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

Imprint:	Universitat Autònoma de Barcelona. Departament d'Economia de l'Empresa 2014
Description:	46 p.
Abstract:	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.
Rights:	L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons:
Language:	Anglès
Series:	Departament d'Economia de l'Empresa. Documents de treball
Series:	Document de treball (Universitat Autònoma de Barcelona. Departament d'Economia de l'Empresa) ; 14/4
Document:	Working paper
Subject:	Auditoria ; Impostos ; Informació financera

46 p, 231.4 KB

The record appears in these collections:
Research literature > Working papers > Department of Business. Working papers