Individuals and corporations give generously to nonprofit organizations. However, supporters are naturally concerned about the financial strength and operational efficiency of an organization. Using publicly available nonprofit databases and websites, this case exposes students to a real-world scenario in which students analyze a 501(c)(3) organization of their choosing using GuideStar data and select Better Business Bureau Wise Giving Alliance criteria in five areas: governance and oversight, effectiveness, finances, fundraising and information materials, other financial and non-financial performance measures. The overall learning objective of this case is to enhance students’ understanding of a nonprofit’s financial and non-financial performance through research and analytical procedures. This case helps to fill a void by familiarizing students not only with standard nonprofit financial performance metrics, but also important non-financial areas related to governance, mission-driven goals, and organizational transparency. It also affords students the opportunity to develop a more thorough understanding of key accounting and non-accounting issues associated with nonprofits, which are not always explicitly or implicitly covered in textbooks.

In this study, we examine the role of temporal framing in the context of tax audit risk. Using construal-level theory, we propose that compared with an every-year frame (e.g., 1.5 million returns are audited every year), framing audit risk in an everyday frame (e.g., 4,000 returns are audited every day) will make audit risk seem more likely and thus increase taxpayer compliance. We test whether perceived fairness of the tax system, an individual difference variable related to tax compliance, moderates the effect of temporal framing on behavioral intentions. The results show that communicating risk in a day frame rather than a year frame increases compliance for taxpayers who perceive the tax system as unfair but not for taxpayers who perceive the tax system as fair. Increasing compliance among taxpayers who perceive the tax system as unfair is crucial, as they are less likely to be compliant. Thus, framing audit risk can assist in increasing taxpayer compliance.

In this study, we examine the role of temporal framing in the context of tax audit risk. Using construal-level theory, we propose that compared with an every-year frame (e.g., 1.5 million returns are audited every year), framing audit risk in an everyday frame (e.g., 4,000 returns are audited every day) will make audit risk seem more likely and thus increase taxpayer compliance. We test whether perceived fairness of the tax system, an individual difference variable related to tax compliance, moderates the effect of temporal framing on behavioral intentions. The results show that communicating risk in a day frame rather than a year frame increases compliance for taxpayers who perceive the tax system as unfair but not for taxpayers who perceive the tax system as fair. Increasing compliance among taxpayers who perceive the tax system as unfair is crucial, as they are less likely to be compliant. Thus, framing audit risk can assist in increasing taxpayer compliance.

We used DEA to measure the performance of New York State school districts and provide alternative improvement targets for each district. We found that 201 of the 624 (32.2%) districts with one or more high schools and 28 of the 31 (90.3%) districts with no high school were on the performance frontier. We found evidence that NYS could reduce FTE teachers by 8.4%, FTE teacher support by 17.2%, and FTE administration and professional staff by 9.4%. We also found that NYS could increase percentage of students who pass the English exam by 4.9 percentage points, the mathematics exam by 5.0 percentage points, and the science exam by 5.8 percentage points, while increasing the average graduation rate by 5.4 percentage points.

We evaluate the efficiency with which the 50 U.S. states convert public and private spending into jobs. We use a Data Envelopment Analysis model in which the states are the decision-making units; federal, state, private sector spending are the inputs; and jobs is the output. We find that 38 percent of states are efficient. However, there is considerable variation in efficiency, suggesting that the effect on job creation depends on where the money is spent. We find that high population states more likely to be efficient than low population states, while states located in the Southeast region are less likely to be efficient relative to states located elsewhere. We find that states with higher proportions of their workforce in the Professional and Business Services, Government, or Education and Health Services super-sectors are less likely to be efficient relative to states with lower proportions of their workforce in these super-sectors.

We propose an efficiency-based mechanism for state funding of public colleges and universities using data envelopment analysis. We describe the philosophy and the mathematics that underlie the approach and apply\break the proposed model to data from 362 U.S. public four-year colleges and universities. The model provides incentives to institution administrators to eliminate wasteful spending and increase positive outcomes while maintaining educational quality and research productivity. The institutions in our study spent $96.74 billion, and states would reimburse $88.02 billion. Thus efficiency-based funding would reduce state government expenditures on these institutions by $8.72 billion, or approximately 9.0 percent. Efficiency-based funding is politically viable, as demonstrated by North Carolina’s successful use of this approach in pupil transportation operations since 1994. The model will be of interest to state legislators, state education officials, and others who are concerned with funding formulas for institutions of higher education.

For e-commerce to grow, customers must trust organizations with which they interact. In this article, we propose and test a theoretically-derived model of trustworthiness of Web merchants in general. Trustworthiness is influenced by behavioral, competence, and attitudinal beliefs. Findings indicate trustworthiness is strongly influenced by behavior-related beliefs, and less strongly by attitude-related beliefs. Trustworthiness beliefs impact intentions to purchase from Web merchants.

For nearly two decades, accounting educators have debated whether to continue with a preparer approach, or adopt a user perspective, or a blended model in the introductory financial accounting course. We examine the extent to which accounting programs have chosen to employ each approach, the factors that influenced their selection, as well as the relative importance of each factor. We also explore institutional and course characteristics associated with the choice of instructional method.Our results indicate that one-third of programs employ the user perspective, and one-fifth the traditional preparer approach, while nearly half use a blend of the two. Programs using the preparer approach tend to focus on the accounting major (e.g., performance and career goals). In contrast, user approach institutions appear to emphasize performance issues and career paths of non-accounting majors.

Purpose – To investigate how accounting majors have reacted to recent accounting scandals and to evaluate the extent to which they are familiar with the scandals, the effects of the scandals on their opinions of accountants and corporate managers, and the consequent influences on the student's educational and career plans.

Purpose - To investigate how accounting majors have reacted to recent accounting scandals and to evaluate the extent to which they are familiar with the scandals, the effects of the scandals on their opinions of accountants and corporate managers, and the consequent influences on the student's educational and career plans.Design/methodology/approach - In total 105 accounting majors at two institutions were surveyed. Forsyth's ethics position questionnaire was used to evaluate the student's ethical orientation. The survey instrument also measures student demographic data, the student's knowledge of the profession and the scandals, and how the scandals affected the student's opinions and plans. The data are analyzed using linear regression.Findings - Accounting students are generally knowledgeable about the scandals but seem to know considerably less about the accounting profession. Accounting students lowered their opinions of corporate managers more than that of accountants. Accounting students also express an increased interest in majoring in accounting and seeking a position in the profession, but express less interest in working for a Big 4 firm. Students scoring higher on the idealism scale tended to lower their opinions of accountants more than that of corporate managers.Research limitations/implications - The results represent a case study only. It is believed that the conclusions may apply to other student populations.Practical implications - The results can guide educators to prepare interventions that help students to avoid ethical crises.Originality/value - The paper introduces ethical orientation in explaining how students react to ethical crises. The results enable accounting educators to understand what students feel and how and why they react to such events.

Auditors may encounter misstatements during the course of an audit, each of which requires a binary materiality assessment. We propose a fuzzy expert system approach that assesses materiality as a continuous characteristic by allowing a misstatement to possess a degree of materiality between 0 and 1. This potentially allows the auditor more flexibility and precision in materiality assessment, and greater insight regarding subsequent testing and investigation. We demonstrate that a fuzzy expert system can help the auditor incorporate qualitative factors into the materiality assessment of each misstatement and identify which misstatements are most worthy of further investigation. The auditor may compare the materiality assessments of all misstatements to plan an audit strategy. By providing a formal model structure, the fuzzy expert system formalizes and documents the materiality assessment process. This may facilitate better communication within the audit team and with the client, and enhances process consistency across auditors, engagements, and years.

PurposeTo explore the effects of mandatory auditor rotation and retention on the long‐term market shares of the accounting firms that audit the members of the Standard and Poor's (S&P) 500.Design/methodology/approachA Markov model is constructed that depicts the movements of S&P 500 firms in the period 1995 to 1999 among Big 5 accounting firms. Auditor rotation and retention are reflected in the transition probabilities. The impacts of mandatory auditor rotation and retention policies are evaluated by examining the state probabilities after two, five, and nine years.FindingsThe paper finds that mandatory auditor rotation will have substantial effects on long‐term market shares, whereas mandatory auditor retention will have very small effects. It shows that a firm's ability to attract new clients, as opposed to retaining current clients, will be the primary factor in determining the firm's long‐term market share under mandatory auditor rotation.Research limitations/implicationsThe paper assumes that S&P 500 firms will continue their reliance on Big 5 firms and that the estimated transition probabilities will remain stable over time.Practical implicationsExcessive market share concentration resulting from such policies should not be a concern of regulators. The paper conjectures that, under mandatory rotation, accounting firms will reallocate resources to attract new clients rather than retain existing clients. This may result in lower audit quality.Originality/valueInterestingly, over the past 25 years, several bodies have considered mandatory auditor rotation and retention. Surprisingly, the authors have found no studies of the effects of mandatory auditor rotation and retention on audit market share.

This chapter introduces linguistic delivery style to auditing research, demonstrates how linguistic delivery style relates to client credibility, and shows how linguistic delivery style and client credibility influences auditors' judgment. Two hundred auditors participated in an analytical procedures task. The results indicate that high client credibility and powerful linguistic delivery style increase the auditor's assessed likelihood that the explanation accounts for the fluctuation and decrease their intent to perform additional testing. Moreover, powerless linguistic delivery style from an otherwise high credibility client leads to auditor judgments and intentions that are indistinguishable from those that arise from a low credibility client. Finally, evidence indicates that linguistic delivery style is a fourth component of credibility.

AbstractBusiness-to-consumer electronic commerce (e-commerce), one form of which is Web-based shopping, is defined as electronic-based economic transactions conducted between individual consumers and organizations. While this form of e-commerce is forecast to grow rapidly for the foreseeable future, it still represents only a small fraction of total consumer spending. To better take advantage of and be prepared for this economic phenomenon, organizations need to identify and understand factors that may impact consumers' decisions to engage in Web-based e-commerce. Recently, the importance of trust has been discussed in both the academic and practitioner press. The impact of trust on the use of e-commerce has been established empirically. The research reported here builds on those findings by establishing that not only is trust in Web merchants significantly related to purchase intentions via the Web, but this significance holds even when other, more traditional perceptions are considered. A survey of consumers was conducted and results indicate that trust in Web merchants is positively related to intentions to make purchases from Web merchants, even when the impact of other perceived innovation characteristics are considered. The research also contributes to the literature on technology adoption by verifying the impact of perceived innovation characteristics on adoption intentions.

The efficiency and the effectiveness of the audit depend in part on the efficiency and the effectiveness of the client inquiry process. This paper presents a model that helps auditors to understand the stages of the client inquiry process and the factors that influence its reliability. The model serves to illuminate the client inquiry process and thereby assist auditors in evaluating the evidence thus obtained. Our model is a multistage communication channel that connects reality, the client’s perception of reality, the client’s representation of reality, the auditor’s perception of reality, and the auditor’s representation of reality. Distortions of reality occur between adjacent stages as the result of the subjectivity, technical incompetence, untrustworthiness, and poor presentation skills of either the client or the auditor. We discuss our model in the context of the analytical review task.

Arthur Andersen’s conviction and its decision not to audit public firms will transform the Big 5 into the Big 4. Meanwhile, other Big 4 firms face investigations that threaten their future market shares. The article compares the observed post‐scandal shifts in market share with those estimated by a Markov model. It then estimates the year‐by‐year and long‐term market shares that the Big 4 firms would have achieved had they remained untouched by these investigations. The study finds that the absence of Arthur Andersen alone would not have led to excessive market share concentration. It demonstrates how the post‐scandal shifts reveal the impacts of the investigations on the Big 4 firms and provides market share benchmarks against which the firms can evaluate the long‐term effects of the investigations. Finally, the article concludes that a firm’s long‐term gain in market share depends on its ability to retain audit clients.

Women have yet to welcome Web-based shopping as readily as men. A primary factor for this state is how men and women view shopping. Understanding those differences will help vendors address this vital pool of consumers.

This article describes an exploratory study of the educational effectiveness of course Web sites among undergraduate students in accounting and graduate students in business statistics. We measured Web site visit frequency, the usefulness of each Web site feature, and the impacts of the Web sites on perceived learning and course performance. Graduate students visited the Web site significantly more often than did undergraduate students. In both groups, students rated course note availability and access to grades most useful and, relative to men, women felt that the Web site added more to their learning. Undergraduate students who visited the Web site more often and graduate students who found the discussion board more useful also perceived that the Web site contributed more to their learning. Finally, the graduate (but not the undergraduate) students who visited the Web site more often also performed better in the course.