nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2021‒05‒03
seven papers chosen by

  1. Methodological issues in the estimation of current account imbalances By Valerio Della Corte; Claire Giordano
  2. Cybersecurity risks and situation awareness: Audit committees' appraisal By Didier Fass; Stéphanie Thiéry
  3. The Double Dividend of a Joint Tariff and VAT Reform: Evidence from Iran By Yousefi, Kowsar; Vesal, Mohammad
  4. The Banker's Oath And Financial Advice By Utz Weitzel; Michael Kirchler
  5. Audits and the Quality of Government By Maximiliano Lauletta; Martín A. Rossi; Christian A. Ruzzier
  6. Taxing Multinationals: The Scope for Enforcement Cooperation By Hindriks, Jean; Nishimura, Yukihiro
  7. Infrequent Identity Signals and Detection Risks in Audit Correspondence Studies By Catherine Balfe; Patrick Button; Mary Penn; David Schwegman

  1. By: Valerio Della Corte (Bank of Italy); Claire Giordano (Bank of Italy)
    Abstract: The study outlines the main challenges when setting up a “current account (CA) model” in order to measure external imbalances. This model is a reduced-form relationship between the CA balance and a set of CA fundamental and policy drivers, from which a CA “norm” may be derived and against which the actual CA balance is appraised. After having formally outlined a standard CA model similar to those developed by the main international institutions, the paper raises several concerns in CA modelling, amongst which the measurement and selection of both the dependent and explanatory variables and some technical issues in the estimation procedure. Recent trends affecting the CA balance, such as the expansion of global firms and the rise in corporate saving, as well as the outbreak of the COVID-19 pandemic, are also discussed. The paper does not prescribe fully-fledged solutions to the manifold issues discussed, but rather aims to raise awareness of the latter, as well to provide some hints on how to tackle at least some of these challenges.
    Keywords: current account balance, cyclically-adjusted current account, external imbalances
    JEL: F00 F20 F32 F41
    Date: 2021–04
  2. By: Didier Fass (ICN Business School, MOSEL - Proof-oriented development of computer-based systems - LORIA - FM - Department of Formal Methods - LORIA - Laboratoire Lorrain de Recherche en Informatique et ses Applications - Inria - Institut National de Recherche en Informatique et en Automatique - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique); Stéphanie Thiéry (ICN Business School, CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine)
    Abstract: The issue of cybersecurity has become a challenge for companies and boards of directors. Cybersecurity is not only an IT topic but a risk extended to all operations of the companies. Indeed, cybersecurity potentially has an impact on financial reporting quality, this attribution being one of the duties of audit committees. Using Endsley's model, our exploratory study seeks to determine the levels of cyber situational awareness of audit committee members, how they comply with it and if this appraisal matches the steps identified within the model.
    Keywords: Cybersecurity Awareness,Board of Directors,Audit Committee,Safety by Design,Cyber-resilience
    Date: 2020–07–16
  3. By: Yousefi, Kowsar; Vesal, Mohammad
    Abstract: Abstract A rich theoretical literature discusses whether replacing tariffs with value added tax (VAT) improves efficiency. We provide empirical evidence on a novel complementarity between VAT and trade taxes. Downstream domestic firms require VAT receipts from importers to claim purchases VAT increasing incentives for honest reporting of imports. We use the trade gap, the difference between mirror and domestic trade reports in Iran at 6-digit HS disaggregation, to measure this complementarity. Iran introduced VAT in 2008 and increased its rate from 3 to 9 percent since then. Difference-in-differences estimations show that a 1 percentage point increase in the VAT rate reduces the trade gap by 6.7 percent. Consistent with the compliance mechanisms of VAT, we observe a smaller effect for the consumer products that have a shorter value chain. Our results suggest that replacing tariffs with VAT results in a double dividend. Tax revenue could increase due to better tariff compliance and a broader VAT base.
    Keywords: Value Added Tax; Trade Liberalization; Tariffs; Chains Effect; Tax Compliance;
    JEL: F13 F14 H25
    Date: 2021–04–16
  4. By: Utz Weitzel (Vrije Universiteit Amsterdam); Michael Kirchler (University of Innsbruck)
    Abstract: Financial misbehavior is widespread and costly. The Dutch government legally requires every employee in the financial sector to take a Hippocratic oath, the so-called ``banker's oath.'' We investigate whether moral nudges that directly and indirectly remind financial advisers of their oath affect their service. In a large-scale audit study, professional auditors confronted 201 Dutch financial advisers with a conflict of interest. We find that when auditors apply a moral nudge, referring to the banker's oath, advisers are less likely to prioritize bank's interests. In additional prediction tasks, we find that Dutch regulators expect stronger effects of the oath than observed.
    Keywords: experimental finance, audit study, banker’s oath, moral nudges, financial advice
    JEL: C92 D84 G02 G14
    Date: 2021–04–26
  5. By: Maximiliano Lauletta; Martín A. Rossi; Christian A. Ruzzier
    Abstract: We exploit the random assignment of Brazilian municipalities to an audit program to explore the link between audits and the quality of government. We find that audited municipalities employ less labor to provide a given level of public services, and change the way in which they screen their employees—relying less on discretion and more on merit. These improvements in bureaucratic efficiency and professionalization, which take place right away and persist four to five years after the audits, imply an increase in the quality of municipal governments.
    Keywords: bureaucracy, corruption, audits, efficiency, public sector employment
    JEL: D73 D78 H11 H70 J45 O12
    Date: 2020–11
  6. By: Hindriks, Jean (Université catholique de Louvain, LIDAM/CORE, Belgium); Nishimura, Yukihiro
    Abstract: Policymakers seeking to raise more tax revenues from multinational enterprises have two alternatives: to raise tax rates or to devote more resources to improve tax compliance. Tougher tax enforcement increases the cost of profit shifting, and thus mitigates tax competition. We present a tax-competition model with two policy instruments (the corporate tax rate and the tightness of tax enforcement). In line with the OECD’s BEPS project, we analyze the scope for enforcement cooperation among asymmetric countries, considering that taxes are set noncooperatively. We show that the low-tax country may fail to cooperate if asymmetry is large enough and that tax havens would never agree to cooperate. Then we identify two drivers for enforcement cooperation. The first driver of cooperation is the complementarity of enforcement actions across countries. This is because the efficiency loss from enforcement dispersion is greater under complementarity. The second driver of cooperation is tax leadership by the high-tax country, which acts as a level-playing field in the tax competition and reduces the extent of disagreement on enforcement.
    Keywords: Profit shifting; Tax competition; Tax enforcement; Weakestlink; Tax leadership; Tax Haven
    JEL: C72 F23 F68 H25 H87
    Date: 2020–12–15
  7. By: Catherine Balfe; Patrick Button; Mary Penn; David Schwegman
    Abstract: Audit correspondence studies are field experiments that test for discriminatory behavior in active markets. Researchers measure discrimination by comparing how responsive individuals ("audited units") are to correspondences from different types of people. This paper elaborates on the tradeoffs researchers face between sending audited units only one correspondence and sending them multiple correspondences, especially when including less common identity signals in the correspondences. We argue that when researchers use audit correspondence studies to measure discrimination against individuals that infrequently interact with audited units, they raise the risk that these audited units become aware they are being studied or otherwise act differently. We present the result of an audit correspondence study that demonstrates how this detection can occur when researchers send more than one correspondence from an uncommon minority group. We show how this detection leads to attenuated (downwardly biased) estimates of discrimination.
    JEL: C93 J15 J16 J71 K42 Z13
    Date: 2021–04

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