A field study on the limitations of activity-based costing when resources are provided on a joint and indivisible basis

Article Abstract:

A study was conducted to demonstrate the limitation of activity-based costing and actual business spending. Specifically, the conditions are established under which conventional and activity-based costing based on an assumed linear association between costs and activities can both produce poor estimates of actual expenditures. The data used in the study are derived from a field experiment conducted at a hospital. Simulations are applied to this data to approximate the manner in which a change in anaesthetics would minimize the demand for nursing services in the recovery room of the hospital's outpatient surgery facility. Results show that linear activity-based costing may not furnish dependable indicators for decision making if resources are provided on an indivisible or joint basis.

Cost Control Techniques, Business budgets, Resource allocation, Cost accounting, Cost control

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On auditors and the courts in an adverse selection setting

Article Abstract:

The effect of litigation against auditors on the prevailing equilibria and the resulting welfare of the participants when the endogenously determined rates of interest and audit fees reflect expectations of future litigation is presented. The introduction of the auditor into the court system decreased the extent of litigation in the equilibrium, and provides an insurance role for the auditor for firms with limited ability to pay damages. Firms cannot design audit contracts where payment is a function of the variables.

Laws, regulations and rules, Auditing, Auditors

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The management of corporate financial disclosure: opportunism, ritualism, policies, and processes

Article Abstract:

The idea of a corporate financial disclosure position or strategy may present significant potential for explaining voluntary financial disclosure. It would appear to be beneficial to design a measure of this idea, to analyze the degree of discretion that exists over it and how environmental factors alter that discretion. Although that discretion exists, it is restrained by the dependence of companies on financial resources, market opportunities, and disclosure regulations.

Managerial accounting, Financial disclosure

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