Does expanded disclosure in the audit report involve unintended consequences? Evidence from tax avoidance

Saeed Rabea Baatwah and Khaled Hussainey ()

International Journal of Accounting & Information Management, 2024, vol. 32, issue 3, 447-474

Abstract: Purpose - This study aims to examine how new regulation changes for the auditor’s report, so-called key audit matters (KAMs), influence tax avoidance. Design/methodology/approach - This study uses data from firms listed on the Omani capital market over the period 2012–2019 and analyzes these data using pooled panel data regression with a robust standard error. It uses two common proxies for tax avoidance and two measures for the KAMs disclosure requirement. Findings - This study finds a sharp decrease in the effective tax rate following the introduction of KAMs disclosure and the issuance of more KAMs in audit reports. This result is supported by several robustness checks. In an additional analysis, the authors observe interesting results, indicating that real earnings management mediates this association, while the audit committee plays a moderating role. The authors do not find a moderating effect of Big4 on this association, but find discrepancies within the Big4 firms in relation to this moderating effect. Originality/value - The results of this study indicate that although the introduction of the KAMs disclosure requirement may have positive consequences, it may also lead to unintended negative consequences. This conclusion has not been comprehensively reported in literature.

Keywords: KAMs; Tax avoidance; Earnings management; Audit committee; Big4 audit firms (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

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:eme:ijaimp:ijaim-04-2023-0086

DOI: 10.1108/IJAIM-04-2023-0086

Access Statistics for this article

International Journal of Accounting & Information Management is currently edited by Dr Xin (Robert) Luo and Professor Han Donker

More articles in International Journal of Accounting & Information Management from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().