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Title: Auditors' constraining effect on tax noncompliance at different book-tax conformity levels in a transition economy
Author(s): Chan, Koon Hung 
Author(s): Luo, R.
Mo, P. L. L.
Issue Date: 2016
Publisher: American Accounting Association
Journal: Journal of International Accounting Research 
Volume: 15
Issue: 3
Start page: 1
End page: 30
This study examines how differential auditor quality can affect clients' tax noncompliance at different book-tax conformity levels. Overall, we find that high-quality auditors are associated with client firms' better tax compliance. Specifically, high-quality auditors are effective in constraining book-tax-conforming noncompliance because of the direct linkage between financial and tax reporting for such noncompliance at both the higher and the lower conformity periods. In contrast, high-quality auditors' constraining effect on book-tax-difference noncompliance is significant only in the lower conformity period when there are more opportunities for reporting irregularities. Furthermore, firms that switch from a low- to a high-quality auditor have better tax compliance after the switch. This study contributes to the literature by providing evidence that high-quality auditors not only can constrain clients' earnings management, but can also constrain tax noncompliance.
DOI: 10.2308/jiar-51612
CIHE Affiliated Publication: No
Appears in Collections:BHM Publication

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