Search results

Over the past two years, fraudulent financial reporting has become a major concern of both the Securities and Exchange Commission and investors. These concerns have been spurred by evidence that several high-profile companies such as Enron, Tyco, WorldCom, and HealthSouth have published false and/or misleading financial reports. Statement on Auditing Standards (SAS) No. 82 specifies that auditors have a responsibility to assess the likelihood of management fraud and identifies specific risk factors that should be considered when making that assessment. Apostolou et al. (2001b) examined how internal and external auditors rate the relative importance of these factors. This study extends Apostolou et al. (2001b) by examining how forensic experts at four Big 5 professional service firms assess the factors specified in SAS No. 82. These assessments produced two different models of relative importance: (a) a statistical model (produced by the Analytic Hierarchy Process); and (b) a subjective model (based on subjects’ assessment of the relative weights). These models are then used to assess the self-insight of and the degree of agreement among the forensic experts. The results indicate that forensic experts have a moderately high degree of self-insight. A moderate to high degree of consensus among experts’ judgments about the relative importance of fraud risk factors was noted.

Many specialized areas exist in the world of accounting education. One of these is the tax case. Considering published cases over the last quarter century, this review summarizes the parameters of this academic niche. The review discusses the specific tax topics that have been touched upon by case authors. The structure of these materials, most of which are common to all accounting cases, is also reviewed in a variety of ways. In addition, the current useability and educational contributions of tax cases is explored against the background of pedagogy in taxation. This supports ideas about areas of need and the broader future of writing cases in this domain. As a reflection on the literature as a whole, this review will not necessarily help faculty select cases nor is it intended to be an endorsement of any particular publication.

Many managers have taken advantage of the benefits associated with engaging in in‐substance defeasance of debt. For example, defeasance can generatea ccounting gains that result in higher reported income and earnings per share without a corresponding change in cash flows. Since the inception of this transaction in 1982, controversy over the accounting treatment of defeasance resulted in the issuance of Statement of Accounting Standards No. 76, Extinguishment of Debt. However, unsettled issues remain. This article describes the evolution of the defeasance transaction, the related controversial points, and explores the unsettled issues that remain so that due consideration can be given to a contemplated defeasance transaction.

Statement on Auditing Standards No. 9 (SAS 9) discusses the role of a client′s internal audit department (IAD) in the independent auditor′s examination. Despite the benefits of reliance on the client′s IAD to both the auditor and client, evidence indicates that SAS 9 has not been effectively implemented in practice. This article illustrates the use of the Analytic Hierarchy Process to develop a judgement aid for determining the overall reliance to be placed on a client′s IAD. The judgement aid illustrated may represent an initial step towards effectively implementing auditing standards requiring a great deal of subjective judgement in practice.

The growing prominence of the internal auditing profession has led to new college and university courses. Louisiana State University began one such course in its summer internship programme. The advantages of the internship programme to employers, the profession and the university are stated. The academic benefits of internship to the student are presented, as are its contribution to the student's professional growth and its impact on the student's perception of internal auditing as a profession.

Association to Advance Collegiate Schools of Business (AACSB) member schools often compare their faculties’ research records to journal lists of their “peer and aspirational” programs. They often survey faculty and administrators’ perceptions of journal quality; number of Social Sciences Citation Index downloads; or “count” the number of faculty publications – but rarely analyze accounting programs’ actual journal quality lists. To examine this issue, we use a survey of national accounting programs. We identify a set of quality-classified journal lists by sampling 38 programs nationwide, varying by mission (e.g., urban or research), degrees granted (e.g., doctoral degrees in accounting), and national ranking (e.g., classified as a Top 75 Research Program) – from which we derive 1,436 data points that classify 359 journals that appear on these 38 programs’ journal lists. We also describe a case study that an accounting program used to revise its old journal list. We also find that while programs generally use generally accepted “bright lines” among the top three categories (A+, A, A−), they tailor their listings from the wide variety of B or C classified journals to create their own sets of acceptable journals in these categories. The study provides guidance and data for accounting programs who wish to develop or revise their own journal lists. While many studies have examined journal rankings, this is the first study to document the use of journal lists by accounting programs with a wide array of missions.

Compare and contrast how the accounting, organizational behavior and other literatures analyze sunk costs. Sunk costs form a key part of the decision-making component of the management accounting literature, which generally include previously incurred and unrecoverable costs. Management accountants believe, since current or future actions cannot change sunk costs, decision makers should ignore them. Thus, ongoing fixed costs or previously incurred sunk costs, while relevant for matters of accountability such as costing, income determination, and performance evaluation are irrelevant for most short- and long-term decisions. However, the organizational behavior literature indicates that sunk costs affect decision makers’ actions – especially their emotional attachments to the related project and the asymmetry of attitudes regarding the recognizing of losses and gains. Called the “sunk cost effect” or “sunk cost fallacy,” this conflict in sunk costs’ underlying nature reflects one element of incoherence in contemporary accounting discourse. We discuss this sunk cost conflict from an accounting and a philosophical perspective to denote some ambiguities that decision usefulness and accountability introduces into accounting discourse.

Review, summarize and analyze the above literatures

Managerial accountants can apply many lessons from the various literature sources.

We also show how differing opinions on how to treat sunk costs impact a firm’s decision-making process both economically and socially.