nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2021‒06‒28
nine papers chosen by

  1. Open innovation in managerial innovation: the case of internal audit. By Stéphane Lhuillery; Marion Tellechea; Stéphanie Thiery
  2. Corporate taxation and firm-level investment in South Africa By Mashekwa Maboshe
  3. A Two-Stage Model of Decision-Making over Financial Reporting Regimes and Techniques: Analysis and UK Case Studies By Yu-Lin Hsu; Gavin C. Reid
  4. Switching From Incurred to Expected Loan Loss Provisioning: Early Evidence By López-Espinosa, Germán; Ormazabal, Gaizka; Sakasai, Yuki
  5. Accélérer les entreprises ! Une évaluation ex post By Fabrice Gilles; Yannick l'Horty; Ferhat Mihoubi
  6. Le futur de l'audit IT : quelles évolutions possibles ? By Nabyla Daidj; Thierno Tounkara; Cyril Bordeaux
  7. Somalia: Technical Assistance Report-Bank Supervision and Regulation By International Monetary Fund
  8. Social Network and Tax Evasion: Theoretical Model and Empirical Evidence in Bangladesh By Kazi Abdul, Mannan; Khandaker Mursheda, Farhana; G M Omar Faruque, Chowdhury
  9. Democratic Republic of the Congo: Technical Assistance Report-Governance and Anti-Corruption Assessment By International Monetary Fund

  1. By: Stéphane Lhuillery; Marion Tellechea; Stéphanie Thiery
    Abstract: Research on innovation has grown into a substantial body of literature and has drawn attention to knowledge sources. However, little is known about the drivers of audit innovation. This article seeks to identify, delineate and categorize knowledge sources’ impact on internal audit innovation. We implement an econometric model and find that internal audit departments developing search capabilities to modify their processes can innovate in their practices. Using the original measures of internal search capabilities and innovation, our findings highlight the effects of search, intrafirm and external knowledge sources on internal audit innovation: among intrafirm knowledge sources, management’s reviews of internal audit functions are key factors that foster innovation. Among external sources, professional associations play a prominent role in firms’ propensity to innovate. Most noticeably, firms with high absorptive capabilities deliberately deviate from compliance to innovate using professional associations’ and ICT consultants’ knowledge. Our study contributes to the literature on open innovation and auditing by illuminating internal audit functions’ innovative potential.
    Keywords: internal audit; open innovation; search; internal knowledge sources; external knowledge sources; absorptive capacity.
    JEL: O3
    Date: 2021
  2. By: Mashekwa Maboshe
    Abstract: This paper investigates the responsiveness of firm-level investment to corporate tax changes in South Africa over the period 1999 to 2012. The study exploits rare changes in corporate tax policy to assess the responsiveness of firm-level investment among Johannesburg Stock Exchange listed non-financial firms. Our estimation of a neoclassical investment model using GMM techniques shows that although changes in corporate tax policy reduced the tax-adjusted marginal cost of capital over time, the reductions did not translate into significant investments in fixed assets. We speculate that the well-documented financial frictions in the capital markets could explain the failure of neoclassical investment theory in South Africa. Our findings are similar to those in other developing countries and crucially suggest that investment policies should look beyond the use of corporate tax incentives.
    Keywords: corporate taxation, capital investment, user cost of capital
    JEL: E22 H32 C23
    Date: 2021–06
  3. By: Yu-Lin Hsu; Gavin C. Reid
    Abstract: This paper develops a new two-stage decision model to explain the choices of financial reporting regimes (e.g. IFRS or UK GAAP) and techniques (e.g. valuing intangibles, by cost, income, or market methods) for UK companies. The theoretical framework is based on the choice theory of orderings (Lex and CoLex) and is expressed in decision trees which capture firms’ actions, based on calibrated benefits and costs. The decision-making processes are examined through three UK empirical case studies (one private and two public firms), that expound their decision trees, and explain their decisions. We probe the rationale of their decisions using field-work investigation methods, through which we develop a ‘stated preference’ metric of choice, which allows us to interpret how decisions are made, and how they differ: over time (notably when regime changes are being implemented e.g. the emergence of New UK GAAP post-2015); and across firms (where factors like ease of execution and the quality and quantity of information needed for decisions, are shown to play a large part).
    Keywords: IFRS, case studies, decision making, preferences, accounting choices
    JEL: D21 D22 G38 M21 M41
    Date: 2021–04
  4. By: López-Espinosa, Germán; Ormazabal, Gaizka; Sakasai, Yuki
    Abstract: This paper provides early evidence on the effect of global regulation mandating a switch from loan loss provisioning (LLP) based on incurred credit losses (ICL) to LLP based on expected credit losses (ECL). Using a sample of systemically important banks from 74 countries, we find that ECL provisions are more predictive of future bank risk than ICL provisions. To corroborate that the switch to ECL provisioning results in more information to assess bank risk, we analyze the market reaction to disclosures on the first-time impact of the accounting change; we find that a higher impact on loan loss allowances elicits lower stock returns, higher changes in CDS spreads, and higher changes in bid-ask spreads. Critically, these patterns are most pronounced when credit conditions deteriorate. Finally, we also find evidence that, as credit conditions worsen, the rule change induces an increase in provisions and a contraction of credit. Our study contributes to the debate on the effect of the ECL model on procyclicality, an especially pressing issue in the context of the current pandemic.
    Keywords: bank accounting; expected credit losses; loan loss provision
    JEL: G21 M41
    Date: 2020–05
  5. By: Fabrice Gilles (Université de Lille, LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique, TEPP - Travail, Emploi et Politiques Publiques - CNRS - Centre National de la Recherche Scientifique - UPEM - Université Paris-Est Marne-la-Vallée); Yannick l'Horty (Université Gustave Eiffel, TEPP - Travail, Emploi et Politiques Publiques - CNRS - Centre National de la Recherche Scientifique - UPEM - Université Paris-Est Marne-la-Vallée, ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel); Ferhat Mihoubi (UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12, ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel, TEPP - Travail, Emploi et Politiques Publiques - CNRS - Centre National de la Recherche Scientifique - UPEM - Université Paris-Est Marne-la-Vallée)
    Abstract: Accelerators are selective and intensive programs to support company managers, in a cohort approach, in order to develop the growth potential of their business. They appeared in the mid-2000s in the United States and have since spread throughout the world. In France, the Accelerator Program implemented by Bpifrance since 2015 is part of this group, while having the particularity of being strictly non-financial. Participating companies benefit from advice, training and networking, without their participation in the Accelerator giving them privileged access to investments and equity investments, as is the case for many other Accelerator programs. This original aspect of the program allows the effect of the non-financial component of an accelerator program to be identified. We evaluate the effect of this program based on accounting data from companies covering the period 2010-2018, comparing three cohorts of accelerated companies with companies of the same characteristics that did not benefit from the program. For the first cohort, we find a significant impact on the probability of moving from small and medium enterprise to midcaps status. For the last two cohorts, we find a positive effect of the program on both the increase in sales performance, of the order of 10 percentage points, on value added by 16 percentage points, and on firms' tangible investment, which increases tenfold under the program.
    Abstract: Les accélérateurs sont des programmes sélectifs et intensifs d'accompagnement des dirigeants d'entreprises, dans une logique de cohorte, afin de développer le potentiel de croissance de leur activité. Apparus au milieu des années 2000 aux Etats-Unis, ils ont essaimé depuis dans le monde entier. En France, le programme accélérateur mis en oeuvre par Bpifrance depuis 2015 s'inscrit dans cet ensemble tout en ayant comme particularité d'être strictement non financier. Les entreprises participantes bénéficient de conseils, d'actions de formation et d'une mise en réseau sans que leur participation à l'accélérateur ne leur ouvre un accès privilégié à des investissements et des prises de participation, comme c'est le cas pour de nombreux autres programmes d'accélérateur. Cet aspect original du programme permet d'identifier l'effet du volet non financier d'un programme accélérateur. Nous évaluons l'effet de ce programme à partir de données comptables d'entreprises couvrant la période 2010-2018, en comparant trois cohortes d'entreprises accélérées avec des entreprises de mêmes caractéristiques qui n'ont pas bénéficié du programme. Pour la première cohorte, nous trouvons un impact positif sur la probabilité de passer du statut de PME à celui d'ETI : celle-ci s'accroitrait de plus de 7 points de pourcentage. Pour les deux dernières cohortes, nous trouvons un effet positif du programme à la fois sur la progression du chiffre d'affaires, de l'ordre de 10 points, sur la valeur ajoutée, de 16 points, et sur l'investissement corporel des entreprises, qui décuple sous l'effet du programme.
    Keywords: accélérateurs,aide à l'innovation,évaluation ex post,doubles différences,données de panel
    Date: 2021–05–28
  6. By: Nabyla Daidj (TIM - Département Technologies, Information & Management - IMT - Institut Mines-Télécom [Paris] - IMT-BS - Institut Mines-Télécom Business School, LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay - IMT-BS - Institut Mines-Télécom Business School); Thierno Tounkara (TIM - Département Technologies, Information & Management - IMT - Institut Mines-Télécom [Paris] - IMT-BS - Institut Mines-Télécom Business School, LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay - IMT-BS - Institut Mines-Télécom Business School); Cyril Bordeaux (Advolis Orfis)
    Abstract: L'audit interne est une activité clé dont le rôle doit évoluer dans un contexte de transformation digitale sous l'impulsion de changements majeurs qui affectent l'ensemble de l'économie et des secteurs d'activités. La digitalisation a non seulement un impact sur l'environnement de l'audit mais aussi sur les pratiques de l'audit interne, le management des risques dans l'entreprise et les systèmes d'information. L'audit interne évolue également dans ses pratiques qui intègrent progressivement des approches agiles, des améliorations en continu avec le traitement et l'analyse des données au centre du dispositif grâce à des outils et des technologies de plus en plus performantes. Ce livre blanc vise plusieurs objectifs : - effectuer un état des lieux de la fonction et des activités d'audit interne ; - présenter succinctement les principes de quelques méthodologies d'audit ; - mieux appréhender l'évolution de l'environnement de l'audit et des pratiques dans un contexte très «disruptif» mais aussi très incertain depuis la crise de la COVID-19.
    Keywords: Technologies,Outils,Méthodologies d'audit,Audit IT,Audit interne,Risques,Transformation digitale,Innovation
    Date: 2021–05–03
  7. By: International Monetary Fund
    Abstract: The purpose of the missions of Phase I was to develop a functional central bank, including establishing a modern banking supervisory regime. Especially, MCM provided TA missions under the Phase I that have focused on operationalizing banking license capacity, development of on and offsite supervisory capability, and other relevant areas.
    Keywords: risk rating system; audit report; bank ownership; Somali bank; banks in Somalia; bank's governance; CBS management; CBS directive; Mobile banking; Islamic banking; Bank licensing; Commercial banks; Bank regulation
    Date: 2021–03–31
  8. By: Kazi Abdul, Mannan; Khandaker Mursheda, Farhana; G M Omar Faruque, Chowdhury
    Abstract: This paper examines ethical and behavioral aspects of taxpayers, the financial condition of citizens, tax fairness, taxpayer services, complexities in the tax regime, tax rates, penalties and enforcement, and tax amnesties and the black economy. Primary data were collected by conducting a survey utilizing structured printed questionnaires. Secondary data were collected from project reports, government publications and documents, books, journals, reports, newspapers and electronic media. Empirical findings suggest that all these issues are associated with tax evasion in Bangladesh. We also find that eligibility in a social network increases the likelihood that others will take-up. This suggests that taxpayers affect each other’s decisions about tax avoidance, highlighting the importance of accounting for social interactions in understanding enforcement and tax avoidance behavior, and providing a concrete example of optimization frictions in the context of behavioral responses to taxation. The involvement and nexus of the three actors in tax policy formulation, implementation and compliance processes were examined. The empirical findings indicate the presence of this nexus which facilitates tax evasion. The high magnitude of tax evasion in Bangladesh is significantly acknowledged by respondents in the study. The empirical findings suggest that the absence of a participatory policy making process, lack of research into, and reform of, the tax system, short-term oriented and politically motivated tax policies, loopholes, anomalies and complexities of tax laws and policies are responsible for creating scope for tax evasion.
    Keywords: Taxation, Social Network, Tax Evasion, Tax Avoidance, Network Centrality, Optimal Auditing, Network Model
    JEL: H2 H20 H21 H22 H24 H26 H7 H75
    Date: 2021
  9. By: International Monetary Fund
    Abstract: At the request of His Excellency the President of the Republic and Head of State, the Legal (LEG) and Fiscal Affairs (FAD) Departments of the IMF conducted an assessment of governance and corruption mission in Kinshasa, Democratic Republic of the Congo (DRC) from December 9 to 20, 2019 (the “mission”).1 The objectives of the mission were to discuss with the authorities (i) a diagnostic of governance issues in the DRC; and (ii) to articulate measures to help improve governance and the fight against corruption.
    Keywords: TA recipient; legal department; Board audit committee; payment procedure; staff team of the International Monetary Fund; Corruption; Mining sector; Anti-money laundering and combating the financing of terrorism (AML/CFT); Public enterprises; Sub-Saharan Africa; Global; Central Africa
    Date: 2021–05–25

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