CPA Review Manual by Herbert E. Miller; George C. MeadReview by: Robert W. LentilhonThe Accounting Review, Vol. 48, No. 1 (Jan., 1973), pp. 228-230Published by: American Accounting AssociationStable URL: http://www.jstor.org/stable/245219 .

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228 The Accounting Review, January 1973

low users to reorganize the book to suit their own preferences.

In the opinion of the reviewer, Horngren has certainly met his goal of providing ample home- work material on all topics, and within a range of difficulty from the very illustrative to the chal- lenging. This has been one of the features of the previous editions, and the inclusion of more and updated homework material within the third edi- tion should only enhance the book's popularity. There is as well at least some greater emphasis on quantitative-mathematical terminology and tech- nique throughout the book, but not so much as to make the book difficult for those not mathemati- cally orientated. Horngren also does go about as far as anyone can in relieving "drudgery" by stressing concepts and their application, as well as by the use of relatively short homework problems that are pointed to a specific issue as opposed to lengthy worksheet-type problems.

Whether or not the author has achieved his stated goal of providing "maximum flexibility" is, of course, subject to differences of opinion. Horngren states that a major objective of this re- vision was to promote flexibility by using what he calls a modular approach which he described as follows: "The material has been arranged to al- low instructors working with students having dif- ferent backgrounds and within curricula having various overlaps the greatest latitude in picking and choosing chapters." (p. xvii).

It does appear that such flexibility is promoted by the relatively independent character of most of the seventeen chapters contained in Section III, as well as the use of homework problems that primarily stress only the material presented in a given chapter.

However, if "modules" exist within the book, they must frequently be in sub-sections of chap- ters rather than chapters as a whole. In other words, flexibility in this book, other than that set forth above, can be achieved as it is achieved in any book. That is, to cover a multi-facted subject in a certain sequence one may have to assign chapters, sub-sections within chapters, and pages within sub-sections. For example, suppose one wanted to take up the subject of absorption cost- ing under an actual cost system including a job- order cost system with a predetermined overhead rate and also wanted to cover overhead variance analysis. To do this, he must assign Chapter 4 (Job-order Costing), Chapter 8 (Cost Behavior Patterns), Chapter 9 (pages 289-290) on over- head variance analysis under a non-standard cost system, Chapter 12 (pages 413-421) on different

bases for overhead application, and Chapter 10 (pages 318-324) on the use of various activity levels in absorption costing. The problem could also be illustrated by assuming that a professor wanted to treat cost accounting for financial statement purposes separately from managerial accounting. Horngren, it seems, often attempts to consider accounting for both of these purposes ei- ther concurrently or at least in close order. For example, in both Chapter 3 and 4, Horngren treats both managerial accounting (breakeven analysis) and financial accounting (product cost- ing for inventory evaluation purposes) concur- rently. One would be forced to try to separate these sections of these chapters in any attempt to treat financial accounting separately from mana- gerial accounting. This kind of flexibility would seem to be available in most any textbook.

It may also, to some degree, be difficult to treat financial accounting topics prior to a consider- ation of managerial accounting. To the extent that Horngren does segregate financial and mana- gerial accounting into separate chapters, he ar- ranges these chapters in the beginning in such a way that the natural sequence of the book is to treat managerial accounting first. For example, overhead variance analysis under an actual cost system is merely extrapolated from an illustration of variances under a standard cost system and is located at the end of Chapter 9 which emphasizes such standard costing.

In conclusion, the third edition, like its prede- cessors, is comprehensive, well written, and has suf- ficient text and homework material in terms of variety and scope to assure its continued popular- ity as a cost accounting textbook that emphasizes managerial accounting and to a lesser extent may also provide adequate, if not ample, material on inventory valuation for financial statement pur- poses. The current revision broadens the scope of the book in terms of subject matter and elabo- ration. A desire by its author to be even more thorough in treatment than before is also evident throughout much of this third edition. While this reviewer questions Horngren's success in provid- ing maximum flexibility for users of the book, he is of the opinion that sufficient flexibility is pro- vided so as to accommodate the differing desires of most professors in this regard.

ROBERT A. SCHUCHARDT

Associate Professor of Accounting University of Missouri-St. Louis

HERBERT E. MILLER AND GEORGE C. MEAD, Editors, CPA Review Manual, Fourth Edi-

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Book Reviews 229

tion (Englewood Cliffs, New Jersey: Pren- tice-Hall, Inc., 1972, pp. viii, 744 in book; iii, 204 in separate Taxation booklet, $15.00).

In 1955 I found the first edition of Miller's CPA Review Manual (along with actual CPA ex- aminations) to be invaluable in preparing for the CPA examination. Since that time, as we all know, the examination has changed drastically: from one planned for the person with two or three years of practical experience (not necessarily a college graduate) to an examination closely re- lated to college preparation. The content has changed and continues to change from that exam- ination in 1955. Has the CPA Review Manual changed with the times? And, more importantly, has it changed enough?

A comparison between this fourth edition and the last revision (apart from Taxation), published in 1966, reveals: about 100 more pages of text in the fourth; some re-ordering of topic sequence, e.g., accounting theory before auditing and sun- dry topics before law; new contributors in ac- counting theory, auditing, managerial accounting and law; new chapter titles, e.g., fund accounting for governmental and institutional and managerial accounting for cost accounting. With these changes it is fair to state that this is considerably more than a re-hash or up-dating of the third edi- tion.

As in previous editions there are eight sections in the bound book. The introduction by George C. Mead gives considerable valuable information about the examination including how to prepare for it, when to take it and how it is graded. Much of this is useful emphasis of topics covered in the AICPA's Information for CPA Candidates. A grading guide to a theory question is a helpful ad- dition to this chapter, since many candidates see only the very complete AICPA unofficial solu- tions.

Accounting theory by Charles T. Zlatkovich stresses the importance of APB opinions and statements, most of which have been issued since the previous commentary on accounting theory was written. This chapter, in only seventy pages, presents most of the important sources of ac- counting theory through text treatment and care- ful footnotes. Some troublesome areas have been selected for special treatment including intangible assets, earnings per share, leases and income tax allocation, among others. APB opinion quotations are included where pertinent. A question and un- official answer from a CPA examination are pre-

sented for illustrative purposes. In several in- stances the importance of a particular area on the examination has been stressed. This chapter has done an admirable job of refreshing the potential candidate's memory on a host of important and timely topics. It strikes me, as I look at the May 1972 CPA examination in accounting theory, that a candidate would have been well-served if he had used this chapter as the basis for his review.

Auditing by Alvin A. Arens represents a fifty percent increase in space devoted to this topic over the third edition. The Institute's objectives in giving the examination are presented along with a careful and concise treatment of topics with which the candidate must be familiar. Basic changes in emphasis involve statistical sampling, currently an important area on the examination and covered in eighteen pages in this edition vs. less than two pages in the previous one. Also au- diting EDP systems, a "must" area for candi- dates, is newly introduced and given fourteen pages. Flowcharting for internal control evaluation has been added. Regretably, illustrative examina- tion questions have been dropped.

Fund accounting by Edward S. Lynn and Rob- ert J. Freeman is also given about fifty percent more space than was allotted to it previously. In fact, the 140 pages devoted to fund accounting represent some twenty percent of the pages in the hard-cover book. The solid coverage includes all of the usual municipal funds along with expanded treatment of accounting for institutions such as hospitals and colleges. It is doubtless true that the non-quantitatively oriented candidate must now answer the fund accounting problem in the accounting practice section. At the same time, the coverage of this topic seems disproportionate to me (preparation for one problem on the account- ing practice section versus preparation for com- plete examination sections: auditing and account- ing theory).

Consolidated statements by Herbert E. Miller and George C. Mead is basically the same presen- tation given in the third edition. Some revision of the material on inter-company profits has been made. APB Opinions 16 and 17 were responsible for some changed material in connection with sec- tions on consolidated goodwill and purchase vs. pooling, while a new section on contingent consid- eration has been added to the coverage of good- will-specific complications.

Managerial accounting by Kenneth W. Perry replaces the section on cost accounting found in earlier editions. The change in title is indicative of the change in emphasis on the CPA examina-

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230 The Accounting Review, January 1973

tion from a relatively narrow field to one encom- passing a broad range of internal accounting prob- lems. Topics ranging from break-even and marginal income analysis to economic order quantity and reorder point are covered along with illustrative problems from prior CPA examinations. The usual cost accounting systems are covered in de- tail, although process cost is presented only from the FIFO approach. A section on budgeting is in- cluded. Although the coverage is generally well- done, it seems to me that too much space is de- voted to some rather elementary topics (break- even, job cost detail including a job cost sheet) while some currently more relevant topics for ex- amination purposes are ignored. These latter ones include the quantitative techniques which are now regularly appearing on the examination (matrix algebra and linear programming for example). It is obvious that a treatment in depth of accounting uses of mathematics is out of the question, but perhaps some illustrations of relevant topics could have been presented-perhaps at the ex- pense of some of the space devoted to fund ac- counting. Since the AICPA has stated its inten- tion of including problems requiring some sophis- ticated mathematical knowledge on the examina- tion, no serious candidate can omit them in his preparation.

Sundry topics by Herbert E. Miller covers es- sentially the same material as in previous edi- tions. Inexplicably, it includes some twenty pages on estates and trusts, a topic of slight importance on past examinations and one which is not even listed among theory and practice topics in the lat- est edition of Information for CPA Candidates. The material on the funds statement has been somewhat revised to present a statement in ac- cord with APB Opinion 19 calling for a more comprehensive statement. Consignment sales has been kept as a topic while installment sales, of more importance to the candidate, has been drop- ped. The statement of affairs section has been de- leted in accordance with AICPA policy to exclude this and the realization and liquidation statement from the examination. A new section on price- level changes with a recent examination problem illustration has been added. Certainly everything that might be expected on the accounting practice examination cannot be given detailed treatment, and just as obviously preparation for accounting theory is also preparation for many parts of ac- counting practice. But perhaps some mention could have been made of some problem areas that have caused difficulty on past examinations and have been omitted from this book. I am thinking of problems in partnerships, insurance, including

the sticky area of business interruption insurance, investments, and home office and branch account- ing, among others.

Law by Robert L. Black is the last section in the bound volume and includes coverage of most of the major topics to be expected on the exami- nation, according to Informntion for CPA Candi- dates. Within the limitations of space (120 pages) the author provides a good basis for review of im- portant concepts. The importance of the Uniform Commercial Code, as it affects the various law sections, has been stressed. Unfortunately, three topics which the AICPA included among those to be tested on, starting in November, 1972, have not been covered in this section. These are: anti- trust, federal securities regulation and regulation of the employer and employee relationship.

As in the past, an excellent section on taxation, revised by the Prentice-Hall tax editorial staff, is in a separate booklet. Taxation is the most impor- tant single topic on each accounting practice ex- amination; generally, it is difficult to prepare for properly given the range of subject matter and legal complexities. Probably this volume does as much as any single source could to point out criti- cal areas for the candidate.

At the start of this review, I raised some ques- tions about the CPA Review Manual keeping up with the examination. The answer seems to be, yes the Manual has changed with the times and on the whole, it has changed enough to still make it as useful as I found the first edition to be. Cer- tainly this edition represents the most significant break with the past. It is perhaps most helpful in its current and concise sections dealing with the accounting theory, auditing and law sections of the examination. As noted previously, I have found the coverage of accounting practice topics to be somewhat uneven: strong in taxation, too much in fund accounting and to little in mathe- matical approaches to accounting problems. On balance, though, it can be fairly stated about this edition (as it was about the third edition in the April 1967 Accounting Review), ". . . it is still one of the best ready references available to the CPA candidate."

ROBERT WV. LENTILHON Professor of Accounting

University of Massachusetts-Amherst

THEODORE NESS AND EUGENE L. VOGEL, Taxa- tion of the Closely Held Corporation (New

York: The Ronald Press Company, 1972, pp. v, 1144, $35.00). Because of a controlling stockholder's dominion

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