I am indebted to Ross Watts for many valuable discussions and for his insightful remarks on this paper. I also wish to thank the remaining members of my Ph.D. committee, Andrew Christie,Cliff Smith and Jerry Zimmerman, for their helpful comments. The paper has benefited from the comments of Bob Kaplan, Rick Antle, George Benston, Tom Dyckman, Bob Holthausen, MichaelJensen, Rick Lambert, David Larcker, Richard Leftwich, Tom Lys, Terry Marsh, Ram Ramakrishnan,and Rick Ruback. I am grateful to George Goddu and Peat Marwick for allowing me to use their library and financing my preliminary data collection, and to Bob Holthausen and Richard Rikert for letting me use their data bases of changes in accounting procedures. Financial support for this paper was provided by the Ernst and Whinney Foundation and the American Accounting Association.