Download this Paper Open PDF in Browser

Determinants and Consequences of Tax Service Provider Choice in the Not-for-Profit Sector

55 Pages Posted: 23 May 2011 Last revised: 5 Oct 2013

Stevanie S. Neuman

University of Missouri at Columbia - School of Accountancy

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy

Anne Thompson

University of Illinois at Urbana-Champaign

Date Written: August 1, 2013

Abstract

This study examines the determinants and consequences of tax service provider choice among not-for-profit (NFP) organizations. Understanding how clients choose among professional services firms for tax services is important both because of the economic significance of tax service revenues to public accounting firms and because of regulatory changes to the market for tax services following the Sarbanes-Oxley Act. Because public accounting firms compete with law and consulting firms for tax clients, we examine whether factors that influence the organizational structure of professions – client proximity and knowledge availability – influence clients’ decisions to purchase tax services. Using data from the U.S. NFP sector where the decision to purchase tax services is observable for all organizations, we find that NFPs are less likely to retain their auditor for tax services as distance to the auditor and knowledge availability increase. We document that self-preparing NFPs are more likely to misreport executive compensation on their return, and we find no differences in misreporting between auditor and non-auditor paid preparers. Finally, we find that NFPs receive lower donor contributions after changing from paid preparers to self-preparing the Form 990.

Keywords: Tax Provider Choice, Non-Audit Services, Nonprofit Organizations, Donor Contributions

JEL Classification: M40, M41, M42, M49

Suggested Citation

Neuman, Stevanie S. and Omer, Thomas C. and Thompson, Anne, Determinants and Consequences of Tax Service Provider Choice in the Not-for-Profit Sector (August 1, 2013). Available at SSRN: https://ssrn.com/abstract=1845831 or http://dx.doi.org/10.2139/ssrn.1845831

Stevanie S. Neuman (Contact Author)

University of Missouri at Columbia - School of Accountancy ( email )

College of Business
Columbia, MO 65211
United States

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Anne Thompson

University of Illinois at Urbana-Champaign ( email )

360 Wohlers Hall
1206 South Sixth Street
Champaign, IL 61820
United States

Paper statistics

Downloads
224
Rank
114,193
Abstract Views
1,762