We examine the effect of foreign employment on two outcomes—income shifting and the tax uncertainty of foreign transactions. Using a hand-collected sample of employment disclosures, we partition our sample into firm-years with a higher or lower degree of foreign employment. Using two distinct income shifting models, we document that, on average, a high degree of foreign employment is associated with greater tax-motivated income shifting out of the U.S. We also posit and find that a high degree of foreign employment enhances the economic substance of foreign transactions, reducing the tax uncertainty associated with foreign income. We conduct additional analyses to mitigate selection bias concerns, and we use exogenous changes to the costs and benefits of income shifting using foreign employment to strengthen identification. Our results highlight firms' use of employees as part of a tax-efficient supply chain and how foreign employment enhances income shifting opportunities between jurisdictions.

Two forms of expertise can influence audit quality: industry and task-specific expertise. Anecdotal evidence suggests that tax knowledge is task-specific, rather than industryspecific and audit offices with increased exposure to complex tax issues develop this taskspecific expertise. Using outcomes related to audits of the income tax accounts, we examine whether tax task-specific knowledge (TSK) affects the audit quality of the income tax accounts and find that tax TSK increases the audit quality of the income tax accounts. We also find evidence of an improved response to misstatements among audit offices with tax TSK, demonstrated by a decreased likelihood of future tax misstatements following the disclosure of a tax restatement. Finally, we observe the effect of tax TSK among audit offices with lower levels of auditor-provided tax services (APTS). This result suggests that audit offices without the benefit of knowledge spillover from APTS rely more on the tax TSK.