The Association between Auditor Provided Tax Planning and Tax Compliance Services and Tax Avoidance and Tax Risk

Chyz, J., R. Gal-Or, V. Naiker and D. Sharma, 2021, The Association between Auditor Provided Tax Planning and Tax Compliance Services and Tax Avoidance and Tax Risk, The Journal of the American Taxation Association, Forthcoming

54 Pages Posted: 9 Apr 2021

See all articles by James Chyz

James Chyz

University of Tennessee, Knoxville - Department of Accounting and Business Law

Ronen Gal-Or

Bentley University - Department of Accountancy

Vic Naiker

University of Melbourne - Faculty of Business and Economics

Divesh Sharma

Kennesaw State University, School of Accountancy

Date Written: April 7, 2021

Abstract

This study examines associations between auditor-provided tax compliance and tax planning services and tax avoidance and tax risk. Collectively, our results suggest that companies paying their auditors for tax planning advice are more effective tax planners (in terms of higher tax avoidance, and lower tax risk) than firms that do not engage their auditor for tax work. Our tax avoidance results are more pronounced for clients of auditors with more tax expertise and longer tenure as well as for firms with higher tax and operational complexity. We also find that our tax avoidance results hold only when firms also engage their auditors for tax compliance work, which is consistent with auditors seeking to minimize reputation threats. Our study’s unique hand-collected panel dataset provides a more precise and nuanced perspective on the role auditors play in tax outcomes.

Keywords: tax non-audit services, effective tax rates, tax volatility

JEL Classification: M41, M42, H25, H26

Suggested Citation

Chyz, James and Gal-Or, Ronen and Naiker, Vic and Sharma, Divesh Shankar, The Association between Auditor Provided Tax Planning and Tax Compliance Services and Tax Avoidance and Tax Risk (April 7, 2021). Chyz, J., R. Gal-Or, V. Naiker and D. Sharma, 2021, The Association between Auditor Provided Tax Planning and Tax Compliance Services and Tax Avoidance and Tax Risk, The Journal of the American Taxation Association, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3821858

James Chyz

University of Tennessee, Knoxville - Department of Accounting and Business Law ( email )

Knoxville, TN
United States
865-974-1701 (Phone)

Ronen Gal-Or (Contact Author)

Bentley University - Department of Accountancy ( email )

175 Forest Street
Waltham, MA 02452
United States

Vic Naiker

University of Melbourne - Faculty of Business and Economics ( email )

198 Berkeley Street
Melbourne, Victoria, 3010
Australia

Divesh Shankar Sharma

Kennesaw State University, School of Accountancy ( email )

Kennesaw, GA 30144
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
90
Abstract Views
363
rank
351,598
PlumX Metrics