Audit fees and book-tax differences
Name
Hanlon_Audit Fees.pdf
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193.47 KB
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Adobe PDF
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Author(s)
Hanlon, Michelle
Krishnan, Gopal V.
Mills, Lillian F.
Date Issued
January 2012
Journal
Journal of the American Taxation Association
Publisher
American Accounting Association
Citation
Hanlon, Michelle, Gopal V. Krishnan, and Lillian F. Mills. “Audit Fees and Book-Tax Differences.” The Journal of the American Taxation Association 34.1 (2012): 55–86.
Version
Author's final manuscript
Abstract
We investigate whether book-tax differences are associated with higher audit fees, a proxy for auditor risk assessments and auditor effort. Our evidence suggests that there is a significantly positive relation. Further, this association is larger for firms that appear to have managed earnings (i.e., have high accruals) relative to those that are tax avoiders (i.e., have low cash effective tax rates). Our evidence is consistent with large book-tax differences representing an observable proxy for earnings management that is associated with auditor decisions. Our study contributes to capital market research that examines audit fees, as well as other research that examines the usefulness of book-tax differences for market participants.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike 3.0
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.2308/atax-10184
