NDLI: A potential benefit of increasing book–tax conformity: evidence from the reduction in audit fees

Content Provider	Springer Nature Link
Author	Kuo, Nan Ting Lee, Cheng Few
Copyright Year	2016
Abstract	Our study explores a possible benefit of conforming book income to taxable income. We expect that increased book–tax conformity can reduce audit fees by simplifying tax accruals and increasing tax authorities’ monitoring, which reduce audit workload and audit risk, respectively. Consistent with our expectations, we find that a higher country level of required book–tax conformity leads to lower audit fees. Moreover, firm-level book–tax differences are positively associated with audit fees. We also find that the negative association between country level of required book–tax conformity and audit fees is mitigated among firms with larger book–tax differences. Our findings are robust to including country-level legal investor protection or other extra-legal institutions. Overall, our results suggest that one benefit of increasing book–tax conformity is the reduction in audit fees.
Starting Page	1287
Ending Page	1326
Page Count	40
File Format	PDF
ISSN	13806653
Journal	Review of Accounting Studies
Volume Number	21
Issue Number	4
e-ISSN	15737136
Language	English
Publisher	Springer US
Publisher Date	2016-07-18
Publisher Place	New York
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Audit fee Book–tax conformity Book–tax difference Legal institution Extra-legal institution Accounting/Auditing Corporate Finance Public Finance
Content Type	Text
Resource Type	Article
Subject	Accounting

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A potential benefit of increasing book–tax conformity: evidence from the reduction in audit fees