The Effect of Quality Differentiated Auditor-Cum-Tax Agent on Corporate Tax Payable

• Main Author: Mohd. Jaafar, Embong
• Format: Thesis
• Language: English; English
• Published: 2004
• Subjects: HG Finance
• Online Access: http://etd.uum.edu.my/1330/1/MOHD._JAAFAR_B._EMBONG.pdf; http://etd.uum.edu.my/1330/2/1.MOHD._JAAFAR_B._EMBONG.pdf; http://etd.uum.edu.my/1330/

This paper investigates the effect of employing the same auditor as the tax agent on the computation of corporate tax payable by the company listed on the Kuala Lumpur Stock Exchange. After auditing the financial statement, the auditor is appointed as a tax agent to do tax agent work to compute tax payable. The competency of auditor-cum-tax agent is analysed by looking at the amount of audit work as reflected on audit fees. The independence of auditor-cum-tax agent is analysed by looking at the amount of non-audit work provided by the auditor as reflected by non-audit fees. On the other hand auditor cum-tax agent‘s reputation is examining by looking at auditor’s brand name. The results indicate that there is a positive relationship between the corporate tax payable and the audit fee charged which demonstrate that more audit work result in higher corporate tax payable computed by the auditor-cum-tax agent. Moreover, as predicted there is a negative relationship between tax payable and non-audit fees. This findings show that the more independent the relationship between auditor-cum-tax agent and clients, the higher is the tax payable. In addition Big Five firms’ clients pay higher tax than companies audited by non-Big Five firms. This shows that brand name or reputable auditor such as the Big Five can affect the computation of tax payable.