Do Auditor-Provided Tax Services Impair Independence or Generate Knowledge Spillover? Evidence from Assessing Tax Accrual Quality
نویسندگان
چکیده
This study examines the association between auditor-provided tax services (APTS) and financial reporting quality to determine if APTS impairs auditor independence or generates knowledge spillover. Lower (higher) financial reporting quality is generally viewed as evidence supporting auditor independence impairment (knowledge spillover). We use the quality of the income tax accrual estimate from Choudhary et al. (2013) as our measure of financial reporting quality because the tax account is where spillover should be most evident. We find a negative association between tax accrual quality and APTS, consistent with auditor independence impairment. Cross-sectional tests reveal that engaging an audit expert does not mitigate lower tax accrual quality for firms with APTS. Our findings are consistent with regulatory concerns that APTS have the potential to impair auditor independence. Acknowledgements: This paper has benefited from insightful comments by Michael Donohoe, Miguel Minutti-Meza, Katherine Schipper, and Georgetown University Accounting/Finance Brown Bag participants. http://finpolicy.georgetown.edu
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