This study investigates the extent to which a retailer's willingness to share internal (sales and inventory) information with a manufacturer and the reliability of the information transmission between the retailer and the manufacturer affect the total supply-chain profits resulting from two alternative inventory management systems. I present analytical models of a traditional system and a Vendor Managed Inventory (VMI) system. The VMI system is a supply-chain management technique in which the retailer delegates its inventory decisions to, and shares its internal accounting information with, the manufacturer. With VMI, the parties aim to reduce inventory-related costs and increase supply-chain profits. The theoretical analysis indicates that the system that produces higher supply-chain profits depends on the extent to which the retailer reveals its internal accounting information to the manufacturer and the ability of the manufacturer to accurately receive and use this information in its decisions. Survey data corroborate the model's prediction that manufacturers are more likely to select VMI when retailers provide more precise sales and inventory (i.e., demand) information and when the manufacturers' systems ensure reliable transmission and receipt of this information. The study's results suggest that managerial accountants should consider the retailer's willingness to share sales and inventory information with the manufacturer and the manufacturer's ability to reliably transmit this information before implementing VMI systems.

Abstract There has been growing recognition in recent years of the importance of corporate governance in ensuring sound financial reporting and deterring fraud. The audit serves as a monitoring device and is thus part of the corporate governance mosaic. The objective of this paper is to examine the impact of various corporate governance factors, such as the board of directors and the audit committee, on the audit process. Importantly, there is little professional guidance on how auditors should consider such factors when formulating an appropriate audit strategy, and there has been only one prior study on this issue (Cohen and Hanno 2000). Because there are no current specific auditing standards that relate to the effect of corporate governance on the audit process, we conducted a semi‐structured interview with 36 auditors on current audit practices in considering corporate governance in the audit process. Reflecting on client experiences, auditors indicate a range of views with regard to the elements included in the rubric of “corporate governance”. Most significantly, auditors view management as the primary driver of corporate governance. The inclusion of top management in the “corporate governance mosaic” is inconsistent with agency theory's prescription of the board and other mechanisms serving as a means to independently oversee management's actions to protect stakeholders. Auditors consider corporate governance factors to be especially important in the client acceptance phase and in an international context. Further, despite the attention placed on the audit committee in the academic literature, in the business community, and by regulators in different countries (e.g., Canada, United States, Australia), several respondents indicated that their experiences with their clients suggest that audit committees are typically ineffective and lack sufficient power to be a strong governance mechanism. Implications for research and practice are presented.

A large body of literature suggests that firm-level stock prices “underreact” to news about future cash flows; i.e., shocks to a firm's expected cash flows are positively correlated with shocks to expected returns on its stock. We examine the joint behavior of returns, cash-flow news, and trading between individuals and institutions. Institutions buy shares from (sell shares to) individuals in response to positive (negative) cash-flow news, thus exploiting the underreaction phenomenon. Institutions are not simply following price momentum strategies: When price goes up (down) in the absence of any cash-flow news, institutions sell shares to (buy shares from) individuals. Although institutions are trading in the “right” direction, institutions as a group outperform individuals by only 1.44% per annum before transaction and other costs, because they are extremely conservative in deviating from the value-weighted market index.

The core theory of behavior in Economics, which structures inquiry and provides a framework for empirical analysis, is largely responsible for the success of the discipline. Behavioral Economics (BE) challenges this theory, but has failed to provide a coherent alternative. Consequently the influence of BE has been limited. In what follows we argue that Evolutionary Psychology (EP), suitably adapted, can provide at least a partial foundation for BE. Its methods offer a way of generating theories of the origins of anomalous behaviors and of testing those theories. I. Behavioral Economics BE has been most successful in documenting failures of the rational actor model (e.g. failures of expected utility theory, irrational cooperation, and time inconsistent preferences). However, attempts to incorporate these observations into theory have been ad hoc: either an anomalous behavior is induced by modifying the utility function or the behavior is simply assumed and implications derived. The lack of theoretical foundations causes a number of problems for BE. First, empirical analysis can show the inadequacy of mainstream theory, but it does little to help develop alternatives. Second, without a