nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2015‒03‒27
thirteen papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Taxation and the User Cost of Capital : An Introduction By Creedy, John; Gemmell, Norman
  2. Does exchange of information between tax authorities influence multinationals' use of tax havens? By Braun, Julia; Weichenrieder, Alfons J.
  3. Reporting the Total Quality Management Costs in Compliance With International Financial Reporting Standards By Fahri Kursunel; Yunus Ceran
  4. A regional approach of financial performance- evidence from Romania By Laura Brad; Florin Dobre; Radu Ciobanu
  5. Evidence on the Responsiveness of Export-Related VAT Evasion to VAT Rates in the EU By Jon Bakija; Ivan Badinski
  6. An Exploratory Study of The Level of Sophistication of Management Accounting Practices (MAPs) in Manufacturing Companies Libya By Nassr Saleh Mohamad Ahmad; Abdulghani Leftesi
  7. Challenges before Bulgarian state universities for development of financial management and control systems in spending public funds By Tihomir Staykov; Pepa Hadzhieva
  9. Do Leverage and Ownership Concentration influence Firms’ Value? A Study of Jordanian Listed Firms By Dana Al-Najjar
  12. Improving Saudi Technical College students Skills in Accounting Courses By Fahad Alamr
  13. The Impact of Psychological Traits on Judgments Related to Ethics By Agarwalla, Sobhesh Kumar; Desai, Naman; Tripathy, Arindam

  1. By: Creedy, John; Gemmell, Norman
    Abstract: The aim of this paper is to provide an introduction to the concept of user cost and its determinants. Particular attention is given to the influence of taxation. The concept of user cost relates to the rental, the rate of return to capital, that arises in a profit maximising situation in which further investment in capital produces no additional profit. This paper sets out in some detail the range of assumptions involved in obtaining alternative expressions for the user cost. The user cost refers to a before-tax capital rental, the rate of return that ensures that the (after-tax) cost of capital is equal to the post-tax returns over its life. Hence, associated with the user cost measure is an effective marginal tax rate. This can differ substantially from the statutory marginal rate applicable to the investor. A related effective average tax rate is also defined.
    Keywords: Taxation, User cost, Tax rates,
    Date: 2015
  2. By: Braun, Julia; Weichenrieder, Alfons J.
    Abstract: Since the mid-1990s, countries offering tax systems that facilitate international tax avoidance and evasion have been facing growing political pressure to comply with the internationally agreed standards of exchange of tax information. Using data of German investments in tax havens, we find evidence that the conclusion of a bilateral tax information exchange agreement (TIEA) is associated with fewer operations in tax havens and the number of German affiliates has on average decreased by 46% compared to a control group. This suggests that firms invest in tax havens not only for their low tax rates but also for the secrecy they offer.
    Keywords: tax havens,tax information exchange agreements,location decisions,international taxation
    JEL: F21 F23 H87
    Date: 2015
  3. By: Fahri Kursunel (Selcuk University); Yunus Ceran (Selcuk University)
    Abstract: Suppliers have started to focus on costs as tough competing market conditions have been triggered by globalization and leaving of national protection. Under the competitive market conditions, the measures taken firstly are cost information and reducing them. As result of these precautions, suppliers have attempted to research in reducing costs, cost accounting, and managerial accounting in this area, and also they have started to implement those techniques in their enterprises. Quality costs are also defined as inferiority costs. A business cannot recognize any cost to increase the quality of the product as quality cost after having been established to produce any goods to meet the consumers' needs. Any incremental cost that incurred as a result of disorder of the organization cannot be accounted as quality cost. It can be considered as inferiority-cheapness cost. Eventually quality costs comprise of all the expenditures that are incurred to reduce the errors and to correct them.Quality costs are generally classified as in 4 groups. These are prevention costs, measuring costs, internal failure costs and external failure costs. Quality costs can be measured for the entire organization and also it can be prepared on the basis of product and department. Depending on the situation, calculation period can be monthly, three-month, yearly and etc. In the report, comparison between periods, new developments in comparison to same period of the previous year, trends of quality costs' components and various graphical representations take place. Each organization must find the most appropriate reporting scheme and period according to their characteristics. Being able to compare quality costs with sector will be more useful for firms to analyze their quality costs. Having started to apply quality cost practices, feedbacks to the company must be monitored.In general, financial statements are prepared within an accounting model based on recoverable historical cost and protection of nominal capital.According to IFRS, Financial information -to be beneficial- must be appropriate with the requirements and it must be presented in a realistic way what it aims to explain. If financial information is comparable, verifiable, and understandable also presented in a timely manner, benefits of this mentioned information increases. In quality costs reporting which is prepared taking IFRS into accounting, first of all reporting must be done as fitting for purpose and realistically which are considered as basic qualitative characteristics.
    Keywords: Total Quality Management, Financial Reporting Standards, Cost Accounting
    JEL: M41 M40
    Date: 2014–12
  4. By: Laura Brad (Bucharest University of Economic Studies); Florin Dobre (Bucharest University of Economic Studies); Radu Ciobanu (Bucharest University of Economic Studie)
    Abstract: Regional financial performance could influence the attitude of shareholders and of the investors. It is important as it provides information about the entities that act in the area and about the factors, qualitative: like auditor type or quantitative such as individual financial elements that have an impact upon financial performance. Using different approaches for financial measures, a panel research was conducted upon the entities listed on Bucharest Stock of Exchange that have to apply as compulsory the International Financial Reporting Standards accounting regime. The results provide mix evidence: in some geographical regions (North East and South West) there is indeed a higher financial performance upon return on assets and upon cash flow indicator (North East variable), while in other regions (Central region and Bucharest Ilfov region) a lower financial performance is obtained (for cash flow indicator and return on assets).
    Keywords: financial performance, Romania, International Financial Reporting Standards, panel, fixed effect, audit, regional analysis, return on equity, return on assets, cash flow from operation
    JEL: M21 M41 M42
    Date: 2014–10
  5. By: Jon Bakija (Williams College); Ivan Badinski (The Analysis Group)
    Abstract: In almost all countries that operate a value-added tax (VAT), the VAT “zero-rates†exports, meaning that exporting firms can claim credit for VAT on their inputs, but pay no VAT on sales of exports. This is necessary when the goal is to make the base of the tax domestic consumption. A consequence is that firms can reduce their tax burdens by misreporting some of their sales to domestic consumers as exports. In principle, reported exports from country i to country j should match up with reported imports into country j from country i, except for measurement errors, and costs of insurance and freight that are included in import value but not export value. VAT evasion can be another source of discrepancy which would tend to cause reported exports to exceed reported imports for trade flows in the same direction. We use data on such discrepancies in trade flows between pairs of European Union member countries during 1984 through 2011 to infer whether higher VAT rates are associated with greater over-reporting of exports. A difference-in-differences identification strategy, exploiting the fact that VAT rates changed in different ways over time in different countries, suggests that each percentage point increase in the exporting country’s standard VAT rate increases the discrepancy of exports over imports by about 1.1 percent of exports. For the typical EU-15 country, this implies that at the margin, about 15 percent of the static revenue gain from a VAT rate increase would be lost due to this particular channel for VAT evasion.
    Keywords: value added tax, exports, evasion
    JEL: H2 H26
    Date: 2014–11
  6. By: Nassr Saleh Mohamad Ahmad (Libya Academy); Abdulghani Leftesi (Libyan Academy)
    Abstract: Traditional MAPs such as standard costing and variance analysis, traditional budgeting and cost volume profit analysis have been under attack for some time now as being out of date and not suitable for today's new manufacturing and business environment. Thus, to keep pace with such new manufacturing and business environment, it becomes imperative for organisations, including Libyan organisation to adopt advanced MAPs such as ABC, JIT, TQM, life cycle assessment and target cost. Purpose: This study seeks to examine the extent to which traditional and advanced MAPs are being used in Libyan manufacturing companies, and investigating the stages of management accounting evolution in the country. Design/Methodology/approach: Data have been collected by utilising eighty-one postal questionnaires with the senior financial staff, such as financial directors, financial managers, the senior management accountant of large and medium size Libyan manufacturing companies from different industrial sectors. Then, an IFAC-based model was applied to analysis the stage of evolution of the management accounting practices in Libya. Finally, the reasons behind this low adoption rate of advanced MAPs were explained. Findings: The results of this study indicate that Libyan manufacturing companies rely heavily on traditional management accounting techniques, while the adoption rates of recently developed or advanced tools were rather low, slow and similar than those presented in other developing countries. Moreover, the analysis revealed that MAPs in Libya were still between stage one and two in IFAC-based model. Thus, almost all of Libyan manufacturing companies are implementing MAPs which provided information for cost determination and financial control and information for management planning and control. Finally, the reasons underlying an apparent low adoption rate of advanced MAPs were explained. These reasons are related to institutional factors, the attributes of adopter and the attributes of advanced MAPs. Limitation: The study is restricted to manufacturing companies, service sector companies raise their own particular issues and require separate in-depth studies. Value: It is envisaged that this initial study will add to the limited literature on MAPs in developing countries and provide a useful framework for further studies, especially those in the Arabic region. Moreover, it provides some insight into the barriers of applying the advanced MAPs, which if they are solved, will pave the way for Libyan organisations to compete globally in the future.
    Keywords: Traditional MAPs, Advanced MAPs, Libyan Manufacturing companies, Libya, Developing countries, Arabic region, IFAC-based Model and Barriers, Institutional factors, The attributes of adopter, The attributes of advanced MAPs.
    Date: 2014–05
  7. By: Tihomir Staykov (Research Sector of University Prof. Dr. Assen Zlatarov - Burgas, Bulgaria); Pepa Hadzhieva (Bulgarian National Audit Office)
    Abstract: After accession of Bulgaria to the European Union, the Bulgarian government performed new initiatives and some actions related to the implementation of major reforms in the field of financial control, in order to ensure good financial management of public funds. Among several new acts, the Financial Management and Control in the Public Sector Act was focused on managerial accountability and requires the managers of public sector organisations to manage resources so as to achieve the objectives of the organisation, and to ensure the protection of public interests. They have an obligation to introduce adequate and effective financial management and control systems and to ensure the internal audit function. “Prof. D-r Assen Zlatarov†University is the only state university in Southeastern Bulgaria. The University faced the challenge of designing and implements a system for financial management and control after legislative amendments that were passed to implement the adopted strategy for the overall development of public internal financial control in Bulgaria after 2006. Difficulties have risen from the differentiation of the various components of the integrated framework for financial management and control, as well as misunderstanding how important the implementation of these systems is. The internal rules adopted by that time have launched a dynamic process of development of the internal controls in this public institution. In 2012, the financial management and control system of the University was updated in accordance with five interrelated components, based on the Integrated Internal Control Framework, as well as with the organisational structure and its specific activities, contributing to the consistent application of the regulatory framework in the country. The financial management and control is carried out through financial management and control systems, including policies, procedures and internal rules established by the management of the organisations for the purposes of providing reasonable assurance that the goals of the organisation have been achieved through: 1. Compliance with legislation and internal acts and contracts; 2. Reliability, comprehensiveness and accuracy of financial and operational information; 3. Economy, efficiency, effectiveness and transparency of operations; 4. The safeguarding of assets and information; 5. Promoting compliance with prescribed management policies.One of the biggest challenges facing Bulgarian higher education institutions in the implementation of the financial management and control is the process of risk management, which should provide a better understanding of potential threats, actions or events that may positively or negatively affect the ability of public institutions to achieve their objectives.
    Keywords: Internal control, Financial Management and Control Systems, IICF
    JEL: M48 A19
    Date: 2014–07
  8. By: Katarzyna Åšwietla (Cracow University of Economics)
    Abstract: The range of information for the effective management of the enterprise is increasingly exceeding the competences of persons employed in the economic entities and thus it becomes necessary to use outside specialized services. In the financial sphere, this is due to situations such as the one where the growing information needs create new demands for entrepreneurs. The result of this approach is the increased interest in corporate accounting services. Entrusting accounting services to external providers promotes not only an increases speed and accuracy of decisions, but also affects the efficiency of one’s own resources and their utilization for the core business. Outsourcing is commonly used for this purpose. Here, actions are sourced from competent and experienced accountants regardless of the localizaion from which they provide their services, which is made possible by the convergence of accounting solutions and the development of IT technologies. Therefore, it can be said that through the spread of outsourcing, both the providers and recipients benefits, and the result is growth for the economy of the country (or countries) where they operate.
    Keywords: modern business, globalization of the economy, accounting, services, outsourcing,
    JEL: M41 O31
    Date: 2014–10
  9. By: Dana Al-Najjar (Applied Science Private University)
    Abstract: In the last decade corporate control has been facing a major challenge enhanced by successive corporate scandals; moreover, the shape of relationship between financial decisions (capital structure) and ownership structure on the firm value has been the heart debate of academics and financial experts for recent years. Furthermore, there have been contradictory findings across years by different researchers all over the world, in this path the studies of Demsetz (1983), Demsetz and Lehn (1985) provides support to no statistical relationship between ownership structure and firm performance. On the other hand, subsequent studies by Morck, Shleifer and Vishny (1988), McConnell & Servaes (1990; 1996), Smith & Watts (1992), and Lang et al., (1996) all these studies reported that their statistical analysis support the existence of relationship between both capital structure and firms’ performance. In turn capital structure is likely to affect managers' incentives and, hence, the firms’ performance (Harris & Raviv (1991); Fama & French (1998); Barclays & Smith (1999); and Rizov (2004)).This study uses a sample of Jordanian non-financial firms listed from 2005-2012 to examine how the capital structure, and ownership structure affect the firm’s value. The study depends on panel data analysis; the dependent variable is the firm value measured by P/E ratio, and the independent variables are leverage measured by Debt/ Asset ratio, and ownership concentration through Herfindahl index, for the explanatory variables they contain both firm size, and profitability.Partially consistent with the previous studies; my empirical results support the presence of significant relationship between capital structure and firm value, and insignificant relationship between ownership structure and firms value for Jordanian firms.
    Keywords: Ownership structure; Capital structure; Firm value; Accounting Measurements; Agency Theory; Jordanian Listed firms; Emerging Markets.
    Date: 2014–10
  10. By: Małorzata Kucharczyk (Kozminski University); Iwona Cieślak (Kozminski University)
    Abstract: The role of management accounting in improving the efficiency of business entities management has been described in literature repeatedly. The positive side associated with its use has long been known and the creation of new tools of management accounting only strengthens it. However, so far the management accounting has been used primarily in large enterprises. Numerous examples showing possibilities of its practical application, its advantages and benefits of using it are cases based on experience gained in large business entities. Does it mean that management accounting cannot be applied in small and medium-sized enterprises?The article takes the issue of application of management accounting in small and medium-sized enterprises. The assumptions of management accounting in relation to the specific needs of small and medium-sized enterprises will be discussed. The experience in terms of the applicability of accounting in small and medium-sized enterprises will be analysed. The review of the issues being faced by the managers in small and medium-sized enterprises concerning the application of management accounting tools will be conducted. Challenges for people professionally engaged in management accounting will be intimated. This article is debatable. It is a review of the literature. It complies the result of work concerning the application of management accounting in small and medium enterprises coming form various research centres and other centres professionally dealing with accounting. It also refers to the issue of supporting managers in small and medium-sized enterprises in application of management accounting tools. Its aim is to seek answers to the question whether the outsourcing of accounting in small and medium enterprises creates the possibility to popularize the management accounting. This article is also a reason to consider undertaking further works, the effect of which should be growing knowledge about management accounting among managers/owners of small and medium-sized enterprises as well as the development of abilities of the practical application of management accounting tools in small and medium enterprises. Such work will thus contribute to the improvement of effectiveness of the enterprises’ operation. This is especially important in the economy of the European Union. According to data contained in the ANNUAL REPORT ON EUROPEAN SMEs 2012/2013 in 2012 small and medium-sized enterprises were the place of employment of about 86,8 million of people and the development of over 57% share in gross value added generated by the private, non-financial economy in Europe.
    Keywords: management accouting, small and medium - size enterprises, accounting tools
    JEL: M49
    Date: 2014–10
  11. By: Clement Emeka Eze (Department of Business Education,Federal college of Education, Eha- Amufu)
    Abstract: A cursory look at the results of N.C.E Business Education students in Business Education courses in Nigeria over the years indicates that their performance in financial accounting courses in poor when compared with the students performance in other business courses. This study was therefore undertaken to determine the strategies to be adopted to improve students performance in financial accounting in N.C.E Business Education programmes in colleges of education in South East Nigeria. The study adopted survey research design. It answered two research questions. The population comprised all the 76 lecturers in Business Education programmes of the colleges of education in South East Nigeria. Since the population is small, the entire population was used for the study. A 28 item four (4) point scale questionnaire was the major instrument used for data collection. Mean score was used for data analysis. The findings of the study revealed among others that non-possession of accounting as one of the prerequisite entry subjects, non-ownership of accounting textbooks and poor quality entrants militate against students performance in financial accounting while making pass in accounts in senior school certificate examination a perequisite for admission, retraining of accounting lecturers, prompt marking of assignments/exercises, writing or recommending textbooks having graded exercises or short exercises among others are strategies for improving students performance in financial accounting in colleges of education. Based on the findings, it was recommended among others that graded financial accounting textbooks should be written or recommended and that a pass in Accounts in S.S.C.E. should be a compulsory requirement for admission into N.C.E. business education programme.
    Keywords: Accounting, Business Education, Strategies, Performance, Financial Accounting, Improving, Nigerian Certificate in Education
    Date: 2014–07
  12. By: Fahad Alamr (Dammam University)
    Abstract: Saudi Technical Colleges provide programs in accounting. I summoned all accounting mentors from tow colleges, to discuss their current training strategies. 10 Trainers -out of 12- indicated that they use lecturing most of the time. Accordingly, I proposed a four weeks workshop on strategies for developing worksheets and administering group discussions. A four-weeks workshop was administered during the spring quarter 2013; the first two weeks designated for skill drills and training. The second two weeks the mentors practiced their acquired skills on real live situations. All 12 trainers attended the workshop. Six of them were training one group of students each during this quarter, and the other six were training two groups each. Therefore, our data collection process focused on the results collected from trainers with two groups; we used one group as an experimental group, and the other as a control group.Statistical analyses indicate there is statistically significant deference between the groups, to the benefit of the experimental groups.Some recommendations were suggested.
    Keywords: Saudi, Accounting, Technical,
    JEL: A00 A20
    Date: 2014–07
  13. By: Agarwalla, Sobhesh Kumar; Desai, Naman; Tripathy, Arindam
    Abstract: This paper examines how two contradictory psychological traits, self-deception (SD) and professional skepticism (PS), affect managers and auditors assessments of the ethicality of various earnings management choices. Whereas, self-deception allows individuals to reduce cognitive dissonance (Festinger 1957) arising from their self-serving behavior which could be unethical (Audi 1988; Sanford 1988), professional skepticism or trait skepticism (Hurtt 2010) would force individuals to question such self-serving behavior and, as a result, could make them less likely to act unethically. The results indicate that SD, PS and participant type (Chartered Accountant (CA) versus Manager) had a significant effect on the ethicality ratings. Managers exhibiting high (low) SD and low (high) PS view the earnings management techniques that were generally considered to be unethical, as relatively more (less) ethical. For CAs, the SD and PS scores are not significantly related to their ethicality ratings. This result appears to be driven by the fact that CAs tend to have greater exposure information that emphasizes ethics such as their standards and education and hence psychological traits did not affect their ethicality ratings.

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