Effects of Advice on Effectiveness and Efficiency of Tax Planning Tasks

Abstract

Supervisory advice is generally given to tax professionals in public accounting firms before they commence tax planning tasks. The objectives of giving advice are to achieve effectiveness and efficiency in tax planning, as well as for training tax professionals. An experiment with 54 tax professionals, from accounting firms across Canada, was conducted to determine the effects of supervisory advice on effectiveness and efficiency in performing tax planning tasks of different complexity. Advice results in lower effectiveness in lower-complexity tasks, as evidenced by more technically inadequate tax plans, signs of confusion and overdetermined solutions (i.e., unnecessary information in the tax plans). In higher-complexity cases, the results suggest a limited improvement in effectiveness, as evidenced by more technically adequate plans, but at a cost of limiting insightful judgment. On the other hand, advice results in limited gains in efficiency for both the lower and higher-complexity tasks. This study extends the advice and tax literatures by investigating the role of advice in the performance of tax planning tasks of different complexity, which has not been examined in other research. This study also contributes to tax practice, as public accounting firms should consider the limited gains in efficiency with the decrease in effectiveness for lower-complexity tasks and the potential to limit insightful judgment for higher complexity tasks. The results of this study suggest that firms face trade-offs in achieving efficiency, effectiveness and the training objective.Des conseils de supervision sont g en eralement prodigu es aux fiscalistes des cabinets d'expertise comptable avant qu'ils ne s'attaquent a leurs tâches de planification fiscale. Ces conseils ont pour but d'assurer l'efficacit e et l'efficience de la planification fiscale ainsi que de former les fiscalistes. L'auteure r ealise une exp erience a laquelle * This paper draws on my PhD dissertation. I thank the public accounting firms and the participants.Special thanks to my supervisor, Michael Gibbins, and the members of my committee, Karim Jamal and Christina Gagne, for their tremendous support. I am also sincerely grateful to the School of Business, MacEwan University, and the Winspear Distinguished Chair in Accounting, University of Alberta, for the financial assistance provided for my dissertation.participent 54 fiscalistes de cabinets comptables de tout le territoire canadien afin de d eterminer les r epercussions des conseils de supervision sur l'efficacit e et l'efficience avec lesquelles sont ex ecut ees des tâches de planification fiscale pr esentant des degr es diff erents de complexit e. Les conseils sont associ es a une moins grande efficacit e dans les tâches de complexit e plus faible, ainsi qu'en t emoignent des plans fiscaux moins ad equats sur le plan technique, des indices de confusion et des solutions surd etermin ees (c'est-a-dire des plans fiscaux contenant de l'information inutile). Dans les tâches de complexit e plus grande, les r e...