Template-Type: ReDIF-Article 1.0 Author-Name: Umapathy Ananthanarayanan Author-Name: Peter Harris Title: MICRO ANALYSIS OF AUDIT REVENUE IN NEW ZEALAND Abstract: Data analysis enhances the quality of audit. Data analysis also enable auditors to gain better insights, draw better conclusions and ultimately improve the audit process. Audit profession of the late uses more data analysis to improve their audit planning, monitoring and control. Our analysis aims to use such a technique to analyze and visualize financial and audit data of listed companies from New Zealand stock exchange. Our analysis finds that New Zealand audit market has a unique market segmentation favoring the big four firms and the audit market is highly competitive with low auditor turnover. Our analysis find evidence that big four firms charge premium for their services in New Zealand. Compliance costs increase the audit and non-audit services fee and we find evidence in our analysis that the adoption of International Financial Reporting Standards (IFRS) increases both the audit and non-audit services fee in the year 2007 and 2008. Other interesting findings suggest that city of the auditor office is important and industry specialization of the audit firm determine their revenue share in some the industries Classification-JEL: M42, M48, M49 Keywords: New Zealand, Audit Fees, SOX, IFRS Journal: Accounting & Taxation Pages: 1-10 Volume: 12 Issue: 1 Year: 2020 File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v12n1-2020/AT-V12N1-2020-1.pdf File-Format: Application/pdf Handle: RePEc:ibf:acttax:v:12:y:2020:i:1:p:1-10 Template-Type: ReDIF-Article 1.0 Author-Name: Gow-Cheng Huang Author-Name: Herman Manakyan Author-Name: Ani Mathers Title: FOREIGN EXPOSURE LEVEL AND THE IMPACT OF THE 2017 TAX CUTS AND JOBS ACT ON VALUATION OF US MULTINATIONAL COMPANIES Abstract: U.S. multinational corporations conduct a significant amount of their business and book a significant portion of their sales and profits in foreign countries. Prior to the passage of the Tax Cuts and Jobs Act, which was signed into law by President Trump on December 22, 2017, income generated by US multinational corporations was not subject to US taxation until repatriated to the US. The Tax Cuts and Jobs Act reduced US corporate tax rates, changed the corporate taxation of US multinational corporations to a territorial system, and created an immediate tax liability for US multinationals’ deemed repatriation of their past foreign earnings. This study examines the impact of these complex changes to the US corporate tax system on the short-term valuation of US multinational firms. Our results indicate the Tax Cuts and Jobs Act had a net negative impact on US multinational corporations’ valuation in the short-term, with higher levels of foreign exposure leading to lower returns. Our results are robust to alternate measures of foreign exposure and abnormal returns. Classification-JEL: G14, G38, H25 Keywords: Valuation, Multinational Corporations, Tax Cut and Jobs Act Journal: Accounting & Taxation Pages: 11-22 Volume: 12 Issue: 1 Year: 2020 File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v12n1-2020/AT-V12N1-2020-2.pdf File-Format: Application/pdf Handle: RePEc:ibf:acttax:v:12:y:2020:i:1:p:11-22 Template-Type: ReDIF-Article 1.0 Author-Name: Arianna Pinello Author-Name: Lee Puschaver Author-Name: Ara Volkan Title: THE RELATIONSHIP BETWEEN CRITICAL ACCOUNTING ESTIMATES AND CRITICAL AUDIT MATTERS Abstract: Accounting estimates are an essential part of financial statements, are pervasive, and substantially affect a company’s financial position and results of operations. As part of Regulation S-K, the Securities and Exchange Commission requires a discussion about critical accounting estimates in management’s discussion and analysis section of Form 10-K. As of July 2019, the Public Company Accounting Oversight Board has requirements for disclosing critical audit matters in audit reports. In order to gain insight concerning the estimates that are considered critical to the preparation of financial statements and might potentially be reported as critical audit matters, the disclosures in the 2017 Form 10-K filings for the Dow Jones 30 Industrials were reviewed. The potential linkage between management’s disclosures of critical accounting estimates and the newly required auditor reporting of critical audit matters was analyzed, leading to three major predictions, as follows: 1) critical audit matters will most likely reflect items already identified by management as critical accounting estimates; 2) future Public Company Oversight Board inspections will be inclined to note shortcomings in critical audit matters reporting and generate controversy; and 3) management discussion and analysis will address, as critical accounting estimates, any matter raised by auditors as a critical audit matter Classification-JEL: M41, M42, M48 Keywords: AICPA, CAMs, CAEs, KAMs, PCAOB, SEC, Audit Reports, Financial Statements Journal: Accounting & Taxation Pages: 23-33 Volume: 12 Issue: 1 Year: 2020 File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v12n1-2020/AT-V12N1-2020-3.pdf File-Format: Application/pdf Handle: RePEc:ibf:acttax:v:12:y:2020:i:1:p:23-33 Template-Type: ReDIF-Article 1.0 Author-Name: Sherry Fang Li Author-Name: Sherry Fang Li Title: COST OF DEBT AND AUDITOR CHOICE Abstract: This paper examines whether auditor choice affects a firm’s cost of debt and whether debt sources matter. We find that the choice of a brand name or industry specialist auditor decreases a firm’s cost of debt. The additional impact of industry specialization, however, is not significant for the sub-sample of Big N audited firm-years. For the sub-sample of non-Big N audited firm-years, engaging an industry specialist auditor appears to increase cost of debt. A further breakdown of the full sample into a sample with only private debt and a sample with both public and private debt provides more insight. For the sample with both public and private debt, engaging a brand name and specialist auditor decreases cost of debt. But for the sample with only private debt, engaging a specialist auditor increases cost of debt. Our findings provide additional evidence for the role of external auditing in reducing cost of debt and show differences between the two dimensions of auditor differentiation: brand name reputation and industry specialization. Furthermore, our findings suggest that the choice of an industry specialist auditor has different impact on cost of debt for firms that have only private debt and firms that also have public debt. Classification-JEL: M41, M42 Keywords: Auditor Choice, Cost of Debt, Debt Sources, Public Debt, Private Debt Journal: Accounting & Taxation Pages: 35-44 Volume: 12 Issue: 1 Year: 2020 File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v12n1-2020/AT-V12N1-2020-4.pdf File-Format: Application/pdf Handle: RePEc:ibf:acttax:v:12:y:2020:i:1:p:35-44 Template-Type: ReDIF-Article 1.0 Author-Name: Enas Abdullah Hassan Title: THE ECONOMIC CONSEQUENCE OF INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTION: EVIDENCE FROM CORPORATE TAX AVOIDANCE IN GULF STATES Abstract: We examine whether IFRS as an accounting standard affects firm-level tax avoidance in the context of six economies across the Gulf region. We use a sample of 3,393 publicly listed firm-year observations from 2010 to 2016. Results show that firms adopting higher levels of harmonization with IFRS (full adoption) in the preparation of their financial reports engage less in tax avoidance activities. In contrast, nonadopting IFRS or adopting IFRS with modifications might be not only inappropriate and irrelevant, but also significantly harmful to reporting quality. We use two models in addition to OLS model. The overall results from both the logistic model and quantile model provide extra support to the OLS results. However, when other control variables are introduced in the main model (i.e. reporting losses, institutional ownership concentration and Big N auditors), the results suggest that in the context of GCC countries institutional ownership and Big N auditors, as external governances play negative role in monitoring managerial activities including the tax function. The findings of this paper have implications for tax authorities, investors and researchers Classification-JEL: M41, H26 Keywords: International Financial Reporting Standards, Tax Avoidance, Gulf Region Journal: Accounting & Taxation Pages: 45-65 Volume: 12 Issue: 1 Year: 2020 File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v12n1-2020/AT-V12N1-2020-5.pdf File-Format: Application/pdf Handle: RePEc:ibf:acttax:v:12:y:2020:i:1:p:45-65 Template-Type: ReDIF-Article 1.0 Author-Name: Yanfu Li Title: AN IMPROVED METHOD FOR ESTIMATING DISCOUNT RATES FOR LISTED COMPANY VALUATION Abstract: This study offers a comprehensive overview of estimation methods for the discount rate used in company valuation, and then attempts to improve these methods. Firstly, for the cost of equity estimation method, this study improves the traditional form of build-up model by replacing its size premium with a betaadjusted size premium, so that the size premiums for firms in different size groups can be better reflected. Next, the study introduces an expanded capital asset pricing model (CAPM) which replaces the ordinary least square (OLS) beta with a shrunk beta. The beta-adjusted average size premium and the firm-specific risk premium were also added to capture unsystematic risk not measured by the traditional CAPM. In addition, this study introduces a target price-based multi-stage Gordon growth model, which adapts the consensus target price as a proxy of the intrinsic value in a manner consistent with the assumption of the basic Gordon growth model. The study continues by offering an effective solution to the estimation of cost of debt for companies above and below investment grade. The marginal tax rate and the forecasted rate on new debt issuance are recommended when estimate cost of debt. Finally, the study suggests a forwardlooking target capital structure to combine the cost of equity and cost of debt. The approach involves a three-step process to identify the possible target structure that firms are likely to adopt in the long term Classification-JEL: G12, G14, C10 Keywords: Discount Rate, Cost of Capital, Company Valuation Journal: Accounting & Taxation Pages: 67-79 Volume: 12 Issue: 1 Year: 2020 File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v12n1-2020/AT-V12N1-2020-6 .pdf File-Format: Application/pdf Handle: RePEc:ibf:acttax:v:12:y:2020:i:1:p:67-79 Template-Type: ReDIF-Article 1.0 Author-Name: Daniel Acheampong Author-Name: Tanya Benford Title: ALTERNATIVE TREATMENT OF CONTRIBUTION IN AID OF CONSTRUCTION: THE IMPACT ON INVESTOR-OWNED UTILITY PLANT ASSET REPLACEMENT Abstract: This paper proposes an alternative treatment of Contribution in Aid of Construction within the InvestorOwned water and wastewater utility industry. This study analyzes the impact of CIAC on funding utility aged assets by comparing the current amortization (credit) treatment to an alternative depreciation (debit) treatment of CIAC. This paper examines how the establishment of a reserve account for the recovery of plant asset usage through depreciation can fund Investor-Owned utility plant asset replacement Recommended viability financial ratios and related CIAC ratios are used to consider the efficacy of funding a reserve account to replace retired assets. The results suggest an inverse correlation between the current credit treatment and aged plant assets and a positive correlation between the proposed debit treatment and financing of donated plant assets Classification-JEL: M4 Keywords: Contribution in Aid of Construction, Investor-Owned Utilities, Credit Treatment, Debit Treatment, Aged Plant Assets, Donated Capital Journal: Accounting & Taxation Pages: 81-96 Volume: 12 Issue: 1 Year: 2020 File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v12n1-2020/AT-V12N1-2020-7.pdf File-Format: Application/pdf Handle: RePEc:ibf:acttax:v:12:y:2020:i:1:p:81-96 Template-Type: ReDIF-Article 1.0 Author-Name: Salahudeen Saeed Title: SMALL BUSINESS OWNERS’ PERCEPTION ON VALUE ADDED TAX ADMINISTRATION IN GHANA: A PRELIMINARY STUDY Abstract: This paper examines Small Business Owners’ knowledge of Value Added Tax obligations to the Government of Ghana, their opinions on Ghana’s Value Added Tax system, and attitudes towards the payment of Value Added Tax. Based on a cross-sectional survey, the study employed a snowball sampling technique in selecting 328 respondents for the study. Simple percentages and frequency tables were employed for the data analysis. The paper shows that most Ghanaian small business owners do not understand their Value Added Tax obligations. There is also some willingness to evade Value Added Tax. Further, they view the tax as unfair. Moreover, results show that Ghanaians appear to have accepted the civic responsibility of Value Added Tax payment to the state. Equally important, the author demonstrates that Ghanaian small business owners do not understand the basic procedure in assessment, collection and enforcement of Value Added Taxes legally due the state. Classification-JEL: H21, H30 Keywords: Taxation, VAT Compliance, Tax Evasion, Tax Administration, Ghana Journal: Accounting & Taxation Pages: 97-105 Volume: 12 Issue: 1 Year: 2020 File-URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v12n1-2020/AT-V12N1-2020-8.pdf File-Format: Application/pdf Handle: RePEc:ibf:acttax:v:12:y:2020:i:1:p:97-105