An Analysis of Corruption, Taxation and the Iasb: The Effect on Global Competitiveness

By Wilhelm, Paul G.; Wilhelm, Jana P. | Advances in Competitiveness Research, January 1, 2010 | Go to article overview

An Analysis of Corruption, Taxation and the Iasb: The Effect on Global Competitiveness


Wilhelm, Paul G., Wilhelm, Jana P., Advances in Competitiveness Research


ABSTRACT

This article examines national accounting standards as disclosure rules that are set endogenously within a society in concert with that society's tolerance for corruption as well as its combined corporate tax rate. Societies with different levels of corruption and taxation are expected to have different levels of detail, comprehensiveness, and comparability within their national standards. The 2004 Corruption Perception Index produced by Transparency International is related to measures of the consistency of local accounting standards and the international accounting standards (IAS) of the International Accounting Standards Board. Countries with higher levels of perceived corruption have more violations of IAS due to the lack of specific rules and fewer violations of IAS due to inconsistencies. Level of taxation had no significant relation to violations, corruption, or GDP per Capita (global competitiveness). The potential role of a culture of evaluation in harmonization efforts is discussed.

Keywords: Corruption, Taxation, IAS Standards

INTRODUCTION

Accounting standards are one piece of the regulatory, institutional, and governmental mix that influences the transparency of financial information available within a country. Arising within separate historical and cultural contexts, accounting standards differ from country to country. Some sets of standards are detailed, some vague; some are consistent with tax rules, some legislated; some are based on more objective criteria, some rely on practitioners' judgment. These differences affect the level of accessibility of financial information within a society and can inhibit or give freer reign to corruption in that country. In particular, this article compares the perception of corruption in countries based on the Corruption Perception Index (CPI) produced by Transparency International with measures of the strength of their accounting standards based on the international accounting standards (IAS) of the International Accounting Standards Board (IASB), using the recent International Forum on Accountancy Development's (IFAD) GAAP study. Two measures of harmonization between national and international standards display a significant association with the CPI. Countries with higher levels of perceived corruption have more violations of IAS due to the lack of specific rules and fewer violations of IAS due to inconsistencies.

This research provides an important link between accounting and corruption perceptions. In some areas of the world, engaging in corruption is essentially unavoidable (Getx and Volkeman 2001). Previous studies have demonstrated the effect of corruption on the economic well-being of nations (Mauro 1995), but the mechanisms by which corruption persists despite its deleterious effects are less clear. Institutional regulation such as accounting standards can act to cover up corruption if standards allow sufficient latitude and lack of comparability. An alternative to local accounting standards became readily available upon the completion of a comprehensive core set of accounting standards by the IASB in December 1998. The subsequent endorsement of these standards by the International Organization of Security Commissions in June 2000 and the European Union's (EU) commitment for its members to use IAS by 2005 have provided a catalyst for change.

CORRUPTION AND ACCOUNTING

Corruption is typically measured as "the misuse of public power for private benefits" (Lambsdorff 2001a, 4).

In general corruption arises when government officials have a role in allocating profit opportunities such as import quotas, licenses, or government contracts. There is empirical evidence regarding the phenomenon of corruption. There is less corruption:

* Where there are fewer trade restrictions

* Where there are no favoritist government policies

* Where national resources are more abundant

* Where civil servants are better paid

* Where more is spent on education

* Where more is spent on public investment

* Where there is higher economic growth

* Where there is more political stability

* Where there is less bureaucracy

* Where there is strong legislative and judiciary systems. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

An Analysis of Corruption, Taxation and the Iasb: The Effect on Global Competitiveness
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.