nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2006‒10‒28
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Board structure and modified audit opinions: the case of the Portuguese Stock Exchange By Jorge Farinha; Luis Filipe Viana
  3. Governmental Accounting Reforms: Going Back Where We Belong? By J. CHRISTIAENS; J. ROMMEL
  4. Anti-evasion auditing policy in thepresence of common income shocks By Miguel Sanchez
  5. How Progessive is the US Federal Tax System? An Historical and International Perspective By Piketty, Thomas; Saez, Emmanuel
  6. Flat Tax Reforms in the US: A Boon for the Income Poor By Díaz-Giménez, Javier; Pijoan-Mas, Josep
  7. The Value Relevance of Financial Reporting on the Oslo Stock Exchange over the Period 1964-2003 By Gjerde, Øystein; Knivsflå, Kjell Henry; Sættem, Frode

  1. By: Jorge Farinha (CETE, Faculdade de Economia, Universidade do Porto); Luis Filipe Viana (DGCI - Direcção-Geral dos Impostos)
    Abstract: Prior research has found evidence that some characteristics of the board of directors influence the quality of accounting information (e.g., Beasley, 1996; Dechow et al., 1996; Klein, 2002a; Xie et al., 2003). In this study we extend the literature by analysing a different dimension of accounting information quality, the probability of a firm receiving a modified audit opinion. Using a sample of companies listed on Euronext Lisbon where firms can publish financial statements not in accordance with GAAP, unlike the current situation in other markets like the US, and 91 firm-year observations for the period 2002-03, we find evidence consistent with the hypotheses that board diligence and independence contribute negatively to the probability of a modified opinion, while board size is not statistically significant. Our results are robust to different specifications and also show that financial health, performance, growth opportunities and the existence of dividend payments are additional factors affecting the likelihood of a modified audit opinion.
    Keywords: auditing, modified opinions, accounting quality, board structure, corporate governance, non-executive directors
    JEL: G34 G38 M42
    Date: 2006–10
    Abstract: The objective of this paper is to trace the development of the French auditing profession, the commissaires aux comptes, focusing on the appearance of the large Anglo-American audit firms on the French market. The French audit market has always shown a number of peculiarities, among which the continued importance of a number of local audit firms. The French audit profession finds its roots in late nineteenth century company law that introduced an obligation for companies to release audited financial statements. The profession of commissaire aux comptes became regulated in its modern form in the 1960s. The paper tries to explain the growing impact of the international audit firms on the French profession, using a framework that relates to internationalisation strategies in service industries. It also demonstrates how local professionals and the French state reacted to these developments.
    Keywords: Auditing profession, history, internationalisation, service industries, Anglo-Saxon accounting firms, France
    Date: 2006–06
    Abstract: Based on governmental accounting experiences and on the rising criticism considering accrual accounting, this paper aims at proposing that accrual accounting in governments will only succeed in the coming years in businesslike (parts of) governments. This proposition mainly leans on the inappropriately transferred framework from the profit sector, the underestimated difficulties considering accrual budgeting and the poor attention on the political dimension. This paper intends to shed a light on important technical and political issues that seem to be forgotten in the mind of the protagonists of transferring accrual accounting as a successful tool in modernising governments.
    Keywords: Cameralistic accounting, accounting reform, government accounting
    Date: 2006–06
  4. By: Miguel Sanchez
    Abstract: When fairly homogeneous taxpayers are affected by common incomeshocks, a tax agency's optimal auditing strategy consists of auditing alow-income declarer with a probability that (weakly) increases with theother taxpayers' declarations. Such policy generates a coordination gameamong taxpayers, who then face both strategic uncertainty - about theequilibrium that will be selected.and fundamental uncertainty - about thetype of agency they face. Thus the situation can be realistically modelledas a global game that yields a unique and usually interior equilibriumwhich is consistent with empirical evidence.Results are also applicable to other areas like regulation or welfarebenefit allocation.
    Keywords: Keywords: Tax Evasion, Coordination/Global Games,Expectations, Asymmetric Information
    JEL: H26 D82 D84 C72
    Date: 2006–02
  5. By: Piketty, Thomas; Saez, Emmanuel
    Abstract: This paper provides estimates of federal tax rates by income groups in the United States since 1960, with special emphasis on very top income groups. We include individual and corporate income taxes, payroll taxes, and estate and gift taxes. The progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s. This dramatic drop in progressivity is due primarily to a drop in corporate taxes and in estate and gift taxes combined with a sharp change in the composition of top incomes away from capital income and toward labour income. The sharp drop in statutory top marginal individual income tax rates has contributed only moderately to the decline in tax progressivity. International comparisons confirm that is it critical to take into account other taxes than the individual income tax to properly assess the extent of overall tax progressivity, both for time trends and for cross-country comparisons. The pattern for the United Kingdom is similar to the US pattern. France had less progressive taxes than the US or UK in 1970 but has experienced an increase in tax progressivity and has now a more progressive tax system than the US or the UK.
    Keywords: income tax progressivity
    JEL: H2
    Date: 2006–07
  6. By: Díaz-Giménez, Javier; Pijoan-Mas, Josep
    Abstract: In this article we quantify the aggregate, distributional and welfare consequences of two revenue neutral flat-tax reforms using a model economy that replicates the U.S. distributions of earnings, income and wealth in very much detail. We find that the less progressive reform brings about a 2.4% increase in steady state output and a more unequal distribution of after-tax income. In contrast, the more progressive reform brings about a -2.6% reduction in steady state output and a distribution of after-tax income that is more egalitarian. We also find that in the less progressive flat-tax economy aggregate welfare falls by -0.17% of consumption, and in the more progressive flat-tax economy it increases by 0.45% of consumption. In both flat-tax reforms the income poor pay less income taxes and obtain sizeable welfare gains.
    Keywords: earnings distribution; efficiency; flat-tax reforms; income distribution; inequality; wealth distribution
    JEL: D31 E62 H23
    Date: 2006–09
  7. By: Gjerde, Øystein (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration); Knivsflå, Kjell Henry (Dept. of Accounting, Auditing and Law, Norwegian School of Economics and Business Administration); Sættem, Frode (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: This article focuses on the value relevance of financial statements in Norway over the 40-year period from 1964 to 2003. Since Norwegian generally accepted accounting principles are based on an earnings-oriented conceptual view rather than a balance-oriented conceptual framework, like the ones adopted by the IASB and the FASB, this study provides interesting empirical evidence on the value relevance of earnings-oriented conceptual frameworks. Our main finding is that the value relevance of financial reporting for investors trading on the Oslo Stock Exchange has increased significantly over the past four decades. This result is obtained by evaluating the adjusted R2-metric from a stock market return regression over time using deflated earnings and deflated change in earnings as explanatory variables, and controlling for changes in underlying economic variables over the period. A significant time trend is consistent with the view that Norwegian accounting regulators and standard setters have been successful in achieving more value relevant financial statements over time. Norway is an example where employing an earnings-oriented conceptual framework has improved the value relevance of accounting information.
    Keywords: Capital Markets; Financial Reporting; Equity Valuation; Value Relevance
    JEL: G10 G38 M41
    Date: 2005–12–23
  8. By: Ana-Isabel Mateos (Universidad CEU Cardenal Herrera); Mariano González (Universidad CEU San Pablo)
    Abstract: In financial literature, different ways of estimating the cash flow generated in a firm can be found. These methods are based on the estimation of these flows and on the analysis of the components that are involved in them. Although the estimation is important, we want to know what these cash flows are used for. The answer can be found in the statement of cash flows and the investor decisions about cash excess. So, this paper provides a theoretical model for the use of cash-flows and an empirical contrast in a sample of Spanish firms. The size of these firms will be used to test the validity of our model. En la literatura financiera existen diferentes vías para estimar el cash-flow generado por una empresa en un período de tiempo. Estos métodos suelen centrarse en la estimación de dichos flujos y el análisis de los componentes que intervienen en este cálculo. Pero tan importante como realizar una estimación correcta de los flujos es saber el destino que se les da. En los estados de tesorería y las decisiones de inversión de los excedentes de caja está la respuesta. Por ello, este trabajo plantea un modelo teórico de la aplicación de los flujos y su contrastación empírica mediante panel data sobre una muestra de empresas españolas, con el objetivo de comprobar su validez en función del tamaño de la empresa.
    Keywords: Salida de flujos, Flujo de Caja Libre, Flujo de Caja de Capital, Datos de Panel Outflows, Free Cash Flow, Capital Cash Flow, Panel Data.
    JEL: C23 C33 M41 G00
    Date: 2006–10

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