nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2018‒03‒19
fifteen papers chosen by

  1. Audit Firm Reputation versus Auditor Capability: Their Effect on Audit Quality in Indonesia By Astrid Rudyanto
  2. Antecedent Factors on an Auditors' Attitude Towards Conducting an Intended Qualified Audit By Hendrian
  3. Earnings Management, Corporate Governance and Tax Avoidance: The Case in Indonesia By Lulus Kurniasih
  4. The Effect of Corporate Governance, Ownership and Tax Aggressiveness on Earnings Management By Nico Alexander
  5. Firms’ financial surpluses in advanced economies: the role of net foreign direct investments By Tatiana Cesaroni; Riccardo De Bonis; Luigi Infante
  6. Advances and Issues in Fraud Research: A Commentary By Ozili, Peterson K
  7. Tax certainty: Proposals for the short term and the long term By Diaz de Sarralde, Santiago; von Haldenwang, Christian; Hentze, Tobias; Monkam, Nara
  8. The Effect of IFRS Convergence on Earnings Quality: Empirical Evidence from Indonesia By Paulina Sutrisno
  9. Taxation of Insurance By Vidar Christiansen
  10. The Effect of Application of Management Accounting To Performance through Strategy By Ali Muktiyanto
  11. The effect of Double Taxation Treaties and Territorial Tax Systems on Foreign Direct Investment: Evidence for Spain By Castillo-Murciego, Ángela; López Laborda, Julio
  12. Increasing resource rent taxation when the corporate income tax is reduced? By Lund, Diderik
  13. Introducing an Advance Tax Ruling (ATR) Regime By Christophe J Waerzeggers; Cory Hillier
  14. Public Tax-Return Disclosure By Jeffrey L. Hoopes; Leslie Robinson; Joel Slemrod
  15. Bosnia and Herzegovina; Technical Assistance Report-Government Finance Statistics By International Monetary Fund

  1. By: Astrid Rudyanto (Department of Accountancy, Trisakti School of Management Author-2-Name: Dipta Daniswari Author-2-Workplace-Name: Trisakti School of Management, Jl. Kyai Tapa No 20, 11440, Jakarta, Indonesia Author-3-Name: Yuli Oktaviani Author-3-Workplace-Name: Trisakti School of Management, Jl. Kyai Tapa No 20, 11440, Jakarta, Indonesia)
    Abstract: Objective –The emergence of the ASEAN Single Window has triggered the need for higher audit quality in ASEAN countries, including Indonesia. A recent study conducted in Indonesia reveals that the reputation of auditing firms, as rated by clients and users, and auditor's competence, as rated by the auditor, are the primary determinants of audit quality. The purpose of this study is to analyze whether the reputation or competence of an auditor affects audit quality, within manufacturing companies in Indonesia. Methodology/Technique –This paper contributes to the creation of new measurements for auditor capability, by highlighting empirical evidence concerning the determinants of audit quality in Indonesia. Findings – By using discretionary accrual as the inverse determinant of audit quality, the result show that financial statements audited by reputable auditing firms contain the same discretionary accruals as those audited by other firms. The results further demonstrate that auditor capability does not affect audit quality. Audit quality in Indonesia is therefore not determined by firm reputation or auditor capability. Hence, it is important to search for new determinants of audit quality. Research Limitations/Implications – The limitation of this research is the low number of reputable audit firms and specialized auditors used by the sample firms, which lead to the exclusion of numerous controlled variables that may be integral when explaining audit quality. Future studies may use other sample firms and use additional controlled variables, to further explain audit quality.
    Keywords: Audit Quality; Discretionary Accrual; Audit Firm Reputation; Auditor Capability
    JEL: M40 M42
    Date: 2017–12–16
  2. By: Hendrian (Universitas Terbuka,Indonesia Author-2-Name: Rini Dwiyani Hadiwidjaja Author-2-Workplace-Name: Universitas Terbuka, Indonesia Author-3-Name: Eko Suwardi Author-3-Workplace-Name: Universitas Gadjah Mada, Indonesia)
    Abstract: Objective – This study proposes to investigate an auditor's works by usingthe model on the Theory of Reasoned Action (TRA), with the inducement of intervention by a supervisor, that influences an auditor's aattitudes. The study uses the TRA proposed by Fishben and Ajzen (1975) to predict and explain the behaviors of Indonesian auditors. The results reveal those factors influencing an auditor's intention to provide qualified and reliable audit reports. Methodology/Technique – The study focuses on audit implementation in the public sector, specifically the auditing of financial statements in regional administrations. The study examined a total of 53 governmental auditors from the Audit Board of the Indonesian Republic (BPK-RI). A Structural Equation Model (SEM) was used for the analysis. Findings – The results of the study show that perceived audit risk, moral norms, and incentives have a positive and statistically significant impact on an auditor's attitude when performing an audit. Meanwhile, intervention by a supervisor has a negative impact, and is not statistically significant towards the auditor's attitude and behavior. This means that the auditor's attitude and behavior implies that there is no intervention from their supervisor when performing an audit. Furthermore, an auditor's attitude influences their intention to perform qualified and credible audits. Novelty – This study infers that The Indonesian Republic Decree No. 188 of the Year 2014 regarding Personel Performance Benefit in the Audit Boards of Indonesia Republic (BPK-RI) is achieving its intended purpose.
    Keywords: Auditor; Attitude; Risk Perception; Audit Reports
    JEL: M40 M42
    Date: 2017–12–21
  3. By: Lulus Kurniasih (Sebelas Maret, Surakarta, Indonesia Author-2-Name: Sulardi Author-2-Workplace-Name: Universitas Sebelas Maret, Surakarta, Indonesia Author-3-Name: Sri Suranta Author-3-Workplace-Name: Universitas Sebelas Maret, Surakarta, Indonesia)
    Abstract: Objective – This study aims to determine the effect of earning management and corporate governance mechanisms on corporate tax avoidance. Methodology/Technique – Corporate governance mechanisms use institutional ownership, the size of the board of commissioners, the percentage of independent commissioners, auditing committees, and audit quality as proxies. Meanwhile, earnings management uses the modified Jones model. The sample of this study includes non-financial companies that are listed on the Indonesian Stock Exchange (IDX) between 2014 and 2016. Findings – Corporate tax avoidance can be detected by using the effective tax rate (ETR), which is the ratio of income to tax expenses. This sample was chosen using a purposive sampling method, resulting in 871 firms. The results suggest that earnings management has a significant impact on ETR. Novelty – This study identifies that only independent commissioners and audit quality have a significant influence on ETR.
    Keywords: Tax Avoidance; Earnings Management; Corporate Governance; Effective Tax Rate; Audit Quality.
    JEL: G3 G39 G39
    Date: 2017–12–02
  4. By: Nico Alexander (Trisakti School of Management, Kyai tapa No. 20, 11440, Jakarta, Indonesia Author-2-Name: Silvy Christina Author-2-Workplace-Name: Trisakti School of Management, Kyai tapa No. 20, 11440, Jakarta, Indonesia)
    Abstract: Objective –The purpose of this research is to empirically examine the effect of corporate governance, ownership and tax aggressiveness on earnings management. Methodology/Technique –The population of this research consists of non-financial companies listed on the Indonesian Stock Exchange (IDX) between 2013 and 2015. This research uses 3 recent years and utilizes different variable that have not been used in prior research. The 67 samples were choose using a purposive sampling method. The hypotheses are tested using multiple regression analysis with the SPSS program, to investigate the influence of each independent variable on earnings management. Findings –The results show that the board of director have a positive influence on earnings management, while board independence, audit quality, managerial ownership, and tax aggressiveness have no influence on earnings management. Novelty –This research add value in the existing literature and empirically study the effect of the board of directors, independence of the board, audit quality, managerial ownership, and tax agressiveness on earnings management.
    Keywords: Earnings Management; Corporate Governance; Ownership; Tax Aggressiveness.
    JEL: M40 M41 M49
    Date: 2017–12–21
  5. By: Tatiana Cesaroni (Bank of Italy); Riccardo De Bonis (Bank of Italy); Luigi Infante (Bank of Italy)
    Abstract: According to macroeconomic predictions firms are expected to be net borrowers: the net change of their financial assets should be smaller than the net change of their financial liabilities. However, since the mid-1990s, the non–financial sector has been on average a net lender in countries such as Japan, the UK, Germany and the Netherlands. Conversely firms remained on average net borrowers in countries such as France, Italy and the US. Using financial accounts, we investigate the sources of corporate sector surpluses and deficits applying panel data techniques. Our statistics include 18 industrial countries over the period 1995-2014. We find that firms’ surpluses are structurally linked to net foreign direct investments. The econometric results are robust to the use of variables that control for the business cycle, such as the output gap, the ratio of corporate investment to GDP, firms’ profits and leverage, and taxation.
    Keywords: net lending/net borrowing, corporate sector, global saving glut, panel data
    JEL: E2 G3
    Date: 2017–11
  6. By: Ozili, Peterson K
    Abstract: This article discusses some observations in the forensic accounting-based fraud literature. We identify recent advances in the literature and highlight several important issues that are worth noting. The main message of this commentary article is that fraud is complicated, and fraud complexity can significantly impact the way we undertake forensic accounting-based fraud research. The practical implication is that forensic accountants and forensic accounting researchers should incorporate into their practice the complexity of fraud regardless of whether they follow an empirical, experimental, exploratory, analytical or critical approach to fraud investigation.
    Keywords: Fraud; Forensic Accounting; Fraud Detection; Financial Reporting; Data Mining; Forensic Accounting Education; Banking.
    JEL: G3 M1 M4 M41 M42
    Date: 2018–03–01
  7. By: Diaz de Sarralde, Santiago; von Haldenwang, Christian; Hentze, Tobias; Monkam, Nara
    Abstract: Tax certainty aims at the stabilization of expectations of both, taxpayers and governments. Improving tax payer service, easing cooperation channels and clarifying legal framework are strategies already in place to increase tax certainty, even though to different extent depending on the countries level of development. For the short run, concrete measures can be recommended through which international cooperation can contribute to strengthening tax certainty. These measures concern the establishment of enhanced engagement programs, the development of model legislation as a tool for the implementation of international rules and standards, the alignment of bilateral treaties and domestic legislation to international good practices, using the country-by-country-report as an indicator for the adequacy of tax payments and setting up investment incentives. In the long run, a radical change in the international tax scheme is suggested since, amongst others, the current rules do not match with the emerging digital economy. A unitary taxation system might be therefore the appropriate response even if the implementation on an international level is complex.
    Keywords: corporate taxation,international profit shifting,tax certainty
    JEL: H25 H26 O19
    Date: 2018
  8. By: Paulina Sutrisno (Trisakti School of Management Author-2-Name: Indra Arifin Djashan Author-2-Workplace-Name: Trisakti School of Management)
    Abstract: Objective –The purpose of this research is to examine the impact of the International Financial Reporting Standard (IFRS) convergence in Indonesia on earnings quality. Methodology/Technique – Earnings quality is measured on both accrual earnings management and real earnings management. Indonesia began convergence IFRS in 2012. IFRS is considered capable of improving comparability, transparency, and earnings information, which is expected to ultimately improve earnings quality. The sample in this research uses manufacturing firms listed on the Indonesian Stock Exchange that were suspected to avoid loss during the observation period. The data consist of 45 companies examined between 2008 and 2015. Results –This study uses statistical methods and multiple regression linear to analyse the data. The research results show that IFRS convergence in Indonesia has had a negative impact on accrual earnings management and no impact on real earnings management. Novelty –The evidence shows that IFRS convergence in Indonesia has the ability to improve earnings quality related to a decrease in accrual earnings management but not real earnings management.
    Keywords: IFRS; Discretionary Accrual; Abnormal Cash Flow Operation; Abnormal Production; Abnormal Discretionary Expenditure.
    JEL: M40 M41 M49
    Date: 2017–12–09
  9. By: Vidar Christiansen
    Abstract: Should we exempt the services of insurance companies from VAT? Addressing this issue, the paper distinguishes between insurance against a general loss of resources and a loss of a specific commodity (property insurance). There is a case for exempting the former kind of insurance, but not the latter. Finally, comparing insurance through a producer warranty with insurance provided separately by an insurance company, it is conceivable that tax exemption of the latter will distort the choice of product quality.
    Keywords: insurance, warranties, value added tax, VAT exemptions
    JEL: H21
    Date: 2017
  10. By: Ali Muktiyanto (Universitas Terbuka, Jalan Cabe Raya-Pamulang, 15418, Tangerang Selatan, Indonesia)
    Abstract: Objective – The context strategy as process and strategy as content have significant impact to the correlation between strategy and management accounting (Muktiyanto, 2016; Parnell, 2010). In the context strategy as process, this paper aims to investigate the role of management accounting to performance through the choice of strategy. Methodology/Technique – The method by structural equation modeling on 70 (seventy) of undergraduate Accounting Study Program (composition: 70% Private Universities and 30% Public Universities). Opposite with Henry (2006) and Widener (2007) and support with Speklé and Verbeeten (2014) and Acquaah (2013). Findings – This paper shown that the accounting management directly influence the performance, but not mediated by strategy. The practice of budgetary slack, the implementation of modern accounting such as activity-based costing and target costing, the use of performance measurement techniques such as the balanced scorecard, measurements based performance, and the economic value added, as well as integrated information system is an important factor in improving the performance of Higher Education. Unfortunately, the choice of strategy moderate or "stuck in the middle" has not been able to improve the performance of Higher Education directly nor as a mediating between management accounting and performance. However, in the context strategy as process, management accounting have positive influence to the strategic choice. Novelty – The effort of Higher Education to improve the performance is choose a single strategy or focus on the prospector's strategy.
    Keywords: Management Accounting, Strategy, Performance, Indonesia.
    JEL: M40 M41
    Date: 2017–12–23
  11. By: Castillo-Murciego, Ángela; López Laborda, Julio
    Abstract: The present paper evaluates the effect of Double Taxation Treaties and the Territorial Tax System of countries on Spain's inward and outward FDI for the period 1993-2013. Estimations produce a positive and statistically significant effect of Treaties for both samples when using a simple binary variable for measuring the effect of the mere existence of the same. These outcomes keep for old and new Treaties and for the sub-sample of developed partner countries of Spain. However, regarding developing countries, the positive result exists only for the outbound sample. Also for the global samples and the sub-samples of developed countries, there is an additional positive effect on investments for countries applying the Territorial Tax System for taxing foreign income.
    Keywords: Foreign Direct Investment,Double Taxation Treaty,Territorial Tax System,Spain
    JEL: F21 F23 H25 H32 H87
    Date: 2018
  12. By: Lund, Diderik (Dept. of Economics, University of Oslo)
    Abstract: Under international tax competition, corporate income tax rates are predicted to decrease, and the tax burden will shift onto immobile factors. This case study considers tax changes that illustrate the predictions for Norway 2012–2018. Petroleum rent was taxed at high rates in 2012, and while corporate income tax rates were reduced in four steps, the marginal tax on rent was kept constant. The four steps are analyzed in light of the tax burden shift predicted by theory, and possible intentions of the government. The tax on petroleum rent has not been increased. Government intentions seem to have been shifting.
    Keywords: rent taxation; tax competition; immobile factors; petroleum; Norway
    JEL: H21 H25 H87 Q30
    Date: 2018–02–15
  13. By: Christophe J Waerzeggers; Cory Hillier
    Abstract: Advance tax rulings are a common feature of mature tax systems. The tax systems of the United States, the United Kingdom, the Netherlands, Germany, Australia, and South Africa all have established ruling practices. Taxpayers can obtain an advance tax ruling in nearly all OECD member countries. Increasingly, many non-OECD countries are also offering advance tax rulings. An advance tax ruling regime seeks to promote clarity and consistency regarding the application of the tax law for both taxpayers and the tax authority. However, there are also inherent risks associated with the proliferation of granting confidential advance tax rulings which are not published or otherwise reported. This Tax Law IMF Technical Note focuses on designing an advance tax ruling regime in the nature of private tax rulings.
    Keywords: United Kingdom;United States;Western Hemisphere;Netherlands;South Africa;Sub-Saharan Africa;Taxation;Asia and Pacific;Australia;Europe;Germany;tax, tax law, taxpayer, taxpayers, tax rulings, Fiscal, Rulings, Legal design, Legal drafting,
    Date: 2016–05–31
  14. By: Jeffrey L. Hoopes; Leslie Robinson; Joel Slemrod
    Abstract: We investigate the consequences of public disclosure of information from company income tax returns filed in Australia. Supporters of more disclosure argue that increased transparency will improve tax compliance, while opponents argue that it will divulge sensitive information that is, in many cases, misunderstood. Our results show that in Australia large private companies experienced some consumer backlash and, perhaps partly in anticipation, some acted to avoid disclosure. We detect a small increase (decrease) in tax payments for private (public) firms subject to disclosure suggesting differential costs of disclosure across firms. Finally, we find that investors react negatively to anticipated and actual disclosure of tax information, most likely due to anticipated policy backlash rather than consumer backlash or the revelation of negative information about cash flows. These findings are important for both managers and policy makers, as the trend towards increased tax disclosure continues to rise globally.
    JEL: H25 H26 M4
    Date: 2018–02
  15. By: International Monetary Fund
    Abstract: In response to a request for IMF technical assistance (TA) made by the Ministry of Finance (MOF) of the Republic of Srpska (RS), Bosnia and Herzegovina, a TA mission on government finance statistics (GFS) visited Banja Luka, Bosnia and Herzegovina, during June 27–July 1, 2016. It was the fourth mission to Bosnia and Herzegovina and the first mission to the RS to be conducted under the Swiss State Secretariat for Economic Affairs-GFS capacity building project. The main objective of the mission was to assist the MOF of the RS in the compilation and dissemination of GFS in accordance with the guidelines of the Government Finance Statistics Manual 2014 (GFSM 2014) and the European System of Accounts (ESA 2010).
    Date: 2018–02–22

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