Tax Avoidance, Property Rights and Audit Fees

Abstract

Tax avoidance leads to high information opaqueness of enterprises and weakens the quality of accounting information. Auditors need to implement additional auditing procedures to control audit risks that may arise from tax avoidance, thus charging higher audit fees. Based on the trend of risk-based auditing and “deep pocket” theory, this article takes the 2012-2015 A-share listed companies in Shanghai and Shenzhen Stock Exchange as a sample to explore the relationship between tax avoidance and audit fees, then considers the influence of property rights. Our study found that the degree of corporate tax avoidance and audit costs are positively correlated, and compared to state-owned enterprises (SOEs), the relationship in non-state-owned enterprises (non-SOEs) is more pronounced. This article may be of some reference to regulators and audit pricing.