Do Income Tax-Related Deficiencies in Publicly Disclosed PCAOB Part II Reports Influence Audit Client Financial Reporting of Income Tax Accounts?

• 成果类型: Article
• 署名作者: Drake, Katharine D.; Goldman, Nathan C.; Lusch, Stephen J.
• 署名单位: University of Arizona; University of Texas System; University of Texas Dallas; University of Kansas
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-51338
• 发表日期: 2016
• 页码: 1411-1439
• 关键词: sfas no. 109; earnings management; valuation allowance; inspection reports; Sarbanes-Oxley; QUALITY; assets; avoidance; analysts; reserve

摘要

Deloitte's 2007 PCAOB Part II report identifies, among other issues, concerns related to the audit firm's quality controls with respect to auditing income tax accounts. We investigate whether Deloitte's actions to remediate the PCAOB's concerns are associated with changes to their clients' financial reporting for income taxes. We find that Deloitte's clients increased the reported valuation allowance on deferred tax assets and increased the reported reserve for uncertain tax benefits (UTBs) in response to increased auditor scrutiny over income tax accounts. Additionally, we find that in subsequent periods, Deloitte's clients report valuation allowances and UTB balances that are not significantly different than other annually inspected auditors, consistent with Deloitte changing the quality controls related to audits of income tax accounts after the failed remediation of the 2007 Part II report.