The Strength of Audits, Reporting Standards and Corruption, on Tax Evasion: A Cross-Country Study

Abstract

Purpose: The study aims to examine the influence of audits, reporting standards and corruption on tax evasion on selected countries. Design/Methodology/Approach: Tax evasion is measured using the shadow economy estimation and a tax evasion survey from the IMD World Competitiveness Yearbook by using a sample of 132 countries in th eperiod 2008-2015. Data were analyzed using Ordinary Least Square regression (OLS) and multilevel mediation analysis. Findings: The results showed that improving audit quality and reporting standards reducing the level of corruption can significantly reduce tax evasion. We also find that corruption mediates the effect of the strength of audit and reporting standards on tax evasion. Practical Implications: Result implies that in order to reduce tax evasion, the government must reduce the level of corruption first through strengthening audits and reporting standards. At the end, it is hoped that no more corrupted officials will facilitate the company to manipulate financial statements. Originality/Value: This research provides a clearer view by building a conceptual framework on how corruption mediates the effect of audit power and reporting standards on tax evasion.

The effect of the quality of local government financial reports on corruption moderated with the audit findings

“…The average value illustrates that, in general, during the observation period, the quality of LKPD for provincial governments in Indonesia is very high. This outlines preparing and presenting financial statements following Government accounting rules (SAP) (Hudori & Mustikasari, 2020).…”

The effect of mandatory audit firm rotation and the auditing and reporting standards on the auditor competition and audit fees relationship: Evidence from emerging markets

“…Several empirical studies have examined the determinants of ARS strength (Boolaky, 2012; Boolaky et al, 2012; Boolaky & Cooper, 2015; Boolaky & O'Leary, 2011). Also, another strand of research is specifically dedicated to examining the relationship between ARS and country‐level governance (Avram et al, 2015), financial reporting quality (Achim, 2018), and tax evasion (Hudori & Mustikasari, 2020). Such studies shed some light on the relevance and significance of ARS; however, very few have directly examined the effect of ARS on auditing functions generally and audit costs specifically.…”