The relationship between accounting and taxation in Norway

The financial accounting regulations in Norway have not been motivated by corporate income taxation. Nevertheless, historically there has been a close relationship between financial accounting and income taxation. As a general taxation rule, the reported financial income has been the basis for the computation of the taxable income. This has made financial reporting sensitive to tax considerations. Stricter financial accounting requirements and an innovation in the financial reporting format in the mid-1970s gradually decreased tax-induced financial reporting. The promulgation of a larger number of specific and standardized tax rules in 1992 made the computation of taxable income less dependent on accounting income. The Tax Reform in 1992 also initiated a requirement in the accounting legislation to recognize deferred taxes in financial statements.

Earnings announcements and the variability of stock returns

This paper is concerned with the dissemination process of firm-specific annual earnings information in the Norwegian capital market. We find a significant reduction in stock price volatility in the post-announcement period relative to the pre-announcement period for companies traded on the Oslo Stock Exchange in the period 1990-1995. Potential explanations for this phenomenon are tested by relating the observed return volatility to changes in the volatility of the underlying business, the speed at which information is incorporated into stock prices, and the amount of noise in the price process. The empirical analyses reveal no significant changes in either the underlying business variance or the price adjustment coefficients. However, we find a significant decline in the noise term for the largest companies after the earnings release date, supporting the hypothesis that earnings announcements reduce informational asymmetries among investors

Earnings manipulation : cost of capital versus tax

We show that if taxable income were linked to accounting income, there will exist an automatic safeguard against manipulation of earnings within the analyzed framework. Separating taxable income from accounting income will remove this self-controlled mechanism, and accordingly create a need for separate countermeasures to prevent earnings manipulation

Earnings manipulation : cost of capital versus tax

We show that if taxable income were linked to accounting income, there will exist an automatic safeguard against manipulation of earnings within the analyzed framework. Separating taxable income from accounting income will remove this self-controlled mechanism, and accordingly create a need for separate countermeasures to prevent earnings manipulation

Enforcement der Wirtschaftsprüfer

Enforcement der Wirtschaftsprüfer - Vergleichende Analyse der Disziplinaraufsicht und der Qualitätskontrolle im deutschen und norwegischen Wirtschaftsprüfungswesen -Wirtschaftsprüfer

Current materiality guidance for auditors

Auditors have to make materiality judgments on every audit. This is a difficult process, as both quantitative and qualitative factors have to be evaluated. Additionally, there is no formal guidance for how to implement the materiality concepts discussed in the auditing standards. Although they are sometimes difficult to make, good materiality judgments are crucial for the conduct of a successful audit as poor judgments can result in an audit that is ineffective and/or inefficient. This report explains the materiality concept and the relationship between materiality and audit risk, discusses factors affecting the materiality decision, and provides application examples of approaches of determining materiality at overall and account level

Auditor detected misstatements and the effect of information technology

This paper presents information on the causes and detection of misstatements by auditors and the relationship of those misstatements with information technology (IT). The last major study of misstatements and IT used data that was gathered in 1988. In the intervening period, there have been significant changes in IT, possibly altering the error generation and detection process. Two research questions related to detected misstatements and the effect of IT are examined. The six largest public accounting firms in Norway provided data from 58 engagements. We find that (1) the major causes of misstatements were missing, poorly designed, and improperly applied controls; inadequate methods used to select, train and supervise accounting personnel; and an excessive workload for accounting personnel, (2) missing and poorly designed controls, and excessive workload for accounting personnel were more likely to be causes of misstatements in computerized business processes than those that were not computerized, and (3) the increased use of tests of details over attention directing procedures on audits appears to result from auditors deciding that it is more effective or efficient to conduct such tests than rely upon IT controls. These findings have important implications for both audit practitioners and researchers