nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2018‒02‒05
three papers chosen by

  1. Can Audits Backfire? Evidence from Public Procurement in Chile By Gerardino, Maria Paula; Litschig, Stephan; Pomeranz, Dina
  2. Predicting earnings and cash flows: The information content of losses and tax loss carryforwards By Dreher, Sandra; Eichfelder, Sebastian; Noth, Felix
  3. International Tax Reforms with Flexible Prices By Assaf Razin; Efraim Sadka

  1. By: Gerardino, Maria Paula; Litschig, Stephan; Pomeranz, Dina
    Abstract: Audits are generally intended to monitor compliance with existing rules. However, audits can also create unintended effects and incentives through the specific protocol by which they are executed. In particular, audits can discourage the use of complex administrative procedures with more rules for auditors to check. This paper investigates the effects of procurement audits on public entities' choice of purchase procedures in Chile. While the national procurement legislation tries to promote the use of more transparent and competitive auctions rather than discretionary direct contracts for selection of suppliers, auctions are significantly more complex and the audit protocol mechanically leads to more scrutiny and a higher probability of further investigation for auctions than for direct contracts. Using a regression discontinuity design based on a scoring rule of the National Comptroller Agency, we find that audits lead to a decrease in the use of auctions and a corresponding increase in the use of direct contracts. In order to further test the underlying mechanism, we develop a new approach to conduct subgroup analysis in regression discontinuity designs while holding other observables constant.
    Date: 2017–12
  2. By: Dreher, Sandra; Eichfelder, Sebastian; Noth, Felix
    Abstract: We analyze the relevande of losses, accounting information on tax loss carryforwards, and deferred taxes for the prediction of earnings and cash flows up to four years ahead. We use a unique hand-collected panel of German listed firms encompassing detailed information on tax loss carryforwards and deferred taxes from the tax footnote. Our out-of-sample predictions show that considering accounting informaton on tax loss carryforwards and deferred taxes does not enhance the accuracy of performance forecasts and can even worsen performance predictions. We find that common forecasting approaches that treat positive and negative performances equally or that use a dummy variable for negative performance can lead to biased performance forecasts and we provide a simple empirical specification to account for that issue.
    Keywords: perfomance forecast,in-sample prediction,out-of-sample prediction,loss persistence,deferred taxes,tax loss carryforwards
    JEL: M40 M41 C53
    Date: 2017
  3. By: Assaf Razin; Efraim Sadka
    Abstract: The growing spread of globalization creates a genuine need for international tax reforms. In this we establish the neutrality of border-tax adjustments of the income tax; the welfare dominance of residence-based over source-based income taxation, albeit at the cost of a larger trade deficit; and the ineffectiveness of non-transitory border taxes as a means for reducing the trade deficit.
    JEL: F0 G20 H2
    Date: 2018–01

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