"Critical Thinking in the Public Accounting Profession: Aptitudes and Attitudes," Journal of Accounting Education, with B. Cunningham, D. Fordham, R. Gardner, and S. Wolcott, 16:3, 1998.

Both accounting educators and practicing professionals have called for a refocusing of accounting education to emphasize the development of critical thinking skills in accounting graduates. To facilitate future research aimed at curricular change to meet the needs of the profession, this article delineates the critical thinking competencies needed in public accounting and discusses their implications to accounting educators.

The profession uses the term critical thinking to refer to a broad set of competencies which includes both cognitive and non-cognitive attributes, attitudes, and behaviors. However, traditional accounting education is geared more toward technical understanding than cognitive development. Researchers need to address how to best interject the enhancement of these mental processes into the existing curriculum. While most critical thinking researchers agree that such processes can be developed, there is little evidence on how to best implement such development in accounting education. For example, should the cognitive components be addressed individually, or together as a single, composite skill? And, can these attributes be developed in courses other than accounting, then integrated into the accounting domain?

Some of the more interesting research questions pertain to developing the non-cognitive attitudes and behaviors. It is still unclear whether traits such as curiosity can be satisfactorily addressed in an educational atmosphere. And, to produce the holistically-competent graduate being demanded by the profession, can non-cognitive attitudes be taught separately from the cognitive attributes?

In distinguishing cognitive and non-cognitive critical thinking attributes, this article lends additional insight into the mental processes, levels of development, and other factors associated with the critical thinking skills deemed essential by the profession. And, the discussion makes clear that the holistic nature of the required set of competencies presents a greater challenge to educators than does a set of independent skills and proficiencies.

"Critical Thinking Competencies Essential to Success in Public Accounting," Federation of Schools of Accountancy Resource Guide, with M. Chain, B. Cunningham, D. Fordham, R. Gardner, K. St. Pierre, S. Wolcott, 1998.

The public accounting profession is changing rapidly and the preponderance of evidence suggests that traditional accounting education is producing graduates without many of these newly-required skills. Mentioned specifically in most of the profession’s calls for increased emphasis on a different skill set is the ability to think critically. Under my chairmanship the FSA’s 1997 Educational Research Committee took the first step in a process to develop more effectively the critical thinking skills of accounting graduates. This resource guide identifies the critical thinking competencies needed for success in public accounting.

To better articulate employer expectations we obtained and analyzed the performance appraisal documents of five of the Big 6 public accounting firms. Then, we conducted follow-up, in-person interviews with 31 senior managers and partners representing offices across the country. Using an abbreviated Delphi method, we analyzed the interview transcripts to summarize the critical thinking competencies needed for success.

While the accounting professionals interviewed offered widely differing "definitions" of critical thinking, there is a set of characteristics, attributes, attitudes, and behaviors which they commonly associated with critical thinking. The set of cognitive skills and traits provided by interviewees and traditionally associated with academic models of critical thinking include seeing the "Big Picture", transferring knowledge, recognizing when more information is needed, recognizing problem areas, and thinking ahead. In addition, during the course of the interviews we discovered some observable attitudes and behaviors often associated with cognitive components of critical thinking, but not viewed as "pure" critical thinking by academics. These peripheral critical thinking components include initiative, curiosity, confidence, and clear communication. The successful public accountant must apply these attitudes in demonstrating the cognitive critical thinking competencies.

"Economic Value Added and Small Businesses," Journal of Small Business Strategy, with B. Marshall and R. Sartelle, Fall 1997.

Economic Value Added (EVA), a tool to create wealth, enjoys widely publicized acceptance among large, publicly-traded corporations. Highly regarded companies like Coca-Cola and AT&T have seen their market values soar since adopting EVA. The concept is straightforward; earn more than the cost of invested capital. Thus, it is not surprising that EVA is the leading idea in corporate finance today. And, it is time for many small, privately-held firms to embrace this fundamentally sound financial idea to create firm value. This article demonstrates EVA’s application in small, privately-held firms, examines EVA’s strengths, weaknesses and ways to overcome those weaknesses, and describes specific operating, investing and financing actions available to small business managers which can create wealth.

"A Catalog of Resource Materials for Assessing Students’ Higher-Level Thinking Skills," Federation of Schools of Accountancy, with C. Johnson, S. Mahenthiran, M. Sahan, and G. Weinstein, December 1996.

This resource catalog is one of a series devoted to providing background information to instructors to enhance classroom pedagogy. First, the catalog presents a brief overview of assessment in general and the range of learning objectives related to facilitating the development of higher-level thinking skills. Next, the matching of learning objectives with appropriate assessment methods is illustrated. Finally, the catalog presents an annotated bibliography covering the key articles for educators interested in improving their assessment of the critical thinking and reasoning skills of students. It is through the use of feedback from valid assessment tools that educators can effectively and efficiently enhance their curriculums as well as their instructional skills.

"Managing Risk with Derivatives," Management Accounting, with R. Benke and G. Buetow, November 1996.

This article was awarded the Lybrand Gold Medal, the highest honor in the Institute of Management Accountants 1995-1996 manuscript competition. Nearly 300 manuscripts were submitted for the competition.

"Managing Risk with Derivatives" discusses both the risk environment in which businesses operate and the advantages of financial derivatives in hedging that risk. And, the article illustrates with specific examples the use of forward or futures contracts, options and swaps to eliminate financial risk. Each derivative security offers unique properties such as distinct payoff profiles, existence of organized exchanges, and the ability to cover a longer time horizon, making one better than another in a particular risk setting.

Derivatives enable a business to counterbalance existing interest rate, exchange rate and commodity price risks, thereby limiting potential losses and stabilizing cash flows. Moreover, derivatives offer speed, precision, flexibility and low transaction costs. Properly hedged risk can lead to lower borrowing costs, less volatility in net income, and increased firm value.

Nevertheless, risk reduction with derivatives can be costly. The examples demonstrate that the future may unfold in such a way that a company’s cash flows would have been superior if the hedging strategy had not been implemented. But, to criticize a hedging strategy retrospectively would be analogous to an individual who remains healthy finding fault with paying an insurance premium after the coverage period expired.

Finally, the process of managing risk with derivatives must itself be managed. Procedures must be developed and controls implemented to ensure the effective management of the market, credit and legal risks of derivative use. Establishing effective oversight by the board of directors, audit committees and senior management is paramount. With adequate controls the financial catastrophes due to financial derivatives during the past few years such as Metallgesellschaft, Proctor and Gamble, and Gibson Greetings might have been avoided.

"Change in Accounting Education: A Research Blueprint," Center for Research in Accounting Education, Editor, November 1995.

Reprinted in Journal of Accounting Education, Summer 1996.

This collection of commissioned essays from 15 prominent accounting educators encourages academics to extend their knowledge of the educational process through experimentation and the dissemination of findings. In addition to providing a foundation for examining change, the authors challenge academics to explore, explain and share with colleagues their experiences with change. And, to facilitate improving the effectiveness of academic programs the authors present and discuss various research avenues to address the identification, design and implementation of structural, curricular and instructional change.

As chairman of the 1995 Federation of Schools of Accountancy’s (FSA) Educational Research Committee, I developed the idea for the book, then invited, edited, published and distributed these essays to member schools. And, to achieve a wider circulation I coordinated the reprinting of my preface and the 15 essays in the Journal of Accounting Education.

"Scholarly Accomplishments in Promotion and Tenure Decisions of Accounting Faculty," Journal of Accounting Education, with D. Street, Spring 1994.

Given the emphasis placed on research by deans and accounting department heads when making promotion and tenure decisions, this study examines the relative values assigned to specific scholarly accomplishments. Institutions are grouped based on their educational mission as measured by the Carnegie Foundation classification system. We find that the relative values assigned differ in a manner consistent with the educational missions of the respondents’ institutions. Subsequent recognition of academic publications through citations and reprints is valued more at doctoral-granting than nondoctoral-granting schools. However, no disparity was found among either deans of accounting heads in their valuation of publishing in an academic journal, the accomplishment held in the highest esteem by respondents from all institutional categories.

"Essays on Changing Accounting Education," Center for Research in Accounting Education, with B. Roof, 1994.

This collection of 21 recently published (1987-1992) essays promotes, describes and analyzes change in accounting education. The first four articles promote a change in perspectives on accounting education, with the lead article by Bedford and Shenkir describing the work and conclusions of the AAA’s committee on the future structure, content and scope of accounting education. The second sectiom comprised of four articles considers changing the industry of accounting education, including faculty performance evaluation, the accreditation process, and 150-hour curriculum innovation.

In the third section accounting program change is reviewed. Smith and Usry analyze the changes which have occurred over the past 25 years to provide perspective. Mayer-Sommer proposes a curriculum modification which teaches students to learn how to learn. Mock et al. present a systems approach to accounting curriculum development. And, Baldwin and Ingram suggest that the elementary accounting courses be reconceptualized to attract high quality students who otherwise forsake accounting as a major.

The fourth section is comprised of nine articles which provide guidance in changing accounting instruction. Two articles deal with integrating ethics into the accounting curriculum, two with using the case method in accounting classes, two with teaching methods to improve writing and other social integration skills, and three with ways to enhance the realism of accounting classes.

"Research, Teaching, and Service in Promotion and Tenure Decisions of Accounting Faculty," Journal of Accounting Education, with D. Street and R. Benke, Spring 1993.

This study examines the relative value of research, teaching, and service activities in promotion and tenure decisions of accounting faculty and identifies how these values vary across AACSB colleges of business and departments of accounting. Institutions are grouped based on their educational mission as measured by the Carnegie Foundation classification system. The results demonstrate that the relative values assigned to research, teaching and service vary across deans and accounting department heads in a manner consistent with their institutions’ educational missions. We find that the views of deans and accounting heads at doctoral-granting, high-research support schools differ from their counterparts at both doctoral-granting, low-research support schools and nondoctoral-granting schools. We conclude that for faculty performance studies the traditional classification of schools and programs based simply on doctoral-granting status may provide misleading or incomplete results. Future research studies in this area should utilize the Carnegie classification scheme.

"Promotion and Tenure Decisions for Business Law Faculty in AACSB Colleges of Business," Journal of Legal Studies Education, with A. Hamilton and D. Street, Spring 1993.

This article reports the results of a survey of AACSB college of business department heads who evaluate business law faculty performance. Accounting department heads comprise ten percent of the respondents. The survey addresses the relative weights assigned to teaching, research, and service and the importance of various scholarly activities in promotion and tenure decisions. While confirming that research performance is most highly valued, the study reveals that research expectations differ depending on where business law faculty are housed within colleges of business. We find that the heads of separate business law departments place more emphasis on research than do their colleagues in accounting/finance or management/marketing departments.

"How Does Your Accounting Department Measure Up?" Management Accounting, with B. Roof, April 1991.

Based on the results of a survey of 1,000 companies, this article characterizes the accounting operations in small and medium-sized firms. Measures of the magnitude of controller budgets and the number of accounting personnel by function are provided for firms with up to $150 million in revenues. Surprisingly, we find that 40 percent of accounting personnel resources are consumed by financial management, marketing support, and MIS activities. Further, accounting operations in respondent firms are overwhelmingly devoted to custodial endeavors. As a result these accounting personnel are not able to be employed to improve the efficiency of overall operations.

"Use 1-2-3 to Advise Your Clients with the Lease, Cash Purchase, or Purchase with Financing Decision," Computers in Accounting, with R. Benke, January 1991.

Spreadsheets are particularly effective for assisting those making asset financing decisions; they can accommodate many variables simultaneously. This article discusses the various financing alternatives available to firms considering asset acquisitions and presents instructions for constructing a template using 1-2-3 to help accountants in advising clients making these decisions. The acquisition of office equipment provides the example. Variables considered include equipment cost and residual value, the borrowing rate and loan term, the lease term and monthly payment, the tax life of the property, and the tax rate of the prospective buyer.

"The Lease versus Purchase Decision," Management Accounting, with R. Benke, March 1990.

Reprinted in the IEEE Engineering Review, September 1990.

This article examines in detail the financing decision to lease or purchase a capital asset. Based on information supplied by the Advanced Business Institute (IBM) and BankAmeriLease Company (Bank of America), we analyze using discounted cash flow techniques four alternatives for financing a computer. The articles describes how leasing really works with special attention paid to the impact of tax rules. Additionally, the effects of qualitative factors on the lease/purchase decision are presented. These attributes include the financial statement and financial ratio impact of the various financing alternatives, the flexibility which innovative lessors can provide, and the ability and value of managing financial risk.

Dimensions of Faculty Research," Center for Research in Accounting Education, with R. Benke and D. Street, 1990.

This volume presents selected articles examining the various dimensions of faculty research. The lead article examines the scope of scholarly activity, followed by six articles which investigate reasons for engaging in faculty research. Of particular interest are three articles addressing the relationship between research and teaching. Then, given the importance placed on faculty research, a series of articles examines ways of enhancing publication levels. The book concludes with an article urging administrators to expand their definition of scholarly activity and to reward a combination of good research and teaching.

"The Plan to Restructure Professional Standards: An Overview," The Virginia Accountant Quarterly, with M. Lathan, September 1988.

In January 1988 the AICPA’s members approved overwhelmingly all six proposals constituting the Plan to Restructure Professional Standards." This lead article of the issue summarizes and discusses the potentially far-reaching impact of these proposals on the practice of public accounting.

"Fraudulent Financial Reporting and the Treadway Commission Report," The Virginia Accountant Quarterly, with M. Lathan, March 1988.

This article provides an overview of the Treadway Commission’s recommendations to the financial reporting community for reducing the incidence of fraudulent financial reporting. These recommendations are directed to management, the public accounting professions, the SEC and other regulators, as well as educators.

"Long-Term Incentive Compensation, Ownership, and the Decision Horizon Problem," working paper, University of North Carolina Accounting Research Colloquium, May 1987 invited presentation.

Cited by Gaver et al., "The Stock Market Reaction to Performance Plan Adoptions," The Accounting Review, January 1992, 172-181.

Cited by Gaver, J. and K. Gaver, "Performance Plan Adoption and Corporate Capital Investment: A Note," Journal of Management Accounting Research, Fall 1993, 145-158.

The motivation and incentive theory of compensation posits that incentive plans are employed to align the incentives of managers with those of stockholders. This paper examines whether introducing performance plans or restricted stock compensation contracts induces managers to extend their decision horizons, thereby increasing capital investment and research and development expenditures. To control for differential investment opportunities, Value Line’s capital spending forecast is introduced. As hypothesized, capital spending is shown to be positively related to the adoption of both performance and restricted stock plans. Moreover, the plans are found to be most effective when adopted by manager-controlled firms, those in which stockholders lack adequate information or power to exact profit-maximizing behavior from management.

"Performance Plans and Ownership Structure: An Empirical Analysis," working paper.

This paper empirically examines the position that performance-contingent compensation plans are introduced to reduce agency costs arising from differences between the decision horizons of shareholders and managers. When ownership is separated from control and when bonus contracts are included in executive compensation packages, managers may overemphasize the short-term earnings effects of decision alternatives. Performance plans can alleviate this problem by rewarding operating results covering a three- to five-year period.

As hypothesized, the decision to adopt a performance plan is found to be negatively related to the level of managerial ownership and positively related to the inclusion of a short-term bonus scheme in the manager’s compensation package. These findings are interpreted as supporting the motivation and incentive theory of compensation.

Supplied for the First Courses in Accounting," working paper, with R. Benke.

The Frederickson and Pratt model views accounting education as a constrained optimization process, with a goal of producing accounting graduates possessing competencies desired by employers. This paper demonstrates the use of this structure for redesigning a subset of the accounting curriculum, the first courses in accounting. We report how one university modified the model to determine the competencies demanded of students successfully completing this sequence of courses. Rather than the needs of employers driving the competencies to be supplied by an accounting program, it is the skills required for success in subsequent courses which help determine the competencies supplied in the first courses in accounting. Other factors in the model influencing the competencies supplied by accounting faculty include course content and instructional methods, with limitations imposed by student ability and effort, faculty ability and effort, and the institutional resources provided for education.