nep-acc New Economics Papers
on Accounting
Issue of 2005‒06‒19
seven papers chosen by
Bernardo Batiz-Lazo
Bristol Business School

  1. A primer on governance and performance in small and medium-sized enterprises By Enrique Yacuzzi
  2. Environmental Auditing and the Role of the Accountancy Profession: A Literature Review By P. DE MOOR; I. DE BEELDE
  3. Internal Auditor’s Perception about their Role in Risk Management Comparison between Belgian and US Companies By G. SARENS; I. DE BEELDE
  4. On the IASB Comprehensive Income Project, Neutrality of Display and the Case for Two EPS Numbers By P. VAN CAUWENBERGE; I. DE BEELDE
  5. Firm Level Implications of Early Stage Venture Capital Investment - An Empiri cal Investigation By Max Keilbach; Dirk Engel
  6. Book-Tax Gap. An Income Horse Race By Maurizio Bovi
  7. Entre gouvernance et leadership : la palabre et le chef By Juliette Arnal; Jean-Pierre Galavielle

  1. By: Enrique Yacuzzi
    Abstract: This paper is a primer on corporate performance, corporate governance, and their interrelationships and measurement systems, with particular focus on Small and Medium- Sized Enterprises (SMEs). This is the first report of a larger on going research project. In the domain of performance measurement the paper describes the trend from financial to non-financial measures, as well as a taxonomy of measures and the impact of the TQM movement on measurement practices. In the domain of governance, governance as a general concept is presented, followed by the more specific concept of corporate governance. Four theories of corporate governance are explained, along with literature findings on the relationship between corporate governance and corporate performance, with reference to both works on large firms and works on SMEs.
    Keywords: Corporate governance, corporate performance, measurement, small and medium-sized enterprises (SMEs)
    JEL: G30 G34 L25 M11
    Date: 2005–06
    Abstract: This review of the literature on environmental auditing and the potential role of accountants distinguishes between compliance audits and audits of the environmental management system. After an extensive introduction to the concept, this review focuses on the similarities and differences between an environmental audit and a financial statement audit. Except that environmental audits are largely unregulated, the general approach to both types of audits is similar. Both audits place an emphasis on the evaluation of control systems, which is an argument in favor of external auditors playing a role in environmental audits. Another argument for including external accountants, is their code of ethics. However, these professionals seem to be reluctant to enter the field of environmental auditing. It is argued that this reluctance is because of a lack of generally accepted principles for conducting environmental audits. If external accountants are engaged in environmental auditing, they should be part of multidisciplinary teams that also include scientists and engineers to avoid a too strong focus on procedures. Rather than treating these audits as totally different, it is proposed that there be a move towards integrated, or even universal, audits.
    Keywords: Environmental auditing, Environmental reporting, Compliance audit, Environmental management system, External auditors
    Date: 2005–04
    Abstract: In addition to a number of quantitative studies in this area, this study wants firstly to elaborate in a complementary qualitative way how internal auditors perceive their current role in risk management within the Belgian context where internal auditing is a relatively young profession. Secondly, we want to investigate whether, under the influence of recent changes in corporate governance regulations, a greater financial emphasis in internal auditors’ work can be noticed. Thirdly, we are interested in differences between Belgian companies and Belgian subsidiaries of US companies with relation to internal auditors’ role in risk management. In order to get adequate data, we interviewed 10 Chief Audit Executives and collected relevant documents. The data reveal that the specific content of internal auditors’ role in risk management is very time and country specific. For the Belgian companies, internal auditors’ focus on acute shortcomings in the risk management system creates opportunities to demonstrate their value in the short run. Internal auditors are playing a pioneering role in the creation of a higher level of risk and control awareness and a more formalised, standardised, transparent and documented risk management system. In the Belgian subsidiaries of US companies, internal auditors’ objective evaluations and opinions are a valuable input for the new internal control review and disclosure requirements mentioned in the Sarbanes Oxley Act. Moreover, an enhanced attention for financial controls and the quality of financial reporting was noticed within these companies.
    Keywords: internal auditors, risk assessment, risk management, risk and internal control communication, Sarbanes Oxley Act, interviews
    Date: 2005–04
    Abstract: The IASB is presently involved in a project on reporting comprehensive income. Since the IASB accounting system is a mixture of two income determination methods, to wit historical cost accounting and fair value accounting, an interesting question pertains to whether the display of comprehensive income should be neutral with regard to these two competing paradigms. This paper scrutinizes, with a valuation perspective in mind, the typical arguments made by proponents of historical cost net income and comprehensive fair value income and finds that claims for exclusive reliance on a single concept of earnings are untenable. This means that a case could be made for advancing neutral income display as a policy objective. The matrix format of comprehensive income that is proposed under the IASB performance project certainly allows for such a neutral interpretation. However, given the importance of summarization in financial analysis, as is most extremely reflected in the focus on the earnings per share (EPS) number, if neutrality is to prevail, then it should also be reflected at the highest level of summarization of financial performance reporting. In other words, mandatory publication of two EPS numbers, one for net income and one for comprehensive income, should be considered. Possible effects on perception and actual use of financial reports that should enter such a consideration are suggested as topics for experimental research.
    Keywords: Comprehensive income; Neutrality of income display; Double EPS reporting
    Date: 2005–04
  5. By: Max Keilbach; Dirk Engel
    Abstract: The paper analyses the impact of venture capital finance on growth and innovation activities of young German firms. Among other variables, our panel of firm data includes data on venture capital funding and patent applications. With statistical matching procedures we draw an adequate control group of non­venture funded but otherwise comparable firms. The analysis confirms other findings that venture funded firms in Germany have higher number of patent applications than those in the control group. However, they do so already before the venture capitalists engagement. After this engagement, the number of patent applications does not differ significantly from that of the control group, however the venture funded firms display significantly larger growthrates. We conclude that the higher innovation output of venture funded firms is mainly driven by the selection process made by the venture capitalist.
    Keywords: Firm Demography, Firm Start­Ups, Firm Growth, Venture Capital, Patented Inventions, Microeconometric Evaluation Methods
    JEL: L21 D21 D92 C14 C33
  6. By: Maurizio Bovi (ISAE - Institute for Studies & Economic Analyses)
    Abstract: This paper presents some stylised facts about the book-tax gap, i.e. the difference between book and taxable income, of Italian corporations. This divergence is a reflection of the usage of any tax shields and any applicable credits and rebates which, in turn, implies that the concept of taxable income is elusive. Moreover overlapping fiscal policies make harder, on the one hand, firms’ tax planning and, on the other hand, policymakers’ control on the effectiveness of their manoeuvres. As for the fiscal year 2000, evidence based on data drawn from the Diecofis database shows that, as expected (why pay more?), in Italy there is a widespread and active industry set up to enable taxpayers to identify and take advantage of particular tax effects. In that year 55,201 (16% of the) firms were able to report positive book profits and to indicate non positive taxable incomes. A less expected outcome shows that the “income race” may finish in a quite different way. More than half (57%) of the uneconomic companies, ends up with positive taxable incomes (83,449 in absolute terms). A disaggregated analysis highlights that this latter share is much more lower among southern corporations and large enterprises, especially in the construction and in the hotel/restaurant services sectors. Finally, it results that industries whose firms more often declare negative taxable incomes tend to display significantly higher shares of irregular workers, as well.
    Keywords: Corporate income tax, tax avoidance, accounting
    JEL: G14 M4 K2
    Date: 2005–06–13
  7. By: Juliette Arnal (LESSOR - UniversitŽ Rennes II et MATISSE); Jean-Pierre Galavielle (MATISSE)
    Abstract: The question concerning the domain covered by entreprise governance has not been definitely settled and neither has the question of the dividing line between governance and leadership. Thus, the real issue is the interpretation of governance to-day. Does it have to be confronted with that other mode of management which is leadership ? Actually, the dividing line does not seem to be definitive. This remark appears to be all the more realistic as the decisions taken daily by entreprise refer simultaneously to social and societal dimensions. Furthermore, embedded in those two logics, the government of material objects is frequently opposed to the government of people. Thus, it seems adequate to juxtapose the "law of the market" and a possible responsibility of leading employees. Finally, it appears that confidence plays the part of mediator between governance and leadership, which explains the emergence of a certain number of instruments of ethical codifications, codes of conduct and norms.
    Keywords: Economic ethics, governance, leadership, social and societal responsibility, enterprise citizenship, confidence, codes, deontology.
    JEL: D2 D6 I3 K3 M14
    Date: 2004–04

This nep-acc issue is ©2005 by Bernardo Batiz-Lazo. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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