nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2013‒11‒22
ten papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Recent Reforms of Tax Systems in the EU: Good and Bad News By Gaëlle Garnier; Aleksandra Gburzynska; Endre György; Milena Mathé; Doris Prammer; Savino Ruà; Agnieszka Skonieczna
  2. Competition for FDI and profit shifting: On the effects of subsidies and tax breaks By Oscar Amerighi; Giuseppe De Feo
  3. Local Governmental Accounting Reform: The Case of Turkey By S. S. ADA; J. CHRISTIAENS
  4. Shadow Economies in highly developed OECD countries: What are the driving forces? By Andreas Buehn; Friedrich Schneider
  5. Creative accounting in the British Industrial Revolution: Cotton manufacturers and the ‘Ten Hours’ Movement. By Toms, Steven; Shepherd, Alice
  6. A Conceptual Framework for Commercial Property Price Indexes By Diewert, Erwin; Shimizu, Chihiro
  7. Advances in rule-based process mining: applications for enterprise risk management and auditing. By Caron, Filip; Vanthienen, Jan; Baesens, Bart
  8. A Cross-country Comparison of Household Income, Consumption and Wealth between Micro Sources and National Accounts Aggregates By Maryse Fesseau; Florence Wolff; Maria Liviana Mattonetti
  9. Managers and Market Capitalism By Rebecca Henderson; Karthik Ramanna
  10. "The reflective practitioner goes global": Vom Nutzen der Professionssoziologie für die Global Governance-Forschung By Herberg, Martin

  1. By: Gaëlle Garnier (European Commission); Aleksandra Gburzynska (European Commission); Endre György (European Commission); Milena Mathé (European Commission); Doris Prammer (European Commission); Savino Ruà (European Commission); Agnieszka Skonieczna (European Commission)
    Abstract: This paper reviews to what extent Member States followed the tax policy priorities put forward by the European Commission in the Annual Growth Survey of November 2012: shifting taxation away from labour, broadening tax bases, reducing corporate tax debt bias and improving tax compliance. The ‘good news’ which emerges from the analysis is that overall Member States are making efforts to make tax systems more efficient, competitive and fair; the ‘bad news’ is that the extent of the challenges calls for more action in all the priority areas identified.
    Keywords: European Union, taxation, tax policy, tax reform, VAT, tax fraud, corporate taxation, personal income taxation, environment, research and development
    JEL: H11 H20 H24 H25 H26 H27 H87
    Date: 2013–10
  2. By: Oscar Amerighi (Agenzia Nazionale per le Nuove Tecnologie, l'Energia e lo Sviluppo Economico Sostenibile (ENEA)); Giuseppe De Feo (: Department of Economics and Management, University of Pavia)
    Abstract: We investigate competition for FDI within a region when a foreign multinational firm can profitably exploit differences in statutory corporate tax rates by shifting taxable profits to lower-tax jurisdictions. In such framework we show that targeted tax competition may lead to higher welfare for the region as a whole than lump-sum subsidies when the difference in statutory corporate tax rates and/or their average is high enough. Tax competition is also preferable from an efficiency point of view (overall surplus) by changing the firm's investment decision when profit shifting motivations induce the firm to locate in the (before tax) least profitable country.
    Keywords: Policy competition for FDI; Profit shifting; Tax discrimination
    JEL: H25 H26 H32 H73 F23
    Date: 2013–11
    Abstract: This article examines to what extent Turkish municipalities apply the recently reformed Turkish accrual accounting rules as prescribed by the “Public Financial Management and Control Law, no: 5018” in 2004. As an emerging country, influenced by European and Asian cultures but not fitting to none of them, Turkey is an interesting and important case for the policy transfer. In Turkey, administrative reforms are especially encouraged by EU, IMF and WB who are external actors of the policy transfer process, turning these innovations into top--‐down reforms. Another important aspect of the study is that due to population growth, new municipalities are still formed in Turkey. These newly founded municipalities employ new public management methods of which accrual accounting is part. Based on this background, this paper briefly reviews the context, and driving forces conditioning the path of accrual accounting in public sector especially for the municipalities. Conclusions are drawn from the result of the level of compliance which is found as 60,8 % for 102 municipalities. Multiple regression analysis was the statistical method used to test the link between compliance level and municipal size and type, human resources, financial resources and the external influence such as external audit in this research.
    Keywords: Accrual accounting,compliance index, developing countries, new public management, public sector reform, Turkey
    Date: 2013–11
  4. By: Andreas Buehn; Friedrich Schneider
    Abstract: The main focus of this paper lies on the “driving forces” of the development and size of the shadow economy in 39 highly developed OECD countries. The most influential factors on the shadow economy are tax policies and state regulation, which, if rising, increase the shadow economy, though other, economic factors like unemployment are important, too. Specifically, it is shown that the main driving forces of the size and development of the shadow economy are unemployment, self-employment and the tax burden, which impact the shadow economies in these 30 OECD countries to a different degree. Between 1999 and 2010 unemployment and self-employment have on average the largest relative impact (14.6%), followed by tax morale (14.5%), GDP growth (14.3%), business freedom (14.2%) and indirect taxes (14.1%).
    Keywords: Shadow economy, tax morale, tax pressure, state regulation, undeclared work
    JEL: K42 H26 D78
    Date: 2013–08
  5. By: Toms, Steven; Shepherd, Alice
    Abstract: The paper examines an early case of creative accounting, and how, during British industrialization, accounting was enlisted by the manufacturers’ interest to resist demands, led by the ‘Ten hours’ movement, for limiting the working day. In contrast to much of the prior literature, which argues that entrepreneurs made poor use of accounting techniques in the British industrial revolution, the paper shows that there was considerable sophistication in their application to specific purposes, including political lobbying and accounting for the accumulation of capital. To illustrate lobbying behaviour, the paper examines entrepreneurs’ use of accounting to resist the threat of regulation of working time in textile mills. It explains why accounting information became so important in the debate over factory legislation. In doing so, it shows that a significant element was the accounting evidence of one manufacturer in particular, Robert Hyde Greg, which had a strong impact on the outcome of the parliamentary process. The paper uses archival evidence to illustrate how accounting was used in Greg’s enterprise and the reality of its economic performance. The archival evidence of actual performance is then contrasted with the figures presented by Greg to the Factories Inquiry Commission, convened by the House of Commons in 1833-1834 to hear witnesses from the manufacturing interest. These sets of figures are compared and contrasted and discrepancies noted. Conclusions show that the discrepancies were substantial, motivated by Greg’s incentives to present a particular view of low profits, high fixed costs, and the threat of cheaper overseas competition. The figures appeared to lend some credibility to the apparent plight of manufacturers and to Nassau Senior’s flawed argument about all profit being earned in the ‘last hour’ of the working day. The consequence was a setback for the Ten Hours movement, leading to a further intensification of political struggles over working conditions in the 1840s.
    Keywords: Key words: British Industrial Revolution, Accounting, Child labour, Factory Reform, Lancashire cotton textiles, Greg, Quarry Bank Mill
    JEL: J21 J31 K31 L50 L67 M4 N13 O14 O15 O38
    Date: 2013–11–15
  6. By: Diewert, Erwin; Shimizu, Chihiro
    Abstract: The paper studies the problems associated with the construction of price indexes for commercial properties that could be used in the System of National Accounts. Property price indexes are required for the stocks of commercial properties in the Balance Sheets of the country and related price indexes for the land and structure components of a commercial property are required in the Income Accounts of the country if the Multifactor Productivity of the Commercial Property Industry is calculated as part of the System of National accounts. The paper suggests a variant of the capitalization of the Net Operating Income approach to the construction of property price indexes and uses the one hoss shay or light bulb model of depreciation as a model of depreciation for the structure component of a commercial property.
    Keywords: Commercial property price indexes, Net Operating Income, discounted cash flow, System of National Accounts, Balance Sheets, methods of depreciation, l
    JEL: C2 C23 C43 D12 E31 R21
    Date: 2013–10–09
  7. By: Caron, Filip; Vanthienen, Jan; Baesens, Bart
    Abstract: Process mining research has mainly focused on the development of process mining techniques, with process discovery algorithms in the center of attention. However, far less research attention has been paid to the actual applicability of these process mining techniques in common business settings. Consequently, there only exists a partial fit between the existing process mining techniques and the compliance checking & risk management applications. This research report contributes to the process mining and compliance checking research by proposing an effective and efficient rule-based approach for analyzing organizational information and processes. Additionally, a general content-based business rule taxonomy has been developed as a source of business rules for the compliance checking approach. Furthermore, we also provide formal grounding for and an evaluation of the rule-based approach.
    Keywords: Business Rules; Compliance Checking; Risk Management; Process Mining; Process-Aware Information Systems;
    Date: 2013–03
  8. By: Maryse Fesseau; Florence Wolff; Maria Liviana Mattonetti
    Abstract: Much valuable information exists already on household economic resources (i.e. income, consumption and wealth). Indeed, the national accounts provide aggregate measures and micro sources (surveys, administrative records, and censuses) can be used to derive measures of the distribution across household groups. Over the years, however, macro and micro statisticians have tended to work separately leading to sometimes divergent results which can cause problem to users. In 2011, the OECD and Eurostat launched a joint Expert Group to carry out a study on the feasibility of compiling measures of the distribution of income, consumption and wealth across household groups that are consistent with national accounts definitions and totals. The first challenge of the Expert Group was to draw a detailed picture of the extent to which statistical information derived from micro sources can be aligned to three national accounts aggregates; 20 countries studied all (or part) of the components of adjusted disposable income, 21 all (or part) of the components of actual final consumption and 7 studied all (or part) of the components of household net worth. Results show that there are a number of identified reasons that can explain differences between micro and macro sources. Some of them were quantified and isolated showing finally that for most countries micro sources provide distributive information for most of the national accounts components but for some of them with quite significant gaps in total amounts. Overall, micro and macro totals are closer to each other for income components than for consumption and wealth components. The results also show that there is greater heterogeneity in results across countries for consumption components. Plusieurs types de sources fournissent des informations sur les ressources économiques des ménages. Les données macro-économiques des comptes nationaux fournissent des données agrégées sur le revenu, la consommation et le patrimoine de l’ensemble des ménages. Les sources microéconomiques (enquêtes, données administratives et recensement) informent sur la manière dont ces ressources économiques sont réparties entre les ménages. Au fil des années les statisticiens micro et macro ont eu tendance à travailler séparément conduisant parfois à des résultats divergents. En 2011, l’OCDE et Eurostat ont lancé un groupe de travail conjoint afin d’étudier la possibilité de produire des indicateurs sur la distribution du revenu, de la consommation et du patrimoine qui soient cohérents avec les totaux et les définitions des comptes nationaux. Le premier challenge du groupe de travail a été de définir dans quelle mesure l’information statistique issue des données micro est compatible avec trois des principaux agrégats des comptes nationaux. Ainsi, 20 pays ont étudié tout ou partie des composantes du revenu disponible ajusté, 21 pays tout ou partie des composantes de la consommation finale et 7 pays tout ou partie des composantes du patrimoine net des ménages. Les résultats montrent qu’il existe un certain nombre de raisons bien identifiées qui expliquent les différences entre les données micro et macro. Certaines d’entre elles ont pu être quantifiées par les membres du groupe d’experts. L’analyse réalisée montre que dans la plupart des pays les sources micro fournissent de l’information pour la plupart des composantes des comptes nationaux mais que pour certaines composantes les totaux issus des deux sources sont très différents. Dans l’ensemble, les totaux apparaissent plus proches pour les composantes de revenu que pour les composantes de la consommation et du patrimoine. Une plus grande hétérogénéité des résultats entre pays est constatée sur les données de consommation.
    Keywords: health, consumption, national accounts, surveys, income, household
    Date: 2013–11–13
  9. By: Rebecca Henderson (Harvard Business School, Strategy Unit); Karthik Ramanna (Harvard Business School, Accounting and Management Unit)
    Abstract: In a capitalist system based on free markets, do managers have responsibilities to the system itself? If they do, should these responsibilities shape their behavior when they are engaging in the political process in an attempt to structure the institutions of capitalism? The prevailing view-perhaps most eloquently argued by Milton Friedman-is that the first duty of managers is to maximize shareholder value, and thus that they should take every opportunity (within the bounds of the law) to structure market institutions so as to increase profitability. We maintain here that this shareholder-return view of political engagement applies in cases where the political process is sufficiently 'thick,' in that diverse views are well-represented and sufficiently detailed information about the issues is widely available. However, we draw on a series of detailed examples in the context of the determination of corporate accounting standards to argue that when the political process of determining institutions of capitalism is 'thin,' in that managers find themselves with specialized technical knowledge unavailable to outsiders and with little political resistance from the general interest, then managers have a responsibility to market institutions themselves, even if this entails acting at the expense of corporate profits. We make this argument on grounds that this behavior is both in managers' long-run self-interest and, expanding on Friedman's core contention, that it is managers' moral duty. We provide a framework for future research to explore and develop these arguments.
    Date: 2013–03
  10. By: Herberg, Martin
    Abstract: Ziel des Papiers ist es, einige grundlegende professionssoziologische Konzepte in die Debatte über Global Governance einzuführen. Zu den wichtigsten Governance-Mechanismen zählen nicht nur Hierarchien, Märkte und Netzwerke, auch professionsorientierte Institutionen spielen eine wichtige Rolle. Professionalisierte Praxis ist nicht gleichbedeutend mit der technischen Anwendung von Expertenwissen. Erforderlich sind vielmehr spezielle praktische und hermeneutische Kompetenzen, die eine einzelfallorientierte und kontextbezogene Herangehensweise ermöglichen. Zur empirischen Untermauerung werden zwei Praxisfelder besprochen, nämlich (1) Formen der internationalen Rechtsberatung und (2) die Praxis der Umweltauditierung in multinationalen Unternehmen. Beide Fälle zeigen den Schaden, der entsteht, wenn Experten zu technisch an ihre Aufgaben herangehen. Gleichzeitig ist zu beobachten, dass viele Praktiker sich dieser Gefahren bewusst sind. Sie entwickeln ihre eigenen Standards guter Praxis, und darüber hinaus bemühen sie sich um den Aufbau institutioneller Strukturen, durch die ein professioneller und reflexiver Modus der Aufgabenerfüllung unterstützt wird. -- The paper aims to introduce some basic concepts from the sociology of the professions to the debate on global governance. While hierarchies, markets and networks are often described as the most basic modes of global governance, profession-oriented mechanisms should also be taken into account. Professionalized practice - or reflective practice, as Donald Schön has called it - should not be confused with the technical application of expert knowledge. Rather, professional actors fulfill their tasks on the basis of specific hermeneutical skills which allow for a case-oriented and context-sensitive approach. As an empirical illustration, the paper includes (1) the case of international law reform assistance, which has become an important mechanism of governance in Europe and beyond, and (2) the practice of environmental auditing in multinational companies. Both cases demonstrate the damage which arises if experts fail to adopt a context-sensitive approach. At the same time, however, it becomes evident that many experts are highly aware of these technocratic dangers. They develop their own standards of good practice, and furthermore, they try to establish institutional structures which help to support a professionalized mode of action.
    Date: 2013

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