We examine whether monitoring by the Internal Revenue Service (IRS) affects managers’ decisions to engage in fraudulent financial reporting. We argue that IRS monitoring provides a disciplining effect reducing managements’ incentives to engage in rent diversion activities such as costly financial statement misreporting. Using information on IRS audit rates and instances of fraud disclosed in Securities and Exchange Commission (SEC) Accounting and Auditing Enforcement Releases (AAERs), we find evidence consistent with IRS monitoring providing positive spillover effects in reducing the likelihood of accounting fraud. Our results are robust to using a matched sample of fraud and nonfraud firms. Altogether, we find evidence that tax authorities provide positive externalities in reducing agency costs through monitoring and enforcement.

We examine how the relation between taxpayers and their government affects tax evasion. Specifically, we examine how perceived influence over government policymaking affects firms' decisions to evade tax. We argue that firms are less willing to comply with tax laws when they perceive the influence over their government to be unfavorable to them or the result of an unfair policymaking process. Consistent with this argument, we find that firms evade more tax when other domestic firms have more perceived influence over domestic government policymaking. This suggests a potential negative externality of lobbying: higher tax evasion by other firms. However, government effectiveness or lack of corruption eliminates the positive relation between evasion and perceived influence over policymaking. Our study is the first to document the relation between perceived influence over government policymaking and tax evasion. Our results suggest that limiting domestic firms' influence over policymaking could help governments decrease tax evasion. JEL Classifications: H26. Data Availability: Data used in this study are available from public sources identified in the paper, except as otherwise specified.

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The article explains the role of the International Public Sector Accounting Standards Board (IPSASB) in setting accounting standards for the public sector, and the due process that is followed in setting those standards. The article explains the scope of the IPSASB's current project on social benefits, and how this compares to the scope of social benefits in Government Finance Statistics (GFS)/System of National Accounts (SNA) as well as the IPSASB's previous social benefits projects. The scope is wider than pensions, and wider than social security as social assistance is also included. The accounting principles that underpin the IPSASB's current project are discussed and include the IPSASB's definition of a liability, and the key role that a “past event” plays in that definition. This is contrasted with some of the actuarial approaches. The article then describes the potential past events that the IPSASB has considered to date in the project, and what impact liabilities from these past events would have on the financial statements. This comparison makes reference to pensions, where the financial impact of different past events will be greatest. The article sets out the IPSASB's proposals in its recent Exposure Draft ED 63, Social Benefits, and also discusses alternative views on recognition and measurement. The article concludes by discussing the IPSASB's current guidance in RPG 1, Reporting on the Long‐Term Sustainability of an Entity's Finances, and notes that the IPSASB is seeking views on whether it should undertake further work in this area.

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