Tax-related Key Audit Matters and Changes in Corporate Income Shifting

46 Pages Posted: 4 Apr 2024

See all articles by Christof Beuselinck

Christof Beuselinck

Catholic University of Lille - IESEG School of Management

Nathan C. Goldman

North Carolina State University - Department of Accounting

Jochen Pierk

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Cinthia Valle Ruiz

Catholic University of Lille - IESEG School of Management

Date Written: March 19, 2024

Abstract

This study examines the association between tax-related key audit matters (KAM) disclosures and corporate income shifting. We test our research question using KAM disclosures in the expanded audit reports from a large sample of European firms from 2012 to 2021. We find that group-level KAM disclosures are associated with a decline in corporate income shifting in current and subsequent periods when the KAMs relate to Uncertain Tax Positions (UTPs). In additional tests, we show that receiving UTP KAMs shapes affiliate-level tax planning responses, especially for financially unconstrained groups. Our results support the idea that corporations respond to the saliency provided by the expanded audit report dialogues by altering their income shifting behavior. More broadly speaking, we provide novel evidence on the real economic consequences of and usefulness of expanded audit report components.

Keywords: Multinational corporations, income shifting, Key Audit Matters (KAMs), tax planning

JEL Classification: H25, H26, H40

Suggested Citation

Beuselinck, Christof and Goldman, Nathan C. and Pierk, Jochen and Valle Ruiz, Cinthia, Tax-related Key Audit Matters and Changes in Corporate Income Shifting (March 19, 2024). Available at SSRN: https://ssrn.com/abstract=4765271 or http://dx.doi.org/10.2139/ssrn.4765271

Christof Beuselinck

Catholic University of Lille - IESEG School of Management ( email )

3 Rue de la Digue
Office: A321
Puteaux, 92800
France
+33320545892 (Phone)

Nathan C. Goldman

North Carolina State University - Department of Accounting ( email )

Raleigh, NC 27695-8113
United States

Jochen Pierk (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Cinthia Valle Ruiz

Catholic University of Lille - IESEG School of Management ( email )

Socle de la Grande Arche
1 Parvis de la Defense
Puteaux, Paris 92800
France

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