Download or read book Auditor Provided Tax Services and Earnings Management in Tax Expense written by Ling Lei Lisic and published by . This book was released on 2014 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Regulators do not prohibit auditors from providing tax services to their audit clients, provided these services are preapproved by audit committees. I examine whether the association between auditor-provided tax services and earnings management in tax expense varies with audit committee effectiveness. I develop a composite proxy for audit committee effectiveness by combining six audit committee characteristics. I find that auditor-provided tax services are less positively associated with earnings management in tax expense as audit committee effectiveness increases. My findings suggest that the knowledge spillover effect of auditor-provided tax services is more likely to dominate the independence impairment effect when auditor-provided tax services are preapproved by more effective audit committees.

Download or read book Auditor provided Tax Services and last Chance Earnings Management written by Ling Lei and published by . This book was released on 2008 with total page 106 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Is There an Association Between Earnings Management and Auditor Provided Tax Services written by Gopal V. Krishnan and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The issue of whether auditor-provided nonaudit services enhance or exacerbate financial reporting quality has been intensely debated among the regulators, auditors, investors, academic researchers, and the media. In 2006, the SEC approved the rules proposed by the PCAOB limiting the tax services that incumbent auditors can offer to their clients. We contribute to this debate by examining whether auditor-provided tax services mitigate earnings management. We find a negative and significant relation between earnings management (loss avoidance) and tax fee paid to the incumbent auditor. Our results are consistent with knowledge spillover, i.e., when the same audit firm provides both audit and tax services insight learned from providing tax services can contribute to audit quality.

Download or read book Auditor Provided Tax Services and Stock Price Crash Risk written by Ahsan Habib and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines whether auditor-provided tax services affect stock price crash risk: an important consideration for stock investors. Provision of tax services by incumbent auditors could accentuate or attenuate crash risk depending on whether such services give rise to knowledge spillover or impair auditor independence. The study investigates two channels through which tax services might affect crash risk: earnings management in tax expenses, and tax avoidance. Also examined, is whether the association between tax services and crash risk is moderated by the particular business strategy that organizations pursue. A two-stage model is used to control for the potential endogeneity inherent in the selection of auditors for tax services. Empirical findings reveal that auditor-provided tax services attenuate crash risk by constraining both earnings management in tax expenses and tax avoidance. Further evidence shows that auditor-provided tax services reduce crash risk for firms following innovator business strategies. Taken together, empirical findings reported in this study support knowledge spillover benefits, i.e. insights gained from tax services can enhance audit effectiveness.

Download or read book Tax Reserves Auditor provided Tax Services and FIN 48 written by Chunlai Ye and published by . This book was released on 2012 with total page 274 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This study examines two types of consequences of FIN 48, the effect of FIN 48 on firm value and the effect of FIN 48 on audit fees, and shows that these consequences depend upon the size of the firm. Firm size and the role of the auditor are generally ignored in previous FIN 48-related studies. Because of different tax audit risks faced by firms of different sizes, I expect and find that FIN 48 affects firms of different sizes differently. After the adoption of FIN 48, the value relevance of tax reserves decreases for large firms but does not significantly change for medium and small firms. I also find that firms pay additional audit fees following FIN 48 and that the increase depends upon the size of the firm and the extent of tax services provided by the auditor. In addition, auditor-provided tax services mitigate the extra audit fees that firms with more tax reserves need to pay in the post-FIN 48 period.This study also investigates the effect of auditor-provided tax services on earnings management through tax reserves. I find that the auditor who provides more tax services facilitates large firms' earnings smoothing in the post-FIN 48 period, providing clear evidence of impairment of auditor independence due to tax services. This behavior does not exist within medium and small firms, arguably because the auditor does not compromise independence for less important clients.

Download or read book Earnings Management Through Effective Tax Rates written by Kirsten A. Cook and published by . This book was released on 2008 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dhaliwal, Gleason, and Mills (DGM 2004) document that firms manage earnings through decreases in effective tax rates (ETRs) between the third and fourth quarters. We investigate how firms' investments in tax planning impact this association between ETR changes and earnings management incentives. We also study two additional questions related to this association. First, we examine the impact of firms' choices to purchase tax services from providers other than their auditors on their use of third-to-fourth-quarter ETR changes. Second, we explore whether the Sarbanes-Oxley Act of 2002 (SOX) altered firms' propensity to engage in earnings management using changes in ETRs. For firms that would miss consensus earnings forecasts in the absence of ETR changes, higher tax service fees paid to auditors are associated with greater reductions in ETRs between the third and fourth quarters. Among firms that do not purchase tax services from their auditors, companies that would miss their earnings forecasts absent ETR changes also experience greater third-to-fourth-quarter reductions in ETRs than companies that would otherwise meet or beat these estimates. We find no statistically significant impact of the passage of SOX on the relation between tax fees paid to auditors and third-to-fourth-quarter decreases in ETRs for firms that would miss their earnings targets without managing tax expense. However, for firms not purchasing tax services from their auditors, a negative association exists between third-to-fourth-quarter ETR changes and missing income goals absent ETR changes in the pre-SOX period, but our tests fail to detect this relation in the post-SOX period.

Download or read book Taxing Corporate Income in the 21st Century written by Alan J. Auerbach and published by Cambridge University Press. This book was released on 2007-04-16 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book was first published in 2007. Most countries levy taxes on corporations, but the impact - and therefore the wisdom - of such taxes is highly controversial among economists. Does the burden of these taxes fall on wealthy shareowners, or is it passed along to those who work for, or buy the products of, corporations? Can a country with high corporate taxes remain competitive in the global economy? This book features research by leading economists and accountants that sheds light on these and related questions, including how taxes affect corporate dividend policy, stock market value, avoidance, and evasion. The studies promise to inform both future tax policy and regulatory policy, especially in light of the Sarbanes-Oxley Act and other actions by the Securities and Exchange Commission that are having profound effects on the market for tax planning and auditing in the wake of the well-publicized accounting scandals in Enron and WorldCom.

Download or read book The Relation Between Auditors Fees for Non audit Services and Earnings Quality written by Frankel Richard M and published by Legare Street Press. This book was released on 2023-07-18 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This groundbreaking study explores the relationship between auditors' fees for non-audit services and the quality of earnings reported by companies. Using data from a large sample of publicly traded firms, the authors show that there is a strong correlation between the two variables, and suggest that this could be a cause for concern for investors and regulators. The authors also provide recommendations for improving the transparency and reliability of financial reporting. This book is essential reading for anyone interested in the intersection of accounting, auditing, and corporate governance. This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work is in the "public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.

Download or read book Auditor Provided Tax Services and Income Tax Estimation Error written by Preeti Choudhary and published by . This book was released on 2017 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper re-examines whether auditor-provided tax services (APTS) are associated with better or worse audit quality. While some believe that one accounting firm providing both audit and tax services to a client improves audit quality through knowledge spillover, others are concerned that non-audit services inhibit auditor independence by lowering auditors' professional skepticism. Using a tax-specific measure of audit quality that captures within-GAAP income tax estimation error and more rigorous econometric techniques to address endogeneity than those employed by prior research, we find that greater APTS are associated with worse audit quality. When a company begins purchasing a material amount of APTS, income tax estimation error is 17 percent greater. Exploratory analyses suggest that the greater income tax estimation error is due to compromised auditor ability, not compromised auditor incentives. Our findings inform US and EU initiatives that question whether one accounting firm should provide both audit and tax services to a client.

Download or read book The Relation Between Auditors Fees for Non Audit Services and Earnings Quality Classic Reprint written by Richard M. Frankel and published by Forgotten Books. This book was released on 2018-03-03 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from The Relation Between Auditors' Fees for Non-Audit Services and Earnings Quality This paper provides empirical evidence on the relation between non-audit services and earnings quality. We test hypotheses concerning: (1) the association between a firm's purchase of non-audit services from its auditor and earnings management, and (2) the stock price reaction to the disclosure of non-audit fees. In the past decade there has been a dramatic increase in the proportion of fee revenue auditors derive from non-audit services, yet we know little about how non-audit services are related to earnings quality.1 Concern about the effect of non-audit services on the financial reporting process was a primary motivation for the Securities and Exchange Commission (sec) to issue revised auditor independence rules on November 15, 2000. The rules require firms to disclose the amount of all audit and non-audit fees paid to its auditor. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.

Download or read book Auditor Provided Tax Services written by Thomas C. Omer and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates auditor-provided tax services from 2000 to 2002, during which fees paid to auditors for nonaudit services (NAS) were disclosed, but separate disclosure of tax service fees was voluntary. We examine changes in the market for tax NAS in 2002, as Congress debated possible prohibition of these services. Using the Heckman MLE procedure to control for selection bias in tax fee disclosure, we find that a strong pre-2002 positive association between tax fees and higher than expected audit fees weakened significantly in 2002, suggesting that some companies paying high audit fees reduced or terminated auditor-provided tax services in 2002. Our findings also suggest that auditor-provided tax services were reduced among new or short-tenure clients. Controlling for tax complexity, we also find some evidence that early quot;returnsquot; (i.e., tax rate reductions) to companies from auditor-provided tax services were reduced in 2002. Finally, results of our selection model imply that the decision to voluntarily disclose fees paid to the auditor for tax services is positively associated with tax complexity and auditor tenure, and negatively associated with the proportion of NAS fees to total fees. Overall, our findings imply significant change in auditor-provided tax services prior to 2003, when separate disclosure of auditor-provided tax service fees was mandated.

Download or read book Accounting for Income Taxes written by John R. Graham and published by Now Pub. This book was released on 2012-11-09 with total page 176 pages. Available in PDF, EPUB and Kindle. Book excerpt: Accounting for Income Taxes is the most comprehensive review of AFIT research. It is designed both to introduce new scholars to this field and to encourage active researchers to expand frontiers related to accounting for income taxes. Accounting for Income Taxes includes both a primer about the rules governing AFIT (Sections 3-4) and a review of the scholarly studies in the field (Sections 5-8). The primer uses accessible examples and clear language to express essential AFIT rules and institutional features. Section 3 reviews the basic rules and institutional details governing AFIT. Section 4 discusses ways that researchers, policymakers, and other interested parties can use the tax information in financial statements to better approximate information in the tax return. The second half of the monograph reviews the extant scholarly studies by splitting the research literature into four topics: earnings management, the association between book-tax differences and earnings characteristics, the equity market pricing of information in the tax accounts, and book-tax conformity. Section 5 focuses on the use of the tax accounts to manage earnings through the valuation allowance, the income tax contingency, and permanently reinvested foreign earnings. Section 6 discusses the association between book-tax differences and earnings characteristics, namely earnings growth and earnings persistence. Section 7 explores how tax information is reflected in share prices. Section 8 reviews the increased alignment of accounting for book purposes and tax purposes. The remainder of the paper focuses on topics of general interest in the economics and econometric literatures. Section 9 highlights some issues of general importance including a theoretical framework to interpret and guide empirical AFIT studies, the disaggregated components of book-tax differences and research opportunities as the U.S. moves toward International Financial Reporting Standards (IFRS). Section 10 discusses econometric weaknesses that are common in AFIT research and proposes ways to mitigate their deleterious effects.

Download or read book State of Colorado Department of Revenue Income Tax Initiative Project written by Colorado. Office of State Auditor and published by . This book was released on 2000 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Compliance Costs and Book Tax Conformity written by Kathleen Bakarich and published by . This book was released on 2016 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: The decade-long debate on required book-tax conformity has centered on three areas: the information content of earnings, the incentive to engage in earnings management, and the costs of compliance. While the first two have been studied extensively, studies on the effect that conformity may have on compliance costs are limited to estimates of the effect that perfect conformity will have on tax-related compliance costs, a near tautology. This lack of research is perhaps attributable to the relative invariance in conformity within the United States and the relative unavailability of compliance-related data outside the United States. This study overcomes those limitations and fills the gap in the extant research by using an international sample of firms with manually collected audit fee data. We focus on audit fees as it is a more economically significant compliance cost with available data and where the effect of book-tax conformity has tension. Test results show that increased conformity is associated with greater audit fees. This provides evidence that the hypothesized decreases in tax-related compliance costs may be offset by increases in audit fees, implying that the actual reduction in compliance costs may be lower than previously thought. The results of a difference-in-differences test using the adoption of IFRS for consolidated purposes only as an exogenous shock to book-tax divergence shows consistent results and supports a causal prediction. We also find evidence that higher conformity is associated with higher fees paid for auditor-provided tax service, an increased likelihood the firm chooses its auditor to provide tax services, and higher audit quality.

Download or read book Propensity Score Analysis written by Shenyang Guo and published by SAGE. This book was released on 2015 with total page 449 pages. Available in PDF, EPUB and Kindle. Book excerpt: Provides readers with a systematic review of the origins, history, and statistical foundations of Propensity Score Analysis (PSA) and illustrates how it can be used for solving evaluation and causal-inference problems.

Download or read book The Role of Audit Firm Expertise and Knowledge Spillover in Mitigating Earnings Management Through the Tax Accounts written by Brant E. Christensen and published by . This book was released on 2016 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tax-related accounts are complex and often the last accounts finalized in the financial reporting process. Accordingly, these accounts can be used as a 'last chance' earnings management tool (Dhaliwal, Gleason, and Mills 2004). We investigate the extent to which an audit firm's industry expertise constrains earnings management through the tax accounts. We find that national industry audit experts constrain earnings management through the tax accounts. We also find that audit firm tax expertise constrains earnings management through the tax accounts when the audit firm is not considered an industry audit expert. Finally, we find evidence that providing both audit and tax services facilitates a non-expert firm's ability to constrain earnings management through the tax accounts, which suggests that knowledge spillover plays an important role in reducing 'last chance' earnings management. All findings hold among smaller clients and when the extent of earnings management is below quantitative materiality thresholds.

Download or read book Financial statement restatements trends market impacts regulatory responses and remaining challenges written by and published by DIANE Publishing. This book was released on with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: