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tax avoidance, especially when auditor independence is poor, regulators should also pay
attention to auditor independence problem while encouraging the development of auditor
industry expertise. Auditors use their industry-specific knowledge and experience to help
clients engage in tax avoidance activities that may bring a win-win situation for auditors and
clients, since the tax avoidance strategies developed by industry experts are more efficient
and difficult to detect, so the saved tax expenses can increase clients’ after-tax profits and
may increase auditor’s revenue. However, tax avoidance activities are at the cost of
increasing risks of both shareholders and auditors, and are also not conducive to the CSRC’s
supervision of listed companies. Hence, Chinese regulators should encourage local CPA
firms to develop industry expertise while protecting auditor independence and continue to
strengthen legal systems by improving the audit market in order to establish and maintain a
healthy and orderly market for audit firms in China.