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NTU Management Review
Vol. 33 No. 2 Aug. 2023, 37-84
DOI:10.6226/NTUMR.202308_33(2).0002

Tax Avoidance and Financial Statement Readability: The Role of
Industry Specialization Auditor

避稅程度與財務報表可讀性：論產業專精會計師之角色

Chia-Hui Chen, Department of Accounting, National Dong Hwa University
陳家慧 / 國立東華大學會計學系
Pei-Yi Liu, Department of Accounting, Tunghai University
劉佩怡 / 東海大學會計學系
Sin-Pei Syu, Deloitte & Touche, Taiwan
許莘珮 / 勤業眾信聯合會計師事務所
Received 2020/8, Final revision received 2022/9

Abstract
As worldwide pushback against corporate tax avoidance increases, management who
engage in tax avoidance are incentivized to obfuscate firms’ financial information to reduce
the likelihood of being challenged by tax authorities and investors. Previous research has
indicated that when management has an incentive to conceal their opportunistic activities,
the firm’s financial statements become less readable. Building on this indication, this
study aims at investigating whether firms with tax avoidance activities issue less readable
financial statements. It also determines whether high-quality audit can moderate the
effects of tax avoidance on financial statement readability. Using the data of Taiwanese
listed companies from 2013 to 2018 as the sample, empirical results show that firms with
high levels of tax avoidance issue more complex and less readable financial statements.
Furthermore, we confirm that the negative association between financial statement
readability and the level of tax avoidance can be mitigated if firms are audited by industry
specialists. These findings suggest that firms that engage in tax avoidance are more prone
to utilizing complex financial reporting strategies that are challenging to comprehend. This
complexity may serve as a barrier for outsiders attempting to identify their tax avoidance
practices. However, high-quality audit is essential for effective corporate governance,
while protecting the users of financial reports against the opportunistic actions of
management.
【Keywords】tax avoidance, financial statement readability, industry specialization auditor

領域主編：戚務君教授

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