nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2007‒05‒26
four papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Agency Model as a Predictor of the Size of the Internal Audit Function in Belgian Companies By G. SARENS
  2. What distinguishes EMAS participants? An exploration of company characteristics By R. BRACKE; T. VERBEKE; V. DEJONCKHEERE
  3. Let's make the tax system more lovable By Paunić, Alida
  4. A Critical Note on Empirical Comprehensive Income Research By P. VAN CAUWENBERGE; I. DE BEELDE

  1. By: G. SARENS
    Abstract: This study contributes to the literature by using an agency model to explain the size of internal audit functions in a non-Anglo-Saxon environment. Data to test this model were collected from annual reports and a questionnaire sent to Chief Audit Executives. The results show that the agency model has high explanatory power and reveals that the more diffused the ownership structure of the company, the larger the company and the more reporting levels within the company, the larger the internal audit function. The results of this study confirm the growing monitoring role of internal auditing in contemporary corporate governance.
    Keywords: internal auditing, Belgium, agency theory, questionnaire, annual report
    Date: 2007–04
    Abstract: Empirical research on the characteristics of environmentally responsive companies has focussed on US and Japanese firms. For Europe, which is commonly considered as the greenest of the three major markets, similar research is lacking. This paper seeks to fill this gap by empirically investigating business and financial characteristics, stakeholder pressures and public policies to distinguish companies that have implemented the European Eco-Management and Audit System (EMAS) from a unique firm-level dataset of European publicly quoted companies. We find that the EMAS participation decision is positively influenced by the solvency ratio, the share of non-current liabilities, the average labour cost and the absolute company size as well as the relative size of a company compared to its sector average. The profit margin exerts a negative influence. We further find that companies whose headquarters is located in a country that actively encourages EMAS have a higher probability of participation.
    Keywords: EMAS participation, business and financial characteristics, stakeholder pressures, logistic regression
    Date: 2007–04
  3. By: Paunić, Alida
    Abstract: Making the taxes acceptable to large number of people by allocating their obligation to the chosen project is the main subject of this paper. In this way a greater objectivity, transparency and local goals are set in according to the preferences of the tax contributors. State Investment office prevents the rule of invisible hand of market by allocation part of tax money to the less developed regions reducing difference between them.
    Keywords: tax; principal agent problem; welfare
    JEL: D61 H00 D72
    Date: 2007–05
    Abstract: This paper presents a critical analysis of empirical comprehensive income research, the majority of which consists of value relevance studies. The first part of the analysis focuses on the functional form of the value relevance regressions. The paper distinguishes between the informational and the measurement approach to value relevance research and systematically traces the origin of the specifications under both approaches. The informational approach is characterized by diversity in functional form specifications, which can be traced to differences in expectations models for earnings or price/earnings ratios. In the light of this diversity, it is remarkable to observe that most of the authors provide little or no argumentation for the choice of their particular functional specification. While the authors under the measurement approach try to legitimize their regression specifications by referring to the work of Ohlson, in fact, one of the contributions of the residual income model is that it demonstrates the restrictive nature of these specifications. The second part of the paper performs a detailed investigation of the empirical findings. This analysis reveals several peculiarities that defy economic intuition. These peculiarities are nontrivial since they, together with the low explanatory power of the regressions, affect the credibility of the main research findings. The conclusion of the paper is that there is danger in taking the empirical findings of this research domain at face value and that the potential for informing standards setters is limited.
    Keywords: Comprehensive Income; Dirty Surplus; Value Relevance; Residual Income Valuation
    JEL: M41
    Date: 2007–05

This nep-acc issue is ©2007 by Alexander Harin. 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.