nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2017‒06‒11
nine papers chosen by

  1. IFRS Goodwill Impairment Test - Audit Approach, Earnings Management, and Capital Market Perception By Albersmann, Benjamin T.
  2. The effect of corporate taxes on investment: Evidence from the Colombian firms By Ligia Alba Melo-Becerra; Javier Ávila Mahecha; Jorge Enrique Ramos-Forero
  3. The Future of Knowledge in the Internal Audit By Emilia Vasile; Daniela Mitran
  4. Taxation trends in the European Union: 2016 edition By European Commission
  5. Tax Policies in the European Union: 2016 Survey By European Commission
  6. The Internal Control Management Development Strategy in Romania By Marin Popescu; Silvia Mihaela Popescu; Maria Daniela Galca
  7. The effects of tax coordination on the tax revenue mobilization in West African Economic and Monetary Union (WAEMU) By Maïmouna DIAKITE; Jean-François BRUN; Souleymane DIARRA; Nasser ARY TANIMOUNE
  8. Making income and property taxes more growth-friendly and redistributive in India By Isabelle Joumard; Alastair Thomas; Hermes Morgavi
  9. The Effects of the Financial Crisis on Cooperative Banks in Europe – A Critical Comparison – By Henselmann, Klaus; Ditter, Dominik; Lupp, Philipp

  1. By: Albersmann, Benjamin T.
    Abstract: This dissertation addresses the goodwill impairment test under IFRS, which prescribes that goodwill is not amortized and instead tested for impairment at least once a year. The objective of introducing this impairment-only approach in 2004 was to provide more useful information to financial statement users. The dissertation is thereforemotivated by the ongoing debate on the decision usefulness and reliability of goodwill impairment tests, as the IASB’s recent post-implementation review on business combinations shows, and the high practical relevance of this topic for firms, auditors, enforcement institutions, and regulators. Against this background, the dissertation (1) sets forth and critically discusses the accounting requirements for goodwill, (2) develops an audit approach for goodwill impairment tests, (3) empirically assesses whether goodwill impairment tests are used as a device for earnings management, and (4) performs two empirical studies to analyze how goodwill impairments are perceived by capital market participants. Based on the requirements of international and German auditing standards and the author’s practical audit experience, a risk-based audit approach is developed that outlines the different audit steps necessary to verify the reasonableness of goodwill impairment tests including practical application guidance for auditors. Using a sample of German listed firms for the periods 2006 to 2013, the main findings of the three empirical studies are that (1) the likelihood to recognize goodwill impairments and the magnitude of impairment losses are influenced by earnings management incentives, (2) investors perceive goodwill impairments as value relevant, but not timely recognized, and (3) the announcement of goodwill impairments leads to a negative capital market reaction, but the reaction is considerably smaller than the goodwill amount written off. Moreover, the perceived timeliness of goodwill impairments is shown to be influenced by auditor characteristics, which serve as a proxy for perceived audit quality. Overall, the empirical results therefore indicate that the concept of impairment testing might generally have merits in reflecting the economic value and consumption of goodwill, but that current accounting requirements might not be sufficient to ensure a rigorous impairment test providing adequate decision useful information. Hence, improvements of the current approach or the implementation of a different approach, e.g. based on certain amortization requirements with indication-based impairment testing, should be discussed.
    Date: 2017–05
  2. By: Ligia Alba Melo-Becerra (Banco de la República de Colombia); Javier Ávila Mahecha (Dirección de Impuestos y Aduanas Nacionales); Jorge Enrique Ramos-Forero (Banco de la República de Colombia)
    Abstract: The paper assesses the role of taxes on investment in Colombian firms. The analysis is carried out at the firm level for the period 2003-2014. During this period, the national government set five different tax reforms, including changes in the statutory tax rates, tax credits and incentives for corporate investment. The effect of corporate taxation on investment is estimated by first determining the impact of taxation on the cost of capital by computing the effective marginal tax rates (EMTRs) at firm level. Then, we estimate the impact of the cost of capital on investment through a panel data regression. Endogeneity is controlled by an instrumental variable approach, simulating post-reform effective marginal tax rates under pre-reform firm characteristics. Results are robust with different control variables, although some significant differences by size and economic sector of the firm are found. Classification JEL: H32, H25, C23, D22
    Keywords: Corporate taxes, Marginal effective tax rate, Investment, cash flows
    Date: 2017–06
  3. By: Emilia Vasile (Athenaeum University of Bucharest); Daniela Mitran (Athenaeum University of Bucharest)
    Abstract: In the last years the focus of internal audit has shifted away from business toward financial controls. In the future internal audit departments need to align their contributions to the organization’s strategic objectives. The purpose of the internal audit which is organised within the entities is to provide counselling to the general management and to assess the functionality of the internal control system, activities by which it brings an additional value to the entity which is audited. The optimal functioning of the entities on the basis of an integrated internal control framework imposes the existence of a proper control environment which should promote the ethical values, be transparent, accept good practice standards and set responsibilities on the same line with the strategies and policies approved by the superior level management.
    Keywords: internal audit, high quality decision, corporate governance, transparancey
    JEL: M4 M2 M1
    Date: 2016
  4. By: European Commission
    Abstract: This report contains a detailed statistical and economic analysis of the tax systems of the Member States of the European Union, plus Iceland and Norway, which are Members of the European Economic Area. The data are presented within a unified statistical framework (the ESA95 harmonised system of national and regional accounts), which makes it possible to assess the heterogeneous national tax systems on a fully comparable basis.
    Keywords: European Union, taxation
    JEL: H23 H24 H25 H27 H71
    Date: 2016–12
  5. By: European Commission
    Abstract: This report aims to improve the transparency of the European Semester process by publishing in a clear and accessible format the main indicators used to examine Member States' tax policies, alongside information on recent tax reforms. It also sets out some reform options and examples to act as inspiration for Member States looking to improve the fairness and efficiency of their tax systems.
    Keywords: European Union, taxation
    JEL: H23 H24 H25 H27 H71
    Date: 2016–11
  6. By: Marin Popescu (Athenaeum University from Bucharest); Silvia Mihaela Popescu (Valahia University from Targoviste); Maria Daniela Galca
    Abstract: The internal control management means all the forms of control exercised at the public entity, including internal audit, established by the management in accordance with its objectives and legal regulations in order to provide fund administration economically, efficiently and effectively; it also includes the organizational structures, methods, and procedures. The phrase, “internal control management†emphasizes the responsibility of all hierarchical levels for controlling all internal processes undertaken in order to achieve its general and specific objectives. The internal control management development strategy prioritizes managerial responsibility and ensures that the implemented internal control management systems are adequate and prevent or limit errors and fraud.
    Keywords: internal control management system, operational procedure, system procedure, risks registry, internal control standards, risk management
    JEL: M40 M42 M48 M49
    Date: 2017–01
  7. By: Maïmouna DIAKITE; Jean-François BRUN (Centre d'Etudes et de Recherches sur le Développement International(CERDI)); Souleymane DIARRA; Nasser ARY TANIMOUNE
    Abstract: A main objective of the regional integration in West African Economic and Monetary Union (WAEMU) is the effective harmonization of national legislations at Community level notably tax legislation. To coordinate taxation in the zone, WAEMU Commission translates into Directives the Decisions taken by the Council of Ministers of the member states. The implementation of the Community acts by countries through tax reforms may impact on their revenue performance. This paper evaluates the impact of the Directives both in terms of coordination and revenue mobilization. It relies on a comparative case study using the synthetic control method developed by Abadie and Gardeazabal (2003) and extended by Abadie, Diamond, and Hainmueller (2010 & 2015). The main results are that the tax coordination affected the revenue mobilization in the Union but the impact is different across countries.
    Keywords: Tax, Tax coordination\harmonization, Tax reform, Synthetic control method, WAEMU.
    JEL: N21 E61 C02
    Date: 2017–06
  8. By: Isabelle Joumard (OECD); Alastair Thomas (OECD); Hermes Morgavi (OECD)
    Abstract: Tax reforms are crucial to promoting inclusive growth in India. The replacement of a myriad of consumption taxes by a Goods and Services Tax (GST) will boost India's competitiveness, investment, job creation and tax compliance. The potential to raise additional revenue from taxes on goods and services is however limited. In contrast, reforming income and property taxes should help to i) raise more revenue to finance much needed social and physical infrastructure while keeping public debt under control; ii) reduce inequality by increasing the redistributive effect of taxation; iii) promote productivity by reducing distortions in the allocation of resources which emanate from the corporate income tax; iv) boost job creation by eliminating the bias against labour-intensive activities; v) promote confidence, and thus investment, by improving clarity and certainty regarding tax rules and their application and vi) reinforce the ability of states and municipalities to provide key public infrastructure and services. This paper presents the main characteristics of the tax system as well as the rationale and options for reform.
    Keywords: base erosion and profit shifting, income tax, inheritance tax, tax administration, tax system
    JEL: H20 H24 H25 H26 H71
    Date: 2017–06–08
  9. By: Henselmann, Klaus; Ditter, Dominik; Lupp, Philipp
    Abstract: The financial crisis has highlighted the necessity of discussions on the adequacy of banking regulation and accounting standard-setting for financial institutions. We compare the development of several variables in this context between commercial banks, cooperative banks and savings banks from 2005 through 2013, in order to investigate whether smaller banks such as cooperative banks or savings banks tended to be more robust to the financial crisis. We find that the volume of lending (loan loss provisioning) remained stable or increased (decreased) for smaller financial institutions. Furthermore, there is no significant increase in loss avoidance behavior specifically for cooperative banks. Cooperative banks are also the group of banks that showed the least pro-cyclical effects and the most income smoothing behavior. Our results suggest that cooperative banks were the group of banks being most stable during the years surrounding the financial crisis in 2007/2008. This demonstrates the importance that policy makers consider the broad range of financial institutions for discussions on policy adjustments.
    Keywords: Cooperative Banks,Financial Crisis,Loan Loss Provisioning,IFRS
    JEL: M41 M48 G21 G28 G18
    Date: 2016

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