nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2022‒10‒31
seven papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Quality of Audits by Supreme Audit Institutions By World Bank
  2. The Socially Optimal Loan Auditing with Multiple Projects By Peter J. Simmons; Nongnuch Tantisantiwong
  3. Efficient audits by pooling independent projects: Separation vs. conglomeration By Peter J. Simmons; Anna Maria C. Menichini
  4. Fraud Concerns and Support for Economic Relief Programs By Ingar K. Haaland; Andreas Olden
  5. Risk adjustment under IFRS 17: An adaptation of Solvency 2 one-year aggregation into an ultimate view framework By Tachfine El Alami; Laurent Devineau; Stéphane Loisel
  6. Inefficient at Any Level: A Comparative Efficiency Argument for Complete Elimination of Property Transfer Duties and Insurance Taxes By Jason Nassios; James Giesecke
  7. Four essays on the quality of auditing: Causes and consequences By Duiverman, Sytse

  1. By: World Bank
    Keywords: Finance and Financial Sector Development - Financial Regulation & Supervision Public Sector Development - Public Financial Management
    Date: 2020–12
    URL: http://d.repec.org/n?u=RePEc:wbk:wboper:34995&r=
  2. By: Peter J. Simmons; Nongnuch Tantisantiwong
    Abstract: This paper fills the gap in the literature by introducing an efficient, incentive compatible audit policy that can minimise the social loss created by the audit cost while maximising social welfare. We apply this within a loan auditing context, but the method is also applicable to any accounting and tax audit context. We explain why the loan contract design for finance of projects varies between different situations. Each project outcome is random and private information of its individual owner, but reported outcomes can be audited at a cost. Our framework simultaneously determines incentive compatible auditing policies, interest rates and default probabilities to yield an efficient contract design. We show how the socially best loan audit policy and repayments depend on the degrees of information asymmetry and risk correlation between projects, the number of agents in the agreement and the agents’ perception of loan default.
    Keywords: Optimal contract, Incentive compatible audit policy, Heterogeneous and correlated risk, Welfare, Loan auditing
    JEL: D81 D82 G21
    Date: 2022–10
    URL: http://d.repec.org/n?u=RePEc:yor:yorken:22/07&r=
  3. By: Peter J. Simmons; Anna Maria C. Menichini
    Abstract: Within a costly state verification model with endogenous audit and commitment, the paper proposes a rationale for joint financing based on the reduction of audit costs. Joint financing dominates separate financing when the incentive effects brought about by optimally chosen variable intensity audits, with the worst outcomes audited intensively and the intermediate ones residually, outweigh the cost of joint financing. This is represented by the extra-deadweight loss due to the unnecessary audit that a successful project may undergo when jointly financed. The result always holds when joint financing involves coinsurance gains -a successful project bails out a failing onebut may also hold under contagion -a succeeding project is dragged down by a failing one. Moreover, it is robust to the sequencing of audits. The paper derives a number of testable predictions relating the emergence of joint financing to project returns, investment cost, bankruptcy costs, quality of accounting standards and timing of audits.
    Keywords: contracts, auditing, project Önance, conglomerates.
    JEL: D82 D83 D86
    Date: 2022–10
    URL: http://d.repec.org/n?u=RePEc:yor:yorken:22/06&r=
  4. By: Ingar K. Haaland; Andreas Olden
    Abstract: Using a probability-based sample of the Norwegian population, we test whether an informational treatment about fewer audits by the Norwegian Tax Administration during the peak of the COVID-19 crisis affects support for an economic relief program designed to save jobs and prevent bankruptcies. The information treatment significantly reduces support for the economic relief program. The underlying mechanisms are lower trust in the tax administration’s handling of the program and more pessimism about its ability to detect fraud.
    Keywords: policy preferences, economic relief programs, information, audit activities
    JEL: D83 H25 H26
    Date: 2022
    URL: http://d.repec.org/n?u=RePEc:ces:ceswps:_9925&r=
  5. By: Tachfine El Alami (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon, ADDACTIS France); Laurent Devineau (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon); Stéphane Loisel (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon)
    Abstract: The standard IFRS 17 introduces a risk adjustment (RA) to reflect the compensation the insurance entity requires for bearing the uncertainty associated with nonfinancial risks. The risk adjustment is one of the main components in IFRS 17 disclosures and is a factor that impacts strongly IFRS 17 P&L and balance sheet as well as their evolution over a time horizon. IFRS 17 does not prescribe any specific techniques for calculation methodologies; insurance entities are free to adopt their own assessment while meeting several qualitative rules to ensure their consistency. This paper focuses on the recommendations of paragraph §B88 stating that the risk adjustment is required to reflect the diversification benefit of bearing the risk. We suggest a method for aggregating elementary RA (per risk and/or per Line of Business) based on the Solvency 2 elliptic aggregation. We introduce the concept of ultimate correlation as opposed to Solvency 2 one-year correlation and provide a theoretical bridge between both depending on a time diversification parameter. We explore correlation structures involving this time diversification and discuss analytical properties in terms of possible correlations values and the resulting impact on the aggregated RA features.
    Keywords: IFRS 17,Solvency 2,Risk Adjustment,Risk Aggregation,Correlation,Time diversification,Ultimate view
    Date: 2022–08–29
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03762799&r=
  6. By: Jason Nassios; James Giesecke
    Abstract: Harberger (1962) coined the term excess burden to emphasise that taxes impose costs in addition to the revenue they collect. Reviews of Australia's tax system have used point estimates of the excess burden for a series of Australian taxes, among other measures, to motivate and prioritise the nation's reform agenda. In this paper we commence the work needed to elucidate what the optimal tax mix in Australia might look like under alternative revenue raising efforts, by studying how the excess burden of four Australian taxes change as we alter their tax-specific revenue-to-GDP ratios. This is achieved via simulation with a large-scale CGE model with high levels of tax-specific detail. We show that property transfer duties and insurance taxes are highly inefficient even at low levels, strengthening the case for their complete replacement with more efficient taxes.
    Keywords: CGE modelling, Immovable property tax, Recurrent property tax, Insurance tax, Value added tax, Personal income tax, Excess burden
    JEL: C68 E62 H2 H71 R38
    Date: 2022–10
    URL: http://d.repec.org/n?u=RePEc:cop:wpaper:g-337&r=
  7. By: Duiverman, Sytse (Tilburg University, School of Economics and Management)
    Date: 2022
    URL: http://d.repec.org/n?u=RePEc:tiu:tiutis:7d7be078-670f-4712-959b-f37d6e684a82&r=

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