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臺大管理論叢
第
26
卷第
2
期
11
BETR
=
β
0
+
β
1
Spec
+
β
2
Fee
+
β
3
Tenure
+
β
4
Spec
*
Fee
+
β
5
Spec
*
Tenure
+
β
6
Big10
+
β
7
Soe
+
β
8
Size
+
β
9
ROA
+
β
10
Lev
+
β
11
CFO
+
Year
+
IND
+
ε
(1)
CETR
=
β
0
+
β
1
Spec
+
β
2
Fee
+
β
3
Tenure
+
β
4
Spec
*
Fee
+
β
5
Spec
*
Tenure
+
β
6
Big10
+
β
7
Soe
+
β
8
Size
+
β
9
ROA
+
β
10
Lev
+
β
11
CFO
+
Year
+
IND
+
ε
(2)
BTD
=
β
0
+
β
1
Spec
+
β
2
Fee
+
β
3
Tenure
+
β
4
Spec
*
Fee
+
β
5
Spec
*
Tenure
+
β
6
Big10
+
β
7
Soe
+
β
8
Size
+
β
9
ROA
+
β
10
Lev
+
β
11
CFO
+
Year
+
IND
+
ε
(3)
where tax avoidance is measured by
BETR
,
CETR
and
BTD
, and auditor industry
expertise (
Spec
) is measured by
IMS
,
IMS_D
,
IPS
and
IPS_D
. We also use fee dependence
and auditor tenure to proxy for auditor independence. Fee dependence (
Fee
) is measured by
the ratio of a particular client’s total fees given over all total fees received by the audit firm
during a one-year period. This proxy can capture the relative significance of a client’s total
fees to the fee revenue received by the auditor, as a measure to capture economic bonding
between the auditor and the clients (Stice, 1991). Auditor tenure is measured by the length of
the auditor–client relationship (Myers, Myers, and Omer, 2003; Ghosh and Moon, 2005).
Prior research suggests that longer auditor tenure represents poor auditor independence
(Hoyle, 1978). All variables are defined in table 1.
Table 1 Variable Measurement
Measures of Tax Avoidance (
Tax-avoidance
)
BETR
= current income tax expense divided by pre-tax accounting income less special items.
ETRs
with negative denominators are deleted.
CETR
= cash taxes paid divided by pre-tax accounting income less special items. ETRs with
negative denominators are deleted.
BTD
= the natural log of absolute value of pre-tax book income less taxable income
Measures of Auditor Industry Expertise (
Spec
)
IMS
= the sum of sales of all
J
ik
clients of audit firm
i
in industry
k
divided by the sales of
J
ik
clients in industry
k
summed over all
I
k
audit firms in the sample with clients (
J
ik
) in
industry
k
IMS_D
= 1 when
IMS
ik
≥ 10%, otherwise 0.
IPS
= the sum of the sales of all
J
ik
clients of audit firm
i
in industry
k
divided by the sales of all
clients of audit firm
i
summed over all
k
industries.
IPS_D
= 1 when
IPS
ik
is the highest in the portfolio of audit firm
i
, otherwise 0.
Measures of Auditor Independence
Fee
= the ratio of a particular client’s total fees given all total fees received by the audit firm.
Tenure
= the length of the auditor–client relationship