The Relevance of Varieties of Accounting Information: A U.S.A. Survey

Diverse kinds of financial information have been claimed to be relevant, for one purpose or another. A survey by mailed questionnaire over seven professional groups in five large U.S. cities sought to discover whether certain valuation rules yielded serviceable amounts in specific problem settings or in representations of financial position and income. Most of the questions were posed in the form of simple problem situations. To questions relating to wealth, spending power and financial position, large majority responses rejected conventional accounting values and endorsed market selling prices. To questions on income calculation, majorities favouring use of the same principle were smaller. Cross-tabulations of answers on financial position and income showed substantial inconsistencies; a hypothetical explanation is given. A comparison is given of responses to some questions in similar surveys in Australia and South Africa.     

Can Audit Partners Predict Subordinates' Ability to Detect Errors?

This study examines audit partners' predictions of the ability of managers and seniors to detect financial statement errors. If partners are unable to predict the ability of their subordinates to detect errors, audit effectiveness may be affected. Audit partners are asked to predict which members of the audit team (managers or seniors) are able to detect specific types of errors. These predictions are then compared to errors detected by managers and seniors that are seeded in working papers. The results show that partners (1) exhibit significant overconfidence in the ability of subordinates to detect errors, (2) are more accurate in predicting managers' performance than seniors, (3) are more accurate at predicting subordinates' ability to detect mechanical (simple) errors than conceptual (complex) errors, and (4) are not better at predicting subordinates' ability to detect more frequent and more important errors than less frequent and less important errors.     

CONSEQUENCES OF MINIMUM WAGE INDEXING

During the 1980s, the minimum wage fell relative to prices and average wages in the U.S. economy. If the minimum to average wage ratio had been constant at the level maintained through the 1970s, the minimum wage would have been $5.51 in 1993. If the 1993 minimum wage had increased to $5.51, payments to minimum wage workers would have increased by an estimated $20.3 billion, and the number of people earning that wage would have risen from 2.0 million to 14.7 million. Elasticity estimates generated from other studies indicate that employment would have fallen 240,000 (4.4%) among 16–19 year olds and 349,000 (3.0%) among 20–24 year olds. Wage payments to minimum wage workers would have substantially increased, but the effect on family income distribution would have been small. Many minimum wage workers are children living with parents or adults in a family with other earners. Consequently, 75% of minimum wage workers account for less than half of their family's income.