nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2018‒04‒02
seventeen papers chosen by

  1. Internal and External Determinants of Audit Delay: Evidence from Indonesian Manufacturing Companies By Patricia Diana
  2. Taxing Hidden Wealth: The Consequences of U.S. Enforcement Initiatives on Evasive Foreign Accounts By Niels Johannesen; Patrick Langetieg; Daniel Reck; Max Risch; Joel Slemrod
  3. Does Taxation Stifle Corporate Investment? Firm-Level Evidence from ASEAN Countries By Serhan Cevik; Fedor Miryugin
  4. Tax and financial reporting aggressiveness: evidence from Europe By Alexandra Fernandes; António Cerqueira; Elísio Brandão
  5. The effect of capital ratio on lending: Do loan-loss provisioning practices matter? By Malgorzata Olszak; Patrycja Chodnicka-Jaworska; Iwona Kowalska; Filip Œwita³a
  6. A Viable International Tax-Order for Cross-Border Pensions By Bernd Genser
  7. Earnings Management, Effective Tax Rate (Etr) And Book-Tax Gap (Btg) By Jasrial
  8. Opportunistic Behavior, External Monitoring Mechanisms, Corporate Governance, and Earnings Management By Agustina Chandra
  9. Emotional Intelligence and Job Performance of Accounting Students Undertaking Internships By Arif Lukman Santoso
  10. Alternatives For Reserve Balances And The Fed's Balance Sheet In The Future By John B. Taylor
  11. The Dynamic Effects of Computerized VAT Invoices on Chinese Manufacturing Firms By Fan, Haichao; Liu, Yu; Qian, Nancy; Wen, Jaya
  12. Preliminary investigations for better monitoring. Learning in repeated insurance audits By Reda Aboutajdine; Pierre Picard
  13. Transfer Pricing and Partial Tax Harmonization By Wolfgang Eggert; Gideon Goerdt; Sebastian Felix Heitzmann
  14. The Cyclicality Of Fiscal Policy In Bolivia By Darwin Ugarte Ontiveros
  15. How to Strengthen the Management of Government Guarantees By International Monetary Fund
  16. How to Improve the Financial Oversight of Public Corporations By Richard I Allen; Miguel A Alves
  17. Tax Evasion and Inequality By Alstadsaeter, Annette; Johannesen, Niels; Zucman, Gabriel

  1. By: Patricia Diana (Universitas Multimedia Nusantara, Gading Serpong - Tangerang, 15810, Banten, Indonesia Author-2-Name: Maggy Author-2-Workplace-Name: Universitas Multimedia Nusantara, Gading Serpong - Tangerang, 15810, Banten, Indonesia)
    Abstract: Objective – This study aims to examine and explain the relationship between a company's internal factors such as profitability, solvency and audit committee, and external factors including complexity and size of public accounting firms, with audit delay. Methodology/Technique – The importance of financial information is, in part, due to its utility for assessment of company performance. Hence, financial information should be produced and reported as quickly as possible each year. Findings – This study finds that manufacturing companies with high debt levels and low profitability experience longer audit delay. Moreover, the results in this study show that debt level is the most influential and significant factor with a positive relationship to audit delay. Novelty – This study shows that profitability, the number of members on an audit committees and public accounting firm (KAP) size all have an insignificant negative relationship with audit delay. Further, complexity has an insignificant positive relationship with audit delay.
    Keywords: Profitability; Debt; Complexity; Audit Committees; Audit Delays.
    JEL: M42 M41
    Date: 2018–02–21
  2. By: Niels Johannesen; Patrick Langetieg; Daniel Reck; Max Risch; Joel Slemrod
    Abstract: In 2008, the IRS initiated efforts to curb the use of offshore accounts to evade taxes. This paper uses administrative microdata to examine the impact of the enforcement efforts on taxpayers’ reporting of offshore accounts and income. Enforcement caused approximately 60,000 individuals to disclose offshore accounts with a combined value of around $120 billion. Most disclosures happened outside offshore voluntary disclosure programs by individuals who never admitted prior noncompliance. The disclosed accounts were concentrated in countries whose institutions facilitate tax evasion. The enforcement-driven disclosures increased annual reported capital income by $2.5-$4 billion corresponding to $0.7-$1.0 billion in additional tax revenue.
    JEL: H24 H26
    Date: 2018–03
  3. By: Serhan Cevik; Fedor Miryugin
    Abstract: This paper conducts a firm-level analysis of the effect of taxation on corporate investment patterns in member states of the Association of Southeast Asian Nations (ASEAN). Using large-scale panel data on nonfinancial firms over the period 1990–2014, and controlling for macro-structural differences among countries, we find a significant degree of persistence in firms’ net fixed investments over time, which vary with firm characteristics, such as size, sales, profitability, leverage, and age. Our analysis brings up interesting empirical results, including nonlinear patterns of behavior in firms’ capital investment decisions acrosss ASEAN countries. Concerning the main variable of interest, we find that a moderate level of taxation does not hinder business investment, but this effect turns negative as higher tax burden raises the user cost of capital and distorts resource allocations.
    Date: 2018–03–02
  4. By: Alexandra Fernandes (Alexandra Fernandes); António Cerqueira (António Cerqueira); Elísio Brandão (Elísio Brandão)
    Abstract: This study examines the relation between financial and tax aggressive reports on public companies from Europe-15, over the period of 2001-2015. Also, it pretends to analyse if the link between tax and financial aggressiveness gets weaker after IFRS adoption in Europe. To run empirical work, I use discretionary accruals calculated by modified-Jones model (Dechow, Sloan, and Sweeney 1995) as a proxy of financial aggressiveness (DFIN) and discretionary permanent differences as a measure of tax aggressiveness (DTAX) (used by Mary Frank, Luann Lynch and Sonja Rego, 2009), which I estimate using EGLS cross section weights for year and Fama- French 12 industries. To prove that firms with aggressive tax report tend to be financial aggressive and that the link between tax and financial aggressiveness is more significant before IFRS implementation I analyse Pearson and Spearman correlation. Additionally, I estimate relation between DTAX and DFIN when controlling for firm size, earnings management and tax planning incentives using OLS and apply the same model with period restriction for before and after IFRS adoption. Results suggest that financial aggressive firms tend to also be tax aggressive and the link between these two aggressive reports is weaker after IFRS adoption
    Keywords: Tax planning, earnings management, book tax differences, aggressive financial report, aggressive tax report.
    JEL: E62 G32 H26
    Date: 2017–11
  5. By: Malgorzata Olszak (Department of Banking and Money Markets, Faculty of Management, University of Warsaw, Poland); Patrycja Chodnicka-Jaworska (Department of Banking and Money Markets, Faculty of Management, University of Warsaw, Poland); Iwona Kowalska (Department of Mathematics and Statistical Methods, Faculty of Management, University of Warsaw, Poland); Filip Œwita³a (Chair of Market Economy, Faculty of Management, University of Warsaw, Poland)
    Abstract: This paper examines the impact of bank capital ratios on bank lending by comparing differences in loan growth to differences in capital ratios at sets of banks that are clustered based on loan-loss provisioning practices. Applying fixed-effects estimator to sample of all commercial banks operating in Poland and using a unique quarterly dataset covering the period of 1999:4-2012:4 we find that loans growth is particularly capital constrained in poorly-capitalized banks, during both non-recessionary and recessionary periods. Lending of banks with low procyclicality of loan-loss provisions (LLP) is not affected by capital ratio in recessionary periods. Low-procyclicality of LLPs does not make poorly- capitalized banks’ lending immune to recessionary capital crunch. In contrast to common view, profit stabilizing practices achieved through income-smoothing do not make banks’ lending resilient to capital constraints during recession, as we find that high income-smoothing banks seem to suffer from increased capital pressures in their lending. This effect is also present in well-capitalized banks. The implication of our research is that decision-makers implementing new accounting standards for loan-loss allowance (the Expected Credit Loss approach) may not be effective in reducing procyclicality of capital regulation, if they will attempt to reduce recessionary capital constraints solely through profit-stabilizing income-smoothing.
    Keywords: lending, capital ratio, procyclicality, earnings management, income-smoothing, capital management
    JEL: G21 G28 G32 M41
    Date: 2017–12
  6. By: Bernd Genser (Professor of Economics, University of Konstanz; Professor of Economics and Fellow of the Austrian Academy of Sciences (Vienna))
    Abstract: There is strong evidence that the existing pattern of cross-border pension taxation in OECD countries and beyond is extremely diverse and inconsistent and thus generates a double equity dilemma for individuals and countries alike. We argue that this dilemma cannot be solved within the current double-taxation treaty network and therefore propose a new conceptual framework for the taxation of old-age pensions in a world of high and increasing cross-border mobility of workers and pensioners. We demonstrate that a coordinated move to a front-loaded pension tax system and exclusive source taxation would pave the way for an international pension tax order which eliminates the double equity dilemma. As an additional innovative element of front-loaded pension taxation we discuss the decoupling of individual tax assessment and tax payment which may prove helpful by smoothing transitional effects when the front-loaded pension tax system is introduced.
    Keywords: International Tax-Order; Cross-Border Pensions
    Date: 2018–03–01
  7. By: Jasrial (Universitas Terbuka, Jalan Cabe Raya, Pamulang, 15418, Tangerang Selatan, Indonesia Author-2-Name: Susy Puspitasari Author-2-Workplace-Name: Universitas Terbuka, Jalan Cabe Raya, Pamulang, 15418, Tangerang Selatan, Indonesia Author-3-Name: Ali Muktiyanto Author-3-Workplace-Name: Universitas Terbuka, Jalan Cabe Raya, Pamulang, 15418, Tangerang Selatan, Indonesia)
    Abstract: Objective – This research examines the effect of company size, changes in out-cash flow, return on assets, conservatism, and profit levelling on earnings management. Methodology/Technique – The results of this research show that banking capital structure, capital intensity, intensity of inventory, and intensity of R & D have a significant impact on effective tax rates. Further, the results also show that, with respect to the non-banking sector, R & D expenditure contributes significantly to effective tax rates. Simultaneously, earnings management and effective tax rates, as well as other factors, also have an effect on book tax gap. Findings – This study shows that profit management has a significantly positive effect on book tax gap, and effective tax rates has a significant negative effects o book tax gap. In terms of the non-banking sector, earnings management and effective tax rate have no effect on book tax gap. Deferred tax expenses have a lower capability to detect earnings management than accrual, in both the banking and non-banking sector. Novelty – The study of management capabilities optimizes the role of book tax gap and effective tax rate for earning management. Both tax management and earnings management are closely related to behavior management in managing a company based on the agency theory. Furthermore, the study identifies a relationship between earnings management and book tax gap
    Keywords: Book Tax Gap; Effective Tax Rate; Earnings Management; Accrual Total; Indonesia.
    JEL: H26 H29
    Date: 2018–03–10
  8. By: Agustina Chandra (Trisakti School of Management, Jl. Kyai Tapa No. 20, 11440, Jakarta, Indonesia Author-2-Name: Wimelda Author-2-Workplace-Name: Trisakti School of Management, Jl. Kyai Tapa No. 20, 11440, Jakarta, Indonesia)
    Abstract: Objective - The purpose of this research is to analyze the effect of motivational bonus, leverage, firm size, corporate governance (audit committee's size, the proportion of independent commissioners, institutional ownership, managerial ownership) and free cash flow on earnings management. Methodology/Techniques - Earnings management is analyzed in this research using the modified Jones model. The population for the research consists of manufacturing companies listed on the Indonesian Stock Exchange (IDX) between 2013-2015. The final sample includes 60 manufacturing companies. Findings - The result of this study indicate that motivational bonus, leverage, firm size and free cash flow have an influence on earnings management practices. Motivational bonuses and free cash flow as opportunistic behavior also influence earnings management. In addition, leverage and firm size as external monitoring mechanism influence earnings management practices while audit committee size, the proportion of independent commissioners, institutional ownership and managerial ownership as corporate governance practices in companies has no significant effect on earnings management practices. Hence, it is concluded that corporate governance has no effect on earnings management practices in Indonesia.
    JEL: G34 G02
    Date: 2018–03–11
  9. By: Arif Lukman Santoso (Universitas Sebelas Maret Surakarta, Indonesia)
    Abstract: Objective – This paper investigates the influence of emotional intelligence on job performance among accounting students undertaking Student Internships. Methodology/Technique – This study adopts a quantitative research approach, using questionnaires to collect data. The study examines accounting students at Sebelas Maret University. The sample consists of 201 participants who were selected using a purposive method, from the final year students studying Accounting (Undergraduate and Diploma Programs) at Sebelas Maret University. Regression analysis is used to examine the relationship between emotional intelligence and job performance in accounting students. Findings – The results show that emotional intelligence has a positive influence on job performance among students undertaking internships. Further analysis suggests that the ability to motivate oneself and build meaningful relationships are the most important variables in explaining the relationship between emotional intelligence and job performance of students undertaking internships. Novelty – This research contributes to emotional intelligence literature by providing meaningful management implications to the university administrators in the Indonesian higher education system.
    Keywords: Emotional Intelligence; Job Performance; Internship Activity; Accounting Students; Management.
    JEL: M10 M12 M41
    Date: 2018–02–27
  10. By: John B. Taylor
    Abstract: This paper traces the evolution of the Fed's balance sheet in the years since the global financial crisis and presents economic reasons why the eventual size of the balance sheet and level of reserve balances should be such that the interest rate is determined by the demand and supply of reserves—in other words, by market forces—rather than by an administered rate under interest on excess reserves (IOER). The Fed would thus be operating as it did in the years before the crisis. The paper also contrasts this size with a system where the supply of reserves remains above the demand, and the interest rate must be administered through IOER.
    Keywords: Â
    Date: 2018–03
  11. By: Fan, Haichao; Liu, Yu; Qian, Nancy; Wen, Jaya
    Abstract: This paper uses a balanced panel of large manufacturing firms to study the dynamic effects of computerizing VAT invoices on tax revenues and firm behavior in China, 1998-2007. We find that computerization explains 10.8% of cumulative VAT revenues and increases the effective average tax rate by approximately 9-12% in the seven subsequent years. The evidence suggests that the effects of computerization change over time: tax revenue gains are likely to be smaller in the long run. Meanwhile, firms reduce output and input, and increase productivity monotonically over time.
    Keywords: economic development; Firm Growth; state capacity; taxation; technology
    JEL: H25 H26 O12
    Date: 2018–03
  12. By: Reda Aboutajdine (Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS - Centre National de la Recherche Scientifique, CREST - Centre de Recherche en Économie et Statistique - INSEE - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique); Pierre Picard (Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS - Centre National de la Recherche Scientifique, CREST - Centre de Recherche en Économie et Statistique - INSEE - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique)
    Abstract: Audit mechanisms frequently take place in the context of repeated relationships between auditor and auditee. This paper focuses attention on the insurance fraud problem in a setting where insurers repeatedly verify claims satisfied by service providers (e.g., affiliated car repairers or members of managed care networks). We highlight a learning bias that leads insurers to over-audit service providers at the beginning of their relationship. The paper builds a bridge between the literature on optimal audit in insurance and the exploitation/exploration trade-off in multi-armed bandit problems.
    Keywords: learning,optimal auditing,ex-post moral hazard,insurance fraud
    Date: 2018–02–20
  13. By: Wolfgang Eggert; Gideon Goerdt; Sebastian Felix Heitzmann
    Abstract: This paper investigates regulation on corporate income taxation with multinationals and transfer pricing. We recommend full cooperation within the EU if profit shifting costs are sufficiently low and cannot be influenced to a large extend. Otherwise, high profit shifting costs or the potential to significantly influence them imply that partial cooperation is beneficial for all member states.
    Keywords: tax harmonization, transfer pricing, multinational, profit shifting
    JEL: F21 H21 H26
    Date: 2018
  14. By: Darwin Ugarte Ontiveros (Ministerio de Economía y Finanzas Públicas)
    Abstract: This paper analyzes the performance of fiscal policy in Bolivia in years 2003-2015. To this end, the structural fiscal balance and the fiscal impulse are calculated with the aim of characterizing the expansive or contractive nature thereof and determining whether the fiscal policy in recent years has been procyclical or countercyclical relative to evolution of the economic cycle. The findings suggest that the fiscal policy in Bolivia was contractive over years 2003 to 2008 and expansive in the period 2009-2015. Moreover, compared to the economic cycle the fiscal policy was countercyclical from 2003 to 2012, procyclical in 2013 and 2014 and countercyclical in 2015. These results are maintained when using information from the Non-Financial Public Sector (NFPS) or of the Treasury, different classifications of the fiscal accounts or when approximating the non-hydrocarbons fiscal balance. Additionally, the paper highlights the heterodox nature of Bolivia’s fiscal policy and identifies public investment as a countercyclical fiscal policy instrument.
    Keywords: Structural Fiscal Balance, Fiscal Impulse, Cyclicality of the Fiscal Policy
    JEL: H61 E62 E32
    Date: 2016–07
  15. By: International Monetary Fund
    Abstract: This note highlights commonly observed weaknesses in the management of government guarantees, good practices, and measures governments could take to strengthen: (i) the evaluation of guarantee proposals; (ii) the quantification of risks arising from guarantees and their mitigation; and (iii) the budgeting, accounting, monitoring, and disclosure of guarantees.
    Date: 2017–10–19
  16. By: Richard I Allen; Miguel A Alves
    Abstract: Many studies have highlighted how failures of public corporations (otherwise known as state-owned enterprises) can result in huge economic and fiscal costs. To contain the risks associated with these costs, an effective regime for the financial supervision and oversight of public corporations should be put in place. This note discusses the legal, institutional, and procedural arrangements that governments need to oversee the financial operations of their public corporations, ensure accountability for their performance, and manage the fiscal risks they present. In particular, it recommends that governments should focus their surveillance on public corporations that are large in relation to the economy, create fiscal risks, are not profitable, are unstable financially, or are heavily dependent on government subsidies or guarantees.
    Keywords: Capitalization;Public corporations;Europe;Asia and Pacific;Australia;South Africa;Sub-Saharan Africa;Sweden;state-owned enterprises, risk, financial supervision, accountability, fiscal risks, government subsidies, government guarantees, oversight, legal framework, financial controls, quasi-fiscal activities, financial performance, monitoring, auditing standards, financial reporting standards, EU, European Union, transportation sector, capacity building
    Date: 2016–11–23
  17. By: Alstadsaeter, Annette; Johannesen, Niels; Zucman, Gabriel
    Abstract: This paper estimates the size and distribution of tax evasion. We combine random audits, tax amnesties, and leaks from offshore financial institutions matched to wealth records in Scandinavia. Tax evasion rises sharply with wealth: 3% of personal taxes are evaded on average, versus 25%–30% in the top 0.01% of the wealth distribution. A model of the supply of evasion services can explain this gradient. Taking tax evasion into account increases inequality substantially. After using tax amnesties, evaders do not seem to increase legal tax avoidance, suggesting that fighting evasion can allow governments to collect more taxes from the wealthy.
    Date: 2018–03

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