nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2015‒02‒05
ten papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Who is audited? Experimental study on rule-based and human tax auditing schemes By Yoshio Kamijo; Takehito Masuda; Hiroshi Uemura
  2. 房产税制度创新路径研究:基于财富公平分配目标 By Yao, Tao
  3. Loan Loss Provisioning in OIC Countries: Evidence from Conventional vs. Islamic Banks By Ali, Ashraf; M. Kabir, Hassan; Syed Abul, Basher
  4. Um estudo exploratório da auditoria interna nos municípios em Portugal By Sofia Félix
  5. It isn't just about Greece: domestic politics, transparency and fiscal gimmickry in Europe By James Alt; David Dreyer Lassen; Joachim Wehner
  6. The Harrington Paradox Squared By Coria, Jessica; Zhang, Xiao-Bing
  7. Smart auditing : Innovative compliance checking in customs controls By Bukhsh, F.A.
  8. Tax evasion and the optimal non-linear labour income taxation By Salvador Balle; Lucia Mangiavacchi; Luca Piccoli; Amedeo Spadaro
  9. Performance measurement, modes of evaluation and the development of compromising accounts By Robert H. Chenhall; Matthew Hall; David Smith
  10. The perceived credibility of forward-looking performance disclosures By Vasiliki E. Athanasakou; Khaled Hussainey

  1. By: Yoshio Kamijo (School of Economics and Management, Kochi University of Technology); Takehito Masuda (Research Center for Social Design Engineering, Kochi University of Technology); Hiroshi Uemura (School of Economics and Management, Kochi University of Technology)
    Abstract: In this study, we employ a game theoretic framework to formulate and analyze tax audit schemes; we test the theoretical predictions in a laboratory experiment. We compare five audit schemes including three rule-based audits: random audit rule, cut-off audit rule, and lowest income reporter audited rule. The cut-off audit rule is theoretically optimal but, to the best of our knowledge, it has not been experimentally examined. We also employ a novel experimental design for two schemes involving the human auditor conditions. The rule-based audits experimentally enhance tax compliance as predicted, and cut-off yields the highest tax revenue among the three rule-based audits in the lab. Moreover, beyond our prediction, the human auditor conditions maximized tax revenue among the five schemes in the lab. This suggests that auditors’ strategic ambiguity is another route to enhance tax compliance. We also show that subjects’ social norms regarding tax payment influence the choice of tax evasion, in accordance with the experimental literature.
    Keywords: audit schemes, tax evasion, laboratory experiment, cut-off rule, lowest income reporter audited rule, ambiguity
    JEL: C91 D81 H26
    Date: 2015–01
  2. By: Yao, Tao
    Abstract: On whether property taxes are progressive, there are three different views. Through comparative analysis ,it is found that the view is more persuasive that property taxes are progressive. In our current socio-economic environment, property tax reform can effectively improve the unfair situation of the distribution field. It isn’t appropriate that Raising financial income and controlling housing price are the main objective of property tax reform. Narrowing the gap between the rich and the poor should be designed as the most important goal of property tax system. The other two goals are in a secondary position. The general idea of property tax reform is to promote fair distribution of wealth by the means of moderate tax base and tax rate on the condition thar overall burden on taxpayers is roughly constant. It is necessary that system innovate in the following areas: (1) bringing the rural areas into the scope of taxation; (2) the establishment of differential rates; (3) the amount of the local average price in the last two years times 35 square meters per capita is exempt from tax; (4) it is prior that property taxes are usded to construct security housing.
    Keywords: Property Tax Reform,Fair Distribution of Wealth,Institution Innovation
    JEL: H24
    Date: 2015–01–08
  3. By: Ali, Ashraf; M. Kabir, Hassan; Syed Abul, Basher
    Abstract: Using a sample of 291 banks from 35 OIC (Organization of Islamic Cooperation) member Muslim countries with 2078 bank year observations from 2003 to 2010, we analyze if bank earning management in terms of Loan Loss Provisioning (LLP hereafter) is affected by the banking nature whether Islamic or conventional, by the bank accounting standards whether rule-based local Generally accepted accounting principles (here after local GAAP) or principle-based International Financial Reporting Standards (hereafter IFRS), and by the bank listing status. We argue that Islamic banks may exhibit lower signs of earning management, as the Sharia’h Supervisory Boards (SSB hereafter) in Islamic banks may work as an additional tier into the governance system. On the use of accounting standard, we argue that banks using IFRS standard may exhibit lower evidence of earning management, as IFRS requires managers to disclose more accounting information compared to local GAAP. We report mixed evidence supporting these arguments.
    Keywords: International Financial Markets; Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages; Accounting
    JEL: G15 G21 M41
    Date: 2015–01–29
  4. By: Sofia Félix (Município de Tábua)
    Abstract: The municipal internal audit function is an essential support to the policy maker. The paper aims at the characterizing the audit services and assess the contribution of internal audit in achieving municipal goals. Questionnaires were used to obtain the data and statistical analysis was used to analyse the data collected from them, concluding that the internal audit activity is the production of reports based on surveys and complaints by residents. The contribution of internal audit is to ensure that regulatory standards are met and control of assets is effective.
    Date: 2014–12
  5. By: James Alt; David Dreyer Lassen; Joachim Wehner
    Abstract: This article analyzes the political origins of differences in adherence to the fiscal framework of the European Union (EU). It shows how incentives to use fiscal policy for electoral purposes and limited budget transparency at the national level, combined with the need to respond to fiscal rules at the supranational level, interact to systematically undermine the Economic and Monetary Union through the employment of fiscal gimmicks or creative accounting. It also explains in detail how national accounts were manipulated to produce electoral cycles that were under the radar of the EU budget surveillance system, and concludes with new perspectives on the changes to (and challenges for) euro area fiscal rules.
    JEL: N0
    Date: 2014–10
  6. By: Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University); Zhang, Xiao-Bing (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Harrington (1988) shows that state-dependent enforcement based on past compliance records provides an explanation to the seemingly contradictory observation that firms' compliance with environmental regulations is high despite the fact that inspections occur infrequently and fines are rare and small. This result has been labeled in the literature as the "Harrington paradox". In this paper we propose an improved transition structure for the audit framework where targeting is based not only on firms' past compliance record but also on adoption of environmentally superior technologies. We show that this transition structure would not only foster the adoption of new technology but also increase deterrence by changing the composition of firms in the industry toward an increased fraction of cleaner firms that pollute and violate less.<p>
    Keywords: imperfect compliance; state-dependent targeted enforcement; technology adoption; emission standards
    JEL: K31 K42 L51 Q55
    Date: 2015–01
  7. By: Bukhsh, F.A. (Tilburg University, School of Economics and Management)
    Date: 2015
  8. By: Salvador Balle (Universitat de les Illes Balears); Lucia Mangiavacchi (Universitat de les Illes Balears); Luca Piccoli (Universitat de les Illes Balears); Amedeo Spadaro (Universitat de les Illes Balears)
    Abstract: The present work studies optimal taxation of labour income when taxpayers are allowed to evade taxes. The analysis is conducted within a general non-linear tax framework, providing a characterisation of the solution for risk-neutral and risk-averse agents. For risk-neutral agents the optimal government choice is to enforce no evasion and to apply the original Mirrlees' rule for the optimal tax schedule. The no evasion condition is precisely determined by a combination of a sufficiently large penalty and a constant auditing probability. Similar results hold for risk-averse agents. Our findings imply that a government aiming at maximizing social welfare should always enforce no evasion and provide simple rules to pursue this objective.
    Keywords: Tax Evasion, Optimal Taxation, Social Welfare
    JEL: D31 H21 H26
    Date: 2015
  9. By: Robert H. Chenhall; Matthew Hall; David Smith
    Abstract: In this paper we develop the concept of compromising accounts as a distinctive approach to the analysis of whether and how accounting can facilitate compromise amongst organizational actors. We take the existence of conflicting logics and values as the starting point for our analysis, and directly examine the ways in which the design and operation of accounts can be implicated in compromises between different modes of evaluation and when and how such compromises can be productive or unproductive. In doing so, we draw on Stark's (2009: 27) concept of 'organizing dissonance', where the coming together of multiple evaluative principles has the potential to produce a 'productive friction' that can help the organization to recombine ideas and perspectives in creative and constructive ways. In a field study of a non-government organization, we examine how debates and struggles over the design and operation of a performance measurement system affected the potential for productive debate and compromise between different modes of evaluation. Our study shows that there is much scope for future research to examine how accounts can create sites that bring together (or indeed push apart) organizational actors with different evaluative principles, and the ways in which this 'coming together' can be potentially productive and/or destructive.
    JEL: R14 J01
    Date: 2013–05
  10. By: Vasiliki E. Athanasakou; Khaled Hussainey
    Abstract: We investigate the credibility of forward-looking performance disclosures (FLPDs) in the narrative sections of annual reports, as perceived by investors. Our proxy for these disclosures is an index of statements about future performance. We find that companies issue more FLPDs when raising debt or conveying bad news in the financial statements. In the presence of these managerial incentives, investor reliance on FLPDs increases with the quality of earnings reported in the audited financial statements. Our results suggest that firms derive a benefit in terms of higher credibility for their narrative disclosures from having a reputation for high quality earnings.
    Keywords: forward-looking statements; voluntary disclosures; managerial incentives; earnings quality
    JEL: M40 F3 G3
    Date: 2014

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