nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2016‒02‒29
six papers chosen by
Alexander Harin
Modern University for the Humanities

  1. How accounting can reformulate the debate on the Natural Capital and help to implement its ecological conceptualisation? By Alexandre Rambaud
  2. Quality Weighted Citations Versus Total Citations in the Sciences and Social Sciences, with an Application to Finance and Accounting By Chang, C-L.; McAleer, M.J.
  3. Internet and taxation in European Union By Bernardi, Luigi
  4. Impact of Organization Internal Factors on Ethical Intensity of Accountants in Afghanistan By Azimi, Mohammad Naim
  5. The " Triple Depreciation Line " (TDL) accounting model and its application to the Human Capital By Alexandre Rambaud; Jacques Richard
  6. The Lehman Brothers Bankruptcy D: The Role of Ernst & Young By Rosalind Z. Wiggins; Rosalind L. Bennett; Andrew Metrick

  1. By: Alexandre Rambaud (DRM - Dauphine Recherches en Management - Université Paris IX - Paris Dauphine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In this presentation, we firstly give a critical analysis of Natural Capital (NC), in order to clarify the differences between its economic and ecological approaches. Secondly, we connect this debate with the concept of capital in accounting. We argue that accounting theory provides a relevant framework to structure the debate on NC and to implement its ecological conceptualisation. Thus, in the first part, we question the notion of “capital” itself and assert that “capital” is not prima facie money or a mean of production but is a type of power (Nitzan & Bichler, 2009). Indeed, this concept is consubstantial of Modernity, characterized by the Subject/Object dichotomy (Latour, 2004), and of capitalism – a particular modality of the Modern cosmology –, defined as a societal institution based on the unlimited expansion of the rational mastery of Subjects over Objects (Castoriadis, 1998): Capital is the operationalization of this rational mastery. Therefore, by definition, NC is not another type of capital: NC is the natural part of Capital, i.e. the recognition that the Capital partially stems from environmental Objects and so that, these Objects, in the same time, are means under the control of Subjects and contribute to the growth of the power and welfare of these last ones. Now, in economics, Capital has two fundamental forms that we will detail: the fundist one and the materialist one (Hicks, 1974). Their application to NC can clarify the concepts of weak and strong sustainability: in particular, strong sustainability is a specific materialist conceptualisation of NC and so remains based on a capitalist approach. In these conditions, the utilization of the notion of NC by ecologists gives raise to confusion, because it does not rely on capitalism. Ecological NC (ENC) is not “welfare-based” but “stuff-based” (Norton, 2005), i.e. ENC is really another type of capital, whose role is to focus on the preservation of environmental entities. So we will explain what a capital is in this context. In the second part, we firstly claim that double-entry bookkeeping accounting is relevant to reformulate the different viewpoints about NC. Indeed, for capitalism, firms are automated tools which manage some assets in order to develop the Capital of shareholders, the “real” Subjects. Thus, at the corporate level, the economic notion of Capital is not a liability, whose specific conservation implies accountability issues, but is an asset. Therefore the capitalist NC is also an asset, a mere mean. Now, for traditional accounting, capital is a liability. The standard accounting capital is money: its maintenance is the cornerstone of accounting and led to the creation of powerful instruments, like the planned depreciation. So we argue that ENC must also be seen as a liability: therefore, at the corporate level, the difference between a capitalist and an ecological NC relies on the difference between assets and liabilities. In these conditions, we finally suggest that the development of an ecological conceptualisation of NC naturally rests on the extension of the traditional accounting maintenance instruments to this new capital (cf. (Rambaud & Richard, 2013). References Castoriadis, C. (1998). The Imaginary Institution of Society. (K. Blamey, Trans.) (p. 426). MIT Press. Hicks, J. R. (1974). Capital Controversies: Ancient and Modern. American Economic Review, 64(2), 307–316. Latour, B. (2004). Politics of Nature: How to Bring the Sciences into Democracy (p. 307). Harvard University Press. Nitzan, J., & Bichler, S. (2009). Capital as Power. A Study of Order and Creorder (p. 463). Routledge. Norton, B. G. (2005). Sustainability (p. 607). The University of Chicago Press. Rambaud, A., & Richard, J. (2013). The Triple Depreciation Line ( TDL ) against the Triple Bottom Line ( TBL ): Towards a genuine integrated reporting (p. 40).
    Keywords: Balance sheet,Capitalism,Environmental accounting,Natural capital,Asset,Capital,Strong sustainability,Weak sustainability
    Date: 2015–07–08
  2. By: Chang, C-L.; McAleer, M.J.
    Abstract: __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: C10 C81 Y10
    Date: 2015–01–01
  3. By: Bernardi, Luigi
    Abstract: The purpose of this paper is to offer a primer on certain important features and issues concerning Internet and taxation in the European Union. After a general introduction concerning the origins of the matter, the paper discusses why a tax on the huge profits made by the big US digital MNEs in Europe was not substantially reflected in the tax policy of EU members, notwithstanding the large tax gap among EU countries resulting from the shift in profits by the (US digital) MNE towards lower or no taxation countries. Then the main directives on Internet and taxation introduced by the EU (and also by the OECD) since the late 1990s are discussed: the EU especially focusses on establishing the due place of taxation on electronic commerce, while the OECD (more recently together with the G20) has placed the emphasis on regulating Transfer Prices and contrasting Base Erosion and Profits’ Shifting (BEPS).
    Keywords: Web Tax; E-commerce; Profits shifting, Europe; OECD
    JEL: H20 H29
    Date: 2015–06–21
  4. By: Azimi, Mohammad Naim
    Abstract: This study aims to investigate the correlation and consistency of the internal factors to organization that affect the ethical intensity of accountants at workplace in Afghanistan. To investigate this, an ethical scenario based questionnaire was developed and distributed to 250 professional and non-professional accountants who work in auditing and accounting firms in Afghanistan. For statistical analysis, ∂ Cronbach’s model is initially applied and it is further tested by KMO, Bartlett’s test and factor analysis to assure an accurate result. The statistical analysis reflects a highly reliable ∂ ≥ 0.9 of the data and indicates a strong correlation of the internal factors by + ≥ 0.68 (F1 through F10) that affect the ethical intensity of the accountants. The constructed null hypothesis is tested and on the basis of the statistical analysis and the result of study, it is therefore refuted.
    Keywords: Accounting Ethics, Empirical Research, Ethical Intensity, Ethical Fragility, Financial Scandals
    JEL: M0 M4 M41 M42
    Date: 2015–06–15
  5. By: Alexandre Rambaud (DRM - Dauphine Recherches en Management - Université Paris IX - Paris Dauphine - CNRS - Centre National de la Recherche Scientifique); Jacques Richard (DRM - Dauphine Recherches en Management - Université Paris IX - Paris Dauphine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: As an introduction, in a first part, we give a critical analysis of the standard Human Capital theory, with the help of some " traditional " accounting concepts. In particular, we show that this theory is based on a (deliberate) confusion between assets and capital. In order to avoid this issue, we introduce the " Triple Depreciation Line " (TDL) (financial) accounting model, developed in (Rambaud & Richard, 2015), as a concrete way to design an accounting model able to treat " Human Capital " , as a real accounting capital – a matter of concern – that firms have to protect and maintain. Therefore, in a second part, after a brief presentation of this accounting model, we explain how to apply it to the " Human Capital " case. This application allows a discussion about some key issues about this notion and the difference between the standard perspective on Human Capital and the " accounting " one. Finally, we present some important consequences of this accounting model for the Human Capital: the disappearance of the concept of wage and the possibility to report repeated uses of the Human Capital directly in the balance sheet.
    Keywords: human capital,asset,triple depreciation line,financial accounting,integrated reporting,occupational disease,working conditions
    Date: 2016–01–21
  6. By: Rosalind Z. Wiggins; Rosalind L. Bennett; Andrew Metrick
    Abstract: For many years prior to its demise, Lehman Brothers employed Ernst & Young (EY) as the firm’s independent auditors to review its financial statements and express an opinion as to whether they fairly represented the company’s financial position. EY was supposed to try to detect fraud, determine whether a matter should be publicly disclosed, and communicate certain issues to Lehman’s Board audit committee. After Lehman filed for bankruptcy, it was discovered that the firm had employed questionable accounting with regard to an unorthodox financing transaction, Repo 105, which it used to make its results appear better than they were. EY was aware of Lehman’s use of Repo 105, and its failure to disclose its use. EY also knew that Lehman included in its liquidity pool assets that were impaired. When questioned, EY insisted that it had done nothing wrong. However, Anton R. Valukas, the Lehman bankruptcy examiner, concluded that EY had not fulfilled its duties and that probable claims existed against EY for malpractice. In this case, participants will consider the role and effectiveness of independent auditors in ensuring complete and accurate financial statements and related public disclosure.
    Keywords: Systemic Risk, Financial Crises, Financial Regulation
    JEL: G01 G28
    Date: 2014–10

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