Money Laundering Control Systems, External Auditorspecialization and Tax Haven Use: An Empirical Analysis ofU.S. Multinational Financial Corporations

International Journal of Auditing

Posted: 18 May 2021

See all articles by Ahmed Al-Hadi

Ahmed Al-Hadi

Curtin University - School of Accounting; CBFS

Grantley Taylor

Curtin University - School of Accounting

Grant Richardson

Department of Accounting and Corporate Governance

Baban Eulaiwi

Curtin University - School of Accounting

Date Written: May 16, 2021

Abstract

This study investigates the association between money laundering control systems(MLCS) and tax haven use based on a sample of U.S. multinational financial corpora-tions (MFCs). We also examine the impact of external auditor specialization on theassociation between MLCS and tax haven use. We find that MLCS is significantlynegatively associated with tax haven use. Our result is also economically significant.Based on our regression estimates, a one-standard deviation increase in MLCS isassociated with a decrease in tax haven use by around 2.75%. Additional analysisshows that external auditor specialization magnifies the negative associationbetween MLCS and tax haven use. Overall, our study indicates that MLCS and theexternal audit function have important consequences for tax haven use by MFCs.

Keywords: auditor specialization, money laundering control systems, tax havens

JEL Classification: G21; H26; M42

Suggested Citation

Al-Hadi, Ahmed and Taylor, Grantley and Richardson, Grant and Eulaiwi, Baban, Money Laundering Control Systems, External Auditorspecialization and Tax Haven Use: An Empirical Analysis ofU.S. Multinational Financial Corporations (May 16, 2021). International Journal of Auditing, Available at SSRN: https://ssrn.com/abstract=3847417

Ahmed Al-Hadi (Contact Author)

Curtin University - School of Accounting ( email )

Australia

CBFS ( email )

Ruwi, 112
Oman
98999651 (Phone)

Grantley Taylor

Curtin University - School of Accounting ( email )

Australia

Grant Richardson

Department of Accounting and Corporate Governance ( email )

4 Eastern Road
North Ryde
New South Wales, NSW 2109
Australia

Baban Eulaiwi

Curtin University - School of Accounting ( email )

Australia

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