypothesis was that for U.S. firms the rate of return from invested funds would be greatest when the financing involved the most serious exercise of market discipline. On these grounds they conjectured that borrowing would tend to produce significant increases in earnings but not as great as those associated with new stock issues, and that the rate of return to plowback would be the lowest of the three. BHMQ's empirical tests led them to the following conclusions:

I. Introduction: Neoclassical theory and the evolutionary alternative, 90, — II. A specific evolutionary model, 93. — III. Calibration of the model, 98. — IV. Simulation results, 102. — V. Conclusion, 116.

The auditor's real and perceived independence and autonomy in the performance of the attest function seems universally accepted as a desirable attribute. This study utilizes interpersonal exchange theory to consider in detail some of the factors which may affect the relative power of the auditor to maintain independence in an auditor-firm conflict situation. The term "auditor" refers to a professional accountant who is hired by a company to perform an audit and render an opinion on statements to be provided for a third party. The specific conflict situation occurs when the auditor and firm do not agree on some aspect of the performance of the attest function. Under these circumstances, the firm may attempt to influence the manner in which the attest function is conducted. The firm, in attempting to influence the performance of the attest function, may pressure the auditor to take an action that violates acceptable auditing standards, including the rendering of an inappropriate opinion. Compliance with the firm's demands may lead to violations of professional standards which the auditor wishes to avoid. Failure to comply with the firm's demands may result in sanctions by the firm, including the possibility of termination of the engagement. The equalization of power between the auditor and the firm, resulting in a symmetrical power relationship, could lead to mutual accommodation.

Reviews the book "Auditing Public Education: Current Status and Future Potential," by Peter L. McMickle and Gene Elrod.