Title

Tax Aggressiveness and Auditor Resignation

Publication Type

Conference Paper

Publication Date

8-2013

Abstract

We examine the relation between client tax aggressiveness and auditor‟s resignation decision. Consistent with the agency view of tax avoidance which suggests that client tax aggressiveness can increase litigation and reputational risk to auditors and increase the potential conflict with managers, we find a positive association between our proxies for tax aggressiveness and the likelihood that an auditor resigns from an audit engagement. Further, this association is stronger when external monitoring of the client firm is less effective, when there is greater potential for agency problems in the client firm, and when the economic importance of the fees received from the client firm is lower. Overall, our study identifies client tax risk as an important determinant of auditors‟ resignation. This result should be of interest to auditors who actively manage client audit risks and to tax authorities who have incentives to identify firms with abusive tax reporting behavior.

Keywords

Tax aggressiveness, auditor resignation, agency cost, external monitoring, auditor independence

Discipline

Accounting

Research Areas

Corporate Reporting and Disclosure

Publication

American Accounting Association Annual Meeting

City or Country

Anaheim, CA, USA

This document is currently not available here.

Share

COinS