Journal of Accounting and Economics Vol. 79 No. 1 2025
Do signatory auditors with tax expertise facilitate or curb tax aggressiveness?
Abstract
Prior research concludes that tax-expert auditors facilitate tax aggressiveness. However, these studies examine auditors who also provide non-audit tax services to their clients, creating conflicting incentives. We predict that tax-expert auditors, who do not provide non-audit tax services, reduce tax aggressiveness, because tax aggressiveness imposes costs on them. We test our prediction using Chinese data, allowing us to identify Certified Tax Agents as tax-expert auditors. We find that companies are less tax aggressive when their signatory auditor is a tax-expert who does not provide non-audit tax services. Consistent with a causal relation, a decrease in tax rates, which reduces clients’ incentives to be tax aggressive, weakens the effect of tax-expertise on tax aggressiveness. Moreover, tax-expert auditors attenuate the type of tax aggressiveness that results in tax-related misstatements. Overall, by examining auditors who do not provide non-audit tax services, we find that tax-expert auditors curb tax aggressiveness, contrary to prior research.
- DOI
- 10.1016/j.jacceco.2024.101715
- Volume
- 79
- Issue
- 1
- Pages
- 101715
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref