Auditing, Internal control judgement, Meta Analysis

This paper studies a multiperiod moral hazard problem under two assumptions: (i) contracts are subject to renegotiations; (ii) the agent's action has long-term effects. The action is also interpreted as a choice of characteristic or “type.” Renegotiation-proof contracts that implement various actions, including random ones, are characterized. Under appropriate conditions, the equilibrium involves the principal implementing a random action. Therefore, the equilibrium has standard properties of “adverse selection” models.

This paper tests the exclusion of lagged growth rates of money and output from regression equations, with serially correlated disturbances, for the expected real interest rate. The authors empirical approach is an extension of the empirical strategies of Eugene F. Fama (1975) and Frederic S. Mishkin (1981)--which invoke the orthogonality of the inflation forecast error to predetermined regressors under the maintained hypothesis of rational expectations. They discuss the implications of their tests for simple real-business-cycle models.

This paper evaluates the performance of a monetary aggregate that is constructed from principles of economic and index number theory. Results from tests for weak separability indicate that wholesale deposits should not be aggregated with other U.K. financial assets; they currently are included, however, in broad monetary aggregates published by the Bank of England. Financial asset groupings passing the weak separability tests then were aggregated using both simple-sum and Divisia weights. In each case, the Divisia aggregates were more closely related to the growth of nominal GDP and had stable demand for money functions. Copyright 1991 by MIT Press. (This abstract was borrowed from another version of this item.)

Four foreign exchange spot rate series, recorded on an hourly basis for a six-month period in 1986 are examined. A seasonal GARCH model is developed to describe the time-dependent volatility apparent in the percentage nominal return of each currency. Hourly patterns in volatility are found to be remarkably similar across currencies and appear to be related to the opening and closing of the worlds major markets. Robust LM tests designed to deal with the extreme leptokurtosis in the data fails to uncover any evidence of misspecification or the presence of volatility spillover effects between the currencies or across markets.

This paper utilizes unique survey data on labor union coverage at the firm level to examine union effects on the profitability of 705 U.S. companies during the 1970s. Market value and earnings are estimated to be about 10 percent-15 percent lower in an average unionized company than in a nonunion company, following extensive control for firm and industry characteristics. Deleterious union effects on firm profitability are sizable throughout the 1972-80 period, but vary considerably across industries. The relatively poor profit performance of unionized companies may help explain the recent decline in U.S. union membership.

Researchers generally agree that culture affects the behavior and attitudes of individuals within organizations (Hofstede 1980; Adler et at. 1986). Therefore, it may be assumed that an organizational system such as a participative budget-process will have different effects in different cultures. Recent research has indicated that a personality variable, internal- external locus of control, impacts the relationship between budgetary participation and both managers' performance and job satisfaction (Brownell 1981, 1982b). The locus of control construct categorizes individuals as (1) externals, those who believe that events are controlled by fate, luck, chance or powerful others, or (2) internals, those who believe that they have some control over events (Rotter 1966). This article examines whether cultural differences affect the previously identified interrelationship of individual locus of control and participation in the budgeting process as it impacts managerial performance and satisfaction. The, prior research (Brownell 1982b) used middle-level managers in US. manufacturing organizations. In this study, Mexican managers were selected because Mexico provides an interesting cultural contrast to the U.S. on three dimensions identified by Hofstede (1980) which are considered relevant to participative budgeting issues. In contrast to the Angio" Cluster, the Latin Cluster of which Mexico is a unit differs on the `dimensions `of "uncertainty avoidance" and "power distance." An additional factor in the selection of Mexican managers was the magnitude of. economic ties between Mexico and the U.S.' The importance of this. relationship continues to grow as more multinationals establish "niaqull- ladoras" within the border region and as the Mexican government frees some of its constraints on foreign investment The responses of 83 Mexican managers to survey instruments were analyzed using regression to test the interrelationship of locus of control and budgetary participation and their impact on managerial performance and job satisfaction. While the results of this study are generally consistent with previously reported findings for managerial performance, the impact of locus of control on managerial satisfaction was not significant, reflecting an ostensible difference in culture. In addition, the effect of locus of control on the performance of high-level managers was significantly stronger than its impact on the performance of lower-level managers. Finally, contrasting significantly to other Mexican managers, the performance of those Mexican managers employed in 100 percent foreign-owned firms was not discernibly affected by either budgetary participation or locus of control. This last result may be due to the cognitive dissimilarities relating to the cultural interface in these foreign-owned firms. This suggests that, within the Mexican culture, different conclusions are obtained depending on whether the firm is controlled by local or foreign interests.

[Researchers generally agree that culture affects the behavior and attitudes of individuals within organizations (Hofstede 1980; Adler et al. 1986). Therefore, it may be assumed that an organizational system such as a participative budget-process will have different effects in different cultures. Recent research has indicated that a personality variable, internal-external locus of control, impacts the relationship between budgetary participation and both managers' performance and job satisfaction (Brownell 1981, 1982b). The locus of control construct categorizes individuals as (1) externals, those who believe that events are controlled by fate, luck, chance or powerful others, or (2) internals, those who believe that they have some control over events (Rotter 1966). This article examines whether cultural differences affect the previously identified interrelationship of individual locus of control and participation in the budgeting process as it impacts managerial performance and satisfaction. The prior research (Brownell 1982b) used middle-level managers in U.S. manufacturing organizations. In this study, Mexican managers were selected because Mexico provides an interesting cultural contrast to the U.S. on three dimensions identified by Hofstede (1980) which are considered relevant to participative budgeting issues. In contrast to the "Anglo" Cluster, the Latin Cluster of which Mexico is a unit differs on the dimensions of "uncertainty avoidance" and "power distance." An additional factor in the selection of Mexican managers was the magnitude of economic ties between Mexico and the U.S. The importance of this relationship continues to grow as more multinationals establish "maquilladoras" within the border region and as the Mexican government frees some of its constraints on foreign investment. The responses of 83 Mexican managers to survey instruments were analyzed using regression to test the interrelationship of locus of control and budgetary participation and their impact on managerial performance and job satisfaction. While the results of this study are generally consistent with previously reported findings for managerial performance, the impact of locus of control on managerial satisfaction was not significant, reflecting an ostensible difference in culture. In addition, the effect of locus of control on the performance of high-level managers was significantly stronger than its impact on the performance of lower-level managers. Finally, contrasting significantly to other Mexican managers, the performance of those Mexican managers employed in 100 percent foreign-owned firms was not discernibly affected by either budgetary participation or locus of control. This last result may be due to the cognitive dissimilarities relating to the cultural interface in these foreign-owned firms. This suggests that, within the Mexican culture, different conclusions are obtained depending on whether the firm is controlled by local or foreign interests.]

[Decision makers refer to their long-term memory to test the implications of evidence about a current problem (Birnberg and Shields 1984; Libby 1989). Given this reliance on long-term memory, biases in retrieval of previously encountered information may be an important source of decision error (Libby 1989), and differences in such biases may be one explanation for differences in auditor judgment performance across experience levels. The present study adopts a schema-based framework to examine some differences in the knowledge structures and judgments of experienced and inexperienced auditors and the relationship between these knowledge structures and judgments. The study examines the recall of typical and atypical information by experienced and inexperienced auditors within the context of a going-concern situation and then relates this measure of memory to the inferences and predictive judgments made by these auditors. Three experiments were conducted. In experiment 1, auditors read a description of a company that the audit partner-in-charge had suggested may have a going-concern problem. The description consisted of items that are considered typical of a company with going-concern problems, atypical items, and filler items. After an intervening period with a distractor task, all subjects were given a recall test, were asked to infer the likelihood of certain previously unstated items being true, and to estimate the probability that the firm would fail within a year. The first of six main findings showed that experienced auditors recalled more atypical items than inexperienced auditors, but there were no differences in the number of typical items recalled. Second, experienced auditors recalled more atypical than typical items, whereas inexperienced auditors did not. Third, experienced auditors were more likely than inexperienced auditors to infer that previously unstated atypical items were true. Fourth, for both experienced and inexperienced auditors, the ratio of atypical to typical items recalled was positively correlated with the inferences made, and the inferences were negatively correlated with the predictive judgments. This last correlation was much higher for the experienced than for the inexperienced auditors. Fifth, there was no direct relationship between recall and predictive judgments. Sixth, clustering of recall on the basis of atypical/typical items was significantly higher for experienced than for inexperienced auditors and was significantly correlated with inferences for experienced auditors only. In experiments 2 and 3, we collected additional data to examine some validity threats related to the first experiment. In experiment 2, we examined the relationship between recall and judgments, using audit managers who had worked on at least one audit with going-concern as an issue. We found results similar to those of experiment 1. In experiment 3, experienced auditors performed the recall and predictive judgments without the intervening inferences task. This provided a more direct test of the relationship between recall and predictive judgments. Again, no relationship was found.]