nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2022‒08‒15
eight papers chosen by

  1. The Effects of Audit Partners on Financial Reporting: Evidence from U.S. Bank Holding Companies By Gauri Bhat; Hemang Desai; W. Scott Frame; Christoffer Koch; Erik J. Mayer
  2. The Optimal Number of Tax Audits: Evidence from Italy By Daniele Spinelli; Paolo Berta; Alessandro Santoro
  3. Audit interne et gouvernance d'entreprise : une lecture théorique au sein des entreprises publiques By Ben Boubakary
  4. How they hide money? An investigation on tax evasion of large corporations and wealthy taxpayers By Lompo, Miaba Louise; Ouoba, Marie Madeleine
  5. One step forward and three steps back: pros and cons of a flat tax reform By Di Caro, Paolo; Figari, Francesco; Fiorio, Carlo; Manzo, Marco; Riganti, Andrea
  6. Intermediary Balance Sheets and the Treasury Yield Curve By Wenxin Du; Benjamin M. Hébert; Wenhao Li
  7. Verification Options Used in Public Procurement by Apparel Sourcing Countries: Potential and Effectiveness in Bangladesh By Khondaker Golam Moazzem; Tamim Ahmed
  8. Aligning financial and monetary policies with the concept of double materiality: rationales, proposals and challenges By Boissinot, Jean; Goulard, Sylvie; Salin, Mathilde; Svartzman, Romain; Weber, Pierre-François

  1. By: Gauri Bhat; Hemang Desai; W. Scott Frame; Christoffer Koch; Erik J. Mayer
    Abstract: This paper uses confidential data on audit engagement partner names from regulatory filings of bank holding companies (BHC) to investigate whether partners display individual style that affects the financial reporting of the BHCs. We focus on loan loss provisioning. We construct an audit partner-BHC matched panel data set that enables us to track different partners across different BHCs over time. We employ two empirical approaches to investigate partner style. The first approach tests whether partner fixed effects are statistically significant in loan loss provisioning models. The second approach tests whether a partner’s history of loan loss provisioning predicts future practices for the same partner. Our empirical evidence does not support systematic differences in loan loss provisioning across audit engagement partners, suggesting that the audit firm’s standards and quality control constrain personal partner style.
    Keywords: Accounting; Banking; Audit Partner Names; Audit Engagement; PCAOB
    JEL: G21 M42
    Date: 2022–07–08
  2. By: Daniele Spinelli; Paolo Berta; Alessandro Santoro
    Abstract: Tax audits are the main tool adopted by tax administrations to collect taxes. Their optimal number depends on two parameters, i.e. the enforcement elasticity of tax revenue with respect to the audit effort and the sum of private compliance costs and public administrative costs entailed by audits. In turn, the enforcement elasticity critically depends on audit selection criteria actually chosen by tax authorities. In this paper, we apply a machine learning approach to Italian data and we provide evidence that, in 2010 and 2011, audited taxpayers are those whose reporting behaviour in between the report year and the audit year has deviated from the business cycle. We use these audit criteria to match audited taxpayers to non-audited ones and we obtain an estimate of the enforcement elasticity that allows us to characterize the optimal number of tax audits as a function of the ratio between private compliance and public administrative costs.
    Keywords: Optimal Tax Administration, Enforcement Elasticity of Tax Revenue.
    JEL: H26 C55
    Date: 2022–04
  3. By: Ben Boubakary (Université de Yaoundé II)
    Abstract: Cette étude a pour objectif d'analyser la contribution de l'audit interne à la gouvernance des entreprises publiques (EP). La nature de la problématique de recherche reste originale dans notre contexte. En effet, les travaux de recherches y relatifs sont concentrer essentiellement dans la littérature occidentale. Par ailleurs, la plupart des travaux de recherche qui se sont intéressées à l'étude de l'audit interne n'ont pas tenu compte des facteurs contextuels. Pourtant, ces derniers sont indispensables à l'efficacité de l'audit dans la réalité africaine et camerounaise en particulier. Les principaux objectifs de notre étude tiennent à : 1) examiner les normes et fondamentaux de l'audit interne à travers lesquels les gestionnaires des fonds publics sont mieux disciplinés ; 2) vérifier si les normes internationales en matière d'audit interne sont bien adaptées aux réalités socioculturelles des EP ; 3) analyser la place de l'environnement institutionnel de l'audit interne et la gouvernance des EP ; 4) apprécier l'impact de la régularité des activités de l'audit interne au sein des EP sur leur gouvernance ; 5) étudier l'impact de certains facteurs de contingence tels que la taille, le niveau d'expérience, de qualification ainsi que l'indépendance des organes d'audit interne sur la gouvernance des EP ; 6) mettre en exergue le degré d'impact d'implémentation des recommandations formulées par l'audit interne sur la gouvernance des EP. Pour atteindre ces objectifs, nous avons effectué une revue fouinée de la littérature théorique et empirique. Cette étude présente ainsi les bases de l'explication de la relation existant entre l'audit interne et la gouvernance d'entreprise. Une démarche de vérification empirique s'effectuera ultérieurement.
    Keywords: Audit interne,Gouvernance,Entreprise publique,Revue théorique Internal audit,Governance,Public company,Theoretical review
    Date: 2022–06–27
  4. By: Lompo, Miaba Louise; Ouoba, Marie Madeleine
    Abstract: Understanding tax evasion and tax avoidance mecanism is of critical importance in both developed and developing countries. This paper shed light on five main strategies used by corporation and wealthy taxpayers to avoid taxes including tax heavens, underground economy, aggressive tax optimization, parallel financial markets and cryptocurrencies. We also propose several actions to deal with tax non-compliance across the globe including prevention, peer reporting, active monitoring of compliance indicators and international cooperation. Theses actions might be combined to achieve optimal results in reducing the iompact of tax evasion and tax avoidance.
    Keywords: tax evasion, tax avoidance, tax compliance
    JEL: M48
    Date: 2022
  5. By: Di Caro, Paolo; Figari, Francesco; Fiorio, Carlo; Manzo, Marco; Riganti, Andrea
    Abstract: We use a rich administrative dataset on individual tax returns from 2008 to 2015 to analyse the behavioural and distributive effects of a flat tax (FT) reform introduced in 2011 for residential property income in Italy replacing the progressive personal income tax. Linking a panel of individual tax data with cadastral property records, and using a difference-in-difference identification strategy, we address five research questions: (i) does the FT increase the probability of declaring a positive rental income to the tax authorities? (ii) does the FT increase the declared tax base? (iii) is the reduced tax burden shared with the tenant? (iv) does the FT affect the overall tax revenue? (v) who are the gainers of the policy? The estimated intention-to-treat effects suggest that the decrease of tax evasion is limited whereas tax burden reduction is large, it is not shared with tenants and it mostly benefits top-income taxpayers. Overall, top 1% of property owners reap about 20% of the overall lost tax revenues.
    Keywords: Flat tax reform; administrative data; tax evasion; income distribution
    JEL: D12 H24 H25
    Date: 2022–07–01
  6. By: Wenxin Du; Benjamin M. Hébert; Wenhao Li
    Abstract: We document regime change in the U.S. Treasury market post-Global Financial Crisis (GFC): dealers switched from a net short to a net long position in the Treasury market. We first derive bounds on Treasury yields that account for dealer balance sheet costs, which we call the net short and net long curves. We show that actual Treasury yields moved from the net short curve pre-GFC to the net long curve post-GFC, consistent with the shift in the dealers' net position. We then use a stylized model to demonstrate that increased bond supply and tightening leverage constraints can explain this change in regime. This regime change in turn helps explain negative swap spreads and the co-movement between swap spreads, dealer positions, yield curve slope, and covered-interest-parity violations, and implies changing effects for a wide range of monetary policy and regulatory policy interventions.
    JEL: F3 G12 G15 G2
    Date: 2022–07
  7. By: Khondaker Golam Moazzem; Tamim Ahmed
    Abstract: The objective of the study is to review the existing practices of different standards and certificates related to socially responsible public procurement (SRPP), and their potential and effectiveness in improving workers’ well-being, along with employment and workplace safety and workers’ rights in Bangladesh. An evidence-based approach, based on both primary and secondary data, has been followed in conducting the study. The study identifies a number of gaps in the process andmaintenance of certification and standards that include submission of false documents in getting certified, lack of traceability of the supply chain, inadequate disclosure of information, lack of accountability of audit firms and suppliers and ineffective measurement approach. Despite having gaps, the certification process has contributed to improving the labour standards in Bangladeshi readymade garment (RMG) factories to different extents. Human rights in the RMG industries of Bangladesh will be significantly determined by the transparency and effectiveness of the certification process.
    Keywords: Apparel Sourcing Countries, readymade garment, RMG, Bangladesh garment,
    Date: 2022–03
  8. By: Boissinot, Jean; Goulard, Sylvie; Salin, Mathilde; Svartzman, Romain; Weber, Pierre-François
    Abstract: The concept of double materiality is developing rapidly, with potential implications for monetary and financial policies. Double materiality builds on the historical accounting and auditing convention of materiality and expands it by considering that non-financial and financial corporations are not only materially vulnerable to environment-related events and risks, but also materially contribute to enabling dirty activities and environmental degradation. Three rationales that support the use of double materiality are distinguished in this paper, each with different policy implications: i) an idiosyncratic perspective – closely connected to the concept of dynamic materiality – which considers that an entity’s environmental impacts are relevant as they provide information on the institution’s own risks; ii) a systemic risk perspective – closely connected to the concept of endogeneity of financial risks – which seeks to reduce financial institutions’ contribution to negative environmental externalities because of the systemic financial risks that could result from them; and iii) a transformative perspective seeking to reshape financial and corporate practices and values in order to make them more inclusive of different stakeholders’ interests and compatible with the actions needed for an ecological transition. Each of these rationales has potential implications for monetary and financial policies, as well as possible theoretical and practical challenges. While the adoption of a double materiality perspective remains an open question, the concept proposes the opportunity to think more comprehensively about the role of the financial system in urgently addressing the ecological challenges of our times.
    JEL: F3 G3 J1
    Date: 2022–06–09

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.