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on Accounting and Auditing |
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Issue of 2024‒08‒26
eleven papers chosen by |
| By: | Jean-François Gajewski (Laboratoire de Recherche Magellan - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon - Institut d'Administration des Entreprises (IAE) - Lyon); Marco Heimann; Pierre-Majorique Léger; Prince Teye |
| Abstract: | This article studies whether nudges – that is, gentle alterations of people's behaviour – increase audit quality. Although the utility of nudges is well-established in behavioural sciences, their applicability and efficacy have been less studied in accounting and auditing. To bridge this knowledge gap, the study extends nudge theory to financial audits, offering experimental evidence of the impact of social norms and justification nudges on auditor behaviour. A factorial 2 × 2 between-subject experiment (social norms and justification) shows that nudges amplify professional skepticism, a critical indicator of audit quality. A follow-up eye-tracking experiment involving an audit task identifies the underlying cognitive mechanism of this effect; nudges heighten auditors' visual attention to pertinent information, thereby refining their evaluations of audit evidence and increasing their professional skepticism. |
| Keywords: | eye-tracking, behavioural auditing, nudge, Professional skepticism |
| Date: | 2024–07–04 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04636343 |
| By: | Kawabata, Chiaki; Takahara, Tsuyoshi |
| Abstract: | We consider an environment wherein a multidisciplinary firm providing audit (AS) and non-audit services (NAS) competes with an AS-specialty firm and a NAS-specialty firm, and show how we should intervene in the markets for AS quality improvement. We assume that the multidisciplinary firm faces the service provision restriction: it cannot provide the NAS to the clients who purchase its AS and maximize the total profit (centralized decision). We find that policies which intensify competition do not necessarily improve and may rather reduce the AS quality since such policies incentivize the multidisciplinary audit firm to earn profits in the NAS market by moving away from competing in the AS market. Moreover, the multidisciplinary firm's separation is the most effective policy for AS quality improvement, as it allows the service provider to avoid the service provision constraint and delegate their decision in audit quality. |
| Keywords: | Separation of Multidisciplinary Firm, Hotelling Model, Audit Service Competition |
| JEL: | G34 L51 M42 |
| Date: | 2024–05–10 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:120907 |
| By: | Ali, Waqar (HEC Paris) |
| Abstract: | Using ASU 2017-12, which substantially simplified reporting of hedging activities, I compare debt contracting outcomes from public bond issuers’ and private loan borrowers’ implementations of less complex hedge accounting. Bond issuers lower credit spreads by 13 – 22 basis points through effective hedging and reporting under the ASU. In contrast, private loan borrowers face 11 basis points higher loan pricing, and 50% greater balance-sheet covenants post-ASU adoption. I argue that when the ASU removes risk-relevant reporting requirements, information frictions and thus the agency cost of private debt increase for banks, and hedging outcomes from private borrowers’ ASU adoptions are insufficient towards offsetting the increased agency cost of debt. Bondholders and private lenders price the informational content of simplified hedge accounting rules differently even when borrowers’ real hedging outcomes remain unchanged. I extend the literature by showing that complex accounting rules have opposite effects on institutionally different public and private debt markets. |
| Keywords: | Reporting Complexity; Hedge accounting; Financial risk management; Debt contracting; Public debt; Private debt; ASU 2017-12 |
| JEL: | D82 G21 G32 M41 |
| Date: | 2023–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:ebg:heccah:1494 |
| By: | Kazakis, Pantelis |
| Abstract: | This study investigates the unexplored nexus between rhetorical nationalism and corporate tax avoidance. Analyzing Chinese firms from 2010 to 2022, it shows that companies with pronounced nationalistic rhetoric are significantly more prone to engage in tax avoidance. This finding highlights the profound impact of nationalistic sentiments on corporate financial strategies. The result holds through an instrumental variables approach, with an even stronger effect observed among state-owned enterprises. This research offers insights for policymakers and scholars interested in the intersection of nationalism and corporate behavior, paving the way for those looking to understand the drivers of tax avoidance. |
| Keywords: | rhetorical nationalism, tax avoidance, China |
| JEL: | G38 H26 M14 |
| Date: | 2024–07–31 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121633 |
| By: | Baudot, Lisa (HEC Paris); Convery, Amanda (University of Delaware - Accounting & MIS); Kaufman, Matthew (Portland State University) |
| Abstract: | Motivated by trends toward gender equality on standard-setting boards in the United States, this study interviews women members of the FASB, GASB, and EITF to understand the factors critical to their successful nomination and appointment. Semi-structured interviews were conducted with women standard setters to root our understanding in their own experiences and perceptions. Value emerged as a generalizing theme. Participants perceived value to the board in nomination as associated with professional expertise and ties with professional societies. Most participants perceived value in giving back to the profession by serving as a voice for an important stakeholder group as a critical factor for acceptance. Women standard setters consistently downplay the idea that diversity, equity, and inclusion represent primary decision criteria for board membership. Instead, their reflections imply that it is up to the profession to implement practices that promote the advancement of the most competent professionals from all backgrounds. |
| Keywords: | standard setting; gender; nomination; Financial Accounting Standards Board; Governmental Accounting Standards Board; Emerging Issues Task Force |
| JEL: | M41 M48 |
| Date: | 2023–06–28 |
| URL: | https://d.repec.org/n?u=RePEc:ebg:heccah:1482 |
| By: | Aymen Abbadi (Université de Lille); Lionel Escaffre (UA - Université d'Angers) |
| Abstract: | L'audit légal a connu une réelle métamorphose durant les dernières années aussi bien sur les plans normatif qu'opérationnel. Ces changements ont été l'occasion de s'intéresser de plus près au rôle que peut jouer le commissaire aux comptes auprès des entités auditées au-delà du caractère obligatoire de son intervention, afin de mieux découvrir le potentiel non exploité de la mission d'audit légal. L'objectif de l'opinion exprimée par le commissaire aux comptes ne doit pas se limiter à la simple validation des comptes mais plutôt évoluer pour jouer un rôle informatif en envoyant des signaux pouvant rassurer les utilisateurs des informations financières divulguées par les entités contrôlées. Il s'agit d'un support de communication alternatif permettant aux entreprises de compléter les signaux classiques utilisés à savoir le niveau d'endettement de l'entreprise, la politique de dividende, le résultat annuel ou la part des capitaux propres détenus par les dirigeants, ce afin de rassurer des investisseurs à la recherche de garanties fiables. Dès lors, le rapport d'audit ne doit plus être réduit à sa fonction première de validation des états financiers pour privilégier une mise en avant de sa dimension signalétique pouvant être utilisée par les entreprises pour véhiculer des informations d'une grande utilité pour les utilisateurs. Le rapport d'audit dispose d'un potentiel informationnel et signalétique pouvant être exploité par les entreprises pour améliorer leur stratégie de communication financière en capitalisant davantage sur la démarche globale d'audit légal, le statut du commissaire aux comptes et le cabinet auquel il appartient. |
| Keywords: | Audit légal ; Rapport d’audit ; Commissaire aux comptes ; Communication financière ; Signal. |
| Date: | 2022–09–20 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04637840 |
| By: | Mounir Bellari (EMSI - Ecole Marocaine des Sciences de l'Ingénieur) |
| Abstract: | The aim of this article is to understand the reasons that motivate Moroccan companies to manage their results in accounting terms, and to identify the various techniques used by company directors to satisfy such motivations. A series of interviews (38), with experts in accounting and finance, revealed that unlisted companies manipulate their earnings primarily to reduce the tax burden. Listed companies, on the other hand, do so to satisfy potential investors by embellishing their financial performance. To put these practices into practice, these companies prefer to use techniques for smoothing the accounting result, with the main operation being the estimation of provisions. However, one of the limitations of this study is that it focuses on manipulative practices that are, by their very nature, concealed, and therefore difficult for company management to address. To enhance its significance, such a study could be supported by a quantitative analysis, or even a qualitative case study to provide greater objectivity. |
| Abstract: | Résumé : Cet article a pour objectif de comprendre les raisons qui incitent les entreprises marocaines à gérer comptablement leurs résultats et de détecter les diverses techniques mobilisées par les dirigeants de ces entreprises pour satisfaire de telles motivations. Une série d'entretiens (38), avec des experts du domaine comptable et financier, a révélé que les sociétés non cotées manipulent leurs résultats essentiellement pour réduire le fardeau fiscal. En revanche, les sociétés cotées le font pour satisfaire les investisseurs potentiels via un embellissement de leurs performances financières. Pour matérialiser ces pratiques, ces sociétés privilégient les techniques de lissage du résultat comptable, avec comme principale opération, l'estimation des provisions. Cependant, parmi les limites de l'étude, c'est qu'elle s'intéresse à des pratiques de manipulation qui sont, par nature, dissimulées, et donc difficiles à aborder par le management de la société. Pour plus de significativité, un tel travail pourrait être épaulé par une étude quantitative, voire qualitative via l'outil étude de cas pour plus d'objectivité. Mots clés : Gestion comptable des résultats, étude exploratoire, entretiens semi-directifs. Classification JEL : M41. Type du papier : Recherche appliquée. Abstract: The aim of this article is to understand the reasons that motivate Moroccan companies to manage their results in accounting terms, and to identify the various techniques used by company directors to satisfy such motivations. A series of interviews (38), with experts in accounting and finance, revealed that unlisted companies manipulate their earnings primarily to reduce the tax burden. Listed companies, on the other hand, do so to satisfy potential investors by embellishing their financial performance. To put these practices into practice, these companies prefer to use techniques for smoothing the accounting result, with the main operation being the estimation of provisions. However, one of the limitations of this study is that it focuses on manipulative practices that are, by their very nature, concealed, and therefore difficult for company management to address. To enhance its significance, such a study could be supported by a quantitative analysis, or even a qualitative case study to provide greater objectivity. Keywords: Earnings management, acrruals, exploratory study, semi-structured interviews. JEL classification: M41. Paper Type: Empirical research. |
| Keywords: | Gestion comptable des résultats étude exploratoire entretiens semi-directifs. Classification JEL : M41. Type du papier : Recherche appliquée Earnings management acrruals exploratory study semi-structured interviews. JEL classification: M41. Paper Type: Empirical research, Gestion comptable des résultats, étude exploratoire, entretiens semi-directifs. Classification JEL : M41. Type du papier : Recherche appliquée Earnings management, acrruals, exploratory study, semi-structured interviews. JEL classification: M41. Paper Type: Empirical research |
| Date: | 2024–07–22 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04661003 |
| By: | Gavin Ugale; Cameron Hall |
| Abstract: | Generative artificial intelligence (AI) presents myriad opportunities for integrity actors—anti-corruption agencies, supreme audit institutions, internal audit bodies and others—to enhance the impact of their work, particularly through the use of large language models (LLMS). As this type of AI becomes increasingly mainstream, it is critical for integrity actors to understand both where generative AI and LLMs can add the most value and the risks they pose. To advance this understanding, this paper draws on input from the OECD integrity and anti-corruption communities and provides a snapshot of the ways these bodies are using generative AI and LLMs, the challenges they face, and the insights these experiences offer to similar bodies in other countries. The paper also explores key considerations for integrity actors to ensure trustworthy AI systems and responsible use of AI as their capacities in this area develop. |
| Date: | 2024–03–22 |
| URL: | https://d.repec.org/n?u=RePEc:oec:comaaa:12-en |
| By: | Hjalte Fejerskov Boas; Niels Johannesen; Claus Thustrup Kreiner; Lauge Truels Larsen; Gabriel Zucman |
| Abstract: | In the second half of the 2010s more than 100 countries—including all large offshore financial centers—started to automatically exchange bank information with foreign tax authorities. This informational big-bang marks a break with the situation of offshore bank secrecy that prevailed before. We study its effects on tax compliance by analyzing the universe of information reports sent by foreign banks to Danish authorities, matched to population-wide micro-data on income, wealth, and cross-border bank transfers. In response to the automatic exchange of bank information, tax evaders may repatriate previously undeclared offshore wealth, they may start to self-report offshore income to the tax authorities, or the tax authorities may detect their evasion in audits that use the new information reports. Using a variety of research designs, we find large compliance effects along all these margins, with the largest response coming from repatriation of wealth. Overall we estimate that the automatic exchange of bank information has closed about 70% of the offshore tax gap. These results highlight the power of international cooperation to improve tax compliance: tax evasion is not a law of nature in a globalized world. |
| JEL: | D31 H24 H26 K34 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32714 |
| By: | Estrin, Saul; Hanousek, Jan; Shamshur, Anastasiya |
| Abstract: | We explore how the type of owner affects private enterprise investment decisions in Europe. In contrast to the literature, we analyze firms with concentrated (>95%) ownership stakes to reduce the potential that agency problems contaminate our results. We consider four types of supermajority owners – family, institutional, corporate, and state and use detailed ownership and financial information from a large sample of private firms from 24 European countries from 2001 to 2018. We find that family-owned firms exhibit higher gross investment rates and substantially higher sensitivity to investment opportunities, profitability, cash flow, and value-added growth compared to corporate and institutional owners. At the same time, and more consistent with the literature, family-owned firms invest significantly less in intangible assets than other ownership types. To demonstrate the robustness of our results, we employ matching samples complemented by analysis of owner-type transitions from family owners to corporate and institutional owners. |
| Keywords: | private firms; panel data; Europe; ownership types; investments; cash flow sensitivity; profitability; business opportunities; Elsevier deal |
| JEL: | G31 G32 |
| Date: | 2024–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:124030 |
| By: | Gazmuri Barker, Sebastian |
| Abstract: | Developing countries’ tax systems are characterized by a very high reliance on indirect taxation and a very low (if any) progressivity. In this article, the author tries to provide a deeper analysis linking these two characteristics by exploring what actions are available for developing countries to increase their tax progressivity through their indirect taxes. He also analyses the potential distributional gains of three reforms to the VAT in developing countries. Using Chile as a case study, the analysis is based on empirical data on consumption patterns to assess the distributional impact of these reforms, finding that they have a strong redistributive potential to enhance the tax progressivity in developing countries. It also emphasises the importance of following evidenced-based tax reforms and not simply follow the indirect taxation policies of developed countries. The author draws comparisons with the UK VAT to highlight the need to take a different approach to regressivity concerns of indirect taxation. |
| JEL: | E6 |
| Date: | 2023–08–07 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:123660 |