Abstract

http://ssrn.com/abstract=1424565
 
 

Citations



 


 



Voluntary Disclosure of Auditor-Provided Tax Service Fees


Jean C. Bedard


Bentley University - Department of Accountancy

Diana Falsetta


University of Miami - Department of Accounting

Ganesh Krishnamoorthy


Northeastern University

Thomas C. Omer


University of Nebraska at Lincoln - School of Accountancy

June 23, 2009

The Journal of the American Taxation Association, Spring 2010

Abstract:     
This study examines the decisions of firms to voluntarily disclose tax fees paid to their external auditors. Although the Securities and Exchange Commission (SEC) began requiring public companies to disclose fees paid to auditors in 2000, separate disclosure of tax service fees as a component of those fees was not required until 2003. During this period there was increased scrutiny by the SEC on many aspects of the auditor-client relationship, and by the Internal Revenue Service (IRS) on the sale of tax shelters by large public accounting firms to their clients. Hence, we predict that the decisions of firms buying tax services from their auditor to voluntarily disclose fees for those services will be significantly influenced by political costs associated with heightened regulatory scrutiny. Results show that the likelihood of separate disclosure of tax fees in 2002 is negatively associated with the ratio of nonaudit service fees (NAS) to total fees, thus supporting the political cost hypothesis. Importantly, we find that the negative association of political cost and disclosure is exacerbated by both audit committee governance and audit firm size. We also find the disclosure decision to be positively associated with agency costs (institutional ownership and size), and negatively associated with the relative amount of deferred taxes, firm profitability, and auditor change. In summary, these results shed light on the roles played by two important players in the corporate governance structure of a firm (the audit committee and the audit firm) in determining a firm's voluntary disclosure practices.

Keywords: Nonaudit services, tax consulting, voluntary disclosure, political costs

JEL Classification: H25, M40, M41, M49

Accepted Paper Series


Not Available For Download

Date posted: June 24, 2009  

Suggested Citation

Bedard, Jean C. and Falsetta, Diana and Krishnamoorthy, Ganesh and Omer, Thomas C., Voluntary Disclosure of Auditor-Provided Tax Service Fees (June 23, 2009). The Journal of the American Taxation Association, Spring 2010. Available at SSRN: http://ssrn.com/abstract=1424565

Contact Information

Jean C. Bedard (Contact Author)
Bentley University - Department of Accountancy ( email )
175 Forest Street
Waltham, MA 02452
United States
781-891-2410 (Phone)
781-891-2896 (Fax)
Diana Falsetta
University of Miami - Department of Accounting ( email )
Coral Gables, FL 33146-6531
United States
305.284.8642 (Phone)
305.284.5737 (Fax)
Ganesh Krishnamoorthy
Northeastern University ( email )
360 Huntington Ave.
Boston, MA 02115
617-373-4651 (Phone)
617-373-8814 (Fax)

Thomas C. Omer
University of Nebraska at Lincoln - School of Accountancy ( email )
307 College of Business Administration
Lincoln, NE 68588-0488
United States
Feedback to SSRN


Paper statistics
Abstract Views: 663

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.390 seconds