nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2014‒11‒17
six papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Signaling with Audits: Mimicry, Wasteful Expenditures, and Non-compliance in a Model of Tax Enforcement By Kotowski, Maciej H.; Weisbach, David A.; Zeckhauser, Richard J.
  2. Services Trade Restrictiveness Index (STRI): Legal and Accounting Services By Massimo Geloso Grosso; Hildegunn Kyvik Nordås; Frédéric Gonzales; Iza Lejárraga; Sébastien Miroudot; Asako Ueno; Dorothée Rouzet
  3. The societal benefits of a financial transaction tax By Aleksander Berentsen; Samuel Huber; Alessandro Marchesiani
  4. Firms’ disclosure compliance with IASB’s Management Commentary framework:an empirical investigation By Riccardo, Macchioni; Giuseppe, Sannino; Gianluca, Ginesti; Carlo, Drago
  5. A theory of strategic auditing: How should we select one member from a homogeneous group? By Yoshio Kamijo
  6. A General Microsimulation Model for the EU VAT with a specific Application to Germany By Lars-H. R. Siemers

  1. By: Kotowski, Maciej H. (Harvard University); Weisbach, David A. (University of Chicago); Zeckhauser, Richard J. (Harvard University)
    Abstract: The audit policy of a tax authority can signal its audit effectiveness. We model this process and show that in limited circumstances an ineffective authority can masquerade as being effective. We show that high maximal penalties imply underreporting of income.
    JEL: C71 D82 D86
    Date: 2014–01
  2. By: Massimo Geloso Grosso; Hildegunn Kyvik Nordås; Frédéric Gonzales; Iza Lejárraga; Sébastien Miroudot; Asako Ueno; Dorothée Rouzet
    Abstract: This paper presents the services trade restrictiveness indices (STRIs) for the regulated professions of legal and accounting services. The STRIs are composite indices taking values between zero and one, zero representing an open market and one a market completely closed to foreign services providers. The indices are calculated for 40 countries, the 34 OECD members and Brazil, China, India, Indonesia, Russia and South Africa. This report presents the first vintage of indicators for legal and accounting services and captures de jure regulations in force in 2013. The STRI supports the view that legal and accounting services are subject to a relatively high level of regulation. Restrictiveness for legal services ranges from 0.11 to 0.73, with an average of 0.31. Accounting and auditing services show an average of 0.3 and STRI values ranging from 0.13 to 1. The results provide useful policy insights, particularly in order to identify priorities for reform at the national and international levels. Notably, in the case of legal and accounting services, easing a few prominent restrictions could result in a significantly more liberal and competitive market environment.
    Keywords: services trade, legal services, auditing services, services trade restrictions, regulation, accounting services
    JEL: F13 F14 K33 L84
    Date: 2014–11–04
  3. By: Aleksander Berentsen; Samuel Huber; Alessandro Marchesiani
    Abstract: We investigate the positive and normative implications of a tax on financial market transactions in a dynamic general equilibrium model, where agents face idiosyncratic liquidity shocks and financial trading is essential. Our main finding is that agents' portfolio choices display a pecuniary externality which results in too much trading. We calibrate the model to U.S. data and find an optimal tax rate of 2.5 percent. Imposing this tax reduces trading in financial markets by 30 percent.
    Keywords: Tobin tax, financial transaction tax, OTC trading
    JEL: E44 E50 G18
    Date: 2014–10
  4. By: Riccardo, Macchioni; Giuseppe, Sannino; Gianluca, Ginesti; Carlo, Drago
    Abstract: The continuous demand for enhanced financial reporting has highlighted the decline of the usefulness of traditional financial statements in satisfying the informational needs and requirements of users. Despite there being several points of view, many proposals revolve around the increase of narrative disclosure accompanying financial statements. It is apparent that the regulatory attention regarding narrative reporting has mainly focused on the Management Commentary (MC) report. As a result, the accounting standard setters have promoted different approaches to improve the comparability and usefulness of the MC among the firms. In December 2010, the IASB completed the project on the MC disclosure framework, through the publishing of a non-binding IFRS practice statement (IFRSps). The aim of this study is to analyze the information conveyed by the MC report for a sample of firms listed on the Italian Stock Exchange at the end of 2010. More specifically, we investigate the determinants affecting the extent of firms disclosure compliance with the IASB’s MC voluntary guidelines, reported in the IFRSps, soon after its implementation. To the best of our knowledge, this is the first empirical study which examines the explanatory factors affecting the extent of voluntary disclosure convergence in relation to IFRSps, with reference to Italy. To analyze the informational content of each MC report, we create an index of disclosure compliance using a self-constructed checklist designed on the IASB’s MC guidelines. To assess the relationship between the index of disclosure compliance and the firm characteristics, we use a regression model. Consistent with previous accounting studies, our results suggest that firm size and ownership diffusion are positively related to the extent of disclosure compliance with IASB’s MC guidelines. On the other hand, the leverage and profitability were found to be unrelated to the index of disclosure compliance. The results also show that the level of disclosure compliance to the IASB’s MC guidance is low, ranging from 10% to 76%, averaging 39%. This means that despite the continued demand for better comparability in financial reporting practices, in Italy a large number of firms do not seem to converge towards a single set of standards for both the narrative and numerical-financial disclosure.
    Keywords: management commentary, Narrative Disclosure, IAS/IFRS, financial reporting
    JEL: M4 M48
    Date: 2013–10–01
  5. By: Yoshio Kamijo (School of Management, Kochi University of Technology)
    Abstract: This paper theoretically analyzes an audit rule that selects a taxpayer for an audit based on the reported income profile and creates strategic interdependence. Such strategic auditing contrasts with the random auditing rule. This paper proposes the lowest-reporter-audited rule. This rule ensures that the taxpayer with the lowest reported income is inspected from a group of taxpayers that are categorized according to factors such as social status, income level, occupation, and place of residence. We show that, under a realistic penalty rate condition, the lowest-reporter-audited rule is superior to the random audit rule.
    Date: 2014–10
  6. By: Lars-H. R. Siemers (University of Siegen)
    Abstract: The sales taxes in the EU|and in several other countries|are practiced as value-added tax of the consumption type with invoice method. Literature on microsimulation models (MSM) for this type of VAT is rare, though the importance of VAT has continuously increased. We discuss the issues of VAT-MSM in detail and develop a basic general VAT-MSM, applicable to the EU member states (and beyond). To illustrate the functioning of the general model, we apply it in detail to the specific case of Germany. We provide comprehensive estimation results for the distributional and fiscal effects of the German VAT. Finally, we simulate the effects of a small VAT reform in 2010, comparing static and behavioral response simulations.
    Keywords: VAT microsimulation VAT exemption RWI-VAT-SIM EU
    JEL: C6 D12 D31 D63
    Date: 2014

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