nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2022‒10‒17
four papers chosen by

  1. The Banker's Oath And Financial Advice By Utz Weitzel; Michael Kirchler
  2. RESHAPE: Explaining Accounting Anomalies in Financial Statement Audits by enhancing SHapley Additive exPlanations By Ricardo M\"uller; Marco Schreyer; Timur Sattarov; Damian Borth
  3. How accounting ends: self-undermining repetition in accounting lifecycles By Palermo, Tommaso; Power, Michael; Ashby, Simon
  4. Unorthodox Expenditure Procedures in CEMAC and WAEMU Countries By Hoda Selim; Ms. Gwenaelle Suc; Mr. Bruno Imbert; Qing Zhao

  1. By: Utz Weitzel; Michael Kirchler
    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 nudges that (in)directly 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 nudge that directly refers 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, nudges, financial advice
    JEL: C92 D84 G02 G14
    Date: 2022
  2. By: Ricardo M\"uller; Marco Schreyer; Timur Sattarov; Damian Borth
    Abstract: Detecting accounting anomalies is a recurrent challenge in financial statement audits. Recently, novel methods derived from Deep-Learning (DL) have been proposed to audit the large volumes of a statement's underlying accounting records. However, due to their vast number of parameters, such models exhibit the drawback of being inherently opaque. At the same time, the concealing of a model's inner workings often hinders its real-world application. This observation holds particularly true in financial audits since auditors must reasonably explain and justify their audit decisions. Nowadays, various Explainable AI (XAI) techniques have been proposed to address this challenge, e.g., SHapley Additive exPlanations (SHAP). However, in unsupervised DL as often applied in financial audits, these methods explain the model output at the level of encoded variables. As a result, the explanations of Autoencoder Neural Networks (AENNs) are often hard to comprehend by human auditors. To mitigate this drawback, we propose (RESHAPE), which explains the model output on an aggregated attribute-level. In addition, we introduce an evaluation framework to compare the versatility of XAI methods in auditing. Our experimental results show empirical evidence that RESHAPE results in versatile explanations compared to state-of-the-art baselines. We envision such attribute-level explanations as a necessary next step in the adoption of unsupervised DL techniques in financial auditing.
    Date: 2022–09
  3. By: Palermo, Tommaso; Power, Michael; Ashby, Simon
    Abstract: This study develops a process model of how accounting may come to an end. Grounded in a longitudinal study of a risk culture survey, this model focuses on the dynamics that underpin the repetition of accounting practices, and sheds light on two boundary conditions of successful repetition and continuation which are in tension with each other. On the one hand, there are pressures for repetition that preserves continuity and comparability. On the other hand, there is the ongoing organizational need to adjust accounting practices. Iterating between the case-study findings, social studies of accounting, and the sociology of replication in scientific practice, the model shows how moving too close to either boundary increases the risk that repetition undermines the accounting practice being repeated: “perfect repetition” may be perceived as uninteresting and decision-irrelevant; very “imperfect repetition” may be perceived as something too different and idiosyncratic, and hence also decision-irrelevant. As a result, the analysis extends a rich literature that has examined empirical instances of failure of the conditions that sustain the repeatability of accounting practices. Via the theory of “self-undermining repetition”, this study shows how the possibilities for accounting’s ending are paradoxically inherent in the very act of repetition. This notion of “self-undermining repetition” is deepened by a discussion of how it may be affected by four contingencies: task ambiguity; organizational politics; organizational actors’ reflexivity; and external networks of support. Overall, the analysis of the self-undermining dynamics of repetition, and related contingencies, contrasts with research that foregrounds the constitutive nature of repeated uses of accountings. It shows how repetition may also undermine, rather than cumulatively consolidate, accounting practices.
    Keywords: survey; risk culture; repitition; process theory; accounting lifestyle; practice; ESRC/BSB/06; Wiley deal
    JEL: M40
    Date: 2022–06–20
  4. By: Hoda Selim; Ms. Gwenaelle Suc; Mr. Bruno Imbert; Qing Zhao
    Abstract: This paper takes stock of unorthodox expenditure procedures in CEMAC and WAEMU countries and assesses their potential fiscal impact. “Unorthodox procedures” are defined as spending practices that bypass legal provisions governing public expenditure processes and circumvent regular controls or other budgetary rules, including those related to budget time limits, approved ceilings, or approved appropriations. The paper shows that despite PFM reforms, recourse to such procedures has persisted—resulting in the accumulation of arrears; inadequate fiscal reporting, including large stock-flow adjustments; and corruption vulnerabilities.
    Keywords: Budget institutions; budget execution; expenditure controls; fiscal reporting; public financial management; Francophone Africa; procedures in CEMAC; PFM principle; WAEMU country; Multiyear expenditure; control procedure; Budget execution processes; Expenditure control; Budget planning and preparation; Africa; West Africa; post disbursement regularization; cash disbursement; budget authority; expenditure ceiling
    Date: 2022–07–22

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