TY - JOUR
T1 - Joint audit engagements and client tax avoidance
T2 - evidence from the italian statutory audit regime
AU - Bianchi, Pietro A.
AU - Falsetta, Diana
AU - Minutti-Meza, Miguel
AU - Weisbrod, Eric
N1 - Funding Information:
The authors thank Connie D. Weaver (editor), two anonymous reviewers, Ryan Huston (discussant), Sean McGuire, Thomas Omer, Stephanie Rasmussen (discussant), Joe Schroeder (discussant), Marco Trombetta, Irem Tuna (discussant), Jorge Werner (discussant), Peter Wysocki, The University of Arizona Tax reading group, and seminar participants at IE Business School (Madrid, Spain), Massachusetts Institute of Technology, Michigan State University, New York University, University of California, Berkeley, University of Kentucky, The University of Tennessee, The University of Texas at Dallas, the 2014 Florida Accounting Symposium, the 2015 AAA Auditing Midyear Meeting, the 2015 AAA International Accounting Section Midyear Meeting, the 2015 AAA American Taxation Association Midyear Meeting, the 2015 European Accounting Association Meeting, and the 2015 AAA Annual Meeting for helpful comments and suggestions. We also thank the Chamber of Commerce of Verona for providing the statutory auditor data. All errors are our own.
Publisher Copyright:
© 2019, American Accounting Association. All rights reserved.
Copyright:
Copyright 2019 Elsevier B.V., All rights reserved.
PY - 2019/3/1
Y1 - 2019/3/1
N2 - Under the Italian statutory audit regime, three individual accountants are jointly appointed to audit each client’s annual financial statements and sign off on the tax return. These individuals can belong to the same or different accounting firms and through multiple and repeated collaborations they form a professional network. We use network measures of centrality to capture individuals’ ability to acquire and apply tax expertise across clients. We demonstrate that clients engaging better-connected individual auditors have comparatively lower effective tax rates. Our results are robust to controlling for a number of client, individual, and accounting firm characteristics, as well as for alternative network connections between clients. We also use instrumental variables, individual fixed effects, and matching to mitigate the effect of endogenous pairing of clients and auditors. Our findings demonstrate that in a joint audit environment, individual auditor professional networks have consequences for tax outcomes.
AB - Under the Italian statutory audit regime, three individual accountants are jointly appointed to audit each client’s annual financial statements and sign off on the tax return. These individuals can belong to the same or different accounting firms and through multiple and repeated collaborations they form a professional network. We use network measures of centrality to capture individuals’ ability to acquire and apply tax expertise across clients. We demonstrate that clients engaging better-connected individual auditors have comparatively lower effective tax rates. Our results are robust to controlling for a number of client, individual, and accounting firm characteristics, as well as for alternative network connections between clients. We also use instrumental variables, individual fixed effects, and matching to mitigate the effect of endogenous pairing of clients and auditors. Our findings demonstrate that in a joint audit environment, individual auditor professional networks have consequences for tax outcomes.
KW - Auditor networks
KW - Auditor tax expertise
KW - Social network analysis
KW - Tax avoidance
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U2 - 10.2308/atax-52151
DO - 10.2308/atax-52151
M3 - Article
AN - SCOPUS:85070266000
VL - 41
SP - 31
EP - 58
JO - Journal of the American Taxation Association
JF - Journal of the American Taxation Association
SN - 0198-9073
IS - 1
ER -