Incumbent audit firm-provided tax services and the clients with low financial reporting quality
Chong, H. Gin (Prairie View A&M University (Estats Units d'Amèrica))
Laitinen, Erkki K. (University of Vaasa (Finlàndia))
Myllymäki, Emma-Riikka (University of Vaasa (Finlàndia))
Universitat Autònoma de Barcelona.
Departament d'Empresa
Publicació: |
Universitat Autònoma de Barcelona. Departament d'Economia de l'Empresa 2014 |
Descripció: |
46 p. |
Resum: |
This study investigates whether incumbent audit firm-provided tax services enhance or impair the likelihood of acknowledging client companies' low financial reporting quality. In particular, we examine the association between tax-related fees and the likelihood of timely restatements, and internal control weakness disclosures among a sample of US companies that all have misstatements in financial information. The empirical findings indicate that companies paying higher tax-related fees are less likely to disclose SOX 404 internal control weakness disclosures, implying that underlying control problems are unacknowledged when incumbent audit firm provided tax-related fees are higher. However, the findings suggest that just providing both audit and tax-related services does not have an impact on audit quality per se, but rather it is the magnitude of the tax-related fees in particular that counts. We also find some evidence suggesting that companies paying higher tax-related fees have higher likelihood of restatement lags, whereas companies paying smaller tax-related fees to their audit firm restate financial statements in a timelier manner. Overall, the findings suggest that audit scrutiny of client companies with low quality financial reporting is weaker when the magnitude of tax-related fees is higher. |
Drets: |
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Llengua: |
Anglès |
Col·lecció: |
Departament d'Economia de l'Empresa. Documents de treball |
Col·lecció: |
Document de treball (Universitat Autònoma de Barcelona. Departament d'Economia de l'Empresa) ; 14/4 |
Document: |
Working paper |
Matèria: |
Auditoria ;
Impostos ;
Informació financera |
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Registre creat el 2014-12-21, darrera modificació el 2022-07-31