nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2015‒04‒25
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Audit Rates and Compliance: A Field Experiment in Long-term Care By Maarten Lindeboom; Bas van der Klaauw; Sandra Vriend
  2. Aggressive Reporting and Probabilistic Auditing in a Principles-Based Environment By Suzanne H. Bijkerk; Vladimir A. Karamychev; Otto H. Swank
  3. Tax administration and tax systems By Joel Slemrod
  4. Quality Weighted Citations versus Total Citations in the Sciences and Social Sciences, with an Application to Finance and Accounting By Chia-Lin Chang; Michael McAleer
  5. Graph representation of balance sheets: from exogenous to endogenous money By Pitrou, Cyril
  6. Data Sparseness and Variance in Accounting Profitability By Spyridon Stavropoulos; Martijn J. Burger; Dimitris Skuras
  7. The Importance of Being in Control of Business: Work Satisfaction of Employers, Own-account Workers and Employees By Jolanda Hessels; José María Millán; Concepción Román
  8. Identification of Income Underreporting by the Self-Employed: Employment Status or Reported Business Income? By Merike Kukk; Karsten Staehr

  1. By: Maarten Lindeboom (VU University Amsterdam); Bas van der Klaauw (VU University Amsterdam); Sandra Vriend (VU University Amsterdam)
    Abstract: We provide evidence from a large-scale field experiment on the causal effects of audit rules on compliance in a market for long-term care. In this setting care should be provided quickly and, therefore, the gatekeeper introduced ex-post auditing. Our results do not show significant effects of variations in random audit rates and switching to a conditional audit regime on the quantity and quality of applications for care. We also do not find evidence for heterogeneous effects across care providers differing in size or hospital status. Our preferred explanation for the lack of audit effects is the absence of direct sanctions for noncompliance. The observed divergence of audit rates in the conditional audit regime is the consequence of sorting and thus identifies the quality of application behavior of providers.
    Keywords: auditing, field experiment, compliance, feedback, long-term care
    JEL: C93 H51 I18
    Date: 2014–03–18
  2. By: Suzanne H. Bijkerk (Erasmus University Rotterdam); Vladimir A. Karamychev (Erasmus University Rotterdam); Otto H. Swank (Erasmus University Rotterdam)
    Abstract: We analyze the reporting strategies of firms and the investigation strategies of auditors in an archetype principles-based financial reporting system. To this end, we add a verification stage to a standard cheap-talk game, and apply the resulting game to financial reporting. We show that for a principles-based system to work properly, firms should bear a sufficient share of the cost of a thorough investigation. Furthermore, we find that a principles-based system is a mixed blessing. On the one hand, it leads to a plausible investigation strategy of the auditor, in which "suspected" reports receive most attention. On the other hand, a principles-based system only indirectly weakens firms' incentives to report aggressively.
    Keywords: Cheap Talk, Financial Reporting, Principles-based Regulation, Stochastic Auditing
    JEL: D82 M42
    Date: 2013–09–05
  3. By: Joel Slemrod (University of Michigan)
    Abstract: This is a review of the so-called "Optimal tax systems" approach to the economic analysis of taxation. This approach acknowledges the bunch of instruments the public sector has to collect revenues, but also the multiple responses of taxpayers to them. In a way, this is a more realistic approach to taxation, and so should provide reliable guides to action.
    Keywords: Optimal taxation, tax administration, multiple behavioral responses
    JEL: H20
    Date: 2015
  4. By: Chia-Lin Chang (National Chung Hsing University, Taiwan); Michael McAleer (National Tsing Hua University, Taiwan, Erasmus University Rotterdam, the Netherlands, and Complutense University of Madrid, Spain)
    Abstract: The premise underlying the use of citations data is that higher quality journals generally have a higher number of citations. The impact of citations can be distorted in a number of ways. Journals can, and do, inflate the number of citations through self citation practices, which may be coercive. Another method for distorting journal impact is through a set of journals agreeing to cite each other, that is, by exchanging citations. This may be less coercive than self citations, but is nonetheless unprofessional and distortionary. Both journal self citations and exchanged citations have the effect of increasing a journal’s impact factor, which may be deceptive. The paper analyses academic journal quality and research impact using quality weighted citations versus total citations, based on the widely-used Thomson Reuters ISI Web of Science citations database (ISI). A new Index of Citations Quality (ICQ) is presented, based on quality weighted citations. The new index is used to analyse the leading 500 journals in both the Sciences and Social Sciences, as well as 58 leading journals in Finance and Accounting, using quantifiable Research Assessment Measures (RAMs) that are based on alternative transformations of citations. It is shown that ICQ is a useful additional measure to 2YIF and other well known RAMs for the purpose of evaluating the impact and quality, as well as ranking, of journals as it contains information that has very low correlations with the information contained in the well known RAMs for both the Sciences and Social Sciences, as well as in Finance and Accounting.
    Keywords: Research assessment measures, Impact factors, Eigenfactor, Article Influence, Quality weighted citations, Total citations, Index of citations quality, Journal rankings, Self citations, Coercive citations, Exchanged citations
    JEL: C18 C81 Y10
    Date: 2015–01–13
  5. By: Pitrou, Cyril
    Abstract: A graph representation of the financial relations in a given monetary structure is proposed. It is argued that the graph of debt-liability relations is naturally organized and simplified into a tree structure, around banks and a central bank. Indeed, this optimal graph allows to perform payments very easily as it amounts to the suppression of loops introduced by pending payments. Using this language of graphs to analyze the monetary system, we first examine the systems based on commodity money and show their incompatibility with credit. After dealing with the role of the state via its ability to spend and raise taxes, we discuss the chartalist systems based on pure fiat money, which are the current systems. We argue that in those cases, the Treasury and the central bank can be meaningfully consolidated. After describing the interactions of various autonomous currencies, we argue that fixed exchanged rates can never be maintained, and we discuss the controversial role of the IMF in international financial relations. We finally use graph representations to give our interpretation on open problems, such as the monetary aggregates, the sectoral financial balances and the endogenous nature of money. Indeed, once appropriately consolidated, graphs of financial relations allow to formulate easily unambiguous statements about the monetary arrangements.
    Keywords: monetary theory; graph theory; chartalism; endogenous money; central bank; sectoral financial balances; budgetary policy; monetary policy
    JEL: E42 E50 E52 E58 F33 F34
    Date: 2015–04–14
  6. By: Spyridon Stavropoulos (University of Patras, Greece); Martijn J. Burger (Erasmus University Rotterdam, the Netherlands; University of Patras, Greece); Dimitris Skuras (University of Patras, Greece)
    Abstract: A central question in strategic management is why some firms perform better than others. One approach to addressing this question empirically is to decompose the variance in firm-level profitability into firm, industry, location, and year components. Although it is well established that data sparseness in variance decomposition studies can lead to overestimating particular variance components, little attention has been paid to sample size requirements in strategic management studies that have examined the nature of differences in firm profitability. We conduct a meta-regression and variance decomposition study and conclude that the variation in the results from previous studies is driven—to a considerable extent—by the number of observations per group within a component. Based on these findings, we draw conclusions regarding the validity and reliability of previo us variance decomposition studies and provide implications for current debates in the strategic management literature.
    Keywords: Firm profitability, variance decomposition, data sparseness, meta-analysis
    JEL: C18 L16 R11
    Date: 2015–01–26
  7. By: Jolanda Hessels (Erasmus School of Economics, Erasmus Happiness Economics Research Organization (EHERO), Erasmus University Rotterdam, The Netherlands); José María Millán (University of Huelva, Spain); Concepción Román (University of Huelva, Spain)
    Abstract: Self-employed workers can be own-account workers who control their own work or employers who not only are their own boss but also direct others (their employees). We expect both types of self-employed, i.e., own-account workers and employers, to enjoy more independence in determining their work content (type of work) and more flexibility in shaping their work context (e.g., working conditions) compared to paid employees and hence to be more satisfied with their work. Furthermore, we suspect that employers (who can delegate work to their employees and can help them to develop and grow) enjoy even higher levels of work satisfaction compared to both own-account workers (who are their own boss but do not give direction to others) and (non-supervisory) paid employees (who have to obey orders from others within organizational hierarchies). While prior studies typically broadly compare the work satisfaction of self-employed and paid employees, we distinguish employers from own-account workers within the group of self-employed using data from the ECHP for 14 European countries. Our findings indeed show that employers are significantly more satisfied with their work than both own-account workers and paid employees. Additionally, while employers as well as own-account workers enjoy greater procedural utility than (non-supervisory) paid employees stemming from the content and the context of their work, there also seems to be an additional work satisfaction premium for employers.
    Keywords: entrepreneurship; self-employment; employers; own-account workers; work satisfaction
    JEL: J24 J28 L26 O52
    Date: 2015–04–14
  8. By: Merike Kukk (Tallinn University of Technology); Karsten Staehr (Tallinn University of Technology Eesti Pank)
    Abstract: Pissarides & Weber (1989) proposed the use of data on income and food consumption for estimating the extent of income underreporting and possibly tax evasion by the self-employed. This paper is the first to investigate the importance of the way in which self-employed households are identified. Using household budget data from Estonia, the underreporting by self-employed households is computed with different identification methods. The share of unreported income is estimated to be at least twice as large when self-employed households are identified using the share of business income than is the case when they are identified using their employment status. Further analysis confirms that the share of reported business income is indeed a better indicator of income underreporting than the reported employment status. The results may facilitate better governance by helping data collectors to identify households prone to income underreporting. Keywords: income underreporting, business income, self-employed, tax auditing, Engel curveJEL codes: H26, E21, E26, H24
    Keywords: income underreporting, business income, self-employed, tax auditing, Engel curve
    JEL: H26 E21 E26 H24
    Date: 2014–01–17

This nep-acc issue is ©2015 by Alexander Harin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.