nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2021‒11‒29
eleven papers chosen by

  1. A literature review on blockchain in accounting research By Marco Bellucci; Damiano Cesa Bianchi; Giacomo Manetti
  2. Corporate Income Tax, IP Boxes and the Location of R&D By Pranvera Shehaj; Alfons Weichenrieder
  3. The costs of administering a wealth tax By Burgherr, David
  4. Managing Fiscal Risks from National Airlines in Pacific Island Countries By Ms. Leni Hunter; Mr. Paul G Seeds; Vybhavi Balasundharam; Iulai Lavea
  5. Corporate Taxation and International Financial Integration: U.S. evidence from a consolidated perspective By Agustin S. Benetrix; Andre Sanchez Pacheco
  6. edgar: an R package for the U.S. SEC EDGAR retrieval and parsing of corporate filings By Lonare, Gunratan; Patil, Bharat; Raut, Nilesh
  7. Profit taxation, R&D spending, and innovation By Lichter, Andreas; Löffler, Max; Isphording, Ingo Eduard; Nguyen, Thu-Van; Poege, Felix; Siegloch, Sebastian
  8. Impact of the central bank’s financial result on the transfers of benefits across sectors of the economy By Krzysztof Kruszewski; Mikołaj Szadkowski
  9. Auditors’ conflict of interest: does random selection work? By Guglielmo Barone; Laura Conti; Gaia Narciso; Marco Tonello
  10. U.S. Housing as a Global Safe Asset: Evidence from China Shocks By William Barcelona; Nathan L. Converse; Anna Wong
  11. Salary History and Employer Demand: Evidence from a Two-Sided Audit By Amanda Y. Agan; Bo Cowgill; Laura K. Gee

  1. By: Marco Bellucci (University of Florence); Damiano Cesa Bianchi (University of Florence); Giacomo Manetti (University of Florence)
    Abstract: This study aims to review the academic literature on the utilization of blockchain in accounting practice and research to define potential opportunities for further scientific investigation and to provide a framework on how accounting practice has been or will be impacted by blockchain. This study is based on a systematic literature review of 234 research products available on Scopus, which were mapped through bibliometric analyses and critically discussed through five main topics related to the impact of blockchain on accounting, auditing, crypto assets, supply management, and finance. Blockchain has many potential implications for accounting practice and research. Accountants and auditors are interested in triple-entry bookkeeping and the inalterability of blockchains. Accountant and auditor roles might change, focusing more on non-automated activities. However, blockchain could also play a more central role in social and environmental accounting and reporting because there are fewer confidentiality issues than financial data. The problem of the representation of cryptocurrencies in the financial statements following the IFRS interpretations commission can be considered clarified, but significant audit and taxation issues remain. Moreover, blockchain technology holds potentialities for innovating business models in many diverse sectors. The novel contribution of this study is threefold. First, this SLR provides a clear picture of the state of accounting research on blockchain. Second, it provides an investigation of how accounting practice will be impacted by blockchain. Third, it contributes to the accounting literature with a discussion of the potential future research trends in blockchain for accounting.
    Keywords: Blockchain, Cryptoassets, Triple-entry bookkeeping, real-time accounting, continuous auditing
    JEL: M40 M41 M42
    Date: 2021
  2. By: Pranvera Shehaj; Alfons Weichenrieder
    Abstract: The paper discusses the effects of the corporate tax on local R&D expenditures by multinational enterprises (MNEs) when income from intellectual property (IP) may or may not benefit from a special IP regime. Our model shows that an increase of the standard corporate tax may have positive effects on the R&D expenditures in the country that carries out the corporate tax increase. The possible positive R&D effect results from a tax asymmetry: not all R&D returns are subject to the higher tax. First, since R&D creates a public good within the MNE, some of the R&D benefit is taxed at other countries’ tax rates that are not subject to the tax increase. Second, some of the R&D benefits are taxed at a lower IP regime tax rate. Therefore, a higher corporate tax, which increases value of the cost deductibility of R&D, may actually foster R&D. This expectation is empirically supported by country-by-country R&D data of U.S.-owned subsidiaries for countries that have an IP regime.
    Keywords: corporate income tax, R&D, intellectual property regimes, patent box, international profit shifting
    JEL: H25 H26 O30
    Date: 2021
  3. By: Burgherr, David
    Abstract: I assess the costs of administering a wealth tax for taxpayers and the tax authority in the UK context, based on evidence from existing UK taxes on wealth and comprehensive wealth taxes that have been imposed in other countries. My central estimate is that a well-designed wealth tax generates costs to taxpayers of 0.1 per cent of taxable wealth and costs to the tax authority of 0.05 per cent of taxable wealth. I discuss how these costs depend on design choices. My findings can inform revenue modelling and help to evaluate the desirability of wealth taxes.
    Keywords: administrative costs; tax administration; tax compliance; tax enforcement; wealth tax; ES/L011719/1; ES/V012657/1; Wiley deal
    JEL: D31 H24 H83
    Date: 2021–09–01
  4. By: Ms. Leni Hunter; Mr. Paul G Seeds; Vybhavi Balasundharam; Iulai Lavea
    Abstract: Pacific island countries (PICs) rely on national airlines for connectivity, trade, and tourism. These airlines are being struck hard by COVID-19. Losses will weigh on public sector balance sheets and pose risks to economic recovery. With a backdrop of tight fiscal space and increasing government debt, losses in airlines are adding to fiscal risks in some PICs. This paper discusses tools to evaluate and manage the fiscal risks from national airlines in the Pacific. We present a snapshot of the current state of Public Financial Management (PFM) practices in PICs and detail the best practices. This exercise would illustrate the areas in which PICs have scope to improve their risk management with regard to national airlines. We then discuss the use of diagnostic tools and capacity development to enhance monitoring and risk management. Greater transparency and accountability in the airlines, combined with rigorous oversight, would be the first step towards improved financial management of national airlines.
    Keywords: B. airline planning process; airline Support; national Airlines; PFM perspective; D. budget execution consideration; financial support; Fiscal risks; Budget planning and preparation; Financial statements; Public enterprises; COVID-19; Pacific Islands
    Date: 2021–07–09
  5. By: Agustin S. Benetrix (Department of Economics, Trinity College Dublin); Andre Sanchez Pacheco (Department of Economics, Trinity College Dublin)
    Abstract: We document a robust relation between corporate tax differentials and U.S. international financial integration (IFI). While this is the case for traditional IFI based on cross-border positions, the positive link also emerges for its larger consolidated-by-nationality version. The gap between these IFI measures, the key outcome variable in our analysis, exhibits a strong positive correlation with tax differentials too. This is in part due to consolidated assets of multinational enterprises being more strongly correlated with tax differentials than their cross-border counterpart. We interpret this as indirect evidence of U.S. multinationals taking advantage of tax differentials in ways that go beyond what is captured by traditional Balance of Payments procedures.
    Keywords: International financial integration, financial globalisation, multinational enterprises, corporate taxation
    JEL: F36 F21 F23 H87
    Date: 2021–05
  6. By: Lonare, Gunratan; Patil, Bharat; Raut, Nilesh
    Abstract: This paper introduces the R package edgar to download and analyze the Securities and Exchange Commission’s (SEC) mandatory public disclosures in the United States. Corporations in the U.S. submit their periodic reports, registration statements, and financial reports electronically to the SEC. The SEC makes these reports publicly accessible to everyone through the Electronic Data Gathering, Analysis, and Retrieval System (EDGAR). As financial reporting is one of the most crucial aspects of the financial system, efficient retrieval of EDGAR filings becomes imperative for analysts and researchers. We summarize the implementation of edgar package that facilitates downloading, parsing, searching, and sentiment analysis of corporate reports.
    Keywords: EDGAR filing; financial statements; textual analyses; text parsing
    JEL: F3 G3
    Date: 2021–12–01
  7. By: Lichter, Andreas; Löffler, Max; Isphording, Ingo Eduard; Nguyen, Thu-Van; Poege, Felix; Siegloch, Sebastian
    Abstract: We study how profit taxation affects plants' R&D spending and innovation activities. Relying on geocoded survey panel data which approximately covers the universe of R&D-active plants in Germany, we exploit around 7,300 changes in the municipal business tax rate over the period 1987-2013 for identification. Applying event study models, we find a negative and statistically significant effect of an increase in profit taxation on plants' R&D spending with an implied long-run elasticity of 􀀀1.25. Reductions in R&D are particularly strong among more credit-constrained plants. In contrast, homogeneity of effects across the plant size distribution questions policy makers common practice to link targeted R&D tax incentives to plant size. We further find lagged negative effects on the (citation-weighted) number of filed patents.
    Keywords: corporate taxation,firms,R&D,innovation,patents
    JEL: H25 H32 O31 O32
    Date: 2021
  8. By: Krzysztof Kruszewski (Narodowy Bank Polski); Mikołaj Szadkowski (Narodowy Bank Polski, Warsaw School of Economics)
    Abstract: This paper presents an analysis of the impact of the central bank’s financial result and its components on the inter-sectoral transfers of benefits and the creation of central bank money. Transfers of benefits depend on the structure of the central bank’s balance sheet and its financial result. The structure of its balance sheet, its financial result as well as profit distribution influence central bank money creation. If the central bank records a profit, fully transferred to the state budget, and its assets are mainly denominated in domestic currency, then the central bank’s financial result can be seen only as a tool for intermediation in the transfer of benefits between different sectors of the national economy. In such a situation, the bank’s financial result does not affect the volume of the central bank’s money. On the other hand, if the central bank records a profit, fully paid to the state budget, and its assets are mainly denominated in foreign currency, then there is a transfer from foreign entities to the domestic economy, and there is simultaneously an increase in central bank money volume. However, if the central bank incurs a loss and the loss is not covered, for example, by the government, then the central bank transfers benefits directly from itself to other sectors of the economy, and regardless of the structure of its balance sheet, there is an increase in the central bank’s money issuance.
    Keywords: central bank, financial result, balance sheet, transfers between sectors of the economy
    JEL: E51 E58
    Date: 2021
  9. By: Guglielmo Barone (University of Padua); Laura Conti (Bank of Italy); Gaia Narciso (Department of Economics, Trinity College Dublin); Marco Tonello (Department of Economics, Trinity College Dublin)
    Abstract: Third-party auditors are usually chosen and paid by the agent that is being audited and this may lead to a significant conflict of interest and to less strict audits. We investigate the effect of a new random allocation mechanism, according to which, starting from 2012, auditors of Italian municipalities have had to be chosen by means of a random draw from a large pool of experts. By exploiting the staggered adoption of the new allocation rule across municipalities, our difference-in-differences estimates show that the new regime implies a worsening of municipalities’ reported public finances, in terms of budget surpluses of the probability to be in financial distress. The effect is largely driven from municipalities endowed with lower social capital, so signalling that random allocation is somehow a substitute for the solution of the conflict of interest problem. In these municipalities, we also find that the new mechanism reduces some fraud detection indicators based on Benford’s law.
    Keywords: third-party auditors, random selection mechanism, public finance truthfulness
    JEL: M42 H72 D82
    Date: 2020–04
  10. By: William Barcelona; Nathan L. Converse; Anna Wong
    Abstract: This paper demonstrates that the measured stock of China's holding of U.S. assets could be much higher than indicated by the U.S. net international investment position data due to unrecorded historical Chinese inflows into an increasingly popular global safe haven asset: U.S. residential real estate. We first use aggregate capital flows data to show that the increase in unrecorded capital inflows in the U.S. balance of payment accounts over the past decade is mainly linked to inflows from China into U.S. housing markets. Then, using a unique web traffic dataset that provides a direct measure of Chinese demand for U.S. housing at the zip code level, we estimate via a difference-in-difference matching framework that house prices in major U.S. cities that are highly exposed to demand from China have on average grown 7 percentage points faster than similar neighborhoods with low exposure over the period 2010-2016. These average excess price growth gaps co-move closely with macro-level measures of U.S. capital inflows from China, and tend to widen following periods of economic stress in China, suggesting that Chinese households view U.S. housing as a safe haven asset.
    Keywords: China; Housing and real estate; Capital flows; Safe assets
    JEL: F30 F60 R30
    Date: 2021–11–12
  11. By: Amanda Y. Agan; Bo Cowgill; Laura K. Gee
    Abstract: We study how salary history disclosures affect employer demand by using a novel, two-sided field experiment featuring hundreds of recruiters reviewing over 2000 job applications. We randomize the presence of salary history questions as well as candidates' disclosures. We find that employers make negative inferences about non-disclosing candidates, and view salary history as a stronger signal about competing options than worker quality. Disclosures by men (and other highly-paid candidates) yield higher salary offers, however they are negative signals of value (net of salary), and thus yield fewer callbacks. Male wage premiums are regarded as a weaker signal of quality than other sources (such as the premiums from working at higher paying firms, or being well-paid compared to peers). Recruiters correctly anticipate that women are less likely to disclose salary history at any level, and punish women less than men for silence. In our simulation of bans, we find no evidence that bans affect the gender ratio of callback choices, but find large reductions in gender inequality in salary offers among candidates called back. However, salary offers are lower overall (especially for men). A theoretical framework shows how these effects may differ by key properties of labor markets.
    JEL: C90 J70 M50
    Date: 2021–11

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