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This paper examines empirically the unexpected compensation to the top managers of a sample of 45 firms that voluntarily changed to capitalizing interest on long-term construction projects during the time period 1966–1974. The cash compensation to top management increased starting the year of the accounting change compared to that of top management for a firm in the same industry of similar size. Further, a comparison of the capital expenditure per dollar of sales between the sample and a pair-matched set of firms expensing interest in the same industry suggests that the long-term construction project was not taken up by diverting funds from routine capital expenditures. Collectively, the results are consistent with an inference that the managers were rewarded in the short term for a set of actions with expected future benefits in the long term. The accounting change, which may have facilitated the expansion, appears embedded in such a set of actions. Resume. Les auteurs procedent a l'examen empirique de la retribution inattendue que recoivent les cadres superieurs sur un echantillon de 45 entreprises qui sont passees volontairement a la capitalisation des interets dans leurs projets de construction a long terme au cours de la periode s'echelonnant de 1966 a 1974. La retribution en especes versee aux cadres superieurs de ces entreprises a augmente, a partir de l'annee de la modification de la methode comptable, par rapport a la retribution versee a la haute direction entreprises de taille similaire appartenant au meme secteur d'activite. En outre, une comparaison des depenses en immobilisations par dollar de chiffre d'affaires entre les entreprises de l'echantillon et leurs homologues du meme secteur d'activite ayant opte pour l'imputation des interets a l'exercice a revele que les projets de construction a long terme n'etaient pas finances a meme les credits ordinairement reserves aux depenses en immobilisations. Dans l'ensemble, les resultats confirment le raisonnement selon lequel les gestionnaires ont ete retribues a court terme pour un ensemble d'actions dont les avantages futurs prevus se manifesteront a long terme. La modification comptable, qui peut avoir facilite l'expansion, semble inscrite dans cet ensemble d'actions.

The alternative versions of the t-test found in event studies result from different weighting schemes for abnormal returns, different abnormal return models, and different correlational structures among abnormal returns. In the presence of dependencies among abnormal returns, the generalized least squares t-tests are much more sensitive to the mis-specifications in the abnormal return model than are the nongeneralized t-tests. Therefore, when analyzing contemporaneous returns, particularly with samples exhibiting a large industry concentration, a nongeneralized t-test should be preferred to a generalized least squares t-test because of the dependencies that may exist. Because the generalized least squares t-tests are highly sensitive to errors in specifying an appropriate abnormal return model, a portfolio time-series ordinary least squares regression should be preferred to a generalized least squares regression even when the variance or covariance matrix of abnormal returns can be estimated with a high degree of reliability. In testing for the mean effects, the concern for event period variance increases seems to be unwarranted, and the variance estimators using event period data are inefficient and biased. The issue is not whether variance increases in an event period, but which variance is to be used: that of the event period or of the nonevent period? Answers to such questions are presented in this paper. Resume. Les differentes versions possibles du test t que l'on trouve dans les etudes d'evenements resultent de differents systemes de ponderation des rendements anormaux, de differents modeles de rendements anormaux et de differentes structures de correlation des rendements anormaux. Lorsqu'il existe une dependance entre les rendements anormaux, les tests t generalises des moindres carres sont beaucoup plus sensibles aux defauts de construction du modele des rendements anormaux que ne le sont les tests t non generalises. C'est pourquoi lorsqu'on analyse des rendements simultanes, en particulier si l'echantillon presente une forte concentration industrielle, le test t non generalise est preferable au test t generalise des moindres carres, compte tenu des dependances qui peuvent exister. Les tests t generalises des moindres carres etant tres sensibles aux defauts de construction du modele approprie de rendements anormaux, l'application de la methode classique des moindres carres a une serie chronologique relative a un portefeuille est preferable a la regression generalisee des moindres carres, meme s'il est possible d'estimer avec un degre eleve de fiabilite la matrice de variance ou de covariance des rendements anormaux. Dans le test des effets moyens, la preoccupation relative aux augmentations de la variance de la periode d'evenements semble etre injustifiee, et les estimateurs de la variance fondes sur les donnees de la periode d'evenements sont inefficients et biaises. Il ne s'agit pas de determiner si la variance augmente pendant la periode d'evenements, mais quelle variance doit etre utilisee: celle de la periode d'evenements ou une autre. Les auteurs repondent a ces questions.

Summary The main objective of Larsson and Chesley's (1986) paper is to provide a framework for an auditor to assign a probability measure associated with uncertainty or ambiguity related to certain types of events arising in an audit environment. For this framework the authors extracted and applied the general methodology developed by Larsson (1976) in his doctoral thesis, which extends a subjective probability measure from a known s-algebra θ to an unknown and an extended class β, such that an auditor (decision maker), when faced with an extended lottery on events in β, can still come up with the use of utility theory maximization to rank the decisions. The authors make the following claims: (1) their methodology helps the auditor with this new audit tool of probability measure assessment; (2) their measure can capture a number of previously specified approaches by others in this area; and (3) their measure provides some “intuitive conclusions and some well-known mathematical properties.” (Abstract)

This paper analyzes the incentive effects of alternative legal systems on the auditor's decision making process. The first system, termed strict liability, holds the auditor liable whenever there is a loss, and the second system, termed negligence, holds the auditor liable for losses arising from the auditor's deviation from a prescribed due care standard. The auditor is assumed to have ex ante limited knowledge of the financial state of the client and the standard setting process. He revises his beliefs on the client's financial state based on a costless signal that may be interpreted as an internal audit report. The analysis shows that signal “quality” and auditor's perception of the client's financial state jointly determine the level of liability required to induce the auditor to adopt a socially optimal due care level. As in Simon's (1982) Model, negligence with supplementary insurance is preferred to strict liability. Further, negligence is shown to operate with less information than strict liability, in contrast to models such as Green (1978) and Shavell (1978). Resume. Cet article analyse les effets incitatifs de systemes juridiques alternatifs sur le processus decisionnel du verificateur. Le premier systeme, dit de responsabilite stricte, considere le verificateur responsable a chaque fois qu'il y a une perte, et le deuxieme systeme, dit de negligence, considere le verificateur responsable des pertes resultant de sa deviance d'une norme prescrite. Le verificateur est suppose posseder ex ante une connaissance limitee de la situation financiere du client ainsi que du processus de normalisation. Il revise ses opinions portant sur la situation financiere du client a la lumiere d'un signal sans frais qui peut etre assimile a un rapport de verification interne. L'analyse montre qu'un signal «qualite» ainsi que la perception du verificateur quant a la situation financiere du client determinent conjointement le niveau de responsabilite requis pour inciter le verificateur a retenir un niveau de soin raisonnable socialement optimal. De meme que le modele de Simon (1982), le systeme de negligence avec assurances additionnelles est prefere a la responsabilite stricte. De plus, il est montre que le systeme de negligence fonctionne avec moins d'information que le systeme de responsabilite stricte, par opposition a d'autres modeles tels Green (1978) et Shavell (1978).

This paper provides an algebraic basis of accounting transactions, procedures and bookkeeping activities in a framework that supports various financial and nonfinancial reports and accounting views. The development is based, on a set of accounting matrix operators. This approach, when combined with database technology, provides for a new level of control and security of accounting information, and minimizes the processing required for information distribution on a “need-to-know” basis. The procedural accounting matrix captures the essence of a complete accounting procedure; it is independent of any chart of accounts. Moreover, the order in which matrix operators are combined into the procedural matrix implicitly defines the chart of accounts for the related procedure and the accounts' balances. Consequently, it provides an environment in which alternative charts of accounts, and their financial and accounting implications, can be investigated. This approach, though not yet tested for operational efficiency, thus promotes multiple accounting views, such as GAAP, tax, and managerial accounting, that are all based on the same set of basic accounts, and simplifies their reconciliation. Resume. Les auteurs suggerent une base algebrique pour les operations comptables, les precedes comptables et la tenue des livres dans un cadre approprie a divers rapports financiers et non financiers et a diverses optiques comptables. La mise au point de cette base se fonde sur un ensemble d'operateurs comptables matriciels. Cette methode, lors-qu'elle est combinee a la technologie des bases de donnees, mene a un niveau accru de controle et de securite de l'information comptable et minimise le traitement requis pour la distribution de l'information sur une base selective. La matrice comptable de mode operatoire recouvre l'essentiel du procede comptable complet; elle est independante de tout plan comptable. De plus, l'ordre dans lequel les operateurs matriciels sont combines dans la matrice de mode operatoire definit implicitement le plan comptable pour le procede qui s'y rattache et les soldes des comptes. Par consequent, la matrice est propice a l'analyse des plans comptables de rechange et de leurs consequences financieres et comptables. Cette methode, bien que l'efficience de son fonctionnement n'ait pas encore ete mise a l'epreuve, se prete ainsi a differentes optiques comptables, telles celles des P.C.G.R., de la fiscalite et de la comptabilite de gestion, qui s'etablissent toutes sur le meme groupe de comptes fondamentaux, et simplifie leur rapprochement.

In this paper, a service department chooses a fixed/variable cost combination based on the forecasts of two operating departments. The operating departments then make service usage decisions, and the service department provides the level of service demanded. The allocation of fixed and variable service department costs is used to: (1) encourage efficient short term use of the service and (2) encourage accurate forecasting by the operating departments. Three approaches are used to achieve these objectives — incentive compatible allocations, a modified Soviet incentive scheme, and a Groves allocation scheme — and we discuss conditions under which these schemes are successful. Resume. Dans cet article, un atelier de service retient une combinaison de couts fixes/ variables fondee sur des previsions de deux ateliers de fabrication. Par la suite, les ateliers de fabrication prennent des decisions relatives a leurs besoins de services, et l'atelier de service fournit le niveau de service exige. La repartition des frais fixes et variables de l'atelier de service vise a: (1) favoriser une utilisation efficace de l'atelier de service a court terme et (2) favoriser l'elaboration de previsions precises de la part des ateliers de fabrication. Trois approches sont utilisees pour atteindre ces objectifs — la compatibilite des repartitions et des mesures incitatives, un systeme incitatif sovietique modifie et un systeme de repartition de Groves — et nous examinons les conditions necessaires au bon fonctionnement de ces systemes.