nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2023‒03‒27
five papers chosen by

  1. St. Kitts and Nevis: Technical Assistance Report-Strengthening Core Business Functions Audit Capacity (RTAT) By International Monetary Fund
  2. Estimating tax gaps in Zambia: A bottom-up approach based on audit assessments By Kwabena Adu-Ababio; Aliisa Koivisto; Eliya Lungu; Evaristo Mwale; Jonathan Msoni; Kangwa Musole
  3. On the relationship between information and individuals’ perception in affecting income tax evasion By Ludovica Spinola
  4. Government Audits By Martina Cuneo; Jetson Leder-Luis; Silvia Vannutelli
  5. How can accounting reformulate the debate on natural capital and help implement its ecological approach? By Alexandre RAMBAUD

  1. By: International Monetary Fund
    Abstract: The Inland Revenue Department, St. Kitts and Nevis, benefited from a remote Capacity Development (CD) activity delivered by CARTAC over the period November 2021 – March 2022 on auditing of financial institutions. The main objective of this CD was to strengthen the capacity of the auditors to perform audits and verify the accuracy of reporting by taxpayers in the Financial Sector. The training included (i) an overview of the financial sector, financial products/instruments and business processes; (ii) guidance in auditing the banks and insurance companies; and (iii) awareness of the key tax risks within this sector. A total of 22 auditors from the large, medium and small taxpayers’ unit, participated in the training. The training was held over a fifteen (15) day period and concluded with the auditors developing an audit schedule and preparation of audit notification letters to taxpayers selected for audit.
    Keywords: Strengthening audit capacity; core business functions audit capacity; IRD audit team; team Training Program; IRD auditor; World Bank staff; a number of audit case; Auditing; Financial sector; Training and development in revenue administration; Financial audit; Insurance companies; Caribbean
    Date: 2023–02–22
  2. By: Kwabena Adu-Ababio; Aliisa Koivisto; Eliya Lungu; Evaristo Mwale; Jonathan Msoni; Kangwa Musole
    Abstract: Assessing tax gaps—the difference between the potential and actual taxes raised—plays a vital role in achieving positive domestic revenue objectives through improved and reformed taxation. This is particularly pertinent for growth outcomes in developing countries. This study uses a bottom-up approach based on micro-level audit information to estimate the extent of tax misreporting in Zambia.
    Keywords: Tax gap, Value-added tax, Bottom-up approach, Audits, Tax compliance, Tax administration, Zambia
    Date: 2023
  3. By: Ludovica Spinola (Department of Economics, University Of Venice CÃ Foscari)
    Abstract: We experimentally test how information about the number of caught tax evaders, by interacting with individuals’ prior beliefs, affect the decision to underreport taxes. Specifically, our results indicate that when individuals receive the information about the number of people caught evading taxes and perceive this as higher than prior beliefs, they evade less. When, instead, individuals consider the number of caught evaders as low with respect to their beliefs, they evade more. These findings suggest that when subjects are informed on how many people have been found evading taxes they infer the audit probability, rather than the tax evasion rate. Finally, we observe no salience bias effect when considering individuals to whom we highlighted information about others’ norm violation nor when looking at those to whom we emphasised the probability of being audited.
    Keywords: tax evasion, social information, audit probability, salience bias, laboratory experiment
    JEL: D83 D9 H2 H26
    Date: 2023
  4. By: Martina Cuneo; Jetson Leder-Luis; Silvia Vannutelli
    Abstract: Audits are a common mechanism used by governments to monitor public spending. In this paper, we discuss the effectiveness of auditing with theory and empirics. In our model, the value of audits depends on both the underlying presence of abuse and the government’s ability to observe it and enforce punishments, making auditing most effective in middling state-capacity environments. Consistent with this theory, we survey all the existing credibly causal studies and show that government audits seem to have positive effects mostly in middle-state-capacity environments like Brazil. We present new empirical evidence from American city governments, a high-capacity and low-impropriety environment. Using a previously unexplored threshold in federal audit rules and a dynamic regression discontinuity framework, we estimate the effects of these audits on American city finance and find no marginal effect of audits.
    JEL: D73 H83 M42
    Date: 2023–02
  5. By: Alexandre RAMBAUD
    Abstract: This paper shows that the mainstream usage of ‘natural capital’ (NC) is incompatible with an ecological approach. It argues that accounting is relevant for (re)structuring the debate around NC and implementing an alternative approach to NC that works with an ecological perspective.It first performs a ‘Latourian’ anthropological analysis of the mainstream notion of capital, resituated in the Modern cosmology, as well as the notion of ‘ecology’. It goes on to propose an ‘accounting’ study of capital with the objective of suggesting an alternative vision of NC and underlines its potential. The study shows that the mainstream use of NC is incompatible with an ecological approach, even in the case of strong sustainability. Mainstream NC is associated with ‘capital as a debit concept’, but a credit-based approach to NC would align it better with an ecological perspective. The paper renews the critical analysis of NC and of strong/weak sustainability. It opens a potential path of research in ecological accounting based on an alternative perspective on NC. It proposes an extension of the ‘classical’ accounting practices in historical costs to a more ecological vision of NC, linking accounting practices understood by current corporate stakeholders to ecological requirements.
    JEL: Q
    Date: 2023–03–06

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