nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2016‒09‒25
five papers chosen by

  2. Balancing Act: Weighing the Factors Affecting the Taxation of Capital Income in a Small Open Economy By McKeehan, Margaret K.; Zodrow, George R.
  3. Earnings Quality and IFRS Research in Africa: Recent Evidence, Issues and Future Direction By Ozili, P K
  4. Taxing Royalty Payments By Juranek, Steffen; Schindler, Dirk; Schjelderup, Guttorm
  5. The Investment CAPM By Zhang, Lu

  1. By: Raymond A. Ezejiofor (Nnamdi Azikiwe University); Nkiru Peace Nwakoby (Nnamdi Azikiwe University); Jane F. N. Okoye, (Nnamdi Azikiwe University)
    Abstract: This study determine the impact of forensic accounting in combating fraudulent activities in order to ensure good corporate governance practice in Nigerian banking sector. Two hypotheses were formulated in line with the objectives of the study. Survey method was adopted and data were collected through the use of questionnaire. Data collected from sample of fifty five (55) respondents from commercial banks in Awka, Anambra state and were analyzed with five point likert's scale. The two hypotheses formulated were tested using t-test statistical techniques with aid of SPSS version 20.0. The study found among others Forensic accounting is an effective tool for addressing financial crimes in the banking system. Also the forensic audit necessitated in ensuring corporate governance in corporate organizations. Based on this, the study recommended among others the apex bank need to engage the service of forensic accounting to compliment efforts of other professional in reducing fraudulent activities in order to ensure corporate governance in financial sector.
    Keywords: Forensic accounting, financial fraud and banking industry
    Date: 2016–09–03
  2. By: McKeehan, Margaret K. (Rice University); Zodrow, George R. (Rice University and Centre for Business Taxation, Oxford University)
    Abstract: Alternative economic theories yield dramatically different prescriptions for optimal capital taxation in small open economies. On the one hand, foreign firms, including those with investments that yield firm-specific above-normal returns, have a large number of alternative investment opportunities; this suggests that the supply of foreign direct investment is highly elastic, which implies that small open economies should avoid imposing any source-based taxes on capital income. On the other hand, governments invariably want to tax any above-normal returns earned by location-specific capital, especially if the returns accrue to foreigners, and to take full advantage of the potential revenue increase from any "treasury transfer" effect that arises due to residence-based tax systems with foreign tax credits, such as that utilized by the United States. These factors suggest that investment is highly inelastic with respect to capital taxation, so that source-based capital income taxation is desirable; indeed, in one special case, the capital income tax rate for a small open economy should equal the relatively high US tax rate. Moreover, this difficult trade-off is in practice complicated by numerous additional factors: deferral of unrepatriated profits and cross-crediting of foreign tax credits for US multinationals, foreign direct investment from firms from countries that, unlike the United States, operate territorial systems, and the existence of opportunities for both international capital income shifting and labor income shifting. In this paper, we analyze optimal capital income taxation in a small open economy model that attempts to balance these conflicting factors.
    JEL: H21 H25
    Date: 2016–06
  3. By: Ozili, P K
    Abstract: This paper review the recent empirical research on IFRS and earnings quality among African studies and show mixed conclusions regarding the impact of IFRS on earnings quality and financial reporting quality in the region. Also, some discussions on factors that led to the growth in the earnings quality African literature over the last decade as well as some challenges in the recent literature, are provided. Also, the study makes several observations regarding IFRS and earnings quality research in Africa and suggests potential directions for future research. The need to (i) understand the recent direction of earnings quality research in Africa, (ii) understand the interaction between policy and earnings quality research, if any, in the African region, and (iii) the need to maintain high-level rigour in earnings quality research while ensuring greater interaction between policy and research, makes this study important. Given the paucity of research on earnings quality in developing countries, this study contributes to the broader earnings quality literature by providing a review of the African earnings quality literature; hence, conclusions based on empirical studies in this review are not intended to be generalised to developed countries but only to developing countries. Finally, while insights in this paper may be informative to the reader, the intended objective is to stimulate debates that would improve the outputs of earnings quality research and the overall quality of accounting disclosure among firms in Africa.
    Keywords: Earnings quality, Standard setting, Earnings management, IFRS adoption, Accounting quality, Disclosure regulation.
    JEL: M4 M41 M42
    Date: 2016–08
  4. By: Juranek, Steffen (Dept. of Business and Management Science, Norwegian School of Economics); Schindler, Dirk (Dept. of Accounting, Auditing and Law, Norwegian School of Economics); Schjelderup, Guttorm (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: The digital economy is characterized by the use of intellectual property such as software, patents and trademarks. The pricing of such intangibles is widely used to shift profits to low-tax countries. We analyze the role of a source tax on royalty payments for abusive transfer pricing, and optimal tax policy. First, we show that mispricing of royalty payments does not affect investment behavior by multinationals. Second, it is in the vast majority of cases not optimal for a government to set the source tax equal to the corporate tax rate. The reason is that shutting down abusive transfer pricing activities needs to be traded off against mitigating the corporate tax distortion in capital investment. The latter can be achieved by some tax deductibility of royalty payments. If the true arm's length transfer price equals zero or for special corporate tax systems that treat debt and equity alike (i.e., for ACE and CBIT), it will be optimal to equate both tax rates.
    Keywords: Royalty taxation; intellectual property; multinationals; profit shifting
    JEL: F23 H21 H25
    Date: 2016–09–16
  5. By: Zhang, Lu (OH State University)
    Abstract: A new class of Capital Asset Pricing Models arises from the first principle of real investment for individual firms. Conceptually as "causal" as the consumption CAPM, yet empirically more tractable, the investment CAPM emerges as a leading asset pricing paradigm. Firms do a good job in aligning investment policies with costs of capital, and this alignment drives many empirical patterns that are anomalous in the consumption CAPM. Most important, integrating the anomalies literature in finance and accounting with neoclassical economics, the investment CAPM succeeds in mounting an efficient markets counterrevolution to behavioral finance in the past 15 years.
    JEL: G12 G14
    Date: 2015–12

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.