The Association between Audit Quality and Corporate Tax Avoidance. A Bibliometric Review of Literature and Early Evidence on the European Union, from the Perspective of Tax-Related Key Audit Matters Disclosure

Cristian Lungu (), Valentin Burcă, Ovidiu-Constantin Bunget and Alin-Constantin Dumitrescu
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Cristian Lungu: Doctoral School of Economics and Business Administration, West University of Timisoara, 16 Pestalozzi Street, 300115 Timisoara, Romania
Valentin Burcă: Department of Accounting and Audit, Faculty of Economics and Business Administration, West University of Timisoara, 16 Pestalozzi Street, 300115 Timisoara, Romania
Ovidiu-Constantin Bunget: Department of Accounting and Audit, Faculty of Economics and Business Administration, West University of Timisoara, 16 Pestalozzi Street, 300115 Timisoara, Romania
Alin-Constantin Dumitrescu: Department of Accounting and Audit, Faculty of Economics and Business Administration, West University of Timisoara, 16 Pestalozzi Street, 300115 Timisoara, Romania

JRFM, 2023, vol. 16, issue 8, 1-14

Abstract: In the circumstances of increasing forms of corporate reporting, the relevance of the financial information is slightly decreasing, as the reporting strategies do not provide evidence of the potential deterioration of reported earnings, but rather try to hide managers’ earnings management practices through various impression management techniques and lower financial transparency. Therefore, the external auditors’ role becomes essential in mitigating the information asymmetry. This article aims to study the association between a quality audit and corporate tax avoidance. The research methodology was based on two essential stages. The first stage consisted of reviewing the specialized literature by applying the bibliometric analysis. In the second stage, we resorted to an exploratory analysis of the KAMs disclosed by European Union firms listed in 2016–2021. The study was carried out based on the information provided by the Web of Science and Audit Analytics databases. In accordance with the obtained results, we emphasize that more attention should be paid to the association between the KAMs disclosed by auditors regarding the extended audit reports and the indication of corporate tax avoidance through different tax planning metrics. At the same time, the study underlines that collections of data on KAMs’ disclosures could help specialists create a common body of knowledge about KAMs and how they should be used as communication tools between auditors, management, and stakeholders (including the state). The contribution of this article consists of providing informational support to the tax authorities to understand the main concerns regarding the business environment so that they can come up with supporting public tax policies that should facilitate the mission of companies to determine the tax burden. In addition, it provides researchers with a starting point to further explore issues related to tax avoidance techniques and the role of a financial auditor in limiting them.

Keywords: key audit matters; tax avoidance; deferred taxes; bibliometric analysis (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
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