nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2017‒01‒15
eight papers chosen by

  1. Determinants of Internal Audit Task Performance in Nigerian Tertiary Institutions: A Conceptual Approach By Popoola, Oluwatoyin Muse Johnson; Ahmad, Ayoib B Che; Kehinde, Oyewumi Hassan
  2. Honesty or Dishonesty of Taxpayer Communications in an Enforcement Regime By James Alm; David M. Bruner; Michael McKee
  3. An empirical effect of Fraud Specific Problem Representation on Accountants’ Skills and Fraud Risk Assessment By Popoola, Oluwatoyin Muse Johnson; Ahmad, Ayoib B Che; Abdullah, Zaimah; Idris, Kamil Md; Abu Bakar, Fathiyyah
  5. Fiscal Rules and Twin Deficits: The Link between Fiscal and External Balances By Badinger, Harald; Fichet de Clairfontaine, Aurélien; Reuter, Wolf Heinrich
  6. Applying the Fractional Response Model to Survey Research in Accounting By Susanna Gallani; Ranjani Krishnan
  7. Capital Account Openness in Low-income Developing Countries; Evidence from a New Database By Sarwat Jahan; Daili Wang
  8. Does Balance Sheet Strength Drive the Investment Cycle? Evidence from Pre- and Post-Crisis Cyprus By Sophia Chen; Yinqiu Lu

  1. By: Popoola, Oluwatoyin Muse Johnson; Ahmad, Ayoib B Che; Kehinde, Oyewumi Hassan
    Abstract: The increasing rate of financial irregularities, fraud, and mismanagement rocking Nigerian Tertiary Institutions calls for concern. Despite all control measures put in place by the government, coordinating and regulating agencies, and the institutions themselves, lack of transparency and accountability continues unabated. Literature and documentary evidence have shown that lack of functional internal audit department is one of the factors responsible for the frequent occurrence of these acts. The objective of this study, therefore, is to examine conceptually management support and communication skills as the key factors affecting internal audit task performance in the Nigerian tertiary institutions. Based on the existing literature and the pronouncement of accounting and auditing professional bodies, the study develops a framework of these factors as influencing task performance. The study suggests that adequate management support and effective communication skills of internal auditors will enhance the task performance of internal audit department, hence, curbing the incidence of financial malpractices. The study has policy implications as it will assist the proprietors (government and private individuals), coordinating ministries, regulatory authorities, professional bodies, councils and management of tertiary institutions, and auditors in their decision making and oversight functions.
    Keywords: Internal audit, higher education institutions, task performance, management support, communication skills.
    JEL: M4 M40 M41 M42 M48 M49
    Date: 2016–12–30
  2. By: James Alm (Department of Economics, Tulane University); David M. Bruner (Department of Economics, Appalachian State University); Michael McKee (Department of Economics, Appalachian State University)
    Abstract: In many settings the true likelihood of capture when engaging in an illegal activity, such as tax evasion, is not well known to an individual. "Official" statements from the tax administration regarding enforcement effort provide some information. In addition, "informal", or "unofficial", communication among taxpayers can supplement these official announcements, but individuals do not know with certainty whether such unofficial information is honest (or accurate) versus dishonest (or inaccurate). We examine the truthfulness of an individual's revelation of unofficial information to other individuals, along with the factors that affect any revelation, focusing on the intrinsic motivations for revelations. Our experimental design allows us to examine the type and the honesty of messages that an individual chooses to send to other individuals regarding their own audit outcome and their own compliance behavior. Our results indicate that most individuals send accurate messages about their own audit outcomes and their own compliance behaviors. Nevertheless, many individuals are also systematically dishonest about being audited; that is, we observe a significant tendency for individuals to claim that they were audited when they were not. We also observe a strong interaction between individuals' audit outcomes and their compliance behaviors, so that individuals who engaged in tax evasion and who were audited were more truthful in their communications than those whose tax evasion went undetected.
    Keywords: Tax compliance, Tax audits, Information, Honesty, Experimental economics.
    JEL: H2 H26 C91
    Date: 2016–12
  3. By: Popoola, Oluwatoyin Muse Johnson; Ahmad, Ayoib B Che; Abdullah, Zaimah; Idris, Kamil Md; Abu Bakar, Fathiyyah
    Abstract: This paper examines the impact of fraud specific problem representation (FSPR) on the relationship with Accountants’ Skills Requirement (SR) and Fraud risk assessment (FRA) in the Nigerian public sector. The research methodology is quantitative with cross-sectional design and survey. The respondents are accountants (i.e. auditors and forensic accountants) in the public sector accounting and auditing institutions. The study addresses the gap in the literature by highlighting the significant influence of FSPR on SR and FRA regarding fraud detection, prevention and response. The findings from a second generation statistical analysis tool of the Partial Least Square-Structural Equation Modelling (PLS-SEM) confirm the direct relationship of accountants’ skills on fraud risk assessment. Also, a direct relationship of accountants’ skills on fraud specific problem representation, and fraud specific problem representation on fraud risk assessment and the indirect relationship of fraud specific problem representation on skills and fraud risk assessment. This study may help to enhance the regulatory, ethical, institutional and legal framework in Nigeria especially and the developing nations in general. Furthermore, it will accord support for the government transformation programme on efficient and effective public sector and capacity building of the workforce.
    Keywords: Skills requirement, fraud specific problem representation, fraud risk assessment, task performance, forensic accounting, auditing, mediation analysis, developing countries
    JEL: M0 M4 M40 M41 M42 M48
    Date: 2016–12–30
  4. By: Nidhi Varshney; Manjula Jain
    Abstract: The statement of cash flows reports the sources and uses of cash by operating activities, investing activities, financing activities. It shows movement of cash between two balance sheet dates and also discloses the reasons for differences among net income, cash receipts and cash payments. From the financial year 2004-05, it has become obligatory for all the Indian companies to present Cash Flow Statement in their Annual Reports. Institute of Chartered Accounts of India (ICAI) has issued Accounting Standard-3 (AS-3) for the cash flow statement. In this paper, a comparative study has been undertaken between two banks: Bank of Baroda and Syndicate Bank. Key words: Cash, Operating Activities, Investing Activities, Financing Activities. Policy
    Date: 2016–09
  5. By: Badinger, Harald; Fichet de Clairfontaine, Aurélien; Reuter, Wolf Heinrich
    Abstract: This paper investigates the relationship between countries' fiscal balances and current accounts with an emphasis on the role of fiscal rules. The direct effect of fiscal policy on the current account via aggregate (import) demand is potentially amplified by indirect effects, materializing through interest rate effects and inter-generational transfers that reduce savings. On the other hand, the implied positive relation between fiscal and external balances is potentially attenuated by offsetting changes in savings through Ricardian equivalence considerations. We expect this attenuation effect to be stronger in countries with more stringent fiscal rules and test this hypothesis using a panel of 73 countries over the period 1985-2012. As previous studies we find a positive effect of fiscal balances on the current account, supporting the twin deficit hypothesis. However, the effect of fiscal balances on the current account depends on the stringency of fiscal (budget balance or debt) rules in place; it is reduced by one third on average and virtually eliminated for countries with the most stringent fiscal rules. (authors' abstract)
    Keywords: Twin Deficits; Fiscal Policy; Fiscal Rules; Current Account
    Date: 2015–07
  6. By: Susanna Gallani (Harvard Business School, Accounting and Management Unit); Ranjani Krishnan (Eli Broad School of Management, Michigan State University)
    Abstract: Survey research studies make extensive use of rating scales to measure constructs of interest. The bounded nature of such scales presents econometric estimation challenges. Linear estimation methods (e.g. OLS) often produce predicted values that lie outside the rating scales, and fail to account for nonconstant effects of the predictors. Established nonlinear approaches such as logit and probit transformations attenuate many shortcomings of linear methods. However, these nonlinear approaches are challenged by corner solutions, for which they require ad hoc transformations. Censored and truncated regressions alter the composition of the sample, while Tobit methods rely on distributional assumptions that are frequently not reflected in survey data, especially when observations fall at one extreme of the scale owing to surveyor and respondent characteristics. The fractional response model (FRM) (Papke and Wooldridge 1996, 2008) overcomes many limitations of established linear and non-linear econometric solutions in the study of bounded data. In this study, we first review the econometric characteristics of the FRM and discuss its applicability to survey-based studies in accounting. Second, we present results from Monte Carlo simulations to highlight the advantages of using the FRM relative to conventional models. Finally, we use data from a hospital patient satisfaction survey, compare the estimation results from a traditional OLS method and the FRM, and conclude that the FRM provides an improved methodological approach to the study of bounded dependent variables.
    Keywords: Fractional response model, bounded variables, simulation
    JEL: C23 C24 C25 C15 I18 M41
    Date: 2015–08
  7. By: Sarwat Jahan; Daili Wang
    Abstract: The relevance of recording and assessing countries’ capital flow management measures is well-recognized, but very few studies have focused on low-income developing countries (LIDCs). A key constraint is the lack of an appropriate index to measure the openness of capital account and its change over time. This paper fills the gap by constructing a de jure index based on information contained in the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions. It provides an aggregate index to capture the overall openness of the capital account, and also provides a breakdown of openness for various subcategories of capital flows. The new database covers 164 countries with information on 12 types of asset categories over the period 1996–2013. The index provides the largest coverage of LIDCs among all existing indices and also provides granularity on openness across asset types, direction of flows and residency. The paper examines the link between de jure capital account openness with de facto capital flows and outlines potential applications of this database.
    Date: 2016–12–23
  8. By: Sophia Chen; Yinqiu Lu
    Abstract: Fixed investment was the most important contributing factor to the boom-bust cycle in Cyprus over the last decade. Investment boomed during a credit boom in mid-2000s, during which the corporate sector borrowed heavily. Investment collapsed after 2008 when the credit boom ended. Investment and corporate balance sheets further deteriorated during the Cypriot banking crisis over 2012–2014. Using firm-level investment and balance sheet data, we find that corporate indebtedness is negatively associated with investment both before and after the banking crisis, although the effect is weaker after the Cypriot banking crisis, possibly due to the reduced role of credit in driving post-crisis investment and growth. Our results suggest the need to repair corporate balance sheets to support sustainable invesetment.
    Keywords: Investment;Cyprus;Corporate sector;Balance sheets;Cyprus, corporate investment, balance sheet, leverage
    Date: 2016–12–22

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