|
on Accounting and Auditing |
| By: | Aymen Abbadi (LUMEN - Lille University Management Lab - ULR 4999 - Université de Lille); Yosra Hichri |
| Abstract: | This paper studies the effects of convergence towards International Financial Reporting Standards (IFRS) on audit quality in the MENA region. The choice of this region is justified by its attractiveness and its strong economic potential given the strong growth observed during last few years. Through the empirical study carried out, we study the moderating role of earnings management on the relationship between convergence towards IFRS standards and audit quality. The methodology used is a multiple regression which uses the least squares method. The processing of the data collected allowed us to observe that the higher the degree of convergence towards IFRS, the better the audit quality. This improvement is manifested in the positive nature of the audit opinion expressed by the auditor. Our results show that earnings management has no moderating effect on the relationship between convergence towards IFRS and audit quality. However, the convergence towards IFRS increases the requirements of users who are looking for more qualitative information. |
| Abstract: | Ce papier étudie les effets de la convergence vers les normes internationales d'information financière (IFRS) sur la qualité de l'audit dans la région MENA. Le choix de cette région se justifie par son attractivité et son fort potentiel économique compte tenu de la forte croissance qu'elle connait au cours des dernières années. A travers l'étude empirique menée, nous étudions le rôle modérateur de la gestion du résultat sur la relation entre la convergence vers les normes IFRS et la qualité d'audit. La méthodologie utilisée dans cette étude est une régression multiple qui mobilise la méthode des moindres carrés. Le traitement des données collectées nous a permis de constater que plus le degré de convergence vers les IFRS est élevé, plus la qualité d'audit est meilleure. Cette amélioration se manifeste dans la nature positive de l'opinion d'audit exprimée par l'auditeur Nos résultats montrent que la gestion du résultat n'a pas d'effet modérateur sur la relation entre la convergence vers les IFRS et la qualité d'audit. Néanmoins, la convergence vers les IFRS accroît les exigences des utilisateurs qui sont à la recherche d'informations plus qualitatives. |
| Keywords: | IFRS, earnings management, audit quality, audit opinion., IFRS, gestion des résultats, qualité de l'audit, opinion IFRS, earnings management, audit quality, audit opinion |
| Date: | 2024–05–30 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04696190 |
| By: | M N, Nikhil; S Shenoy, Sandeep; Chakraborty, Suman; Abhilash, Abhilash |
| Abstract: | The last few decades have evidenced radical changes in global standards, particularly the International Financial Reporting Standards convergence in India has piqued the curiosity of researchers and professionals. Despite the evolving research, there is no consensus on its consequences in the Indian context. In this backdrop, this paper provides a state-of-the-art summary of empirical archival on determinants and effects of Ind AS for the post-2010 period. To this end, the study employs the systematic literature review method following the Scientific Procedure and Rationales for the Systematic Literature Review approach. A total of 50 articles retrieved from the Scopus and Web of Science database between 2010 and 2024 were reviewed. The results revealed that the perceived benefits of IFRS, globalization, and the urge to enhance reporting quality are the key drivers of IFRS convergence in India. Regarding impact, the review uncovered that Ind AS has increased the quality of financial reporting, value relevance, and firm performance. However, it has led to a decline in the ethical reporting of the firms. Further, Ind AS witnessed the increased length and complexity of financial statements, causing problems with the readability of the reports. Overall, the observed learning curve effect strongly suggested that the Ind AS will have a favourable impact on the Indian accounting realm moving forward. The findings urge that policymakers should adopt concurrent enforcement mechanisms while investors are advised to exercise caution while making investment decisions. |
| Keywords: | Ind AS, Compliance and Adoption, Fair Value Accounting, Accounting Disclosure, India, Review |
| JEL: | M40 M41 M48 M49 |
| Date: | 2024–05–21 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122321 |
| By: | Enrico Di Gregorio (International Monetary Fund); Matteo Paradisi (EIEF); Elia Sartori (CSEF) |
| Abstract: | We show that tax authorities can stimulate tax compliance by strategically releasing audit-relevant information. We focus on audit policies that disclose to taxpayers that audit risk discretely drops above a threshold determined by their predicted revenues. In a theoretical framework, we derive conditions for the existence of improvements over flat undisclosed audit rules, and we build a test for such improvements that relies on a change in the probability jump at the threshold. Our empirical analysis relies on the Sector Studies, an Italian policy with a disclosed threshold-based design. We leverage more than 26 million Sector Study files submitted between 2007 and 2016. First, we show that taxpayers bunch at the threshold to a great extent, and that this behavior is related to evasion proxies, availability of evasion technologies, and tax incentives. Then, we exploit a staggered Sector Studies reform that widens the initial audit risk discontinuity. In line with our theory, taxpayers who benefit from audit exemptions above the threshold reduce their relative compliance, while those below the threshold improve it. However, mean reported profits increase by 16.2% in treated sectors over six years, suggesting – in light of our test – that a disclosed rule performs better than an undisclosed one. |
| Keywords: | tax compliance, enforcement, evasion, audit, disclosure, firm, bunching. |
| JEL: | D04 D22 H24 H25 H26 H32 |
| Date: | 2024–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:729 |
| By: | Xuyang Chen |
| Abstract: | Profit shifting by multinational enterprises (MNEs) causes considerable tax revenues losses globally. This thesis focuses on several developments of anti-avoidance measures, and theoretically investigates their effects on MNEs’ behavior and countries’ corporate taxes. Chapter 1 analyzes tax enforcements coordination and cooperation. We consider a fiscal competition game where the timing of countries’ enforcement decisions is endogenized. Countries differ in market size and tax enforcement productivity (captured by enforcement elasticity of tax revenue). We reveal that the low-enforcement productivity country will be the enforcement leader and will benefit more from enforcement cooperation. Chapter 2 is motivated by the fact that many countries are limiting tax deductibility and using turnover taxes targeted at gross revenues. Our analysis starts from the polar cases: a pure profit tax under separate accounting or formula apportionment, and a turnover tax. We derive conditions under which one tax regime dominates the other two in terms of tax revenue. In the general case of tax deductibility, we show that depending on tax capacity and production technologies, tax deductibility affects countries’ tax revenues very differently. Chapter 3 studies the OECD’s global minimum tax (GMT). Different from the minimum tax literature, we consider both profit shifting and capital investment responses of the MNE. We show that the GMT curbs profit shifting and always benefits the large country. In the short run where countries’ tax rates are fixed, introducing the GMT increases (decreases) the small country’s revenue under high (low) profit shifting cost. In the long run where countries can adjust tax rates, the GMT reshapes international tax competition game and may not bring countries’ tax rates above the minimum rate. Moreover, a marginal GMT reform does not necessarily benefit the small country. |
| Keywords: | Profit shifting; Tax competition; Tax enforcement; Tax deductibility; Tax haven; Global minimum tax |
| Date: | 2024–10–18 |
| URL: | https://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/378389 |
| By: | Julien Albertini (Université Lumière Lyon 2, CNRS, Université Jean Monnet Saint-Etienne, emlyon business school, GATE, 69007, Lyon, France); Xavier Fairise (GAINS, Le Mans Université); Anthony Terriau (GAINS, Le Mans Université) |
| Abstract: | This paper explores the differentiated effects of corporate tax changes based on firm characteristics and evaluates the potential impact of a tax system modulated by both firm size and age. Using tax rate variations across U.S. states and comparing adjacent counties across state borders, we find that corporate taxes significantly reduce employment in small and young firms, while having no notable impact on large and older firms. We then develop a model to analyze firm dynamics throughout their life cycle under different tax regimes. Our simulations show that a corporate tax system adjusted by both firm size and age is more effective than one based solely on size (and even more so than a system with a single rate). This approach lightens the tax burden on highly productive young firms and shifts it toward less productive older firms, ultimately boosting employment and welfare without reducing the fiscal surplus. |
| JEL: | H25 H32 J21 J23 E61 E62 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:gat:wpaper:2410 |
| By: | Léo Czajka (Université Catholique de Louvain); Bassirou Sarr (Ministère des Finances et du Budget, République du Sénégal); Mattea Stein (Università di Napoli Federico II and CSEF) |
| Abstract: | Tax administrations in low-income countries face widespread tax evasion and high enforcement costs. They thus need information to detect where tax evasion is most severe, and allocate scarce resources accordingly. This paper shows that leveraging large firms’ trading network to collect information about their suppliers is a cost-efficient way to detect tax evasion and increase future audit returns. We collaborate with the Senegalese tax administration on a vast data collection effort to digitise lists of payments submitted by the largest firms and show that 88.6% of these firms provide incomplete information about their suppliers. This prevents any cross-checking against income declared by the suppliers themselves. We then randomise a low-cost communication campaign across all 3, 487 misreporting firms, to discourage future misreporting. The intervention increases the prevalence of suppliers’ identification information by 52%. In aggregate, this allows to uncover $145.5 million in unreported revenue (i.e. 0.5 % of GDP). Most of it accrues to a few tax-registered suppliers, as opposed to informal ones. A simulation exercise shows that exploiting the newly available information to target the largest under-reporting suppliers would increase audit returns by at least 100%. |
| Date: | 2024–07–05 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:731 |
| By: | Franz Ostrizek (Sciences Po); Elia Sartori (CSEF) |
| Abstract: | We investigate the behavioral foundations of informed trade. We extend the canonical (Kyle, 1989) model to allow for wide range of misperception about the information environment (e.g. overconfidence and correlation delusion) as well as the market clearing condition (e.g. understatement of individual impact) and ask when a trading equilibrium can exist. We show that existence requires either i) the market clearing rule being perceived with (cognitive) noise of arbitrary size, or ii) sufficiently strong misperceptions that lead traders to overestimate the precision of their private information (relative to that of others) or underestimate their market impact. Following i) provides a cognitive foundation for the noise trader approach, while ii) yields a highly tractable linear model of (sufficiently) biased traders. Fixing the bias, a higher number of traders is beneficial for existence, though the economy is typically discontinuous in the countable-trader limit. In the latter case, equilibrium is characterized by limit uncertainty, a property which is satisfied if and only if traders perceive some correlation in their competitors’ information. |
| Keywords: | tax compliance, enforcement, evasion, audit, disclosure, firm, bunching. |
| JEL: | D04 D22 H24 H25 H26 H32 |
| Date: | 2024–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:730 |
| By: | Yang , Jiaqi (Sustainable Lab Inc.); Takahashi , Kotaro (Sustainable Lab Inc.); Yamadera, Satoru (Asian Development Bank); Tian, Shu (Asian Development Bank) |
| Abstract: | By gathering and analyzing the textual information in eXtensible Business Reporting Language format from the annual securities reports of around 3, 800 Japanese listed companies from 2013 to 2023, this study aims to uncover the trend of Japanese corporate environmental, social, and governance (ESG) materiality disclosure, particularly the environmental aspects. Furthermore, this research explores the potential of self-disclosed ESG information based on eXtensible Business Reporting Language technology as an alternative source for predicting companies' sustainability and financial performance. An upward trend in environmental information disclosure was identified, suggesting a deepening corporate commitment to sustainability practices. Second, our correlation analysis indicated that E, S, and G materialities are increasingly disclosed in a unified manner rather than in isolation. Third, our analysis found limited evidence of a relationship between self-disclosed ESG materiality and corporate financial and ESG performance, which indicates that corporates’ self-disclosure of ESG materiality is not yet sufficient to use as a standalone measure to evaluate and predict financial profitability and climate performance. |
| Keywords: | XBRL; ESG materiality; ESG disclosure; fixed panel regression |
| JEL: | C23 M41 O16 Q56 |
| Date: | 2024–10–09 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:0744 |
| By: | Ms. Teresa R Curristine; Ms. Isabell Adenauer; Virginia Alonso-Albarran; Mr. John Grinyer; Koon Hui Tee; Mr. Claude P Wendling; Delphine Moretti |
| Abstract: | This Note provides guidance on developing and implementing a medium-term fiscal framework (MTFF). MTFFs aim to promote fiscal discipline and sustainability, transparency, and better-informed fiscal decisions. An MTFF comprises a set of institutional arrangements for prioritizing, presenting, reporting, and managing fiscal aggregates - revenue, expenditure, balance, and debt - generally over a three-to-five-year period. It incorporates a fiscal strategy, medium-term projections of key macroeconomic variables and fiscal aggregates, and ceilings on total expenditure to guide subsequent annual budgets. By introducing a medium-term perspective into fiscal and budgetary decision making, MTFFs provide a clearer understanding of the impact, trade-offs, and risks of policy choices. MTFFs contribute to enhancing transparency and accountability by communicating the government’s medium-term fiscal goals, policies, and fiscal performance. Ultimately, clarity on medium-term fiscal plans and on their effective implementation can bolster confidence in the government’s ability to manage its finances prudently and competently. In addition to providing guidance on how to design an MTFF and the institutional and technical arrangements needed to support implementation, the Note discusses key challenges and presents country examples from across the globe by income group and concludes with lessons learned. |
| Keywords: | fiscal frameworks; fiscal planning; budget cycles; MTFF; medium-term fiscal framework; emerging market economy country example; MTFF specification; koon hui tee; MTFF projection Tool; MTFF time horizon; Budget planning and preparation; Fiscal rules; Fiscal risks; Caribbean |
| Date: | 2024–09–26 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfhtn:2024/005 |
| By: | Peijun Liu (Graduate School of Economics, Osaka University) |
| Abstract: | This paper investigates the association between ownership structure with business risk disclosure in Japan, and the relationship between information content of risk disclosure and investors' risk perception. In the sample of Japanese firms over the period 2014-2021, the main results indicate a significant and nonmonotonic relationship between managerial ownership and annual modification in business risk disclosure. In particular, the modification of business risk disclosure decreases as managerial ownership increases for both high and low levels of management share holdings, while it increases for intermediate levels of it. In addition, I find that the annual increase in business risk disclosure is negatively associated with changes in daily stock return volatility and trading volume, suggesting a greater opinion convergence among investors after the release of business risk disclosure. This study contributes to existing literature in support of the nonboilerplate argument and informativeness of risk disclosure. |
| Keywords: | Managerial Ownership, Business Risk Disclosure, Narrative Financial Disclosure, Information Content, Market Reactions |
| JEL: | M41 M48 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:osk:wpaper:2411 |
| By: | Carolina Celis (Inter-American Development Bank); Arturo Galindo (Inter-American Development Bank); Liliana Rojas-Suarez (Center for Global Development) |
| Abstract: | This paper presents findings from a comprehensive survey of 18 central banks and banking supervisor authorities in Latin America and the Caribbean, including major economies like Argentina, Brazil, Chile, Colombia, and Mexico. The survey aimed to assess the adoption of the Basel III standards across the region and revealed significant diversity in regulatory capital frameworks. Notably, while 75 percent of respondent countries have adopted Basel III for some financial intermediaries, 44 percent still maintain hybrid systems allowing for Basel I or II standards. These results highlight the region's varied approach to financial regulation, pointing to both progress in adopting international standards and the persistence of legacy regulatory regimes. The detailed findings and constructed indexes provide valuable insights into the state of financial regulation in the region, reflecting a landscape of both convergence and divergence in banking supervision practices. |
| Keywords: | Financial Regulation, Banking Supervision, Basel III Adoption |
| JEL: | E58 G21 G28 |
| Date: | 2024–10–10 |
| URL: | https://d.repec.org/n?u=RePEc:cgd:wpaper:705 |