nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2016‒03‒29
seven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Corporate taxation and location of intangible assets: Patents vs. trademarks By Dudar, Olena; Voget, Johannes
  2. How to Reform the Property Tax: Lessons from around the World By Enid Slack and Richard M. Bird
  3. Current account and REER misalignments in Central Eastern EU countries: an update using the macroeconomic balance approach By Comunale, Mariarosaria
  4. Internal controls in the Public Administration: current problems and future challenges By Anna Peta
  5. Are the Most Capable Auditors in the Big 4 Firms? Model By Pedro Ortin Ángel; Ana Millan Tapia; Stefan Sundgren
  6. Investment and investment financing in Italy: some evidence at the macro level By Claire Giordano; Marco Marinucci; Andrea Silvestrini
  7. Classification Shifting: Impact of Firm Life Cycle By Nagar, Neerav; Sen, Kaustav

  1. By: Dudar, Olena; Voget, Johannes
    Abstract: Numerous empirical studies have analysed the influence of corporate taxation on the location of intangible assets within a company group. However, the previous literature has rather focused on studying the impact of taxation on patent location choices assuming that these assets represent the rest of intangibles as well. This paper complements previous studies by estimating and comparing the tax elasticities of two different types of intangibles - patents and trademarks. We employ data on European and US patent and trademark applications in the period of 1996-2012 and estimate a multinomial logit model that incorporates various observed and unobserved factors of the intangible's location choice. According to our main findings, trademarks are more sensitive to changes in taxation as compared to patents. This implies that firms use trademarks more eagerly for tax planning purposes than patents.
    Keywords: intangible assets,patent,trademark,tax planning,corporate taxation
    JEL: H25 F23 H26 H3
    Date: 2016
  2. By: Enid Slack and Richard M. Bird (University of Toronto)
    Abstract: Property taxes are generally considered by economists to be good taxes, and many countries are being advised to increase and improve their property taxes. In practice, however, property tax reforms have often proved to be difficult to carry out successfully. This paper discusses why property taxes are particularly challenging to reform and suggests several ways in which efforts to reform this tax may become more successful in the future.
    Keywords: property tax, tax reform, local finance, political economy
    JEL: H24 H25 H71 D78
    Date: 2015–08
  3. By: Comunale, Mariarosaria
    Abstract: Using the IMF CGER methodology, we make an assessment of the current account and price competitiveness of the Central Eastern European Countries (CEEC) that joined the EU between 2004 and 2014. We present results for the "€œMacroeconomic Balance (MB)"€ approach, which provides a measure of current account equilibrium based on its determinants together with mis-alignments in real effective exchange rates. We believe that a more refined analysis of the mis-alignments may useful for the Macroeconomic Imbalance Procedure (MIP). This is especially the case for these countries, which have gone through a transition phase and boom/bust periods since their independence. Because such a history may have influenced a country’s performance, any evaluation must take account of each country'€™s particular characteristics. We use a panel setup of 11 EU new member states (incl. Croatia) for the period 1994-2012 in static and dynamic frameworks, also controlling for the presence of cross-sectional dependence and checking specifically for the role of exchange rate regimes, capital flows and global factors. We find that the estimated coefficients of the determinants meet with expectations. Moreover, the foreign capital flows, the oil balance, and relative output growth seem to play a crucial role in explaining the current account balance. Some global factors such as shocks in oil prices or supply might have played a role in worsening the current account balances of the CEECs. Having a pegged exchange rate regime (or being part of the euro zone) affects the current account positively. The real effective exchange rates behave in accord with the current account gaps, which clearly display cyclical behaviour. The CAs and REERs come close to equilibria in 2012 in most of the countries and the rebalancing is completed for some countries that were less misaligned in the past, such as Poland and Czech Republic, but also for Lithuania. When Foreign Direct Investment (FDI) is introduced as a determinant for these countries, the misalignments are larger in the boom periods (positive misalignments) whereas the negative misalignments are smaller in magnitude.
    Keywords: real effective exchange rate, Central Eastern European Countries, EU new member states, fundamental effective exchange rate, current account
    JEL: F31 F32 C23
    Date: 2015–10–07
  4. By: Anna Peta (Banca d'Italia)
    Abstract: At the beginning of the 1990s, in line with trends in other European countries, the need to increase the efficiency of administrative activity resulted in legislative initiatives to extend some of the management tools developed in the private sector to the Public Administration. Among these instruments, an important role was assigned to internal controls. Over twenty years since their introduction, the functioning of public internal controls still displays several critical aspects. Through a comparative assessment with other European models, this paper highlights the problems affecting the legal framework of Italian public internal controls, such as the lack of a clearly identified internal audit structure; the paper also points out that controls focus almost exclusively on formal rather than substantive aspects. Moreover, the results of past performance appraisal activities show that the principles of “accountability” and “transparency” are not widely applied within the Public Administration, thus undermining the effectiveness and usefulness of internal controls.
    Keywords: planning, internal controls, accountability, efficiency
    JEL: K23 H83 M42
    Date: 2016–02
  5. By: Pedro Ortin Ángel; Ana Millan Tapia (Department of Business, Universitat Autònoma de Barcelona); Stefan Sundgren (Umeå School of Business and Economics)
    Abstract: The CPA exam provides an evaluation of the auditors’ professional competences at the early stages of their careers. Using information from the results generated in Sweden, the paper shows that i) auditors at Big 4 firms are younger when they take the exam, ii) younger auditors and auditors at Big 4 firms perform better in the exam iii) there is a positive association between the results in the CPA exam and wage increases after having received the CPA certification and the association is stronger at Big 4 firms. This evidence is consistent with a theoretical model where Big 4 audit firms attract and retain the more capable auditors of each cohort, based on the imperfect information about the capabilities of the auditors that they have.
    Keywords: North-South, growth model, innovation assimilation
    Date: 2016–01
  6. By: Claire Giordano (Bank of Italy); Marco Marinucci (Bank of Italy); Andrea Silvestrini (Banca d'Italia)
    Abstract: We analyse the developments of investment and investment financing in Italy since 1995, based on data from national accounts and the flow of funds. The exceptional fall in investment after the global financial crisis in 2007 concerned all institutional sectors and asset categories. However, appropriately deflated data highlight the more intense fall of household capital expenditure. Consistently, on the asset side, construction was one of the most hard-hit capital goods; ICT and intangible investment instead weathered the double recession better. Focusing on investment financing, the eruption of the crisis caused a major contraction in the availability of external finance for non-financial corporations and households. Long-term loans to non-financial corporations became more important, crowding out their short-term counterparts. Also the weight of debt securities increased significantly, especially after 2008.
    Keywords: gross fixed capital formation, investment financing, national accounts, financial accounts
    JEL: E22 G01 G31 G32
    Date: 2016–02
  7. By: Nagar, Neerav; Sen, Kaustav
    Abstract: Purpose - This paper examines whether firms in the decline stage of life cycle manipulate core or operating income through misclassification of operating expenses as income-decreasing special items. Design/methodology/approach - Our sample comprises of firms from an emerging market, India with data from 1996-2011. We use the methodology given in McVay (2006) and multiple regressions. Findings - Managers of Indian firms also engage in classification shifting, primary incentive being desire to avoid reporting of operating losses. Further, the use of classification shifting is dependent upon the stage of life cycle in which firm is in. Specifically, firms in the decline stage of life cycle are more likely to use classification shifting to avoid reporting of operating losses. Practical implications - The paper sheds light on a critical phase of the firm life cycle – decline, which increases the possibility of use of classification shifting – an earnings management technique which auditors, investors and regulators find tough to detect. Originality/value - We extend the literature on classification shifting, and present first evidence that such shifting is more likely to take place during the decline phase of firm life cycle.

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