A potential benefit of increasing book-tax conformity: evidence from the reduction in audit fees

• 成果类型: Article
• 署名作者: Kuo, Nan-Ting; Lee, Cheng-Few
• 署名单位: Nankai University; Rutgers University System; Rutgers University New Brunswick
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-016-9367-x
• 发表日期: 2016
• 页码: 1287-1326
• 关键词: earnings management; RESTATEMENTS; services; income; LEGAL; association; avoidance; PREMIUMS; LAW

摘要

Our study explores a possible benefit of conforming book income to taxable income. We expect that increased book-tax conformity can reduce audit fees by simplifying tax accruals and increasing tax authorities' monitoring, which reduce audit workload and audit risk, respectively. Consistent with our expectations, we find that a higher country level of required book-tax conformity leads to lower audit fees. Moreover, firm-level book-tax differences are positively associated with audit fees. We also find that the negative association between country level of required book-tax conformity and audit fees is mitigated among firms with larger book-tax differences. Our findings are robust to including country-level legal investor protection or other extra-legal institutions. Overall, our results suggest that one benefit of increasing book-tax conformity is the reduction in audit fees.