Agency conflicts, Theory of the firm, Reporting discretion

In this paper we have reexamined the relationship between the controller and the controlled within the organization. We have argued that this relationship revolves around the budget process and that the "controlled" exercise significant influence on the outcome of their budgets. This influence manifests itself in the amount of slack which managers (and all other participants) can incorporate into their budgets. The theoretical rationale for such dysfunctional behavior has been previously stated by a number of writers. However, except for the exploratory studies by Schiff and Lewin and Lowe and Shaw, there exist no observations or empirical evidence on how and why managers create slack. Decentralized control was expected to increase organization effectiveness due to the increased participation in decision making created on the local level and because the divisional controller was formally responsible to the corporate controller. Assuming, however, as we did, that financial budgets are no more than a mutually agreed upon control device, then the whole notion of control needs to be reexamined, particularly the role of the decentralized controller who appears to act as the divisional slack manager. Finally, if managerial desire for slack and the attendant dysfunctional consequences must be taken as given then the implications for top management actions must be reconsidered. We have suggested a pragmatic approach aimed at increasing the participation of top management in the budget process on a selective basis. Specifically we have discussed the problem of how top management could impose reasonable goals 23 through constructive reviewing of the budget at critical points during the budget preparation process. We have also recognized that top management is severely limited in its ability to undertake on such a task.

Twenty nine universities in the U.S. offer doctoral programs that will "fit the needs of a student whose primary interest is to prepare for a career of either the teaching of accounting or research in accounting." A survey of these programs was undertaken by the Task Committee on Standards of Graduate Instruction, formed early in 1957 to succeed the Task Committee on Standards of Accounting Instruction. The article summarizes the information the committee gathered during its first year of operation. At three universities the students whose primary interest is accounting pursue their doctoral studies under the jurisdiction of the economics department. In two cases the program is jointly conducted in economics and business administration. In all other instances, the Department or School (College, Division) of Business Administration offers and administers the degree program, subject, in most instances, to general, university-wide requirements. The Committee was interested in institutional practices with respect to any student who wished to major in accounting in his doctoral program without having had the minimum course requirements for a master's degree in accounting.

This article presents the findings of the report of the committee, appointed by President Charles J. Gaa as a task committee operating under the Joint Committee on Education, to receive and review the Ford and Carnegie reports for the American Accounting Association. The two reports--"Higher Education for Business" by Gordon and Howell, and "The Education of American Businessmen" by Pierson were financed and sponsored by The Ford Foundation and the Carnegie Corporation of New York respectively. The authors of Ford and Carnegie reports, in their extensive surveys found glaring examples of bachelor's degrees given for programs of study, overloaded with business in general or with accounting in particular. The Committee urges that the faculty of each school should read the entire reports so that by carefully trying on each shoe of criticism they may find those, which fit their particular situations. It is also expected that the Ford and Carnegie reports will have an impact on collegiate education for business.