Does opinion shopping impair auditor independence? Evidence from tax avoidance

Heesun Chung and Eugenia Y. Lee

Journal of Contemporary Accounting and Economics, 2024, vol. 20, issue 1

Abstract: In this study, we investigate whether a firm’s opportunistic switching of auditors for a favorable audit opinion, known as opinion shopping (OS), affects its tax avoidance activities. Using a sample of Korean firms over the 2006–2018 period, we find that firms that switch auditors for OS purposes engage in more aggressive tax avoidance than other firms. The association between OS-driven auditor switches and tax avoidance is more pronounced for switches to non-Big 4 auditors than to Big 4 auditors. The results are robust to various robustness tests that attempt to control for differences in the characteristics of OS and non-OS firms. Collectively, the findings suggest that auditors hired as a result of OS allow their clients to engage in more aggressive tax avoidance, which is consistent with impaired auditor independence. We contribute to the literature on OS by documenting evidence of the negative consequence of OS on corporate tax compliance. In addition, our findings suggest that firms’ tax and audit behaviors need to be monitored concurrently.

Keywords: Opinion shopping; Auditor change; Tax avoidance; Big 4 auditors; Auditor independence (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1815566923000486
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:20:y:2024:i:1:s1815566923000486

DOI: 10.1016/j.jcae.2023.100398

Access Statistics for this article

Journal of Contemporary Accounting and Economics is currently edited by Agnes C.S. Cheng, P. Clarkson, F.A. Gul, Zoltan Matolcsy, Dan Simunic and Ben Srinidhi

More articles in Journal of Contemporary Accounting and Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().