Keith A. Shriver

An examination of the relative reliability of changing prices income data

Recent studies by researchers, users, preparers, and regulators indicate a renewed interest in the financial reporting of changing prices. The purpose of this paper is to extend prior research in this area and to examine the relative reliability of various changing prices income data. An econometric index of measurement error is utilized to compare the relative reliability of historical cost nominal dollar, historical cost constant dollar, and current cost nominal dollar incomes from continuing operations during the 1979-1983 time period. The results indicate that the current cost nominal dollar income measure was more reliable than the historical cost nominal dollar income measure for several years. These results are consistent with the variety of present proposals to enhance the financial reporting of changing prices in the USA.

The Estimation of Monetary Gains and Losses in Diverse International Economic Environments

Abstract This study provides empirical evidence about the accuracy of the shortcut techniques for estimating monetary gains and losses sanctioned by the UK and US standard-setting bodies. Our analysis is based on a sample of 300 firms diversified across 30 countries and three levels of inflation. We conclude that shortcut estimation techniques perform poorly, producing average errors five to 10 times as large as estimates based on the more sophisticated methodology of numerical mathematics. These results hold regardless of the rate of inflation incurred or the monetary base used. When judged relative to a revenue-based materiality measure, the economic significance of these errors is substantial in international economic environments exhibiting the highest levels of inflation, and may also be material for a subset of firms that operate in countries with intermediate and lower levels of inflation.

The Measurement of Real-Asset Determinants of Systematic Risk and the Likelihood of Receipt of Uncertainty Qualifications

The findings of prior research have been inconsistent about the use of systematic risk (beta) as a surrogate for those aspects of the audit environment related to the likelihood of an uncertainty qualification. The purpose of this study is to refine the theoretical framework and measurement issues of this topic through an examination of the association between two real-asset determinants of systematic risk (the degree of operating leverage and the degree of financial leverage) and the likelihood of receipt of an uncertainty qualification. The results indicate that these two leverage measures are not significantly associated with the receipt of uncertainty qualifications in auditing practice.