Auditors and tax aggressiveness: Empirical evidence in private Spanish companies

Abstract

The purpose of our study was to carry out an empirical test of the extent to which auditors have an influence on the tax practices of the audited firm. Based on a wide sample of Spanish non-listed companies for the period 2009-2017, we have obtained consistent empirical evidence revealing that the choice of a high-quality auditor has a significant impact on the tax planning strategy of the firm. Companies show a greater tax planning aggressiveness when they are audited by one of the Big Four. Notwithstanding, leverage and the existence of tax credits are factors mitigating that aggressiveness. Moreover, abnormally higher audit fees do not seem to be an incentive for the auditor to cooperate in the tax strategies of the audited company. Our results are robust and remain unaltered after adjusting for the potential heterogeneity inherent to auditor’s choice and using alternative variable specifications.