Does IRS Monitoring Deter Managers From Committing Accounting Fraud?

Mason, Paul; Williams, Brian

doi:10.1177/0148558x20939720

Cited by 18 publications

(17 citation statements)

References 61 publications

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“…The idea of auditing is often linked to irregularities or fraudulent financial statement (Mason and Williams, 2022; Afriyie et al , 2022). With the help of computer-assisted audit techniques, auditors’ works on detecting fraudulent financial statement become more efficient (Braun and Davis, 2003).…”

Section: Hypotheses Developmentmentioning

confidence: 99%

Philosophical understanding of the dynamics and control of occupational fraud in the public sector: contingency analysis

Maulidi

2022

IJOES

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Purpose This study aims to examine the roles of organisational control, structure, culture and technology in preventing occupational fraud. This study is essential in the current time. It brings a significant impact on both theory and practice. In the existing studies, there is a lack of clarity on a specific mechanism to prevent organisational fraud. The problem is that they tend to generalise the types of organisational fraud. Conceptually, organisational fraud may include corruption, double funding, asset misappropriation, bribery or falsification of documents. However, many scholars tend to neglect such diversities. Consequently, many occupational fraud cases become unstoppable, particularly corruption. To deal with this topical issue, the current study applies the term “occupational fraud” cited by the Association of Certified Fraud Examiners, consisting of corruption, asset misappropriation and fraudulent financial statement. Design/methodology/approach This study surveyed three Indonesian Local Governments. This study focussed on management levels that have strong power for coordinating governmental activities. The author chose these local governments because their local leaders (the regents) were jailed due to corruption scandals. As expected, this study gives us different perceptions of how fraud mitigation should be designed in the organisation. Findings The results suggest that corruption is a little bit complex than other types of occupational fraud. It is improbable to be prevented through technological and administrative approaches. As such, organisations need to think of extra efforts that could perfectly tailor the organisational control and organisational culture, organisational structure and technological advancement. The benefit of this effort is related to diagnosing the fit or misfit of organisation designs in addressing the dynamic dimensions of corporate governance. Then, it can also strengthen the efficacy of preventive measures to deal with occupational fraud. Originality/value This study provides a provocative discussion regarding the public perception of occupational fraud, consisting of corruption, asset misappropriation and financial statement fraud. And this study also offers a new refined conceptual analysis of how to deal with such types of occupational fraud by incorporating contingency theory and the Committee of Sponsoring Organizations of the Treadway Commission (COSO’s) internal control components.

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Section: Hypotheses Developmentmentioning

confidence: 99%

Philosophical understanding of the dynamics and control of occupational fraud in the public sector: contingency analysis

Maulidi

2022

IJOES

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“…However, widespread frictions in the real capital market, such as information asymmetry and agency problems, lead to deviations from optimal investment decisions (Chen et al ., 2007; Jiang et al ., 2011). Existing studies have shown that tax enforcement can play a governing role (Dyck and Zingales, 2004; Desai et al ., 2007) in improving the quality of accounting information (Hanlon et al ., 2014; Mason and Williams, 2020) and reducing financing costs (Guedhami and Pittman, 2008; Ghoul et al ., 2011). Therefore, tax enforcement may affect the achievement of corporate investment goals.…”

Section: Introductionmentioning

confidence: 99%

“…First, it contributes to the tax enforcement literature by examining the impact of tax enforcement on corporate decision making. Existing studies mainly use developed capital markets as research targets to examine the impact of tax enforcement, including corporate tax avoidance (Hoopes et al ., 2012; Gupta and Lynch, 2016), corporate value (Desai et al ., 2007), capital cost (Guedhami and Pittman, 2008; Ghoul et al ., 2011), and accounting information quality (Hanlon et al ., 2014; Mason and Williams, 2020). The government plays an important role in China’s economic activities.…”

Section: Introductionmentioning

confidence: 99%

“…Second, due to the lack of an ideal exogenous event, most existing studies use the possibility that a company will face an IRS tax audit as a measure of tax administration (Guedhami and Pittman, 2008; Ghoul et al ., 2011; Hoopes et al ., 2012; Hanlon et al ., 2014; Mason and Williams, 2020). However, this indicator cannot rule out the interference of other factors, including regional economic differences and the level of law enforcement (Hail and Leuz, 2006; Goh et al ., 2016), which results in endogeneity problems.…”

Section: Introductionmentioning

confidence: 99%

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The impact of tax enforcement on corporate investment efficiency: evidence from the tax administration information system

Zhang

Chen

Liao

2022

Accounting & Finance

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Information technology is essential in tax enforcement. This study found that stronger tax enforcement after the tax administration information system reform improved corporate investment efficiency by reducing excessive investment expenditures. The effect is more significant under higher local government fiscal pressure, poorer external information environments, weaker external corporate governance, and stronger tax avoidance motivation. The main mechanism is based on the quality of the accounting information. This study enriches the literature on the economic consequences of tax enforcement and adds investment efficiency as an influential factor, which provides implications for international governments to use information technology to strengthen tax enforcement.

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“…The literature shows that domestic and foreign institutional investors (Chen et al, 2007;Ferreira et al, 2010), short selling mechanisms (Chang et al, 2019), media coverage (Borochin & Cu, 2018), analyst coverage (Chen et al, 2015), external regulation by the SEC (Liu et al, 2021), and markets for corporate control (Masulis et al, 2007) Existing studies suggest that due to their tax claim on a firm's cash flow, tax authorities have the same incentives as shareholders to supervise insiders (management and controlling shareholders), and they do not face free-rider problems in preventing them from diverting resources for private benefit (Desai et al, 2007). Consequently, strengthening tax enforcement can improve financial reporting quality (Hanlon et al, 2014;Mason & Williams, 2022), reduce the cost of capital (El Ghoul et al, 2011;Guedhami & Pittman, 2008), and lower the probability of stock price crashes (Bauer et al, 2021).…”

mentioning

confidence: 99%

Alternative corporate governance: Does tax enforcement improve the performance of mergers and acquisitions in China?

Zhang

Liao

et al. 2022

Corporate Governance

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Research Question/Issue We study whether tax enforcement can function as a corporate governance mechanism in emerging countries with weak tax enforcement. In the case of China, we examine whether and how external monitoring by tax authorities constrains insiders' opportunistic behavior in corporate mergers and acquisitions (M&As). Research Findings/Insights We employ the implementation of the third stage of the China Tax Administration Information System (CTAIS‐3) as a quasi‐natural experiment and adopt a difference‐in‐differences (DID) approach. We find that strengthening tax enforcement by CTAIS‐3 can improve the efficiency of M&As by reducing agency problems in the decision‐making process. Our conclusions remain unchanged under a series of robustness checks. Moreover, the results show that the impact is mainly observed in regions with stronger local government taxation motivation and in firms with poorer internal or external governance and poorer accounting information. Theoretical/Academic Implications We find that strengthening tax enforcement can improve M&A decisions even in emerging markets, which provides direct evidence for the predictions from theory that tax authorities play a governance role in supervising corporate insiders. Our paper also extends the literature on the determinants of M&A performance from the perspective of tax authorities. Practitioner/Policy Implications This study has policy implications for governments around the world to improve corporate governance by strengthening tax enforcement. The Chinese government applying advanced information technology to tax enforcement can provide a reference for other countries.

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Does IRS Monitoring Deter Managers From Committing Accounting Fraud?

Cited by 18 publications

References 61 publications

Philosophical understanding of the dynamics and control of occupational fraud in the public sector: contingency analysis

Philosophical understanding of the dynamics and control of occupational fraud in the public sector: contingency analysis

The impact of tax enforcement on corporate investment efficiency: evidence from the tax administration information system

Alternative corporate governance: Does tax enforcement improve the performance of mergers and acquisitions in China?

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