Do tax experts play a monitoring role in audit engagements?

Accounting firm office size and tax aggressiveness

“…During financial statement audits, the auditing of tax‐related accounts is challenging for auditors due to their complexity and the requirement of relevant tax knowledge (De Simone et al, 2015; Gleason & Mills, 2011). Thus, tax experts often assist audit teams in assessing the reasonableness of complex tax provisions (Bauer et al, 2021; Goldman et al, 2022; Hux et al, 2022, 2023). However, Hux et al (2022) report that factors such as trust, firm culture, and regulatory pressure can hinder the collaboration between the audit team and tax team, thereby impairing audit quality.…”

“…Their audit teams accumulate greater industry experience and obtain audit‐specific expertise by engaging in more industry‐specific audits, while tax teams acquire tax‐specific expertise through their exposure to a broader range of tax issues and more complex transactions (Choi et al, 2010; Francis et al, 2013; Francis & Yu, 2009; Goldman et al, 2022). When auditing tax‐related accounts, the engagement audit team usually collaborates with tax experts in the same office because auditing complex tax issues requires insight beyond industry‐specific knowledge (Bauer et al, 2021; Bonner et al, 1992; Goldman et al, 2022; Hux et al, 2022). Tax teams develop tax expertise covering various issues, such as those relating to multinational transfer pricing and R&D tax credits (Goldman et al, 2022).…”

“…In the process of auditing income tax accounts, especially those with complex tax positions, accounting offices usually require tax experts to collaborate with audit teams (Bauer et al, 2021; Goldman et al, 2022; Hux et al, 2022, 2023). The audit team usually allocates the work related to complex tax accounts (e.g., transfer pricing and tax credits) to these tax experts and requires them to prepare the work papers.…”

Exploring the involvement of tax audit experts in the early stages of tax audits

“…Although Boritz et al, (2020) do not aim to explore the intricacies of each subject, they do highlight significant similarities in the way that many types of specialists, including tax specialists, use their specialization. The choice to use tax specialists during audits may vary, according to the scant prior research, and major misstatements connected to taxes continue to happen even when they do (Boritz et al, (2020); Bauer et al, (2021). Therefore, it is critical to the academy and to practice conducting a more thorough analysis of the many functions and applications of tax specialists during audits, the process of collaboration between auditors and tax specialists, and how this collaboration-or lack thereof-affects audit quality.…”