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on Accounting and Auditing |
| By: | Gadžo, Amra; Suljić, Mirza; Herić, Erna |
| Abstract: | This paper presents a data mining approach for Audit opinion pre¬diction in Government-owned enterprises within the Federation of Bosnia and Herzegovina using the Decision tree algorithm. A database was constructed from financial statements covering 2004-2019, incorporating indicators from balance sheets, income statements, and cash flow statements, alongside cor¬responding Audit opinions from the state audit body. The study evaluates three Decision tree algorithms (J48, RandomTree, REPTree) on data from 2020-2023, with REPTree achieving 73% classification accuracy through seven predictive rules. The findings demonstrate the potential of data mining techniques for pattern recognition in audit reports, contributing to transparency in financial reporting and supporting regulatory authorities in detecting irregularities within Government-owned enterprises. |
| Keywords: | Audit opinion, Decision tree, Prediction |
| JEL: | M40 M41 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esconf:334467 |
| By: | John M. Barrios; Brian C. Fujiy; Petro Lisowsky; Michael Minnis |
| Abstract: | We examine how differences in financial reporting practices shape firm productivity. Leveraging new audit questions in the U.S. Census Bureau's 2021 Management and Organizational Practices Survey (MOPS), and complementary tax return data from the Internal Revenue Service (IRS) and detailed financial records from Sageworks, we find that (i) variation in reporting quality explains 10--20 percent of intra-industry total factor productivity dispersion, and (ii) evidence of complementarity between the effects of financial audits and management practices driving firm productivity. We then examine the underlying mechanisms. First, audits function as a managerial technology, improving the precision of internal information and raising efficiency, with stronger effects in competitive, low-margin industries and among younger firms. Second, exploiting cross-state variation in tax incentives, we show that audits constrain underreporting and mitigate the downward bias in measured productivity. Together, these results highlight the underrated importance of financial reporting quality driving firm productivity. |
| JEL: | D15 D24 G3 L2 M20 M4 M41 O33 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34536 |
| By: | Tassi, Annalisa; Bussy, Adrien |
| Abstract: | We investigate whether firms engage in VAT evasion at the retail stage-typically a point of weakness in VAT systems-in a high-enforcement, low-informality setting. To measure evasion, we exploit a reform of VAT rules (the reverse charge, RC) whereby retailers do not only remit taxes on their own value-added, but on that created along the entire supply chain, increasing their incentive to evade. Using German administrative firm-level VAT return data and an instrumental variable approach based on RC's staggered introduction, we find no evidence of greater evasion under RC. Our results suggest that evasion at the retail stage might not be quantitatively important in high-enforcement and low-informality settings, implying little need to enlist consumers in tax enforcement to boost tax compliance. |
| Keywords: | Value Added Tax, VAT, Reverse Charge Mechanism, Tax Evasion, Withholding, Last-Mile Problem |
| JEL: | H21 H26 D22 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:333931 |
| By: | Inna Abramova; John M. Barrios |
| Abstract: | Private equity (PE) has moved rapidly into professional services, yet its impact on accounting, where licensing regimes, reputational capital, and partnership governance traditionally limit external ownership, remains poorly understood. We examine how PE ownership alters the organization and market structure of accounting firms using data from 1999-2024 that link more than 3, 600 PE transactions to detailed information on mergers and acquisitions (M&A), labor markets, and audit pricing. PE investment increases sharply after 2020 and extends to both CPA-licensed audit firms and non-CPA advisory practices, with most activity in large mid-tier PCAOB-registered firms. After PE entry, firms grow faster: non-audit revenues rise, employment expands, and cross-state M&A accelerates, consistent with platform-building and consolidation. These adjustments have market-level implications. PE investment raises labor-market concentration in key accounting occupations and drives up ERISA audit fees in a standardized setting, as confirmed by a synthetic difference-in-differences design. Our results reveal a key tension at the core of professions: preserving independence and competition in a market increasingly driven by financial capital. |
| JEL: | G23 G34 J44 L2 L4 L84 M4 M41 M42 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34575 |
| By: | Bohne, Albrecht; Nimczik, Jan Sebastian |
| Abstract: | We evaluate a tax reform in Ecuador that introduced generous deductions from personal income taxes (PIT), encouraging consumers to request receipts. The reform addresses tax evasion by targeting small self-employed businesses that mainly sell goods or services not subject to VAT but often evade income taxes. Exploiting plausibly exogenous variation in receipt demand due to the distribution of taxpayers across regions and professions, we find significant increases in reported profits among self-employed businesses exposed to the reform. We document spillover effects on the VAT system. Our net-revenue impact analysis suggests that the additional tax payments outweigh the foregone tax revenue. |
| Keywords: | Formalization, Tax Avoidance, VAT, Personal Income Tax |
| JEL: | O17 H26 H24 H25 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:333929 |
| By: | Daniel J. Aronoff; Robert M. Townsend; Madars Virza |
| Abstract: | A repo trade involves the sale of a security coupled with a contract to repurchase at a later time. Following the 2008 financial crisis, accounting standards were updated to require repo intermediaries, who are mostly banks, to increase recorded assets at the time of the first transaction. Concurrently, US bank regulators implemented a supplementary leverage ratio constraint that reduces the volume of assets a bank is allowed record. The interaction of the new accounting rules and bank regulations limits the volume of repo trades that banks can intermediate. To reduce the balance-sheet impact of repo, the SEC has mandated banks to centrally clear all Treasuries trades. This achieves multilateral netting but shifts counterparty risk onto the clearinghouse, which can distort monitoring incentives and raise trading cost through the imposition of fees. We present RepoMech, a method that avoids these pitfalls by multilaterally netting repo trades without altering counterparty risk. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.23842 |
| By: | Bohne, Albrecht; Hines, James R.; Koumpias, Antonios M.; Tassi, Annalisa |
| Abstract: | The purpose of this paper is to evaluate the effect of reverse-charge mechanism (RCM) implementation on VAT compliance using an overall, countrylevel measure of VAT compliance, the VAT gap. The VAT gap is defined as the overall difference between expected and realized VAT revenues and is a broader measure than outcomes employed in previous research, incorporating all types of VAT evasion. Exploiting the staggered adoption of RCM across Europe and the size of industries targeted by RCM, we compare changes in the VAT gap before and after RCM implementation. Evidence from difference-in-differences, event study, and heterogeneous treatment effects estimators indicates that the adoption of the RCM does not lead to significant EU-wide changes on the aggregate VAT gap. Moreover, our results illustrate the mixed impacts of RCM on different goods and industries, with measurable decreases in VAT losses in the construction and industrial crops industries. This study's findings do not provide strong support for policy changes that cast the net of the RCM wider on all industries and EU member states, although bilateral coordination in RCM adoption with top trading partners may assist in curbing VAT fraud relocation. |
| Keywords: | Tax evasion, VAT, VAT gap, reverse-charge mechanism, carousel fraud |
| JEL: | H26 K42 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:333928 |
| By: | Jeanne Bomare (Centre for the Analysis of Taxation, London School of Economics); Ségal Le Guern Herry (Aix-Marseille Univ., CNRS, AMSE, Marseille, France) |
| Abstract: | The 2014 Automatic Exchange of Information (AEoI) represents the most comprehensive global effort to combat tax evasion by enabling cross-border information exchange on financial assets. We examine how this policy shifted offshore investment behavior. While the AEoI mandates reporting of financial assets, it excludes real estate holdings. Using administrative data on UK real estate purchases by foreign companies, we show that offshore users substituted financial assets for real estate in response to the new transparency regime. Our findings suggest that real estate assets now account for a growing share of offshore portfolios, partly due to their exclusion from the AEoI. |
| Keywords: | Tax Enforcement, real estate, Hidden Wealth |
| JEL: | D31 R30 H26 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2523 |