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on Accounting and Auditing |
| By: | Slavko ?odan (Faculty of Economics, Business and Tourism, University of Split) |
| Abstract: | This paper analyses the usefulness of various accrual-based measures in detecting material accounting misstatements. Predicting financial misstatements has been of great interest not only to researchers but also to investors, auditors, financial analysts and regulators. However, since pre-audit financial statements are usually not available, prior research is mainly based only on samples of Securities and Exchange Commission (SEC) enforcement actions. We exploit almost unique institutional framework in which Croatian listed companies are required to publish both pre-audit and audited annual financial statements. Therefore, we are able to investigate which pre-audit financial indicators are significantly related to accounting misstatements detected by independent statutory audit, i.e. audit adjustments. Using a sample of 437 pairs of pre-audit and audited financial statements during 2009-2018, we find that financial statements with high value of absolute residuals from the Dechow-Dichev accrual model modified by McNichols (2002) are more likely to contain material misstatements of net income, working capital or fixed assets.Funding: This work has been partially supported by Croatian Science Foundation under the project IP-2020-02-9372 ?Disentangling Financial Reporting Quality?. |
| Keywords: | Audit adjustments; Pre-audit financial statements; Earnings quality; Accounting misstatements |
| JEL: | M41 M42 |
| URL: | https://d.repec.org/n?u=RePEc:sek:iefpro:14416287 |
| By: | Ikram El Bechychy (ESCA Ecole de Management, Morocco); Azzeddine Allioui1 (ESCA Ecole de Management, Morocco) |
| Abstract: | In the intricate dance between internal control and audit success, this study unveils a harmonious relationship through a comprehensive case study at Alpha. The empirical findings resonate with theoretical constructs, spotlighting deficiencies in customer receivables and asset procurement. This is not just a diagnosis; it is a revelation of opportunities for immediate correction and a blueprint for ongoing operational excellence. The practical assessment serves as a poignant exemplar, showcasing how a nuanced understanding and implementation of internal controls not only safeguard financial integrity but also elevates audit missions to comprehensive and insightful evaluations. The study underscores the critical role of auditors in fortifying internal controls, ensuring a meticulous examination of Alpha's financial landscape. As we revisit the central question of the study—how internal control contributes to the success of accounting and financial audits—the case study unequivocally asserts that internal control is more than a formality. It emerges as a fundamental element ensuring the reliability of financial information, fostering transparency, adherence to standards, and guaranteeing the triumph of audit missions. The substantial deficiencies unearthed in customer receivables management and asset acquisition processes at Alpha underscore the urgent need for enhancements in internal control. Recommendations stemming from these observations offer concrete paths to strengthen financial operations, providing practical perspectives to enhance the quality of audit missions in a complex financial environment. While acknowledging study limitations tied to its specificity, the insights gleaned provide a valuable contribution to understanding the practical importance of internal control. This study paves the way for future research in this indispensable domain of corporate finance, emphasizing the significance of financial resonance for sustained audit triumphs at Alpha and beyond. |
| Keywords: | internal control, audit success, financial integrity, customer receivables, asset acquisition, comprehensive analysis, financial operations, corporate finance, transparency, audit missions, operational excellence |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:smo:scmowp:01292 |
| By: | Abderrahmane Benaissa (UMBB - Université M'Hamed Bougara Boumerdes) |
| Abstract: | The purpose of the study was to shed light on the auditing profession in both Algeria and Qatar to pinpoint the key differences in regulation and practices, in order to provide insight into how both countries can benefit from the other, and also to provide an avenue into how accounting and auditing convergence between the two countries my contributes to the international accounting and auditing convergence efforts, led by the different international accounting and auditing organizations around the world. |
| Keywords: | auditing professions Algerian regulation Qatari law JEL Classification Codes: H83 M41 M42 M48, auditing professions, Algerian regulation, Qatari law JEL Classification Codes: H83, M41, M42, M48 |
| Date: | 2024–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04678405 |
| By: | Siamand Hesami (Department of Finance Bournemouth University, UK and Cambridge Resources International(CRI)); Hatice Jenkins (Department of Banking and Finance, Eastern Mediterranean University, Gazimagusa, Turkey); Glenn P. Jenkins (Department of Economics Queen’s University Canada, Cambridge Resources International Inc.and Cyprus International University, North Cyprus) |
| Abstract: | This paper systematically reviews the impact of electronic invoicing and prefilling tax returns on tax administration and compliance, adhering to the PRISMA guidelines. Our comprehensive literature search and analysis reveal that these technologies are crucial in reducing tax compliance and administration costs. The results indicate significant benefits, including reduced financial stress for firms, especially during development phases, and enhanced efficiency in tax administration processes. The study highlights how e-invoicing and prefilling systems simplify and improve the tracking of taxation, leading to increased efficiency in tax practices globally. This research contributes to understanding the transformative effects of digital technologies in taxation, demonstrating their potential in streamlining tax compliance and administrative procedures. |
| Keywords: | taxation; e-invoicing; prefilling of returns; tax administration; efficiency; compliance; tax technology. |
| JEL: | H25 H71 O33 M48 |
| Date: | 2024–09–03 |
| URL: | https://d.repec.org/n?u=RePEc:qed:dpaper:4621 |
| By: | Toshiyuki Uemura (School of Economics, Kwansei Gakuin University) |
| Abstract: | As of the 2024 fiscal year, Japan's R&D tax credit amounted to 763.7 billion yen, which is equivalent to approximately 5& of corporate tax revenue and the largest loss of tax revenue among special tax measures. Nevertheless, the R&D tax credit is still necessary because there is a positive externality in firms' R&D activities; even if results are produced, there is a public goods-like characteristic wherein they are free-ridden. Thus, if left to the market mechanism, firms' R&D activities will be underestimated. Information asymmetry, uncertainty, and the need to secure funding for R&D activities might also arise. While it is possible to support R&D activities through subsidies or other policy measures, the R&D tax credit has a lower application cost than subsidies requiring advanced applications and post-event reporting of results, thus offering greater benefits to firms. However, as this causes a significant loss in tax revenue, there is a great deal of interest in the results of the R&D tax system, which has led to many empirical analyses on this topic. Subsequently, this study comprehensively surveys previous empirical analyses of Japan's R&D tax credit system and highlights the importance of analyzing the system from the cost of capital perspective. I then present a model of firm behavior that incorporates the R&D tax system, derives the cost of capital, and theoretically examines the after-tax marginal cost of R&D and the B index. Finally, the results obtained from estimating the after-tax marginal cost and B index based on Japan's R&D tax system demonstrate that Japan's system favors small and medium-sized enterprises over large firms. |
| Keywords: | R&D tax system, after-tax marginal cost, B index |
| JEL: | H25 H32 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:kgu:wpaper:276 |
| By: | Schöndube, Jens Robert; Spaeth, Alexandra |
| Abstract: | In practice, both pre- and after-tax performance measures are used to incentivize managers. In this paper, we analyze the optimality of these performance measures in an agency setting, assuming that both the principal and the agent face tax base risks. Switching from a pre-tax to an after-tax measure introduces a risk effect, including an additional variance and a covariance effect, both of which stem from the principal's tax base risk. We show that the after-tax measure is the optimal performance measure if and only if the negative covariance effect dominates the variance effect. If the principal can evade taxes, there is a tax evasion effect in addition to the risk effect, which captures the distortion of tax evasion under the after-tax measure. Now, using the after-tax measure is only optimal, if the weighted risk effect is stronger than the tax evasion effect. Tax revenue may not be maximized by using the optimal performance measure if the agent's tax base risk and the firm's cash flow are positively correlated. While the pay-performance sensitivity of the optimal contract is independent of tax avoidance under the pre-tax measure, under the after-tax measure it is decreasing with increasing incentives for sheltering. If tax evasion is possible, lower levels of tax evasion under the after-tax measure result in an increase in tax revenue relative to the pre-tax measure. The results of our study have implications for contract design, tax political actions and tax revenues. |
| Keywords: | agency theory, performance measures, taxation, tax evasion, tax base risk |
| JEL: | D86 M41 M48 M52 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:han:dpaper:dp-727 |
| By: | Ibirénoyé Honoré Romaric Sodjahin (SMART - Structures et Marché Agricoles, Ressources et Territoires - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement); Fabienne Femenia (SMART - Structures et Marché Agricoles, Ressources et Territoires - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement); Obafémi, Philippe Koutchadé (SMART - Structures et Marché Agricoles, Ressources et Territoires - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement); Alain Carpentier (SMART - Structures et Marché Agricoles, Ressources et Territoires - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement) |
| Abstract: | Despite many benefits provided by diversified cropping systems, there is a dearth of empirical evidence on the economic relevance of their effects, mainly due to lack of information on the dynamics of farmers' crop acreages. Our article contributes to fill this gap and, thereby, to shed light on a pair of apparently contradictory facts. European farmers tend to stick to specialized crop acreages despite agronomic experiments tending to show that crop diversification could reduce chemical input uses while maintaining or even enhancing arable crop yield levels We provide estimates of the effects of previous crops and crop acreage diversity on yield and chemical input use levels based on a sample of 769 arable crop producers covering the Marne département in France from 2008 to 2014. Our farm level dataset combines cost accounting data, information on crop sequences as well as detailed soil and weather data. Our estimation approach relies on yield functions and input use models defined as systems of simultaneous equations. These models feature farm specific random parameters for accounting for unobserved heterogeneity across farms and farmers as well as for accommodating input use endogeneity in the considered empirical crop yield functions. We estimate pre crop and crop acreage diversity effects for four major crops in the area. Pre crops effects on yields are estimated relatively accurately and are generally consistent with the rankings provided by crop production experts. Estimated pre crop effects on input uses are small and insignificant from a statistical viewpoint despite our large sample, suggesting that pre crops don't impact much chemical input requirements or/and that farmers tend to downplay these effects when deciding their chemical input use levels. Our results also show that crop acreage diversity positively impacts yield levels and tend to induce reductions in pesticide uses, herbicide uses in particular. Overall, our results demonstrate statistically significant though economically limited effects of pre crops and crop acreage diversity on crop gross margins. They also suggest that policy measures aimed to foster crop diversification are unlikely to significantly reduce chemical input uses on major crops if they are not supplemented by measures specifically aimed to reduce the uses of these inputs. |
| Keywords: | crop rotation effects, crop diversification, endogeneity, random parameter, SAEM algorithm |
| Date: | 2023–07–23 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04667088 |