Mandatory audit partner's rotation and corporate tax avoidance: Early evidence from form AP disclosure
Document Type
Article
Publication Date
4-1-2021
Abstract
This study examines the impact of mandatory audit partner's rotation on corporate tax avoidance. Using audit partners’ information disclosed in Form AP, we find that companies generally increase their effective tax rates (ETRs) after audit partner's mandatory rotation, and the increase is specifically driven by companies hiring non-Big four auditors. This implies that incoming auditors, especially those from non-Big four accounting firms, are more conservative in tax issues. Further analysis suggests that companies engaging in less tax avoidance before and simultaneously purchasing tax services from their auditors have less increase in ETRs after an audit partner's rotation. The findings of this study assist both audit practitioners and tax regulators to better understand the impact of audit partner rotation on firm's tax behaviors.
Publication Title
Journal of Corporate Accounting Camp; Finance
Volume Number
32
Issue Number
2
First Page
102
Last Page
113
ISSN
10448136
Recommended Citation
Liu, Chenyong; Xu, Chunhao; and Wang, Xiaohong, "Mandatory audit partner's rotation and corporate tax avoidance: Early evidence from form AP disclosure" (2021). Accounting, Business Law, and Finance Faculty Publications. 27.
https://neiudc.neiu.edu/abf-pub/27