Across the world, manufacturing is undergoing substantial changes necessitated by fierce competition in an expanding global market. Quality improvement has become a prime concern in this process. However, the effect of quality improvement on a company's short-term profitability is difficult to measure and assess. Furthermore, many managers and accountants continue to use decision-making models which evaluate projects based on measures of short-term profitability. If quality improvement projects are not to be pushed aside, some effort must be exerted to measure the costs and, more importantly, the financial benefits associated with the projects. These can then serve as inputs to decision-making models.This article describes how accountants identify and measure costs associated with product quality. It then develops, from the Taguchi loss function, a method for measuring financial benefits associated with quality improvements. The article also incorporates these measures into a capital budgeting model to produce a decision to invest or not to invest in a particular quality improvement project. Specifically, the project considered is one which reduces process variability.The remainder of this article is organized as follows: a discussion of the development and accounting definition of quality costs; an explanation of the Taguchi loss function; and an extended example incorporating the loss function in a popular capital budgeting technique (net present value). Finally, the article argues that until such time as accountants can develop quantifiable measures for the benefits of quality improvements or qualitative decision-making models, the Taguchi estimation represents a viable addition to current decision-making models. Accounting Definition of Quality CostsManufacturers' concerns about quality, and consequently quality improvement, can be broken down into two components: quality of design and quality of

The role of the public accounting profession in the savings and loan debacle of the 1980s has recently been the subject of Congressional inquiry and extensive litigation by government agencies, and by angry stockholders and bondholders. These efforts suggest a broad misunderstanding by the public of the causes of the disaster. this paper illustrates that the difficulties which precipitated the crisis were a result of the historical development of the regulatory environment of the savings and loan industry. Examining this regulatory environment helps in understanding the current problems and crises of savings and loans as well as the situation in which the accounting profession now finds itself. The paper illustrates that the manner in which the industry was regulated, including piecemeal and often conflicting legislation, locked the industry into long-term mortgage commitments and then urged diversification from these commitments. The paper illustrates that, over the years, industry responses to this legislation created a net worth crisis. The extent of the crisis was obscured by accounting principles developed by regulators, and which ran contrary to GAAP. Finally, the paper discusses recent legislation designed to correct the regulatory and accounting inconsistencies, and the anticipated effect of this legislation on the future of the savings and loan industry.