nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2024‒05‒13
eleven papers chosen by

  1. Corporate political donations and audit fees: Some evidence from Australian audit pricing By Ferdinand A Gul; Arifur Khan; Karen Lai; Getie Dessalegn; Mohammad Badrul Muttakin
  2. Licensed Professionals and Corporate Board Performance: The Effect of the Sarbanes-Oxley Act on the Audit Committee By Ben Posmanick; Alex Obie; Bobby Chung
  3. Increasing the impact of supreme audit institutions through external engagement: Compendium of European experiences with developing effective relationships between SAIs and non-governmental stakeholders By Bianca Brétéché; Alastair Swarbrick
  4. Design and Consequences of CFC and GILTI Rules: A Review and Potential Lessons for the Global Minimum Tax By Michael Overesch; Dirk Schindler; Georg Wamser
  5. Wealth Tax Mobility and Tax Coordination By David R. Agrawal; Dirk Foremny; Clara Martínez-Toledano
  6. Financial regulation in sport championships as an anticompetitive institution By Budzinski, Oliver
  7. Model-based financial regulations impair the transition to net-zero carbon emissions By Gasparini, Matteo; Ives, Matthew C.; Carr, Ben; Fry, Sophie; Beinhocker, Eric
  8. Pre-publication revisions of bank financial statements: a novel way to monitor banks? By Andre Guettler; Mahvish Naeem; Lars Norden; Bernardus F Nazar Van Doornik
  9. Designing a Progressive VAT By Artur Swistak; Rita de la Feria
  10. Marketing, Other Intangibles, and Output Growth in 61 United States Industries By Leo Sveikauskas; Rachel Soloveichik; Corby Garner; Peter B. Meyer; James Bessen; Mathew Russell
  11. Fighting female unemployment: the role of female ownership of bank accounts in complementing female inclusive education By Simplice A. Asongu

  1. By: Ferdinand A Gul (USC - University of the Sunshine Coast); Arifur Khan (Deakin University [Burwood]); Karen Lai (Shenzhen Univerisity [Shenzhen]); Getie Dessalegn (RMIT University - Royal Melbourne Institute of Technology University); Mohammad Badrul Muttakin (Deakin University [Burwood])
    Keywords: Political donation, audit fees, audit risk, strategic investments, agency costs, government contracts JEL Classification: D72 G34 M42, government contracts JEL Classification: D72, G34, M42
    Date: 2023–09–29
  2. By: Ben Posmanick (St Bonaventure University); Alex Obie (St Bonaventure University); Bobby Chung (USF)
    Abstract: We study the substitution between licensed and unlicensed workers and the quality effect of employing licensed professionals on firms. Leveraging a quasi-licensure mandate of the Sarbanes-Oxley Act (SOX) on audit committees of publicly-traded firms, this paper studies the employment spillover and quality effects of licensing at the firm level. Assembling multiple data sources, we identify independent directors with relevant licenses and the quality of accounting reports for more than 5, 200 publicly-traded firms. Exploiting plausibly exogenous year-by-firm variation in fixed-effect models, the licensure mandate of SOX significantly increases the appointment of certified public accountants (CPAs) at the expense of other types of professionals at the board level. We find a precise zero effect for the presence of CPAs on audit committees on the need to refile financial statements.
    Keywords: Occupational Licensing, Employment Spillover, Quality, Sarbanes-Oxley
    JEL: J44 G38 K10
    Date: 2024–04
  3. By: Bianca Brétéché; Alastair Swarbrick
    Abstract: Supreme audit institutions (SAIs) are a critical part of public accountability systems. They ‘watch’ over governments’ use of public money and report about it publicly, helping to increase transparency. SAIs have an interest in strongly engaging with external stakeholders – including citizens – to make sure that their work is relevant, understood and used to hold governments to account.This paper provides a compilation of European SAIs’ practices on communication, co-operation and collaboration with external partners and is intended to provide inspiration to SAIs of EU candidate countries and potential candidates to further strengthen their engagement with their non-governmental stakeholders.
    Keywords: civil society organisations, EU, EU candidate countries, EU potential candidates, external engagement, non-governmental organisations, non-governmental stakeholders, public accountability, public auditing, public funds, supreme audit institutions, transparency
    Date: 2024–04–29
  4. By: Michael Overesch; Dirk Schindler; Georg Wamser
    Abstract: This chapter provides a description of one of the key anti-tax-avoidance rules to combat profit shifting by multinational corporations, so called Controlled Foreign Corporation (CFC) rules that directly target income in low-tax countries. We explain some key institutional features of CFC provisions. We then present some data and descriptive statistics before we review existing theoretical and empirical research analyzing CFC rules. Our review also includes the new U.S. GILTI rules. CFC rules are effective in curbing profit shifting, but their effect on the real economy is still unclear. In contrast, GILTI seems to be ineffective when it comes to profit shifting, but it has consequences for real activity. We finally argue that research on CFC regulations and GILTI can be informative in assessing the recent global minimum tax initiative.
    Keywords: Controlled-foreign-company (CFC) Rules, Global Intangible Low-taxed Income (GILTI), tax havens, tax avoidance, effects of regulation, global minimum tax
    JEL: H25 F23
    Date: 2024
  5. By: David R. Agrawal; Dirk Foremny; Clara Martínez-Toledano
    Abstract: We study the effects of decentralized wealth taxation on mobility and the effectiveness of tax coordination at mitigating tax competition. We exploit the reintroduction of the Spanish wealth tax, after which all regions except Madrid levied positive tax rates. We find the mobility responses to wealth taxes are within the range of prior estimates with respect to income taxes. However, wealth tax mobility responses generate losses to personal income tax revenues that are six times larger than the direct losses to wealth taxes. Madrid could achieve higher total regional revenues by agreeing to a harmonized positive tax rate.
    Keywords: wealth taxes, mobility, fiscal decentralization, fiscal federalism, tax coordination
    JEL: E21 H24 H31 H73 J61 R23
    Date: 2024
  6. By: Budzinski, Oliver
    Abstract: Financial regulation in sports is usually discussed in the context of representing an instrument against 'financial doping'. Notwithstanding the merits of this discussion, this paper takes the opposite perspective and analyses how market-internal financial regulation itself may anticompetitively influence sporting results. Virtually every regulative financial intervention distorts sporting competition to some extent and creates beneficiaries and losers. Sometimes, the actual winners and losers of financial regulation stand in line with the (legitimate) goals of the regulation like limiting financial imbalances or preventing distortive midseason insolvencies of teams. However, financial regulation may also display unintended side-effects like protecting hitherto successful teams from new challengers, cementing the competitive order, creating foreclosure and entry barriers, or serving vested interests of powerful parties. All of these effects may also be hidden agendas by those who are implementing and enforcing market-internal financial regulation or influencing it. This paper analyses various types of budget caps (including salary caps) with respect to potentially anticompetitive effects. UEFA's so-called Financial Fair Play Regulations and Formula One's recent budget cap are highlighted as examples. Furthermore, the paper discusses allocation schemes of common revenues (like from the collective sale of broadcasting rights) as another area of financial regulation with potentially anticompetitive effects. Eventually, the effects of standards for accounting, financial management, and auditing are discussed.
    Keywords: sports economics, financial regulation, budget caps, salary caps, financial fair play, financial doping, collective sale of media rights, sports broadcasting rights, revenue sharing, formula one
    JEL: Z20 Z23 L40 L83 K21
    Date: 2024
  7. By: Gasparini, Matteo; Ives, Matthew C.; Carr, Ben; Fry, Sophie; Beinhocker, Eric
    Abstract: Investments via the financial system are essential for fostering the green transition. However, the role of existing financial regulations in influencing investment decisions is understudied. Here we analyse data from the European Banking Authority to show that existing financial accounting frameworks might inadvertently be creating disincentives for investments in low-carbon assets. We find that differences in the provision coverage ratio indicate that banks must account for nearly double the loan loss provisions for lending to low-carbon sectors as compared with high-carbon sectors. This bias is probably the result of basing risk estimates on historical data. We show that the average historical financial risk of the oil and gas sector has been consistently estimated to be lower than that of renewable energy. These results indicate that this bias could be present in other model-based regulations, such as capital requirements, and possibly impact the ability of banks to fund green investments.
    JEL: N0 R14 J01
    Date: 2024–04–02
  8. By: Andre Guettler; Mahvish Naeem; Lars Norden; Bernardus F Nazar Van Doornik
    Abstract: We investigate whether pre-publication revisions of bank financial statements contain forward-looking information about bank risk. Using 7.4 million observations of monthly financial reports from all banks in Brazil during 2007-2019, we show that 78% of all revisions occur before the publication of these statements. The frequency, missing of reporting deadlines, and severity of revisions are positively related to future bank risk. Using machine learning techniques, we provide evidence on mechanisms through which revisions affect bank risk. Our findings suggest that private information about pre-publication revisions is useful for supervisors to monitor banks.
    Keywords: banks, bank performance, regulatory reporting quality, regulatory oversight, machine learning
    JEL: G21 G28 M41
    Date: 2024–03
  9. By: Artur Swistak; Rita de la Feria
    Abstract: This paper presents a novel approach to addressing VAT regressivity, by proposing the adoption of a progressive VAT: a single-rate, broad-base, VAT, whereby tax paid on consumption is re-paid to lower income households in real-time, at the moment of purchase. Such a system can effectively eliminate regressivity, while minimizing the political economy, cash-flow, and welfare stigma obstacles that are often associated with standard welfare transfers used in modern VAT systems. It would also have other significant advantages, particularly in terms of compliance incentives.
    Date: 2024–04–05
  10. By: Leo Sveikauskas; Rachel Soloveichik; Corby Garner; Peter B. Meyer; James Bessen; Mathew Russell
    Abstract: Experts in the System of National Accounts (SNA) recently considered whether marketing could be included as a capital asset in the national accounts and later recommended that marketing should be an intangible in the 2025 SNA (IMF, 2022; IMF, 2023). This paper contributes to that discussion by developing macroeconomic measures of marketing investments and stocks for the United States. We also construct and analyze measures of how marketing and other intangibles contribute to output growth in the 61 industries that comprise the U.S. private business sector.
    JEL: M31 M37
    Date: 2023–10
  11. By: Simplice A. Asongu (Johannesburg, South Africa)
    Abstract: The purpose of the study is to assess if a policy of female inclusive education should be complemented with a policy of female ownership of bank accounts to fight female unemployment. The study therefore examines how female ownership of bank accounts moderates the incidence of female education on female unemployment. The focus is on 44 Sub-Saharan African (SSA) countries for the period 2004 to 2018 and the empirical evidence is based on interactive quantile regressions. The interactions are tailored such that female ownership of bank accounts influence the effect of female inclusive education on female unemployment. From the empirical findings, it is evident that female ownership of bank accounts does not effectively moderate female education in order to reduce female unemployment unless complementary policies are considered. The complementary policies should be in view of boosting the interaction between female education and female bank account ownership in increasing employment opportunities for the female gender and by extension, reducing female unemployment. The invalidity of the moderating effect is robust to the inclusion of more elements in the conditioning information set as well as accounting for other dimensions of endogeneity such as simultaneity and the unobserved heterogeneity. Policy implications are discussed. This study contributes to the extant literature by assessing how female ownership of bank accounts complement female inclusive education to reduce female unemployment.
    Keywords: Africa; Inequality; Gender; Inclusive development; Unemployment
    JEL: G20 I10 I32 O40 O55
    Date: 2024–01

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