I. Southern Italy as an underdeveloped economy, 517. — II. A model of regional development, 528. — III. The pattern of regional growth, 533. — IV. Implications for development policy, 539.
Adam Smith's invisible hand had the important property that, if each individual pursued his profit in optimal fashion, the total profit of the community would be maximized. Game theory has proposed a simple situation reversing this conclusion: two prisoners, arrested for a crime, are questioned separately. Each is informed it cannot be proved they committed the crime but that if (1) A does not confess to the crime and (1') B does not confess, both will receive six months in jail on a minor charge; if (1) A does not confess and (2') B does confess, A will receive ten years in prison while B goes free. On the other hand, if (2) A confesses and (1') B does not confess, A will go free while B goes to prison for ten years; while if (2) A confesses and (2') B confesses also, both will go to jail for eight years.
I. Introduction, 454. — II. Minimizing the number of inequities, 458. — III. Effect on total revenue of giving favorable or unfavorable treatment to new taxpayers, 459.
The use of an allowance for repairs to spread total estimated repair cost over the life of the related asset has been criticized on several grounds. A study of maintenance costs also discloses that there are shadings with respect to the significance of amounts as well as the length of time during which the benefits will be derived. The objective must be, however, to match significant costs with revenue in a sound manner. If, for example, the adjustments of tolerances on a piece of precision equipment is significantly costly and is necessarily at the end of each two-year period in the life of the equipment, costs related to adjustments of tolerances should be allocated to the periods receiving the benefit. Presumably when acquired, the equipment was properly adjusted by the manufacturer. A part of the acquisition cost conceptually was related to the initial adjustment. It seems reasonable that this portion of acquisition cost should be spread over the following two years. The cost of readjustment incurred at the end of the second year should be allocated to the next two year period etc.
The recording part of elementary accounting is a record of the flow of assets through a business enterprise. That is the asset history recorded in the general ledger in summarized and conventionalized form. The accounts tell four things about the assets, namely: the sources of all assets received by the business: the kinds of assets received by the business; the conversion of some assets into other assets; and finally, the reasons why some assets passed out of the business. Assets are the things being accounted for, and all accounts reflect some aspect of the above life history of assets as they pass through the business for which the accounting system has been designed. That is complete accounting for assets: that (not "all assets are owned by someone") is the basis of double entry bookkeeping. The legal relationship between the proprietor and the revenue sources (sales to customers) and between the proprietor and certain dispositions of assets (expenses, cost of sales, and losses) which leads to an income calculation is another story. It is an interpretative calculation based upon the laws of contracts and private property. It should be delayed until the flow story is understood. The flow story exists without the income calculation; as it does in simple estate and fund accounting. To mix the two at the start of accounting instruction is considered to be an undesirable complication.
The article reports on the auditing section of the May 1962 Uniform C.P.A. examination, which has been conducted on May 17, 1962 from 8:30 to 12:00 noon and included two groups of questions as follows, one of the problem given is, "Your client is a small college in a small town. The college has recently elected as treasurer the president of the local bank in which the college keeps its cash funds. The bank is also the custodian of the college's endowment fund securities. Furthermore, certain short-term securities are held at the bank in a safe deposit box to which the president has access. Confirmation requests to the bank in the past have been signed by the former college treasurer and the bank's replies have been signed by the bank president." The problem has been answered briefly as, "the dual role played by the bank president who is now also treasurer of the client organization signifies the absence of normal internal controls over cash and securities. When internal controls are weak or absent, the auditor should extend and intensify the audit procedures bearing on the areas affected. In this case the auditor should arrange if possible for a college official other than the treasurer to sign the confirmation requests."
The article presents questions and answers of the auditing section of the November 1961 Uniform C.P.A. Examination, which was given November 9, 1961 from 8:30 to 12:00 noon and consisted of seven questions, all required. The suggested time allotments were as follows: Problem 1:20 minutes; Problem 2: 15 minutes; Problem 3: 20 minutes; Problem 4: 25 minutes; Problem 5: 25 minutes; Problem 6: 25 minutes and Problem 6: 35 minutes. First problem was that a client, without consulting its CPA, has changed its accounting so that it is not in accordance with generally accepted accounting principles. During the regular audit engagement the CPA discovers that the statements based on the accounts are so grossly misleading that they might be considered fraudulent. It was asked to discuss the specific action to be taken by the CPA. In response to this question, it was suggested that the first step by the CPA should be to discuss with the client the fact that the changes in accounting made during the year are not in accordance with generally accepted accounting principles. The CPA's objective in this discussion should be to persuade the client to discontinue the unsatisfactory practices and to make such changes as are necessary to permit a fair presentation in the financial statements. If the client will not agree to such revisions the CPA should withdraw from the engagement, since he certainly does not want his name to be associated in any manner with financial statements which are so grossly misleading that they might be considered fraudulent.
The American Accounting Association's follows dual objectives of fostering accounting research and improving accounting instruction. This article briefly summarizes each of the major activities that were carried on during the year 1961. The high quality of published articles was maintained in 1961. During the year more than 80 articles were published in addition to the professional examinations, association notes, and book reviews sections. The Membership Committee under leadership of Ralph F. Beckert had a very successful year. As a result of their efforts, over 1,000 new members were obtained. In 1961, seven education committees functioned under the general direction of Vice-President Norton M. Bedford, who also served as Chairman of the Joint Committee on Education. The Continuing Education Committee was asked to investigate the scope and nature of programs of formal study after a person has launched upon a career in accounting, and to inquire into the matter of suitable forms of instruction.