Innovations often fail to gain adoption by the accounting profession. A factor affecting the rate of adoption of innovations is the perceptions of innovations by individual groups within a profession. The objective of this article is to provide empirical evidence regarding the extent to which differences occur in accounting interest groups' perceptions of the need for and future rate of adoption of accounting innovations. The research evidence indicates that accounting academicians perceive a higher need for adoption and future rate of adoption of innovations. CPAs and financial executives are systematically lower on both variables, and investment analysts fall in the middle range. These findings suggest that the needs and values of the CPA and financial executive groups may be slowing the rate of adoption of accounting innovations. In summary, the findings of this research indicate that system effects are ubiquitous in the accounting profession and could be an important area for research directed toward discovering methods of affecting the rate of adoption of accounting innovations. System effects are the influences of the norms, values, and functions of a group on the behavior of the individual members of that group

One of the innovative and successful new markets developed in recent years has been the registered exchange for the trading of option contracts. Key innovations provided by the option exchanges include the standardization of some contractual terms and the creation of a central clearing corporation to serve as issuer and obligor of each option contract, thus severing the contractual link between a specific option writer and buyer. These changes have facilitated the trading of existing call options in the secondary market and have provided increased liquidity, continuous public reporting of prices, better information on trading volume and open positions, and reduced transaction costs

Two approaches are used to explore the implications for environmental policy of a possible endogenous bias of technical progress for environmental degradation. Using a frontier approach of innovation-possibility and the alternative approach that is critical of innovation-possibility, the author finds that both models indicate a bias for pollution when there is no charge for environmental amenities. The result is that pollution increases faster than production. He concludes that if pollution is to be stabilized in a growing economy, the price must be positive and flexible so that it can rise in response to labor productivity and wage increases. 17 references

Audit education in the university accounting curriculum has not kept pace with the needs of new entrants to the auditing profession. This article describes an attempt at Brigham Young University to professionalize the auditing curriculum by expanding the typical one-semester auditing course to two required semester courses with an elective third course. The first course is basically conceptual, with emphasis upon the environment faced by auditors and an overview of the audit process. The second course is more procedural and emphasizes the development of audit skills. The third elective course pieces emphasis upon developing audit research skills. Learning objectives for the first two courses have been developed and are included in the appendix. Innovative audit education is needed to meet the challenges of auditing in the 1980s

AN important unresolved question in the analysis of capital investment is whether the deterioration of physical capital occurs at a constant exponential rate. (For detailed discussion see both Jorgenson (1971) and Feldstein and Rothschild (1974).) The empirical evidence on physical capital depreciation patterns is inadequate to refute any proposition about the actual decay of capital inputs. On the one hand, analyses of acquisition prices of new and used automobiles by Wykoff (1970) and by Cagan (1965) and of used farm tractors by Griliches (1960) uniformly concluded that the geometric depreciation function adequately characterizes the true depreciation function. On the other hand, Hall (1971) and Feldstein and Rothschild (1974) found statistical grounds for rejecting the null hypothesis of an exponential depreciation function. The major purpose of this paper is to apply the statistical test procedure on the geometric depreciation function developed by Hall (1971) and Jorgenson (1971) to data on Japanese fishing boats. The published Japanese data on the insured value of fishing boats against total loss are adjusted to reflect the assessed market valuation for insurance purposes. These adjusted values are used as proxies for the acquisition prices of new and used fishing boats. These proxy variables can be justified because it is common practice for the insurance companies to minimize the difference between the insured value of capital items and their market or actual replacement value. This is accomplished by annual adjustments of insured values for physical deterioration and technical obsolescence (Lee, 1973). These data form a unique set for comparison with the acquisition price data on used automobiles frequently employed in previous studies. To date, most attention in the literature on capital depreciation has been paid to consumer durables, particularly to automobiles, with the exception of Griliches (1960). By comparison, fishing boats are capital inputs to fishery production activity. In Cagan's (1965) expression, the demand for capital inputs is less likely to be influenced by ephemeral fads and will reflect greater emphasis on innovations of enduring importance than will the demand for consumer durables. In addition, since the assessed market valuation of new boats for insurance purposes is believed to reflect satisfactorily the actual value of new boats, the data should reveal some information on that portion of the lifetime depreciation of a capital asset that takes place during the first year of its life. By contrast, the data constraints of previous studies allowed capital depreciation analyses only for vehicles that were more than one year old. This was an unfortunate and significant omission.' Though the Hall model (1971) is fundamentally under-identified, as will be discussed in detail later, it is still possible to statistically test several typical assumptions regarding the nature of depreciation and embodied technical change that are commonly seen in economic literature. While the results of the test are specific to the Japanese fishing fleet, interpretation of these results along with the results of previous studies should give some indication whether the typical assumptions are empirically Received for publication September 14, 1975. Revision accepted for publication June 23, 1977. * Research Triangle Institute. An earlier version of this paper was presented at the Third World Congress of the Econometric Society, Toronto, Canada, in August 1975. Grateful appreciation is extended to W. Kenneth Poole, Jerome A. Olson, and Allen K. Miedema at Research Triangle Institute for discussion and comments on earlier drafts and to Joanne Turner Rogoff of Research Triangle Institute for her editorial assistance in the preparation of this article. The author also thanks an unknown editorial referee for invaluable comments and criticisms. I Hall (1971) measured the depreciation of half-ton pickup trucks relative to 1-year-old trucks because the prices of new trucks were not available from his sources. Wykoff's (1970) study of acquisition prices of new and used automobiles reveals a sharp drop between the price of new cars and the price of used cars. Jorgenson (1971) contends that Wykoff's finding is attributable mainly to the inadequacy of the list prices of new equipment to reflect the prices paid at actual transactions

In an article in this Review, Christopher Sims presented an innovative statistical technique to determine the direction of causality, then applied this methodology to money and nominal income in the United States. He concluded: main empirical finding is that the hypothesis that causality is unidirectional from money to income agrees with the postwar U.S. data, whereas the hypothesis that causality is unidirectional from income to money is rejected (p. 540). In a more recent paper in this Review, David Williams, C. A. E. Goodhart, and D. H. Gowland applied Sims' statistical methodology to the United Kingdom and concluded: found for the U.K. some evidence of unidirectional causality running from nominal incomes to money but also some evidence of unidirectional causality running from money to prices. Taken together, this evidence suggests, perhaps, a more complicated causal relationship between money and incomes in which both are determined simultaneously (p. 423). Furthermore, Williams, Goodhart, and Gowland suggest some general possibilities for the differences between the United States and the United Kingdom, and they are careful to note that: Because of the various differences in context the finding that in the United Kingdom the relationship between money and income appears different from that found by Sims for the United States in no way casts any doubt on the validity of Sims' own (p. 417). The purpose of this paper is to present a concise model which draws together the findings of Sims for the United States and Williams, Goodhart, and Gowland for the United Kingdom. To accomplish this, a fixed exchange rate system is modeled in which one country, the United States, serves as the primary reserve currency country, while other countries, the United Kingdom in this case, hold a substantial portion of their international reserves denominated in terms of the reserve currency.' Particular attention is paid to the asymmetrical nature of the system with respect to money's influence on nominal income and vice versa. Indeed, the ability of the reserve currency country to create international reserve assets plays the primary role in explaining the asymmetrical nature of the system and the empirical results of Sims, and Williams, Goodhart, and Gowland. The model is couched in a world in which asset reallocations are viewed as adjustments toward maintaining general equilibrium. This equilibrium is based on a stable set of preferences regarding the structure of individual portfolios, broadly defined in terms of holdings of real consumption goods, real interest bearing financial assets, real money balances, and leisure time. The assumption of equilibrium conditions in all markets allows attention to focus directly on the money market to isolate the process of portfolio adjustment in international markets. As in similar models based on the monetary approach to *Economists, Chase Manhattan Bank, N.A. The views expressed in this paper are solely our own and do not necessarily represent those of the Chase Manhattan Bank. We wish to thank David T. King, the managing editor of this Review, J. Richard Zecher, J. E. Tanner, Walton T. Wilford, C. A. E. Goodhart, and Marc A. Miles for their comments on earlier drafts. 1One may note that for the Commonwealth countries the British pound acted as a reserve currency. However, the pound's relative world influence vis-avis the U.S. dollar was small during the Bretton Woods period

Douglas Purvis' discussion of an integrated approach to consumption and portfolio decisions is an attractive extension of the framework advocated by William Brainard and James Tobin. The pitfalls is concerned with the portfolio allocation of a level of wealth which is predetermined by beginning of period asset holdings and current period saving and capital gains. One of the innovative features of this is the inclusion of all asset yields and lagged asset holdings as explanatory variables in the asset demand equations. Purvis supplements the BrainardTobin asset demands with a consumptionsaving relationship that includes a similar list of explanatory variables and reinterprets this system as a of integrated rather than sequential decision making. Despite his observation that, when combined with a consumption-savings relationship such as (2), the Brainard-Tobin will in principle give rise to exactly the same shortand long-run behavior as the integrated model (p. 407), most of Purvis' discussion is concerned with alleged dissimilarities between the two approaches. This is apparently due to his implicit coupling of a simple consumption function and sequential decision making. In particular most of his comments on the BrainardTobin approach are actually concerned with whether or not lagged asset holdings should be included in a consumption function. This is rather unfair to Brainard and Tobin since there is no consumption function in the pitfalls model, and the two issues are really conceptually distinct. An integrated approach does not preclude, and a sequential approach does not require, a simple consumption function. The spirit of Brainard and Tobin's work is in fact that the inherited composition of wealth is very important to consumption, but consumption decisions precede asset demand decisions. The substance of their sequential approach is not that the composition of wealth is unimportant to consumption but rather that there are some variables which influence consumption and yet do not separately affect asset demands; only the net amount of saving motivated by these influences is important. In this paper I have consequently tried to separate these two issues: the use of an integrated or sequential framework and the imposition of parametric assumptions. One of the reasons for the merging of these two issues in Purvis' discussion is that he uses a deterministic scenario which makes the distinction between integrated and sequential decisions unimportant. In Purvis' integrated model, consumption and asset demands are constrained by lagged asset holdings plus income. In the relevant sequential interpretation of this model, consumption is first determined, setting the amount of saving and the level of end of period wealth. Asset demands are then decided upon, subject to the budget constraint that they sum to the predetermined end of period wealth. Thus the integrated asset demands include income as an explanatory variable while the sequential asset demands instead include end of period wealth. In a deterministic world there are no substantive differences between these approaches as long as income and wealth are related through a consumption-saving equation. This equivalence breaks down if the marginal propensity to save out of income is zero (since wealth is then no longer related to income) or if there is an unobserved disturbance term in the consumption *Yale University. Note that equations numbered (1) through (11) are in Purvis' paper. My equations are numbered in the same sequence