A Proposal to Replace 'True and Fair View' With 'Acceptable Risk of Material Misstatement'

This article examines argumentation factors which affect the truth of an audit opinion. We propose that the auditor's report be revised to replace the words 'true and fair view' with 'acceptable risk of material misstatement'. This would better align the communication of auditors with the characteristics of accounting information upon which they report. Adoption of the wording 'acceptable risk of material misstatement' will facilitate a better appreciation by users of financial statements of the accounting estimates in financial statements.     

Voucher Privatization: A detour on the road to transition?

We explore an overlooked aspect of the design of the Czech voucher privatization programme, namely, the consequences of allowing individuals to distribute their vouchers among the voucher privatization funds (VPFs). We develop and analyse a model of voucher privatization in which we study the problem facing individuals who invest their vouchers in VPFs which, in turn, are able to use their skills to alter the performances of the firms in which they acquire shares. The VPFs have different skills and, by their bids and subsequent joint ownership patterns, affect the performances of the firms in their funds. We show that even in the case in which voucher holders have identical and full information, and wish to allocate their vouchers to the VPFs in a manner consistent with the maximization of economy–wide profit, a coordination failure generally prevents the implementation of this efficient outcome. Uncertainty, as well as differing payouts by the VPFs, is shown to exacerbate the problem. We conclude that there was an inherent flaw in the design of the Czech voucher scheme. JEL classification: D44, L33, P21, G11.     

The Explanatory Power of Game Theory in International Politics: Syrian–Israeli Crisis Interactions, 1951–87

The present paper assesses the usefulness of game theory in explaining crisis interactions between Israel and Syria. We begin with the simplest game-theoretic tool for analyzing strategic situations: the one-shot 2×2 game. By analyzing the various episodes of the protracted Syrian--Israeli conflict as one-shot 2×2 games, we avoid the multiplicity of equilibria of the infinitely repeated game and the difficulty of specifying an endpoint of a finitely repeated game. The pure strategy Nash equilibria of these one-shot games are treated as theoretical predictions and are compared with the observed outcomes.     

Reinforcement versus balance response in sequential choice

Psychologists often explore the impact of one act on a subsequent related act. With an eye to the marketing literature, this paper explores two properties of sequential choices that involve the resolution of competing goals. Reinforcement occurs when the goals driving the first choice are made stronger by that choice and result in a congruent subsequent choice. Balance occurs when the first choice satisfies or extinguishes the goals that led to the original decision, producing an incongruent subsequent choice. This review examines a number of psychological frameworks that account for reinforcement or balance responses in sequential choice and identifies theoretically relevant moderating variables that lead to either response.     

Do Taxes Matter for Foreign Direct Investment?

The tax sensitivity of foreign direct investment (FDI) has importantpolicy implications. If FDI is not responsive to taxation, thenit may be an appropriate target for taxation by the host country.This question is examined for Mexico by estimating the responseof FDI from retained earnings and transfers from abroad to thetax regimes in Mexico and the home country, the credit statusof multinationals, country risk factors, and regulatory andtrade regimes in Mexico. FDI in Mexico is found to be sensitiveto the tax regimes in Mexico and the United States, the creditstatus of multinationals, country credit ratings, and the regulatoryenvironment. Thus Mexico's current policies to dismantle regulationsand employ a tax system competitive with the United States areexpected to have salutory effects on FDI in Mexico.     

Inflation and the wage lag during the American Civil War

This paper examines the role of inflation in financing the American Civil War, and the effects of that inflation on the level of real wages in the North. A wage determination model is specified in which the equilibrium real wage is determined by real forces and the money wage is allowed to adjust to its equilibrium value with lags. Econometric estimates of the model support Wesley Clair Mitchell's contention that wage movements lagged price movements during the war. Comparison of the estimated equilibrium money wage and the estimated current money wage makes it possible to assess the magnitude and importance of the wartime redistribution of income attributable to inflation.     

Ethics and environmental marketing

Corporations have scrambled to bring to market products positioned and advertised as addressing the needs of the environmentally-conscious consumer. The vast majority of claims presented in support of these products are best described, however, as confused, misleading or outright illegal. Ethical considerations have not yet been integrated into environmental marketing, and as a result, long-term harm on both the individual and societal level may result. A framework for reversing this trend is presented. It identifies the sequence of actions necessary for the development and communication of ethical environmental marketing claims. The sequence is based upon two aspects of ethical theory: moral style and normative behavior. Specific implications for marketers' actions at each stage in the sequence of framework development are also discussed.Dr. Joel J. Davis is Assistant Professor of Journalism at San Diego State University. Prior to joining the faculty at San Diego State, Dr. Davis was Vice President, Associate Director of Strategic Planning and Research at D'Arcy Masius Benton & Bowles Advertising.