|
on Accounting and Auditing |
| By: | Pollrich, Martin |
| Abstract: | I study the optimal audit mechanism when the principal cannot commit to an audit strategy. Invoking a relevation principle, the agent reports her type to a mediator whi assigns contracts and recommends the principla whether to audit. For each reported type the mediator randomizes over a base-contract and the audit contract, accompanied by a recommendation to audit. For large penalties the optimal mechanism uses strictly more contracts than types and cannot be implemented via offering a menu of contracts. The analysis provides a proper benchmark for studying auditing under limited commitment and sheds new light on the usefulness of mediation in contracting and on the design of optimal mechanisms. |
| Keywords: | Auditing; limited commitment; mediation; contract theory |
| JEL: | D82 D86 C72 |
| Date: | 2015–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:809&r=acc |
| By: | Pavel Strach (University of Applied Sciences Upper Austria); Irena Stejskalova (University of Economics in Prague) |
| Abstract: | Case studies have been utilized frequently throughout business curricula. In the domain of accounting, however, cases have not been as proliferated. The aim of the paper is demonstrate the use of secondary case studies in the didactics of an undergraduate introductory accounting course. Authentic stories from professional journals and daily newspapers have been used for students to critically examine real-life accounting applications. Based on subsequent longitudinal student survey undertaken in two consecutive academic years, secondary case studies have been found effective in delivering real-life accounting applications, enabling greater understanding of accounting phenomena, and enhancing didactic approach in and above the accounting domain. |
| Keywords: | didactics, accounting, case studies, teaching, student feedback |
| JEL: | M41 M49 A22 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:sek:ibmpro:2304424&r=acc |
| By: | Sammy Xiaoyan Ying (Macquarie University); Chris Patel (Macquarie University) |
| Abstract: | Professional scepticism remains one of the most important and controversial topics in auditing. This study examines the influence of partners’ views on auditors’ professional scepticism in China. This examination is important given the hierarchical structures of audit firms, and even more important in China given the strong cultural emphasis on subordination and obedience. Specifically, this study invokes social contingency theory to provide insights into partner influences on auditors from an accountability perspective. It is expected that auditors with knowledge of partners’ views are likely to be susceptible to pressure to align their judgments to the partners’ views, and such pressure influences auditors’ professional scepticism when exercising judgments. A between-subjects experiment was conducted with practicing auditors in China. The independent variable, partners’ views on professional scepticism, was manipulated across three groups: (1) a control group, in which there is no information about partners’ view, (2) a group in which partners’ known views reflect low emphasis on professional scepticism, or (3) a group in which partners’ known views reflect high emphasis on professional scepticism. The results provide evidence that when partners’ views on professional scepticism are known, auditors perceive considerable amount of pressure to follow the partners’ views. Further, the results show that when partners’ views reflect low emphasis on professional scepticism, auditors’ levels of professional scepticism are significantly lower compared to when partners’ views are unknown. However, when partners’ views reflect high emphasis on professional scepticism, auditors’ levels of PS do not significantly differ from when partners’ views are unknown. Furthermore, the results show that when auditors learn partners’ views, increased intensity of perceived pressure can strengthen the effects of partners’ influences on auditors’ professional scepticism. The findings of this study have important implications for auditing regulators, professionals, and audit firms. |
| Keywords: | Professional Scepticism, Auditing, China, Partner influences |
| JEL: | C93 M42 M40 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:sek:ibmpro:2304228&r=acc |
| By: | Michael P. Devereux; Giorgia Maffini; Jing Xing |
| Abstract: | This paper examines how companies’ capital structure is affected by the corporate income tax system. Our analysis employs confidential company-level corporation tax return data in the UK. Our main identification strategy is based on variation in companies⣠marginal tax rates due to the existence of kinks in the corporate tax rate schedule. Using a dynamic adjustment model of capital structure, we find a positive and substantial long-run tax effect on companies' financial leverage. We show that there are considerable discrepancies between estimates of taxable profits reported in tax return data and in financial statements and that the estimated tax effect on capital structure using financial statements is likely to be biased downward. We find that companies adjust their capital structures gradually in response to changes in the marginal tax rate. Moreover, we find that the external leverage of domestic stand-alone companies and of multinational companies responds strongly to corporate tax incentives. |
| Keywords: | Corporate taxation, capital structure, tax returns. |
| URL: | http://d.repec.org/n?u=RePEc:don:donwpa:076&r=acc |
| By: | Richard Fabling; Richard Kneller; Lynda Sanderson (The Treasury) |
| Abstract: | This paper examines firm-level investment responses to exogenous changes in the forward looking user cost of capital associated with reforms to the corporate and personal tax system over the last decade. Adjustments to personal tax rates and fiscal depreciation allowances provide a direct lever through which government policy can affect the cost of capital faced by firms. The effect of these tax adjustments differs across firms according to their asset structure, providing both inter-temporal and inter-firm variation in UCCs and enabling an assessment of the short-run impact of UCC changes on investment behaviour. This analysis shows that while tax-induced changes in the UCC have significantly affected investment behaviour among some firms, the aggregate impacts are likely to have been negligible as the industries in which investment impacts are observed make a very small contribution to aggregate investment. |
| JEL: | D22 H20 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:15/05&r=acc |
| By: | Miles Workman (The Treasury) |
| Abstract: | Indicators of the structural fiscal balance help inform assessments of the sustainability of fiscal settings and identify shifts in discretionary fiscal policy. The Treasury’s headline structural fiscal balance indicator – the cyclically-adjusted balance (CAB) – is estimated by removing the cyclical component of the budget balance from the government’s operating balance. The cyclical component is estimated by adjusting for fluctuations of actual GDP around potential GDP via the output gap. However, this approach does not take account of the composition of GDP. A boom in domestic demand – an absorption boom – will have a more pronounced impact on fiscal revenues than a boom driven by external demand (ie, net exports). This is because some components of demand are more “tax rich” than others. In particular, indirect tax revenues are closely linked to domestic demand rather than output. This paper documents the nature of the absorption cycle in New Zealand and then quantifies its effect on fiscal revenues by estimating a new structural fiscal balance indicator – the cyclically- and absorption-adjusted balance (CAAB) – over the period 1997- 2019. This indicator extends the existing CAB by adjusting for deviations in the level of domestic absorption from its long-run equilibrium level, which is in turn derived with reference to estimates of the long-run equilibrium current account balance. The estimated absorption adjustment on New Zealand’s structural fiscal balance is up to 0.4 percent of GDP. This adjustment is reasonably material given conventional cyclical adjustments average 0.5 percent of GDP for New Zealand. |
| JEL: | E62 H62 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:15/09&r=acc |
| By: | Egert Juuse (Tallinn University of Technology (TTU), Estonia); Rainer Kattel (Tallinn University of Technology (TTU), Estonia) |
| Abstract: | This study on Estonia examines the long-run changes between the financial and the non-financial sectors of the economy, and in particular the effects of financialisation on key variables / categories of the real economy as well as the their contribution to the financial crisis of 2007/08. The first part provides the background historical overview of last 20 years in Estonia with some descriptive statistics on GDP, growth contributions of the main demand aggregates, and the financial balances of the macroeconomic sectors since early 1990s, and it classifies the Estonian development path as following the ‘debt-led consumption’ one. The following chapters examine the effects of financialisation and their extent, accompanied by transition processes, on income distribution, financing of capital stock investments, consumption and current account dynamics in detail. The final parts deal with the elaboration on the causes of the financial and economic crisis as well as the policy response in Estonia. |
| Keywords: | current account balance, trade balance, income distribution, finance-dominated capitalism, transition economies, financialisation, financial and economic crisis, Estonia. |
| JEL: | D31 D33 D43 E25 E61 E64 E65 F40 F43 P20 P21 R21 |
| Date: | 2014–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:fes:fstudy:fstudy20&r=acc |
| By: | Daniel Detzer (Berlin School of Economics and Law and Institute for International Political Economy (IPE) Berlin,); Eckhard Hein (Berlin School of Economics and Law and Institute for International Political Economy (IPE) Berlin,) |
| Abstract: | This study on Germany examines the long-run changes between the financial and the non-financial sectors of the economy, and in particular the effects of these changes on the macroeconomic developments that have led or contributed to the financial crisis starting in 2007 and the Great Recession in 2008/09. The first part provides some descriptive statistics on real GDP growth, on the growth contributions of the main demand aggregates, and the financial balances of the macroeconomic sectors since the early 1980s, and it classifies the German type of development as ‘export-led mercantilist’. The second part examines the effects of an increasing dominance of finance since the early/mid 1990s on income distribution, investment in capital stock, consumption and the current account in more detail. The third part links the long-run developments with the financial and economic crisis and examines the causes of the quick recovery in Germany. |
| Keywords: | current account imbalances, distribution of income, finance-dominated capitalism, financialisation, financial and economic crisis, Germany, Kaleckian distribution theory, trade balance |
| JEL: | D31 D33 D43 E25 E61 E63 E64 E65 F40 F43 |
| Date: | 2014–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:fes:fstudy:fstudy18&r=acc |
| By: | Carlos çlvarez-Nogal (Universidad Carlos III, Madrid); Christophe Chamley (Boston University) |
| Abstract: | Men of finance raised funds for loans, asientos, to Philip II by trading short-term financial instruments in credit markets and by selling long-term annuities, juros. These activities are illustrated by an asiento with the Maluenda brothers (July 13, 1595), where short-term credit secured by the equity of the fleets from the Indies were, for more than one half, converted into funded life annuities that were sold by the Maluendas. The new analysis of this asiento relies on its dossier of more than 400 pages in the archives of Simancas, including the contract, the monitoring attachments, and the final audit. |
| Keywords: | public finances, Philip II, asientos, juros, methodology, archives, verification |
| JEL: | N01 N13 N23 N43 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:hes:wpaper:0079&r=acc |
| By: | Gerard Cornilleau (OFCE); Jerome Creel (OFCE & ESCP Europe) |
| Abstract: | The classification of France in any category is generally very difficult when the time dimension is taken into consideration. Indeed, France has gone through different situations, from current account deficit to surplus, and from surplus to deficit, which makes it difficult to apply to France a one-category-fits-all diagnosis. Nevertheless, drawing on the cyclicality of the public deficit and the steady contribution of households’ consumption to the GDP growth rate, a mild domestic demand-led economy is certainly the best approach to describing the French economy and its connections with financialisation. The 2009 crisis has reduced corporate mark ups, as it is normal during a recession, but we do not observe a long term deviation and the mark-up for the whole economy, on a historical basis, is at a relatively satisfactory level as the share of gross operating surplus in value added has remained higher by one percentage point than the average level of the pre-oil-shocks- period. The crises of the 1990s and 2000s did not cut corporate profitability as the first oil shock did. The idea of a structural deterioration in profitability is therefore not confirmed by macroeconomic data. This is certainly worth being brought closer to the change in income sharing which happened in the early 1980s: the policy of wage restraint implemented in 1982, coupled with rising unemployment, brought back wages evolution at a level consistent with a balanced economic growth, hence in line with productivity growth. France has not gone through financialisationrelated imbalances like, e.g. a real estate bubble. Fluctuations of the French economy can thus be attributed to external shocks, and not to structural imbalances. This conclusion is at odds with the political impetus in favor of the implementation of so-called structural reforms in France. |
| Keywords: | current account imbalances, distribution of income, financialisation, financial and economic crisis, France |
| JEL: | D31 D33 E25 E65 F40 |
| Date: | 2014–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:fes:fstudy:fstudy22&r=acc |
| By: | Yanis Varoufakis (National & Kapodistrian University of Athens); Lefteris Tserkezis (National & Kapodistrian University of Athens) |
| Abstract: | The present essay analyzes the changing relationship between the real and the financial sector in the course of the long-run development of the Greek economy, focusing on the effects of financialization and on its connection to the current economic crisis. The first section offers a brief discussion of the basic tendencies characterizing the long-run development of the Greek economy over the past three decades. The second section examines the effect of financialization on several aspects of the real economy, including income distribution, gross capital formation, consumption and the evolution of the current account. In the third section, the results of the preceding analysis are linked to the outbreak of the current crisis, in an attempt to explain the reasons behind this crisis’ excessive severity in the case of the Greek economy, while the fourth section concludes. |
| Keywords: | capital flows, current account deficit, debt crisis, financialization, Greek economy, trade imbalances |
| JEL: | E25 E62 E63 F34 F40 H21 H62 H63 |
| Date: | 2014–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:fes:fstudy:fstudy25&r=acc |
| By: | Roda Jean-Marc |
| Abstract: | Promoting tropical forest sustainability among corporate players is a major challenge. Many tools have been developed, but without much success. Southeast Asia has become a laboratory of globalization processes, where the development and success of agribusiness transnationals raises questions about their commitment to environmental concerns. An abundance of literature discusses what determines the behavior of Asian corporations, with a particular emphasis on cultural factors. Our hypothesis is that financial factors, such as ownership structure, may also have a fundamental role. We analyzed the audited accounts of four major Asian agribusiness transnationals. Using network analysis, we deciphered how the 931 companies relate to each other and determine the behavior of the transnationals to which they belong. We compared various metrics with the environmental commitment of these transnationals. We found that ownership structures reflect differences in flexibility, control and transaction costs, but not in ethnicities. Capital and its control, ownership structure, and flexibility explain 97% of the environmental behavior. It means that existing market-based tools to promote environmental sustainability do not engage transnationals at the scale where most of their behavior is determined. For the first time, the inner mechanisms of corporate governance are unraveled in agricultural and forest sustainability. New implications such as the convergence of environmental sustainability with family business sustainability emerged. |
| Keywords: | Southeast Asia, oil palm, forest, transnationals, investment strategy, emerging markets, competitiveness, network analysis, network metrics, ethnic business, ownership structure, family business. agribusiness |
| JEL: | D85 F02 F23 G32 L14 L73 Q01 Q13 Q23 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:epf:wpaper:40412&r=acc |