I present a model of tax planning in which the deductibility of the taxpayer’s transaction – if challenged – must be deliberated by the tax authority. Even when all facts are known, the outcome of a deliberation remains uncertain, and the only penalty that can be assessed when the tax...

While comparability across firms and consistency over time are generally held to be fundamental goals of financial reporting, I provide an analytic representation of a concept that explains why concepts-based accounting standards cannot assure comparability and why their induced consistency may...

While it is generally accepted that legitimacy is a desirable feature of accounting standards, ‘legitimacy' remains vaguely defined. Accordingly, I develop a model which highlights the role that accounting plays in classifying a manager's strategically structured transactions. The model...

There is no precise definition to date of either tax aggressiveness or tax risk (Blouin, 2014). Accordingly, I model tax avoidance (tax planning) activity as corresponding to a gray-area continuum with endpoints representing transactions with certain tax treatments. As a modeling innovation –...

The wide-spread routine practice of management by exception (MBE) is at odds with the normative finding that there is no economic demand for the computation of variances from pre-planned thresholds. To address this discrepancy, I propose an algorithm which captures salient features of MBE and...

While sophisticated skepticism promotes voluntary disclosure, various frictions serve to defeat it. One of the simplest frictions is rational investor uncertainty about management's endowment of information (UEI). Sophisticated skepticism will increase as the likelihood that management is...

Informal tone at the top (TATT) is widely regarded as a fundamental ingredient of organizational control, yet due to its soft nature, the scholarship on TATT has not emphasized mathematical modeling. Observing that TATT refers to the example set by top management, I model TATT as ceteris paribus...

Management by exception (MBE) is widely used to allocate scarce managerial expertise on the basis of exception reports. I model MBE as a rule that triggers a management intervention if-and-only-if given thresholds are not met. While the resulting MBE rule economizes on valuable expertise, its...