nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2021‒01‒04
ten papers chosen by

  1. Georgia; Technical Assistance Report-Public Sector Balance Sheet and State Owned Enterprises By International Monetary Fund
  2. Kingdom of Lesotho; Technical Assistance Report-Implementation of Basel II By International Monetary Fund
  3. The Corporate Elasticity of Taxable Income: Event Study Evidence from Switzerland By Matthias Krapf; David Staubli
  4. Taxing Our Wealth By Florian Scheuer; Joel Slemrod
  5. Sweden; Technical Assistance Report-Proposed Amendments to the Riksbank Act By International Monetary Fund
  6. Panama; Selected Issues By International Monetary Fund
  7. Trust and Contracts: Empirical Evidence By Francesco D'Acunto; Jin Xie; Jiaquan Yao
  8. Some considerations on external audits of SDG implementation By David Le Blanc
  9. Firm undercapitalization in Italy: business crisis and survival before and after COVID-19 By Tommaso Orlando; Giacomo Rodano
  10. Denmark; Financial Sector Assessment Program-Technical Note-Banking Regulation and Supervision By International Monetary Fund

  1. By: International Monetary Fund
    Abstract: Georgia’s public sector balance sheet (PSBS) is in relatively healthy shape, with assets exceeding liabilities, and is comparatively lean. Looking across all entities that the government controls, including the central government, local governments, the State-Owned Enterprise (SOE) sector and the National Bank of Georgia (NBG), total assets are worth 149 percent of GDP, made up of cash, loans, infrastructure, land and productive SOE assets. Liabilities are worth 81 percent of GDP, primarily comprising loans and debt of the government and SOEs. This leaves positive net worth of 68 percent of GDP, putting it in the top third of countries in the IMF’s database.
    Keywords: Financial statements;Accounting standards;Public sector;Fiscal accounting and reporting;Fiscal risks;ISCR,CR,foreign exchange,accounts receivable,asset write-down,chief financial officer,cross holdings,return on equity
    Date: 2020–07–23
  2. By: International Monetary Fund
    Abstract: This mission, a follow up to the earlier mission from IMF AFRITAC South (AFS) conducted in March 2017 (STX Mr. Bernie Egan), was designed to further help the authorities in the implementation of Basel II and select elements of Basel III. The main objectives of the mission were to help the CBL finalize the Draft Guidelines to banks on Pillar 1; assist in the implementation of Pillar 2, with attention paid to the Supervisory Review and Evaluation Process (SREP) and the banks´ Internal Capital Adequacy Assessment Process (ICAAP); and evaluate current disclosure requirements in view of the recent revision of Pillar 3 by the Basel Committee on Banking Supervision (BCBS). The adoption of select elements of Basel III especially those related to definition of capital was discussed.
    Keywords: Banking;Basel II;Basel III;Financial statements;Commercial banks;ISCR,CR,capital,III capital requirement,ICAAP report,ICAAP document,liquidity policy
    Date: 2020–07–22
  3. By: Matthias Krapf; David Staubli
    Abstract: We estimate the corporate elasticity of taxable income. Our analysis draws on panel variation in the decentralized system of corporate taxation in Switzerland. We find that an increase in a jurisdiction's corporate net-of-tax rate by 1% results in an increase in aggregate corporate income by about 3.5% over a time span of 4 years. The elasticity is larger in remote, non-central locations. Firm entry, exit, and mobility only account for a small share of the overall elasticity.
    Keywords: corporate income tax, tax elasticity, fiscal federalism
    JEL: H21 H25 H32
    Date: 2020
  4. By: Florian Scheuer; Joel Slemrod
    Abstract: This paper evaluates proposals for an annual wealth tax. While a dozen OECD countries levied wealth taxes in the recent past, now only three retain them, with only Switzerland raising a comparable fraction of revenue as recent proposals for a US wealth tax. Studies of these taxes sometimes, but not always, find a substantial behavioral response, including of saving, portfolio change, avoidance, and evasion, and the impact depends crucially on design features, especially the broadness of the base and enforcement provisions. Because the US proposals are very different from any previous wealth tax, experience in other countries offers only broad lessons, but we can gain insights from closely related taxes, such as the property and the estate tax, and from optimal tax analysis of the role of wealth taxation.
    JEL: H2
    Date: 2020–11
  5. By: International Monetary Fund
    Abstract: At the request of the central bank of Sweden (the Riksbank), the Monetary and Capital Markets Department (MCM) provided technical assistance (TA) on central bank operations by means of a desk review of the proposed amendments suggested by the independent committee to the Swedish Riksbank Act, during the period February 2019 and June 2020. The desk review was led by Mr. Ashraf Khan, and conducted jointly with Mr. Asad Qureshi, Mr. Romain Veyrune, and Mr. Rudy Wytenburg. Additional input was also provided by Ms. Ioana Luca of the IMF’s Legal Department and colleagues from the IMF’s European Department, Sweden Team. The purpose of the desk review was to provide advice to the Riksbank on key issues relating to central bank operations, with a particular focus on the central bank’s governance, independence, instruments, and internal organization. It should be noted that the review findings, comments, and recommendations in this report are not representative of views of the IMF or of its Executive Board and are intended for the purpose of contributing to the public discussion in Sweden in the context of the draft Riksbank Act. The comments are also not intended to be complete, nor represent a detailed legal review of the Act. Instead, as noted above, the comments reflect selected key issues from a central bank operations’ perspective.
    Keywords: Price stabilization;Banking;Internal audit;External audit;Financial sector stability;ISCR,CR,central bank securities,emergency loan,risk exposure,policies transparency code,internal audit function
    Date: 2020–08–05
  6. By: International Monetary Fund
    Abstract: This Selected Issues paper focuses on background, challenges, and policy options in Panama. Panama stands at a crossroad between taking the leap to become an advanced economy or getting stuck in the middle-income trap. The beginning of a new administration provides a window of opportunity to initiate and implement ambitious reforms. This note takes stock of fiscal issues in Panama and proposes policy options. The new administration’s fiscal agenda should feature a comprehensive reform of tax and customs administrations, a review of tax incentives and exemptions and consider steps toward a broader tax policy reform. Efforts to further strengthen the fiscal framework with the appointment of the members of the Fiscal Council should continue going forward. Panama should adopt best practice fiscal accounting and reporting methods. A comprehensive assessment and management of fiscal risks is necessary to create buffers and safeguard public finances given fiscal policy’s exclusive stabilization role.
    Keywords: Mortgages;Housing prices;Revenue administration;Fiscal policy;Real estate prices;ISCR,CR,Panama,bank,government,lending,regime
    Date: 2020–04–21
  7. By: Francesco D'Acunto; Jin Xie; Jiaquan Yao
    Abstract: Trust between parties should drive the negotiation and design of contract: if parties did not trust each others' reaction to unplanned events, they might agree to pay higher costs of negotiation to complete contracts. Using a unique sample of U.S. principal-agent consulting contracts and a negative shock to trust between parties staggered across space and over time, we find that lower trust increases contract completeness. Not only contract complexity but also the verifiable states of the world contracts cover increase after a drop in trust. The results hold for several text-analysis-based measures of completeness and do not arise when agents are also principals (shareholders) or in other falsification tests. Non-compete agreements, confidentiality and indemnification clauses, and restrictions to agents' actions are more likely to be added to contracts signed in the same locations, same industries, and same years after a negative shock to trust.
    Keywords: empirical contract theory, incomplete contracts, cultural economics, beliefs and choice, corporate finance, consulting, textual analysis, non-compete agreements, big five, fraud, accounting, management, organization
    JEL: D86 D91 J33 L14 Z10
    Date: 2020
  8. By: David Le Blanc
    Abstract: Supreme audit institutions (SAIs) have started to audit the implementation of the Sustainable Development Goals (SDGs). While there is no one single audit model or approach to audit SDG implementation, audits should incorporate a few core methodological features related to the principles of the 2030 Agenda. Four methodological and practical challenges associated with conducting performance audits of SDG implementation, as they differ from traditional audits, are discussed in this paper: 1) problem definition, including the level of investigation in the SDG hierarchy of goals and targets and the audit scope; 2) conceptual challenges inherent in going from the level of individual entities or programs to that of whole-of-government performance; 3) practical considerations that should inform an analysis of the coherence of government actions in a given policy area; and 4) the ways in which audit guidance at the international level can help individual SAIs going forward. Ultimately, this paper aims to inform the broader discussion on evaluation of the SDGs.
    Keywords: Sustainable development goals; sustainable development; government accountability; supreme audit institutions; monitoring and evaluation; policy evaluation; external audit
    JEL: H83 O19 O20
    Date: 2020–05
  9. By: Tommaso Orlando (Bank of Italy); Giacomo Rodano (Bank of Italy)
    Abstract: In a context characterized by upcoming regulatory changes and deeply affected by the COVID-19 epidemic, this paper examines the diffusion of firm undercapitalization (i.e., the firm displaying a level of equity below the legal limit) among Italian corporations. In a proposal by the National Board of Accountants, business crisis is substantially identified with undercapitalization. Indeed, our analyses show that the onset of undercapitalization often anticipates business termination: around 60 percent of involved firms go out of business within 3 years. In 2010-18, on average around 8.5 percent of Italian companies were undercapitalized. The impact of the COVID-19 epidemic may be substantial: our predictions indicate that the share of undercapitalized firms at the end of 2020 may exceed 12 percent. This estimate incorporates the powerful mitigating effects of several interventions enacted by the Italian government between March and August 2020 to support firms damaged by the pandemic. The increase in undercapitalization may reverberate onto the functioning of the new ‘early warning’ system, which will become operational in September 2021: our predictions suggest that the number of firms that could be involved in early warning procedures may be almost twice as large as that foreseeable on the basis of accounting data from 2018.
    Keywords: firm undercapitalization, equity deficit, early warning, impact of COVID-19 on Italian corporations
    JEL: G32 G33 K29
    Date: 2020–12
  10. By: International Monetary Fund
    Abstract: COVID-19 pandemic: The Financial Sector Assessment Program (FSAP) work was conducted prior to the COVID-19 pandemic, so this Technical Note (TN) does not assess the impact of the crisis or the recent crisis-related policy measures. Nonetheless, given the FSAP’s focus on vulnerabilities and policy frameworks, the findings and recommendations of the TN remain pertinent. The Danish Financial Supervisory Authority (DFSA) has improved standards in its oversight of banking and insurance sectors since the last FSAP. Nevertheless, risks persist, both in traditional forms, and new areas, such as cyber risk, AML, and innovative market entrants. This note, selects topics to meet evolving supervisory challenges and the expectation that the international supervisory standards themselves will likewise continue to rise.
    Keywords: Banking;Anti-money laundering and combating the financing of terrorism (AML/CFT);Financial Sector Assessment Program;Operational risk;External audit;ISCR,CR,risk assessment,corporate governance,places importance,risk management,supervisory mandate
    Date: 2020–08–12

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