Comprehensive Sims

Chapter 3 Comprehensive Simulations1

Introduction to Comprehensive Simulations The comprehensive simulation is an unstructured decision problem. The ability to set up an unstructured decision problem is the essence of the comprehensive. Invariably, there is a decision maker (“DM”) who relies on a report prepared by a professional accountant. Your ability to identify the major decisions or conclusions facing the DM, the analysis required for each conclusion, and the logical order of analyses given the interrelationship of decisions or conclusions, is what we mean when we say: you have to “set up” the case. As we shall see, there are many different types of comprehensive simulation styles, and rigid “templates” will not be helpful. Nevertheless, all comprehensives are decision-oriented cases, and the suggested approach introduced here is useful if applied with flexibility. The decision-oriented approach, which has been advocated in many of the writings of L. S. Rosen and the others, can be summarized in the following phrase: “accounting information …useful ...for decision making” This phrase nicely captures what we have said above. A s a professional accountant, you have knowledge and skills as outlined in your profession’s defined body of knowledge. The report user (a client, a partner in the firm of professional accountants, or management if you are working in industry) has a decision to make. Your challenge is to match technical analyses to decisions. T his requires that you identify the decision or decisions facing the DM, the logical sequence of those decisions (some conclusions logically precede others), and the relevant information inputs given those decisions. Often, you don’t make the ultimate decision, but make a recommendation as adviser to the DM. So, what we are saying is that you have to tailor your analyses given user needs. We will stress this tailoring theme many times in the pages to follow. Students who are good at tailoring analyses to decisions...