The Effects Of Auditor’s Tenure And Industry Expertise On The Corporate Tax Avoidance

With the rapid development of economic globalization,tax avoidance strategies are widely used in corporate business decisions.The tax avoidance behavior itself is in the gray area of the law and improper operation can easily evolve into illegal activities.So it often becomes the focus the regulatory authorities pay attention to.As an important external governance force of the enterprise,the auditor has a non-negligible influence on tax avoidance.On the one hand,the auditor supervises the tax strategy and restrains the unfair tax avoidance behavior through financial statements auditing,on the other hand,the auditor provides consulting services(e.g.tax advisory).This means that listed companies are important customers and sources of income for auditors,which leads to the close relationship between them.This raises the question: does the auditor play its due role during the tenure when it relates to tax avoidance? Is there any difference and connection between the two factors which are the auditor’s accumulated auditing experience for a particular client and the industry expertise developed through the expansion of the industry’s market share in the governance? The above questions are worthy of further discussion.This paper studies the influence of the auditor’s tenure and industry expertise on the degree of tax avoidance of the company,and then explores the relationship between the auditor’s tenure and industry expertise when they play a role in tax avoidance.The empirical results show that both the auditor’s tenure and industry expertise are negatively related to the company’s tax avoidance,and the two have an alternative role in restraining the company’s tax avoidance.That is to say,when the tenure is short,the auditor’s industry expertise plays a major inhibitory role while auditor’s tenure does not and vice versa.In the robustness test,this paper uses the Heckman two-stage method to control the endogenity with the use of auditor’s age as a tool variable,and the research results have not changed.Finally,the paper concludes the previous research,and puts forwards recommendations for future research.The main innovation of this paper is to expand the research level between auditing and corporate tax avoidance from the firm level in the previous literature to the auditor level.Moreover,it explores the inherent logical relationship between the accumulated experience during the auditor’s tenure and the industry expertise in controlling tax avoidance..