Audit Fees and Book-Tax Differences

Hanlon, Michelle; Krishnan, Gopal V.; Mills, Lillian F.

doi:10.2308/atax-10184

Cited by 107 publications

(37 citation statements)

References 66 publications

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“…Considering the recent financial scandals, a large body of literature extends this works by investigating whether the book-tax differences (BTD) provides information about managerial discretion Mills, 1998;Wilson, 2009;Tang & Firth, 2011;Hanlon, 2005). For example, a number of studies link BTD with earnings quality or earnings persistence (Hanlon, 2005;Blaylock et al, 2012), cost of capital (Dhaliwal et al, 2009;Goh et al, 2013), audit fees (Hanlon et al, 2012). Assessing the BTD is important because BTD can be used as an attribute of financial reporting quality and can contain incremental informations for investors and users of companies' financial reports.…”

Section: Introductionmentioning

confidence: 99%

The Difference between the Accounting Result and Taxable Income in Detecting Earnings Management and Tax Management: The Tunisian Case

Dridi¹,

Boubaker²

2015

IJBM

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In this study, we examine empirically whether the gap between the pre-tax income and the taxable income predicts simultaneously earnings management and tax management. Prior researches have begun to estimate several indictors of earnings quality. We extends this works by investigating whether the book-tax differences (BTD) provides information about managerial discretion. BTD can be used as an attribute of information quality and can contain incremental information for investors and users of financial reports of companies We compose a sample of 21 listed Tunisian firms over the 2003-2012 periods, we apply a statistical methodology implementing a linear panel regression. We develop a model in which we estimate abnormal BTD. All earnings and tax management activities are captures by our abnormal BTD indicator (ABTD). From this regression we are going to test the effect of the variables of the earnings and tax management on the ABTD variable. We find, as expected, a significant association between BTD and manager discretion proxies. Our results indicate that BTD contains a predictive power over the earnings and tax management. We find that Tunisian companies are concerned about tax reducing rather than improved information quality and increasing the financial result.

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Section: Introductionmentioning

confidence: 99%

The Difference between the Accounting Result and Taxable Income in Detecting Earnings Management and Tax Management: The Tunisian Case

Dridi¹,

Boubaker²

2015

IJBM

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“…The auditor-related perspective includes audit firm size, and audit firm tenure (Bedard & Johnstone, 2010;Ezzamel, Gwilliam, & Holland, 2002;Urhoghide & Emeni 2014). However, a different stream of studies continues to discuss other drivers of audit fees, such as earnings managements (Gul, Chen, & Tsui, 2003;Martinez, & Jesus-Moraes, 2017), tax aggressiveness (Donohoe & Knechel, 2014;Hanlon, Krishnan & Mills, 2012;Saremi, Mohammadi & Nezhad, 2016), and corporate governance mechanisms (Boo & Sharma, 2008;Boussaidi & Hamed, 2015;Urhoghide & Emeni, 2014). The main focus of this study is to determine how tax aggressiveness and corporate governance explain changes in audit fees.…”

Section: Audit Feementioning

confidence: 99%

Tax Aggressiveness, Corporate Governance and Audit Fees: A Study of Listed Firms in Nigeria

Onatuyeh¹,

Ukolobi²

2020

IJFR

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The concept of audit fee has received immense empirical investigation in literature. However, these vast studies have not sufficiently explored the relation of the concept with tax aggressiveness and corporate governance. This study therefore sought to provide empirical evidence as to whether tax aggressive and corporate governance mechanisms are significantly associated with audit fees among listed firms in Nigeria. Leaning on the agency and stakeholder theories, the study examined the measures of tax aggressiveness of effective tax rate and cash tax rate as well as corporate governance mechanisms of board gender diversity, audit committee diligence, and board independence; and how these variables explain changes in external audit fees. A sample of one hundred and seven (107) firms from the entire firms quoted on the Nigerian Stock Exchange as at December, 2018 was utilised. Data were sourced solely from annual financial statements of the studied firms over a ten-year period (2009 to 2018). The panel regression technique, with preference for the random effect model based on the outcome of the Hausman test, was employed to estimate the balanced panel data. The results of the study showed that cash tax rate, audit committee diligence and board independence all exert positive and significant effect on audit fees. Surprisingly, the study revealed a positive but statistically insignificant link between board gender diversity and audit fees. This result may not be unconnected with the low presence of female directors on the board of the firms investigated. In light of the findings, we therefore recommend that more female gender should be allowed to sit on the boards of listed firms in Nigeria in line with the Norwegian model of 40% female gender representation and the Federal Government 35% Affirmative Action. We also recommend that board independence should be encouraged more so as to enhance their oversight functions, and promote quality financial reporting and audit amongst listed firms in Nigeria.

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“…Following most of the conducted researches (e.g., Manzon & Plesko, 2002;Ayers et al, 2010;Frank, Lynch & Rego, 2009;Wilson, 2009;Dhaliwal, Huber, Lee, & Pincus, 2008;Desai & Dharmapala, 2006;Hanlon et al, 2005;Moore, 2012;Hanlon, Krishnan, & Mills, 2012;Tang, 2015), BTD is the spread between pretax book income and taxable income. Taxable income is estimated by the rapport between the current tax expense and the tax rate.…”

Section: Total Book-tax Differencesmentioning

confidence: 99%