Abstract Reviews the book `The Accountant's Guide to Legal Liability and Ethics,' by Mark J. Epstein and Albert D. Spalding, Jr.

Abstract Reviews the book "Coordinating Total Audit Coverage: Trends and Practices," by Leonard Eugene Berry.

Abstract ABSTRACT: During its study of the auditing profession, the Cohen Commission received some practitioner inputs which suggested that "one of the causes of the discontinuity between accounting theory and practice is that students graduate from accounting programs with no understanding of the mechanics of how an accounting system operates and what the related documentation looks like" [AICPA, 1978, p. 177]. Thus, the question is raised as to whether accounting curricula are providing students with sufficient knowledge about the form and function of the various documents, records, journals, and ledgers used by enterprises to conduct and to record the results of business activities. The implication of the CPA inputs to the Cohen Commission efforts is that a lack of such knowledge can be a deterrent for auditing students in understanding the concepts of audit program development and evidence collection procedures. This paper reports on a Systems Understanding Aid that has been designed to address students' need for additional knowledge about basic accounting system documents and records. The Aid was administered to students and evaluated for effectiveness. Student testing of the Aid has shown it to be an effective pedagogical supplement to the accounting curriculum.

[In this study, we extend existing municipal audit fee models (e.g., Rubin 1988; Baber et al. 1987) by incorporating additional variables that reflect unique aspects of the municipal accounting and auditing environment. These variables relate to auditor expertise, audit adjustments, audit qualifications, and measures of agency costs related to the level of taxpayer funding of services. We test our model on a sample of Michigan municipalities and find that the fee model explains a greater portion of the variation in audit fees than previous studies. Palmrose (1986) did not find a significant relationship between audit fees for private sector companies and measures of auditor industry experience. In a study of auditors of Texas school districts, Deis and Giroux (1992a) find that audit quality is positively associated with the number of school districts audited by the audit firm. In our study, the regional audit firm with the largest number of municipal clients received significantly higher fees. This result is consistent with the existence of a fee premium due to brand-name reputation based on industry experience. Previous research has not documented reputation effects for non-Big 6 firms. We also find that audit fees are positively associated with the number of audit adjustments. Many of the governmental entities in our sample have significantly more audit adjustments than entities in the private sector (Kreutzfeldt and Wallace 1986; Hylas and Ashton 1982), suggesting that there is opportunity for improvement in many municipal accounting and control systems. The frequency and nature of audit adjustments in the public sector may be an area of future research interest. Previous studies of municipal audit fees (Baber et al. 1987; Rubin 1988; Copley 1989) have not found a significant relationship between audit qualifications and audit fees. We separate audit qualifications into two types of qualifications expected to have different relationships to audit fees. However, neither qualification variable is found to be significantly related to audit fees. The frequent nature of opinion qualifications in the municipal sector suggests that these qualifications may not involve significant amounts of additional audit effort. We find some evidence that audit fees are positively related to agency variables which measure the extent of taxpayer funding of services (Copley 1991; Deis and Giroux 1992b). These variables may capture elected officials' incentives to demonstrate accountability to taxpayers. We do not find a relationship between audit fees and measures of agency costs related to the form of government. We also do not find a relationship between audit fees and measures of political competition. Future research should consider a broader set of incentives for monitoring in the public sector, including agency costs which measure taxpayer funding of services.]

Abstract Develops a municipal audit fees model which incorporates additional variables that reflect unique aspects of the municipal accounting and auditing environment. Fee model for a sample of Michigan municipalities; Association of audit fees with the number of audit adjustments; Agency and political costs; Political competition; Auditor experience; Opinion qualifications.