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 Putting TRAC to Work |
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September 30, 2011 |
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Tax Avoidance and Geographic Earnings Disclosure
By Ole-Kristian Hope Rotman, School of Management, University of Toronto, Mark (Shuai) Ma, Michael F. Price College of Business, University of Oklahoma and Wayne B. Thomas, Michael F. Price College of Business, University of Oklahoma
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The first monitoring mechanism we investigate is the probability of an IRS audit. Prior
studies find that a higher threat of an IRS audit increases financial reporting quality (Hanlon,
Hoopes, and Shroff 2011) and lowers the cost of equity and debt financing (e.g., Guedhami and
Pittman 2008; Ghoul, Guedhami, and Pittman 2011). Their results are attributed to the
monitoring role of tax enforcement. The second monitoring mechanism we investigate is auditor
industry specialization. The role of auditor industry specialization in monitoring managerial
behavior has been documented in a variety of settings, and industry specialist auditors can reduce managers’ discretion in financial reporting and income shifting behavior........[citing TRAC research].
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Transactional Records Access Clearinghouse, Syracuse University
Copyright 2011
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