nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2015‒04‒02
twelve papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Development of Accounting in Turkey and Analysis of the Accounting Culture In Terms of International Accounting and Financial Reporting Standards (IFRS) By Esin Yelgen; Nilüfer Tetik
  2. Tax Agents Perceptions of the Corporate Taxpayers’ Compliance Costs under the Self-assessment System By Noor Sharoja Sapiei
  3. Accounting in Agriculture: Measurement practices of listed firms By Rute Gonçalves; Patrícia Lopes
  4. Approaches to Taxation of Non-Profit Organizations in France and Implications for Russia By Kazakova, Maria
  5. Value-Relevance of Biological Assets under IFRS By Rute Gonçalves; Patrícia Lopes
  7. Differences and Similarities of TQM and AC-QD-Model By Gaby Hahne
  8. Disclosure of risk information in the European banking sector By Emilia Klepczarek
  9. Are Big 4 Audit Fee Premiums Always Related to Superior Audit Quality? Evidence from India’s Unique Audit Market By Joshy,Jacob; Desai, Naman; Agarwalla, Sobhesh Kumar
  10. The Taxation of Foreign Profits: a Unified View By Devereux, Michael P.; Fuest, Clemens; Lockwood, Ben
  11. The Role of Accounting practices both in Abetting and Preventing Money Laudering By Muhammet Bezirci; Merve Oz; Halenur Yılmaz
  12. The Effects of Group Brainstorming on the Auditor’s Search for Potential Misstatements and Assessment of Fraud Risk in the Presence of Pressures and Opportunities By Desai, Naman

  1. By: Esin Yelgen (Akdeniz University); Nilüfer Tetik (Akdeniz University)
    Abstract: Culture may be defined as ‘the collective programming of the mind which distinguishes the members of one human group from another’. Each human group shares its own social norms, consisting of common characteristics, such as a value system which is adopted by the majority of constituents. Moreover accounting is determined by culture and the lack of consensus in accounting practices between countries, because the purpose of accounting is not technical but rather cultural. The culture of a country determines the choice of its accounting techniques and the perception of its various accounting phenomena. For this reason, the accounting culture is to limit the style of financial reporting by determining the principles and rules to be followed in financial reporting and by determining the principles, rules, and valuation measures that the financial reporting based on. Globalization, increase in the international movement of capital, the development of capital markets, changing conditions of competitions, legislative regulations and specialization are the factors affecting accounting culture. Another factor which affects accounting culture is the unfolding experience with the implementation of international accounting and financial reporting systems. International Financial Reporting Standard (IFRS) is formulated for the standardization of accounting regulations all over the world. A growing number of countries have adopted IFRS developed by the International Accounting Standards Board (IASB), and other countries plan to adopt or converge with IFRSs in the near future. IFRS is a set of accounting principles that is generated to support processes of principle based reporting. IFRS is very useful for making the comparability, intelligibility and transparency of the financial statements. Because accounting standards necessitate the development of one unique accounting system across the globe, this necessity leads to changes in the perceptions of accounting and thus a decline in the affect of culture on accounting. When the accounting regulations in Turkey are considered, it can be seen that accounting culture is shaped in parallel with economic and political relations. Accounting culture in Turkey has been discussed within the culture model of the Continental Europe through uniform accounting plan which has to be implemented as from 1994. On the other hand, with IFRS applications, it tends to be closer to the Anglo-American culture model. In the light of these developments, the aim of our study is to discuss the term of accounting culture theoretically; and analyze the affect of International Accounting and Financial Reporting Standards (IFRS) over accounting culture in Turkey.
    Keywords: Development of Accounting in Turkey, Hofstede-Gray Theory, Accounting Culture, Accounting Valuations and IFRS
    JEL: M41 M48 M49
    Date: 2014–10
  2. By: Noor Sharoja Sapiei (University of Malaya)
    Abstract: Reforms and changes in tax laws may affect the level of complexity in the tax system and increase taxpayer compliance costs burden. In Malaysia, the introduction of Self-assessment System (SAS) imposes greater accountability in terms of computational, recordkeeping and filing requirements upon taxpayers. The increase in taxpayer obligations coupled with higher possibility of audit may require taxpayers to seek assistance from tax agents to handle tax matters on their behalf. In spite of the expanding role of tax agents in tax reporting under the SAS, very little research has been directed at examining their views and perceptions. This study, therefore, evaluates the compliance costs of corporate taxpayers from the perspective of tax agents.
    Keywords: Tax Compliance Costs, Self-assessment System, Tax Agents, Corporate Taxpayers, Corporate Income Tax
    JEL: H26 M29 M49
    Date: 2014–05
  3. By: Rute Gonçalves (School of Economics and Management, University of Porto); Patrícia Lopes (School of Economics and Management, University of Porto)
    Abstract: Based on the International Accounting Standard (IAS) 41 – Agriculture, this paper examines measurement practices of biological assets and their drivers, under accounting choice theory, given data from 2012. Taking into consideration 324 listed firms worldwide that have adopted International Financial Reporting Standards (IFRS) until 2011, the empirical evidence supports that while a large number of firms measures biological assets at fair value, there are others that refute the presumption of fair value reliability and measure biological assets at historical cost. The research model includes a binary dependent variable for the measurement practice (fair value or historical cost) and explores several factors that are expected to be related to the measurement of biological assets, namely, a country-level variable – legal status and firm-level variables – biological assets intensity, firm size, listing status, regulation expertise, potential growth, leverage and sector. It was found that the adoption of fair value measurement of biological assets is positively influenced by all variables, except by the negative impact of potential growth and by the absence of relationship with leverage. This paper seeks to help standard setters to better understand measurement practices, their drivers and constraints concerning biological assets, given the current discussion under the IAS 41.
    Keywords: biological assets, measurement, accounting choice, financial reporting, regulation
    JEL: M41
    Date: 2015–03
  4. By: Kazakova, Maria (Gaidar Institute for Economic Policy; Russian Presidential Academy of National Economy and Public Administration)
    Abstract: This paper describes the basic rules as well as some details of tax treatment applicable to non-commercial organizations and their donors in France, assesses problematic issues of their use and identifies the instruments used as part of the tax treatment to reduce the possibilities of abuse and the advisability of adapting them in the Russian tax system. Based on the results of the analysis, proposals are formulated on the improvement of legislation of the Russian Federation in the area of taxation of non-commercial organizations.
    Keywords: Taxation of non-commercial organizations, Non-commercial organizations, Nonprofit organizations, Non-for-profit organizations, Charitable organizations, Corporate tax, Taxation, Income taxation of organizations; Taxation of non-commercial organizations, Non-commercial organizations, Nonprofit organizations, Non-for-profit organizations, Charitable organizations, Corporate tax, Taxation, Income taxation of organizations
    Date: 2014–06
  5. By: Rute Gonçalves (School of Economics and Management, University of Porto); Patrícia Lopes (School of Economics and Management, University of Porto)
    Abstract: Using 389 firm-year observations of listed firms worldwide in 27 countries that adopted International Financial Reporting Standards (IFRS) until 2010, for the period 2011-2013, the purpose of this paper is to examine the value-relevance of fair value accounting of biological assets. In order to operationalize it as the book value’s ability to explain market equity value, this study adjusts the Ohlson model. The results support that recognized biological assets are value-relevant. After including the effect of the disclosure level of biological assets, the results show that biological assets are more value-relevant in firms that exhibit higher disclosure levels. Repeating this last analysis according to the classification bearer and consumable biological assets, the results are the same for bearer biological assets. For consumable biological assets, it seems that investors do not value recognized biological assets in firms that exhibit higher disclosure levels. Given the current adjustment in the International Accounting Standard 41 - Agriculture, under which firms will be permitted to choose either the cost or the revaluation models for mature bearer plants for annual periods beginning on or after 1 January 2016, this paper seeks to help standard setters to better understand the market valuation implications of this standard.
    Keywords: biological assets, fair value accounting, financial reporting, disclosure index, regulation
    JEL: M41
    Date: 2015–03
  6. By: Veli Erdinç Ören (UÅŸak University, Banaz); Merih Tetik (Anadolu University, Graduate of School of Social Sciences)
    Abstract: Globalization trend that spreads widely in the world of economical and technological development has provided many values to be shares at international levels, by removing the borders of the countries. In the globalised world, changes happen in activities of companies as in many fields with the help of developments in information and communication technologies. Companies have been starting activities globally and the number of multinational companies has been increasing, and in this context, the movements of goods, service and capital have been passing the national borders. Globalization has affected the science of accounting as the other disciplines. Depending on these developments, the applications of accountancy which is used at national level before have been inadequate in providing information that the users of financial tables have required. Works that were launched to solve this problem in developed countries resulted in the International Financial Reporting Standards (IFRS) which have been gradually adopted by other countries as the common language of accounting. International Accounting Standards Board has been formed and International Accounting Standards have been published in the process of making up common accounting language. European Union accepted these standards in 2005 and wanted all the members and candidate states to accept them. These standards have been accepted in our country since 2006 and started to apply at the enterprises depending on The Capital Markets Law. The New Turkish Commercial Code enacted on 14 February 2011 obliges to implement “The Turkish Financial Reporting Standards†by the 1 January 2013. In this context, the aim of this study is to determine the perception of accounting standards by accountants. Furthermore, previous studies on the subject were examined and comparisons were drawn. Universe of the study consists of accountants in Uşak Chamber of Certified Public Accountants. Face to face surveys with the questionnaires have been carried out and the results have been analyzed by Statistical Package for the Social Sciences (SPSS). According to the survey results, the accountants expressed their perception that IFRS supply accurate, transparent and reliable financial reporting. On the other hand, the findings of the study reveal that the accountants also have information about IFRS, but they are not completely ready for the adaptation of IFRS.
    Keywords: Turkish Financial Reporting Standards (TFRS), International Financial Reporting Standards (IFRS), UÅŸak, Turkey.
    JEL: M41 M41 M41
    Date: 2014–10
  7. By: Gaby Hahne (HAHNE Revisions- und Treuhand GmbH)
    Abstract: Particularly through the financial- and economic crisis, a frequent discussion about the public task of an auditor and their audit quality arises. A productive discussion of audit quality requires a common understanding of audit quality, which can be obtained only with difficulty, given the complexity. To date, neither a no consensus on a definition nor a general approach could be developed which can depict this complex structure comprehensively. Therefor the author examines the Total Quality Management system, short TQM, according to its effectiveness in small- and medium sized auditing companies. But as the profession of auditors is a very specific one and in order to fulfill all the expectations of the different receivers of audit services, all legal and professional requirements as well as one’s own expectations, a model for audit quality has to be developed, that is very broad. For this reason, the author developed a “new model of quality development of auditing companiesâ€, named the AuditCompanies–QualityDevelopment-Model (AC-QD-Model). In order to examine the differences between TQM and the author’s model and to show the distinction between it, both quality models will be compared in this paper. At the end, a detail recommendation for the usage of the quality models can be given and outlined.
    Keywords: audit quality, TQM, AC-QD-Model
    Date: 2014–05
  8. By: Emilia Klepczarek (Uniwersytet £odzki)
    Abstract: The debate on the scope of bank information disclosures seems to be an essential issue, especially after the 2007-2010 financial crisis. The adequate number of data provided to the public domain is the condition of transparency of the banking sector, which should assure the optimization of market participants’ decisions. There is also a tendency to unify the global accountancy standards and they are expected to ensure the same scope of disclosed information for the global financial market. The aim of the study is to check if the accounting standards required by the European countries influence the number of risk disclosures and if more stable banking sectors tend to report wider scope of data. Finding out the nature of disclosures’ determinants is an important aspect in terms of working out the procedures increasing the transparency and stability of the financial markets.
    Keywords: risk disclosures, financial statements, accounting standards, GAAP, IFRS
    JEL: E44 E52 E58 F33 G18 G21 G28
    Date: 2015–03
  9. By: Joshy,Jacob; Desai, Naman; Agarwalla, Sobhesh Kumar
    Abstract: In this study we examine the fee premiums earned by Big 4 auditors (B4As) in India. We then try to determine the primary cause of the fee premiums in an Indian context. The B4As charge fee premiums for two primary reasons. First they are considered to be a potential indemnifier of losses for the stakeholders of the company. Second they provide a better quality of audit which improves the quality of reported earnings. Since the legal regime in India in significantly less stringent and the risk of auditor litigations is relatively low, B4A premiums in India are most likely to be driven by the need for superior audit quality. The results of our analysis indicate that B4As earn significantly higher fees than Non-Big 4 auditors (NB4As) in India. However there is no difference in the quality of audit provided by the B4As and NB4As as evidenced by the quality of reported earnings. Our results also indicate that B4As earn significantly higher abnormal fees. However, unlike the results of prior research, such abnormal fees are not associated with reduction in the quality of audit and reported earnings. After eliminating the two primary causes of B4A fee premiums, we posit that the need for B4As in India is primarily driven by the need to “signal” a superior quality of reported information.
  10. By: Devereux, Michael P.; Fuest, Clemens; Lockwood, Ben
    Abstract: This paper synthesizes and extends the literature on the taxation of foreign source income in a framework that covers both greenfield and acquisition investment, and a general constraint linking investment at home and abroad for the multinational by introducing a cost of adjustment for the mobile factor. Unless the cost of adjustment is zero, the domestic tax on foreign-source income should always be set to ensure the optimal allocation of the mobile factor between domestic and foreign assets and should follow the classical rules in the literature; national optimality requires the deduction rule, and global optimality requires the credit rule. Only in the zero-cost case does exemption become optimal. Allowances can be set so as to ensure that domestic and foreign asset purchases are undistorted by the tax system: this requires a cash-flow tax on domestic investment in the greenfield case, and a cross-border cash flow tax on foreign investment in both cases. These basic results extend to various extensions of the model, notably (i) when a profit-shifting motive is present; (ii) to some extent, when a corporate income tax is in place. The introduction of tax administration costs into the model can explain the empirical trend towards use of the exemption regime.
    Keywords: corporate taxation; multinational firms; repatriation
    JEL: F23 H25
    Date: 2015–03
  11. By: Muhammet Bezirci (Selçuk University); Merve Oz (Selçuk University); Halenur Yılmaz (Selcuk University)
    Abstract: As a result of globalization, the financial relationships have increased between countries, markets have became integrated, investors have an opportunity to make profitable investments which will bring highest return wherever they want and also internet banking and electronic banking transactions have increased thanks to advanced technology and all these developments have accelerated money circulation, intrinsically these developments have been seen as positive but besides these developments, globalization has brought some costs like fraud, corruption, caused diffusion of crimes. In this respect money laundering is one these crimes and when it is described, dirty or black money which is derived from illegal activities after that this black money is tried to be appeared as legal money that is called as money laundering, so both the way of getting and legalizing this money constitutes a crime. Negative effect of money laundering can be examined within 4 topics; economic, moral, social and legal, and threats economic integrity, stability, reliability, and judicial order. Thus both developing and developed countries must seriously combat with this crime and find what the main reasons that facilitate realizing money laundering are and how it can be prevented.In this paper it is evaluated that the role of accountants and accounting practices abetting to money laundering, and how people use accountants while realizing this victimless crime and also what can be done to prevent money laundering with the help of accounting practices and how accounting practices can prevent money laundering.
    Keywords: Money Laundering, Black Money, Dirty Money, Anti-Money Laundering, Proceeds of Crime
    JEL: M41 M42 M48
    Date: 2014–12
  12. By: Desai, Naman
    Abstract: This paper examines the effect of SAS No. 99 recommended group brainstorming on the auditor’s search for potential material misstatements and assessments of fraud risk in the presence of different levels of pressures and opportunities. We argue that there are potential differences in the auditor’s evaluation of pressures and opportunities while searching for potential material misstatements and assessing fraud risk, and these differences could be exaggerated when auditors brainstorm in groups. The results of a 2 x 2 x 2 between-subjects experiment (in which pressures and opportunities were manipulated at high and low levels, and brainstorming occurred individually or in three member audit teams) indicate that auditors found a significantly greater number of potential material misstatements when they observed high pressures and low opportunities compared to when they observed low pressures and high opportunities (even though there was an equal number of potential material misstatements across in all the treatments). Furthermore, this difference was significantly increased when auditors performed group brainstorming. Similarly, auditors’ assessments of fraud risk were significantly higher when they observed high pressures and low opportunities as compared to when they observed low pressures and high opportunities. Again, this difference was significantly increased when auditors performed group brainstorming.

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