The effect of disclosing audit quality control deficiencies on non-audit tax services: Evidence from Deloitte’s 2007 PCAOB Part II inspection report

Ahn, Jaehan; Akamah, Herita T.; Shu, Sydney Qing

doi:10.1016/j.jaccpubpol.2021.106820

Cited by 5 publications

(3 citation statements)

References 51 publications

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“…In contrast, Albring et al (2014) find just the opposite in the post-SOX period, indicating that directors and/or audit committee members behaved more conservatively because of the increase in SOX-induced litigation and reputation risks. Finley and Stekelberg (2016) and Ahn et al (2021) investigate the impact of reputation concerns related to two Big 4 auditors (i.e. KPMG and Deloitte) on their clients' decisions to retain them (or not) as tax service providers.…”

Section: Auditor-provided Tax Services (Apts)mentioning

confidence: 99%

Book-tax conformity and the demand for auditor-provided tax services: European evidence

Sun

Habib

Yao

2023

JAL

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PurposeThis study aims to examine the impact of different levels of required book-tax conformity (BTC) on audit clients' demand for auditor-provided tax services (APTS). In addition, the authors also investigate the effects of the European Union (EU) Regulation (2014).Design/methodology/approachThis study utilizes a sample of listed companies from 10 EU countries between 2010 and 2019. The final sample consists of 16,049 firm-year observations from 2,515 unique firms, and the authors use both probit and ordinary least square (OLS) regression models in this study.FindingsThe main finding of this paper is that companies listed in countries with a higher level of BTC are less likely to purchase tax services from incumbent auditors and pay fewer auditor-provided tax service fees. Results from further analyses confirm that firms substantially reduced their purchase of APTS after the EU Regulation (2014) was implemented, but these reduced purchases were found to be more pronounced for firms located in countries with low BTC.Originality/valueThis study advances the understanding of the determinants of APTS and the consequences of BTC. Specifically, the authors report that variation in a country-specific feature (i.e. BTC) also affects firms' decision to purchase APTS. Moreover, this paper provides some preliminary evidence of the new regulation and contributes to the literature on APTS regulation. The findings of this study have important policy implications for regulators and are also relevant for various capital market participants.

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Section: Auditor-provided Tax Services (Apts)mentioning

confidence: 99%

Book-tax conformity and the demand for auditor-provided tax services: European evidence

Sun

Habib

Yao

2023

JAL

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“…Instead of examining the determinants of purchasing APTS directly, another stream of studies provides some evidence about the reasons audit clients decide to dismiss or retain their incumbent auditors as their tax services providers (Ahn et al, 2021;Albring et al, 2014;Finley & Stekelberg, 2016;Lassila et al, 2010). Because SOX (2002) and SEC (2000SEC ( , 2003SEC ( , 2006 prohibited certain types of NAS and required more granular classifications of fees disclosure, public firms substantially reduced or terminated the purchase of some NAS, including tax services, from their auditors, to reduce negative reactions from investors and regulators (Abbott et al, 2011;Finley & Stekelberg, 2016;Lennox, 2016;Maydew & Shackelford, 2007) Furthermore, the ex-ante independence risk will increase the costs of retaining decisions.…”

Section: Retaining or Dismissing Incumbent Auditors As Tax Service Providersmentioning

confidence: 99%

“…Because SOX (2002) and SEC (2000SEC ( , 2003SEC ( , 2006 prohibited certain types of NAS and required more granular classifications of fees disclosure, public firms substantially reduced or terminated the purchase of some NAS, including tax services, from their auditors, to reduce negative reactions from investors and regulators (Abbott et al, 2011;Finley & Stekelberg, 2016;Lennox, 2016;Maydew & Shackelford, 2007) Furthermore, the ex-ante independence risk will increase the costs of retaining decisions. Both Ahn et al (2021) and Lassila et al (2010) posit and find evidence that auditors will be perceived as lacking independence if they provide high nontax NAS relative to audit fees to their audit clients and have a long relationship with them;…”

Section: Retaining or Dismissing Incumbent Auditors As Tax Service Providersmentioning

confidence: 99%

Determinants and consequences of auditor‐provided tax services: A systematic review of the international literature

Sun

Habib

2021

Int J Auditing

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We review the empirical literature on the determinants and consequences of auditor-provided tax services (APTS) and provide some directions for future research.We first summarise two theoretical but competing perspectives on APTS provision, namely, the knowledge spillover effect and the impaired independence effect. We then review the evolution of APTS-related disclosures and regulations in selected jurisdictions. Our review of the determinants of APTS suggests that such decisions are related to the cost-benefit trade-off. We then review the literature on the consequences of APTS. This strand of the literature in the United States supports the knowledge spillover effect, but the findings in non-US settings are mixed. The market perceptions of APTS in both the US and non-US settings suggest that market participants react to APTS negatively during uncertain periods, whereas nonarchival studies suggest that the perceptions of APTS vary between stakeholder groups and with the types of APTS provided.

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Does environmental audit help to improve water quality? Evidence from the China National Environmental Monitoring Centre

Dai

Liu

2022

Science of The Total Environment

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The effect of disclosing audit quality control deficiencies on non-audit tax services: Evidence from Deloitte’s 2007 PCAOB Part II inspection report

Cited by 5 publications

References 51 publications

Book-tax conformity and the demand for auditor-provided tax services: European evidence

Book-tax conformity and the demand for auditor-provided tax services: European evidence

Determinants and consequences of auditor‐provided tax services: A systematic review of the international literature

Does environmental audit help to improve water quality? Evidence from the China National Environmental Monitoring Centre

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