Auditor-Provided Tax Services and Earnings Management in Tax Expense: The Importance of Audit Committees

• Autores: Ling Lei Lisic
• Localización: Journal of Accounting Auditing and Finance, ISSN-e 2160-4061, ISSN 0148-558X, Vol. 29, Nº 3, 2014, págs. 340-366
• Idioma: inglés
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• Resumen

  • Regulators do not prohibit auditors from providing tax services to their audit clients, provided that these services are preapproved by audit committees. I examine whether the association between auditor-provided tax services and earnings management in tax expense varies with audit committee effectiveness. I develop a composite proxy for audit committee effectiveness by combining six audit committee characteristics. I find that auditor-provided tax services are less positively associated with earnings management in tax expense as audit committee effectiveness increases. My findings suggest that the knowledge spillover effect of auditor-provided tax services is more likely to dominate the independence impairment effect when auditor-provided tax services are preapproved by more effective audit committees.