Prior research indicates that audit and tax professionals' judgments are influenced by their client's preferences, both directly and indirectly (via information search). In an experiment with tax professionals as participants, we examine whether high practice risk (i.e., exposure to monetary and nonmonetary costs of making inappropriate recommendations) mitigates these effects. We find that, when facing a client with low practice risk, professionals' search is biased in a manner that leads judgments to be consistent with client preference; however, search is less biased when facing a client with high practice risk, and resulting judgments are less consistent with client preference. We also find that, after controlling for the impact of information search, professionals tend to adjust their recommendations away from the client-preferred position, regardless of practice risk. This study sheds light on the direct and indirect paths by which client preference and practice risk affect professionals' judgments.

This paper examines whether industry efforts to decrease managerial discretion, increase uniformity, and improve transparency of a non-GAAP performance measure change voluntary disclosure and market perceptions. We find that the frequency of REITs meeting or beating analysts' expectations of funds from operations (FFO) decreases following explicit industry initiatives to discourage manipulation. Concurrent with this shift, we find that the information content of FFO to investors increased, particularly for firms reporting a reconciliation of FFO with GAAP earnings. We also examine firms in other industries to assess alternative explanations for these results, such as SEC intervention. Collectively, our findings suggest that industry guidance about non-GAAP performance curtailed managers' opportunistic reporting. Furthermore, the market response to FFO is consistent with investors perceiving less manipulation and greater reliability. Our evidence also supports the SEC's subsequent requirement that all non-GAAP disclosures be reconciled to the nearest GAAP measures.

The Securities and Exchange Commission now requires auditors to review interim earnings reports on a timely basis. Previously, auditors could perform this review retrospectively, as part of the year-end audit. We investigate whether timely reviews are likely to increase the relevance and reliability of reported earnings, as reflected by the extent to which the earnings-return relation is contemporaneous. We find that when the auditor reviews interim earnings on a timely basis, the association between quarterly returns and earnings (and between quarterly returns and unexpected earnings) is predominantly contemporaneous. When the auditor reviews interim earnings retrospectively, however, the association between quarterly returns and earnings is not entirely contemporaneous; with retrospective reviews, returns lead interim earnings. We conclude from these findings that timely reviews increase the likelihood that accounting earnings reflect economic events contemporaneously with returns.

This article presents a report of the Task Committee, American Accounting Association on the standards of accounting instruction. From its inception, the American Accounting Association has been concerned with accounting education. This interest has been manifested in various projects and special committee activities undertaken by the Association, alone and jointly with other groups. One of the Association's special task committee in the area of education is the Committee on Standards of Accounting Instruction. It operates in cooperation with, and as a task force of, the Joint Committee on Education. The first project of the Committee on Standards of Accounting Instruction was a questionnaire study of the undergraduate courses taken by accounting majors. The questionnaire was carefully prepared and tested before being released. It was sent to most of the colleges and universities in the U.S. , which offered a major or concentration in accounting in an undergraduate program. The study indicated that the largest school in the sample graduated 837 students in 1954 with bachelor degrees in business. It was notable that 1954 saw less than half as many accounting majors graduating as in 1950. The decline in degrees in business was considerably sharper than for all bachelor degrees. The Committee felt that course work in cost accounting is properly required by nearly all schools

This article comments on inventory pricing and changes in price levels. Ideally, the measurement of accounting profit involves the matching precisely of the identified costs of specific units of product with the sales revenues derived there from. Secondly, where conditions are such that precise matching of identified costs with revenues is impracticable, identified cost matching may be simulated by the adoption of an assumed flow of costs. Also, a flow assumption can be realistic, in that it reflects the dominant characteristics of the actual flow of goods; thus it may reflect an actual dominance of first-in, first-out, average, or last-in, first-out movement. A flow assumption can be artificial, on the other hand, in that it premises a flow of costs that is clearly in contrast with actual physical movement. However, the periodic income of a business enterprise is computed by deducting from the revenues of the period the costs which are properly associated with those revenues. In the case of certain costs, for example sales commissions, the relationship to the revenues of a period is quite direct and the matching process is accomplished with a minimum of uncertainty.

This article discusses the information on the paragraph no. 5. The Paragraph No. 5 under "Expense" in the 1948 Revision of Accounting Concepts and Standards Underlying Corporate Financial Statements of the U.S. reads that An assignment of all or a portion of the cost of an asset to expense, made in good faith after considered judgment and after competent review, in accordance with the accounting concepts and standards of the time, is not subject to reversal in a later period. Errors of a mechanical and non-judgment nature should be corrected in the period of their discovery. The Committee on Concepts and Standards is in agreement with the apparent basic purpose of this statement to reduce the possibility of manipulation of the net income calculation through reversals, revisions and reaccounting of past depredation charges and other amortizations. At the same time it recognizes that a position unalterably opposed to the correction of errors of judgment is both arbitrary and difficult to defend.

Twelve trillion dollars are allocated to private market funds that require outside investors to commit to transferring capital on demand. We show within a novel dynamic portfolio allocation model that ex‐ante commitment has large effects on investors' portfolios and welfare, and we quantify those effects. Investors are underallocated to private market funds and are willing to pay a larger premium to adjust the quantity committed than to eliminate other frictions, like timing uncertainty and limited tradability. Perhaps counterintuitively, commitment risk premiums increase with secondary market liquidity, and they do not disappear when investments are spread over many funds.

Municipal bonds exhibit considerable retail pricing variation, even for same‐size trades of the same bond on the same day, and even from the same dealer. Markups vary widely across dealers. Trading strongly clusters on eighth price increments, and clustered trades exhibit higher markups. Yields are often lowered to just above salient numbers. Machine learning estimates exploiting the richness of the data show that dealers that use strategic pricing have systematically higher markups. Recent Municipal Securities Rulemaking Board rules have had only a limited impact on markups. While a subset of dealers focus on best execution, many dealers appear focused on opportunistic pricing.

In the $793 billion Paycheck Protection Program, we examine metrics related to potential misreporting including nonregistered businesses, multiple businesses at residential addresses, abnormally high implied compensation per employee, and large inconsistencies with jobs reported in another government program. These measures consistently concentrate in certain FinTech lenders and are cross‐verified by seven additional measures. FinTech market share increased significantly over time, and suspicious lending by FinTechs in 2021 is four times the level at the start of the program. Suspicious loans are being overwhelmingly forgiven at rates similar to other loans.

Are some banks prone to perform poorly during crises? If yes, why? In this paper, we show that a bank's stock return performance during the 1998 crisis predicts its stock return performance and probability of failure during the recent financial crisis. This effect is economically large. Our findings are consistent with persistence in a bank's risk culture and/or aspects of its business model that make its performance sensitive to crises. Banks that relied more on short‐term funding, had more leverage, and grew more are more likely to be banks that performed poorly in both crises.