{"title":"Does opinion shopping impair auditor independence? Evidence from tax avoidance","authors":"Heesun Chung , Eugenia Y. Lee","doi":"10.1016/j.jcae.2023.100398","DOIUrl":null,"url":null,"abstract":"<div><p>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.</p></div>","PeriodicalId":46693,"journal":{"name":"Journal of Contemporary Accounting & Economics","volume":"20 1","pages":"Article 100398"},"PeriodicalIF":2.9000,"publicationDate":"2023-12-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Contemporary Accounting & Economics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1815566923000486","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
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.
在本研究中,我们调查了企业为获得有利的审计意见而伺机更换审计师(即所谓的 "意见购物"(OS))是否会影响其避税活动。通过对 2006-2018 年间韩国公司的抽样调查,我们发现,与其他公司相比,出于 OS 目的更换审计师的公司会采取更激进的避税行为。与四大审计师相比,出于审计目的更换审计师与避税之间的关联在更换为非四大审计师时更为明显。各种稳健性检验试图控制OS公司和非OS公司的特征差异,但结果都是稳健的。总之,研究结果表明,由于 OS 而聘用的审计师允许其客户进行更激进的避税行为,这与审计师独立性受损是一致的。我们通过记录 OS 对企业税务合规性产生负面影响的证据,为有关 OS 的文献做出了贡献。此外,我们的研究结果表明,需要同时监控企业的税务和审计行为。