nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2024‒03‒25
six papers chosen by

  1. Double materiality -from theory to practice, an examination of its early implementation By Anis Shami
  2. Tax Administration: Essential Analytics for Compliance Risk Management By Joshua Aslett; Gustavo González; Stuart Hamilton; Miguel Pecho
  3. A Framework for Monitoring of and Reporting for External Project Loans in Developing Countries By Mr. Emre Balibek; Guy T Anderson; Kieran McDonald
  4. The Secular Decline of Bank Balance Sheet Lending By Greg Buchak; Gregor Matvos; Tomasz Piskorski; Amit Seru
  5. Welfare-improving tax evasion By Chiara Canta; Helmuth Cremer; Firouz Gahvari
  6. How do online conflict disclosures support enforcement? Evidence from personal financial disclosures and public corruption By Scherf, Alexandra A.

  1. By: Anis Shami (CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes)
    Abstract: The term "Double Materiality" (DM) was first used by the European Commission (EC) in the 2019 "Guidelines on Non-Financial Reporting: Supplement on Reporting Climate-Related Information" (2019/C 209/01). As a development of corporate reporting, it necessitates sharing information on i) how a company's operations affect society and the environment, and ii) how climate-related events affect the company's performance. We look into whether, where, and how businesses used the concept of double materiality in their 2020 corporate reports. To achieve this, we gathered information on a population of 1018 companies, we then traced mentions of Double materiality and examined their choices of reporting frameworks / standards that support their sustainability communication. Next, we investigate how rating agencies evaluate the financial health and sustainability of the companies. We examined possible connections between the disclosure policies of the companies and this external evaluation. Our findings demonstrate that the double materiality concept was still in its infancy in 2020. Similar to double materiality, non-financial reporting frameworks were also poorly addressed by the reporters, yet through significance testing, our results reveal a positive association between adopting these frameworks (by the reporter's/companies) and the reliability of the performance assessment conducted by external assessing entities (sustainability rating agencies).
    Keywords: Double Materiality Baseline Corporate reporting Non-financial reporting Ratings, Double Materiality, Baseline, Corporate reporting, Non-financial reporting, Ratings
    Date: 2023–06–05
  2. By: Joshua Aslett; Gustavo González; Stuart Hamilton; Miguel Pecho
    Abstract: This technical note introduces analytics for compliance risk management in tax administration. Together with its accompanying toolkit, the note is intended as a starter kit to support capacity development in compliance planning, risk, and intelligence groups. Developed primarily for emerging analysts new to tax administration, the note presents both theory and practical aspects of analytics. Its toolkit is comprised of an initial collection of analytics templates designed to assist in turning the theory presented into practice in the areas of: (1) compliance planning; (2) taxpayer profiling; and (3) audit case selection.
    Keywords: tax administration; compliance risk management; compliance strategy; risk analysis; intelligence; data; analytics; digitalization; information technology; analytics support compliance risk management; support CRM analytics capability; CRM theory; IMF Library; data quality; Tax administration core functions; Machine learning; Value-added tax
    Date: 2024–02–26
  3. By: Mr. Emre Balibek; Guy T Anderson; Kieran McDonald
    Abstract: To produce timely and accurate debt reports at the central government level, it is essential to have a sound legal, administrative, and operational framework in place for debt data compilation, reconciliation, accounting, monitoring, and reporting. This note focuses on the arrangements for external project-based debt, which present distinctive challenges in debt reporting particularly in low-income and developing countries. The discussion complements existing literature and guidance on debt transparency by focusing on stages prior to the production of debt reports. The note also identifies the links between the management of project loans and other public financial management (PFM) processes, such as public investment management, budget preparation, fiscal and financial reporting. It shows that a comprehensive approach that considers these linkages can improve efficiency and transparency in fiscal and debt management. Although the focus is on the central government’s debt obligations, the ideas can be extended to cover government-guaranteed loans and public sector debt in general.
    Keywords: public debt management; public debt transparency; debt reporting; fiscal transparency; external debt; project loans; public investment management; maturity status template; debt transparency; core loan term; IMF Library; loan disbursement advice; Government debt management; Loans; Debt service; Global
    Date: 2024–02–22
  4. By: Greg Buchak; Gregor Matvos; Tomasz Piskorski; Amit Seru
    Abstract: The traditional model of bank-led financial intermediation, where banks issue demandable deposits to savers and make informationally sensitive loans to borrowers, has seen a dramatic decline since 1970s. Instead, private credit is increasingly intermediated through arms-length transactions, such as securitization. This paper documents these trends, explores their causes, and discusses their implications for the financial system and regulation. We document that the balance sheet share of overall private lending has declined from 60% in 1970 to 35% in 2023, while the deposit share of savings has declined from 22% to 13%. Additionally, the share of loans as a percentage of bank assets has fallen from 70% to 55%. We develop a structural model to explore whether technological improvements in securitization, shifts in saver preferences away from deposits, and changes in implicit subsidies and costs of bank activities can explain these shifts. Declines in securitization cost account for changes in aggregate lending quantities. Savers, rather than borrowers, are the main drivers of bank balance sheet size. Implicit banks’ costs and subsidies explain shifting bank balance sheet composition. Together, these forces explain the fall in the overall share of informationally sensitive bank lending in credit intermediation. We conclude by examining how these shifts impact the financial sector’s sensitivity to macroprudential regulation. While raising capital requirements or liquidity requirements decreases lending in both early (1960s) and recent (2020’s) scenarios, the effect is less pronounced in the later period due to the reduced role of bank balance sheets in credit intermediation. The substitution of bank balance sheet loans with debt securities in response to these policies explains why we observe only a fairly modest decline in aggregate lending despite a large contraction of bank balance sheet lending. Overall, we find that the intermediation sector has undergone significant transformation, with implications for macroprudential policy and financial regulation.
    JEL: E50 G2 G20 G21 G22 G23 G24 G28 G29 L50
    Date: 2024–02
  5. By: Chiara Canta (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Helmuth Cremer (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Firouz Gahvari (UIUC - University of Illinois at Urbana-Champaign [Urbana] - University of Illinois System)
    Abstract: We study optimal income taxation in a two-group framework where the private cost of misreporting income is positively correlated with productivity. We show that, if high-wage types always reveal their income truthfully, letting low-wage types cheat would lead to Pareto-superior outcomes regardless of the audit costs (as compared to deterring them). When there is no cheating, redistribution takes place on first- or second-best frontiers with the low-wage types always ending up worse off than the high-wage types. Letting low-wage types conceal their income reduces the need to recourse to second-best mechanisms for redistribution. Additionally, it increases the reach of first-best redistribution to outcomes at which low-wage types are better off than high-wage types.
    Keywords: Optimal taxation, tax evasion, audits, welfare-improving
    Date: 2024
  6. By: Scherf, Alexandra A.
    Abstract: Public corruption is a concern for democracies around the world. In the U.S., states have responded to this issue by publishing personal financial disclosures (PFD) for public officials online. PFD are a conflict-of-interest disclosure designed to relieve agency conflicts between private citizens and government officials by documenting overlaps between officials’ financial interests and public responsibilities. This paper explores whether and how online PFD supports anti-corruption enforcement. I present a stylized model illustrating how online PFD leads investigators to increase case referral volume and quality. Empirically, I find that online PFD for local officials is associated with increased referral rates and greater likelihoods of prosecution conditional on referral. I conduct 126 field interviews of federal prosecutors, journalists, and ethics commissions to understand the mechanisms behind these results. I conclude that online PFD supports the enforcement of local corruption by reducing disclosure acquisition costs for enforcement agents.
    Keywords: disclosure; disclosure processing costs; corruption; financial misconduct
    JEL: F3 G3 M40
    Date: 2024–01–01

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