A two‐period model in which communication restrictions preclude the usual revelation representation is analyzed, and the communication policies take on the appearance of “income smoothing.” The driving force is the information content of the “smoothed” or manipulated series, relative to its counterpart were manipulation not possible. Various possibilities arise, depending on the underlying stochastic structure: performance measure manipulation might be socially efficient, or not; and when it is best to invite and motivate this manipulation, the optimal policy itself can take on a variety of forms.

This paper offers some impressions of current research in accounting. Three themes are identified: Movement toward imbedding accounting thought in (1) a setting that accommodates substitutes for the accounting product, (2) a dynamic view of the environment in which the accounting product is used, and (3) a model of human cognition that generates explicit demand for decision support activities. It is also suggested that closer correlation between theoretical and empirical research would be productive. Résumé. Cet article présente quelques impressions sur la recherche actuelle en comptabilité. Trois thèmes sont identifiés. Un mouvement visant à enchâsser la pensée comptable dans (1) un cadre qui inclut les compléments au produit comptable (2) une vision dynamique de l'environnement dans lequel le produit comptable est utilisé et (3) un modèle de connaissance humaine qui génère une demande explicite pour des activités de support à la prise de décision. Il est également suggéré qu'une corrélation plus étroite entre la recherche théorique et empirique serait productive.

Performance evaluation, Uncertainty, Risk-sharing, Controllability

Application of choice theory to the selection of an appropriate accounting method has been dealt with in a number of recent publications.' Difficulties in pursuing this approach arise, however, when we introduce a number of users of accounting information. We cannot, in general, ascribe a group utility, or social welfare, function to a set of multiple users. As a result the notion of identifying the appropriate accounting system by maximizing some conceptually well specified objective function is often inappropriate in a multiperson setting.2 Nevertheless, there are numerous special cases which do admit to a group utility function. Obvious examples include a team and deferral to an expert (or dictator). More significant is the fact that similar results are achievable when the risks and returns of a cooperative decision are shared among the cooperating individuals in a Pareto optimal manner. For example, under suitable conditions, a partnership will admit to a group level or partnership utility function. The purpose of this paper is to demonstrate that it is possible to view the problem of accounting method choice in a partnership as a formal, welldefined optimization problem. This has the theoretical advantage of explicitly linking the accounting choice to the partnership's economic situation, as well as opening up the possibility of studying optimality existence and characterization. Moreover, it provides a juxtaposition with extant accounting prescription. In particular, I shall demonstrate that, within the framework adopted, existing concepts of partnership accounting are in-

One purpose of an accounting system, or any information system, is to provide a set of signals designed to communicate descriptions of certain past phenomena believed to be decision relevant in the future.' However, it is difficult to evaluate a given or proposed information system because of its complexity. This complexity arises in part because of the interrelated problems of which phenomena to describe and how best to describe them. Since complexity hinders information system evaluation, decomposition of the total interrelated system into a number of less complex subsystems for evaluation purposes is often desirable. Unfortunately, most decomposition will introduce errors into the analysis. But if we can predict the resultant errors, decomposition can still provide a useful surrogate evaluation method. The purpose of this paper is to explore the decomposition approach to information system evaluation, at the conceptual level, relying heavily on Feltham's recently proposed model for predicting the value of information in the single decision case.2

Performance Measurement, Direct costs, Absorption costing, Ex post optimum model

I selectively survey the use of expectations in accounting research. While expectations are central to modeling work and essential in empirical documentation, we tend to rely on largely exogenous expectations, as opposed to closing the analysis with aggressive identification of information sources and an explicit equilibrium argument.

The article presents the author's opinions on organization theory and auditing. The articles: "Auditing: Perspectives From Multi-Person Decision Theory," by Robert Wilson, and "Organization Theory and Methodology," by Michael C. Jensen, were published in the April 1, 1983 issue of the periodical "Accounting Review." The two articles have much in common. Both emphasize the fact that research on intra- and inter-organization equilibrium behavior is mushrooming and now able to accommodate accounting questions in a way never before feasible, or perhaps even imaginable. Wilson suggests that cost allocation may reflect rational (equilibrium) obfuscation in a financial-reporting context. Wilson emphasizes the importance of "reputation" as an explanatory variable in many economic relationships. Reputation-building is the major factor contributing to economies of scale in auditing. According to Jensen, accounting methods are chosen according to organizations' policies. The use of mathematics as a factor of production in the research process comes into the fore with Jensen's vision of two agency models.

The article presents an economic analysis of scholar R.J. Chambers' normative standards by the author. Chambers raises the issue with the notion that not all choices between accounting or information alternatives can be rationalized without admitting individual preferences, beliefs and opportunities into the analysis. His argument is that a form or type of accounting that is preferred to all others does indeed exist and that choice between any pair of inferior alternatives rests upon whose product most closely approaches, that of the preferred form or type. Such belief and attendant prescription are the essential cornerstone in the approach taken to accounting theory that many, including Chambers, follow. An alternative approach, one that some of us follow, is based on economic analysis of accounting alternatives. No universally preferred alternative is posited and preferences, beliefs and opportunities provide the essential cornerstone in the analysis. In short, resolution in the economic domain is ultimately based on aspects of the problem that are not admitted in the universality or necessity approach.