nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2018‒11‒19
twelve papers chosen by

  1. Somalia; Technical Assistance Report-Internal Audit and Accounting Training for the Central Bank of Somalia By International Monetary Fund
  2. The role of the Audit Committee and the Board of Director in mitigating the practice of earnings management: Evidence from Jordan By Khaldoon Al Daoud
  3. Effective Tax Levels Using the Devereux-Griffith Methodology, Update 2017 By ZEW
  4. The Impact of Corporate Taxes on Firm Innovation: Evidence from the Corporate Tax Collection Reform in China By Jing Cai; Yuyu Chen; Xuan Wang
  5. The taxation of savings: the Italian system and international comparison By Nicola Branzoli; Giovanna Messina; Elena Pisano; Giacomo Ricotti; Ernesto Zangari
  6. Deconstructed CSR and Social Audit Model: Postmodernist Paradigm Observations in Luwu Mining Areas, Indonesia By Rahmawati
  7. The Implications of Intangible Assets Identification with DEMPE in the Indonesia’s Transfer Pricing Tax Regulations By Leonard Saputra; Christine Tjen
  8. The equivalence of two tax processes By Dalal Al Ghanim; Ronnie Loeffen; Alex Watson
  9. Study on comparable data used for transfer pricing in the EU By Deloitte
  10. Property Tax and Land Use: Evidence from the 1990s reforms in Japan By MIYAZAKI Tomomi; SATO Motohiro
  11. Tax Equivalences and their Implications By Alan J. Auerbach
  12. Corporate Governance, Accounting Transparency and Stock Exchange Sizes in Germany, Japan and “Anglo-Saxon” Economies, 1870-1950 By HANNAH, Leslie

  1. By: International Monetary Fund
    Abstract: This was the first mission in a series designed to assist the Central Bank of Somalia (CBS) in its development of formal frameworks and professional practices for internal audit and accounting and bring them toward international norms. The mission team conducted a series of training sessions covering accounting and internal audit topics designed to assist the CBS staff in maintaining proper accounting records and preparing proper financial statements and developing and implementing an effective and modern internal audit framework. Specific topics were addressed that reflected the CBS’ current operating and limited capacity levels. Group exercises were conducted using real data and information. Assignments were agreed with each team to be completed prior to the next mission.
  2. By: Khaldoon Al Daoud (Yarmouk University)
    Abstract: Recently, the audit committees and boards of directors have been considered to be corporate governance mechanisms that can play key roles in mitigating earnings management practices. This study?s purpose is to explore the impact of the board of directors (i.e., size, CEO duality, independence and financial expertise and knowledge) and the presence of an audit committee with earnings management practices in Jordanian firms. The study used the leverage ratio as a control variable. The sample covered industrial firms listed in the Amman Stock Exchange from the years 2014-2016. This study used multiple regression in determining if the board of directors and the audit committee affect earnings management practices. The study revealed that the presence of an audit committee negatively affected the earnings management practice in industrial Jordanian firms. This study suggested that characteristics of the board of directors, namely, independence and CEO duality, significantly influenced the practices of earnings management Furthermore, the findings indicate that separating the position of CEO and chairman along with more independent board members plays an increasingly important role in preventing earnings management practices by ensuring the effective monitoring of management. The study recommends extending such research to offer a more comprehensive awareness of earnings management in emerging capital markets using new variables of corporate governance.
    Keywords: Earnings management, board of director, audit committee and Jordan.
    Date: 2018–10
  3. By: ZEW
    Abstract: The project 'Effective tax rates in an enlarged European Union' is based on the methodology used for the calculation of effective tax rates (ETRs) as set out by Devereux and Griffith (1999, 2003). The project includes a focus on the effects of tax reforms in the EU28, FYROM and Turkey as well as Norway, Switzerland, Canada, Japan and the United States for the period 1998-2017 and their impact on the level of taxation for both domestic and cross-border investment.
    Keywords: European Union, taxation, effective tax, corporate tax
    JEL: H25
    Date: 2017–11
  4. By: Jing Cai; Yuyu Chen; Xuan Wang
    Abstract: This paper exploits a tax reform on manufacturing firms in China to study the impact of taxes on firm innovation. The reform switched the corporate income tax collection from the local to the state tax bureau and reduced the effective tax rate by 10%. The reform only applied to firms established after January 2002, allowing us to use regression discontinuity design as the identification strategy. The results show that lower taxes improved both quantity and quality of firm innovation. Moreover, the reform has a bigger impact on firms that are financially constrained and firms that engage more in tax evasion.
    JEL: H25 O31
    Date: 2018–10
  5. By: Nicola Branzoli (Bank of Italy); Giovanna Messina (Bank of Italy); Elena Pisano (Bank of Italy); Giacomo Ricotti (Bank of Italy); Ernesto Zangari (Bank of Italy)
    Abstract: After a brief review of the economic literature, the paper offers a comparative analysis of the main features of capital income taxation in Italy, the EU and the US. The paper also analyses the recent evolution of capital taxation and portfolio allocation in Italy. The findings point to high heterogeneity in the choice of the type of tax system, taxation level and forms of preferential taxation, suggesting no convergence towards a single model of taxation among countries. However, a common feature of most systems is that capital income is taxed more lightly than labour income. The heterogeneity in the tax treatment of households’ savings is likely to persist in the future; recent developments at international level concerning the transparency of taxation are expected to increase governments’ degrees of freedom in choosing their preferred tax system. Empirical evidence for Italy suggests that the tax burden on financial assets has increased in recent years but the evolution of financial assets over time is not particularly sensitive to tax changes.
    Keywords: capital income, taxation, savings
    JEL: E21 H24 K34
    Date: 2018–10
  6. By: Rahmawati (School of Economics Muhammadiyah Palopo, Binturu, 91923, Palopo, Indonesia Author-2-Name: Dileep Kumar Author-2-Workplace-Name: Berjaya University, Kuala Lumpur, Malaysia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - The research aims to decode the model of Social Audit on Corporate Social Responsibility (CSR) and develop a new model for CSR. Methodology/Technique - The study uses qualitative research using Derrida's deconstructive postmodernism paradigm. This study scrutinises all models of CSR, distinguishing between capitalism and socialism in audit practices, and creates a new CSR model that integrates the local wisdom of indigenous peoples. Findings - The study observes several unfair practices without ensuring social and distributive justice to the indigenous community where mining activities are conducted. Several concepts linked to sustainable development were evolved during the data collection phase. By deconstructing the two major concepts of CSR and Social Audit, the research develops a new model of sustainable corporate responsibility which enables stakeholders to empower the Luwu community by ensuring cultural integration and social development. Novelty – By exploring CSR activities in the Luwu area, this study verifies all existing CSR practices and Social Audit models to generate a sustainable corporate social responsibility model for corporations, government and allied stakeholders. This research may be used to support policy agreements between governments, industry players and the corporations, towards effective SCSR implementation.
    Keywords: Corporate Social Responsibility; Social Audit; Sustainable Development; Capitalism; Local wisdom.
    JEL: M40 M42 M49
    Date: 2018–06–30
  7. By: Leonard Saputra; Christine Tjen (LPEM, Faculty of Economics and Business, University of Indonesia)
    Abstract: This study is focusing to analyze the implications of implementing the concept of function identification in the intangible assets that is discussed in Action 8-10, known as DEMPE, in the Indonesia’s transfer pricing regulations. This research method is descriptive research with more priority to in-depth interview as primary data source. The result of this research is that there is relevance to apply BEPS Action Plan 8–10 in Indonesia, DEMPE concept can be applied effectively in Indonesia to overcome various problems, and its implementation only requires less significant adjustment because implicitly DEMPE concept has been applied mainly as basic inspection. Implementation in Indonesia’s pricing transfer rules can create new regulations that are generally described in PMK and the details will be explained in PER by adjusting to the relevance in Indonesia that allows added “marketing” function in the DEMPE concept. This implementation is expected to be able to get closer to each stakeholder’s perspective regarding to the procedure of identifying intangible assets that emphasizes the analysis of economic ownership
    Keywords: Transfer Pricing — OECD — BEPS — Action Plan 8-10 — Intangible Asset — DEMPE
    JEL: H25 H26
    Date: 2018
  8. By: Dalal Al Ghanim; Ronnie Loeffen; Alex Watson
    Abstract: We introduce two models of taxation, the latent and natural tax processes, which have both been used to represent loss-carry-forward taxation on the capital of an insurance company. In the natural tax process, the tax rate is a function of the current level of capital, whereas in the latent tax process, the tax rate is a function of the capital that would have resulted if no tax had been paid. Whereas up to now these two types of tax processes have been treated separately, we show that, in fact, they are essentially equivalent. This allows a unified treatment, translating results from one model to the other. Significantly, we solve the question of existence and uniqueness for the natural tax process, which is defined via an integral equation. Our results clarify the existing literature on processes with tax.
    Date: 2018–11
  9. By: Deloitte
    Abstract: This study aims at providing an overview and assessment of the availability and quality of market data ('comparables') used for transfer pricing purposes and, more specifically comparable searches under the Comparable Uncontrolled Price (‘CUP’) method and under the Transactional Net Margin Method (‘TNMM’)in the EU-28 Member States. More specifically, the study covers the following aspects: Assessing and evaluating situations characterising the lack and / or non-reliability of comparable data; Assessing and evaluating the situation for pan-European comparable searches ; Developing and envisaging EU-tailored solutions and possible adjustments taking into consideration some advantages and assets offered by the EU internal market ; Contribute to strengthening and effectively implementing an improved EU transfer pricing framework and fight against aggressive tax planning.
    Keywords: European Union, taxation, transfer pricing
    JEL: H25 H87
    Date: 2016–12
  10. By: MIYAZAKI Tomomi; SATO Motohiro
    Abstract: This paper examines the effects of property tax reforms at the beginning of the 1990s in Japan through theoretical and empirical investigation. Preferential treatment of farmland in the center of cities and inner suburbs is not favorable because it may hinder changing such land into residential areas and henceforth deter urbanization. We utilize a natural experiment provided by the aforementioned reforms. The results reveal that the proportion of farmland that might have impeded urbanization decreased after the reforms in major cities within metropolitan areas. However, landlords did not necessarily replace all of the land with housing lots, suggesting that the government should have conducted the reforms in a way to promote more conversion.
    Date: 2018–10
  11. By: Alan J. Auerbach
    Abstract: In economic analyses of the effects of tax policies, one commonly encounters discussions of the equivalence of apparently different policies, where equivalence is defined as the policies having the same impact on fundamental economic outcomes. These related tax policies may differ in many respects, which give rise to conditions under which the equivalences may break down. This paper draws out the key issues that relate to tax equivalences, using several illustrations from important instances of such equivalences that span different areas of taxation, with many of these illustrations relating to the taxation of capital income. Recognition of equivalences and the ways in which they may fail to hold is important both for positive analysis (e.g., the political reasons for choosing one approach over another) and for normative analysis (to determine which approach may be a more effective way of implementing a policy).
    JEL: H20 H30
    Date: 2018–10
  12. By: HANNAH, Leslie
    Abstract: Modern discussions of corporate governance have focused on convergence of “varieties of capitalism,” particularly the recent “Americanisation” of laws and voluntary codes in Germany, Japan, and other civil law countries. However German and Japanese legal and business historians have suggested that corporate governance, accounting transparency or other favourable factors in their countries were historically a match for - or even superior to - those in the US. An alleged consequence was deeper penetration by the Berlin and Tokyo stock exchanges of their domestic economies than of the US by the New York Stock Exchange (NYSE), using measures such as market capitalization/GDP ratios. This paper reviews the classic Rajan and Zingales (2003) data on the sizes of stock exchanges. It concludes that the evidence for Japanese historical precocity relative to the US, after the necessary allowance is made for regional stock exchanges and corporate bond finance, stands up better to this closer examination than that for Germany. Many financial historians (e.g. Musacchio and Turner 2013) now agree that stock exchange development was not historically determined by legal origins (“Anglo-Saxon” common vs Euro-Japanese civil law), though today it appears to be driven by legal rules protecting shareholders and/or bondholders and limiting directorial autocracy and information asymmetry. However, both today and historically in some cultures private order rules (voluntary codes, bourse listing requirements, bankers as trusted intermediaries, block-holder monitoring, etc) offered substitute protections, or at least complemented protective laws. This paper reviews the plausibility of these determinants of historical stock exchange sizes - and others that have been neglected - in Japan, Germany, and elsewhere, before 1950.
    Keywords: legal origins, corporate governance, stock exchanges, auditing, OTC markets
    JEL: F21 G10 G30 N20
    Date: 2018–11

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NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.