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While prior research focuses on the effects of tax audits on future tax compliance, the data is often proprietary. DeBacker et al. (2015 )use confidential IRS audit data to show that corporations gradually increase their tax aggressiveness following an audit and then reduce it when the perceived audit probability increases again. The authors assert that the findings reflect that the perceived audit risk decreases post-audit. Conversely, Li, Pittman, and Wang (2019)use confidential Chinese tax audit data and find that after firms have been audited, they significantly increase their effective tax rates, reduce their book-tax differences, and reduce their income-decreasing discretionary accruals. Some prior studies have circumvented the proprietary data issue by relying on Transactional Records Access Clearinghouse (TRAC) data to calculate the probability of an IRS audit-based on asset size (Hoopes, Mescall, and Pittman 2012; Hanlon, Hoopes, and Shroff 2014; Guedhami and Pittman 2008). Using this data, the audit probability is calculated as the number of corporate tax return audits completed divided by the number of corporate tax returns received by the IRS each year across eight nominal asset levels. This measure represents the ex-ante risk of an IRS audit rather then an actual audit......[Citing TRAC data and research].
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