TY - JOUR
T1 - The effect of audit quality on transfer pricing aggressiveness and firm risk
T2 - Evidence from Southeast Asian countries
AU - Sari, Dewi Kartika
AU - Siregar, Sylvia Veronica
AU - Martani, Dwi
AU - Wondabio, Ludovicus Sensi
N1 - Funding Information:
The work was supported by the Universitas Indonesia [PITMA A 2019]. The authors would like to thank the senior editor and anonymous reviewers for their constructive comments and recommendations.
Publisher Copyright:
© 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
PY - 2023
Y1 - 2023
N2 - This research examines the relationship between audit quality and transfer pricing aggressiveness (TPAG), the impact of TPAG on firm risk, and the indirect effect of audit quality on firm risk through TPAG. The research is important in reaffirming the auditor-client relationship, increasing companies’ understanding of the advantages and disadvantages of transfer pricing in their strategies, and advancing research on audit quality and firm risk considering the tax aspects of multinational companies. Data were collected from non-financial publicly listed companies in three Southeast Asian countries, Indonesia, Malaysia, and Singapore, from 2014 to 2018, totaling 1,470 firm-year, using the panel data regression. The result indicates that multinational companies audited by high-quality (Big-N) audit firms exhibit higher levels of TPAG. Moreover, companies that employ more TPAG practices are likely to have lower firm risk because their transfer pricing transactions are efficient. This research also highlights that better audit quality indirectly reduces firm risk by influencing TPAG.
AB - This research examines the relationship between audit quality and transfer pricing aggressiveness (TPAG), the impact of TPAG on firm risk, and the indirect effect of audit quality on firm risk through TPAG. The research is important in reaffirming the auditor-client relationship, increasing companies’ understanding of the advantages and disadvantages of transfer pricing in their strategies, and advancing research on audit quality and firm risk considering the tax aspects of multinational companies. Data were collected from non-financial publicly listed companies in three Southeast Asian countries, Indonesia, Malaysia, and Singapore, from 2014 to 2018, totaling 1,470 firm-year, using the panel data regression. The result indicates that multinational companies audited by high-quality (Big-N) audit firms exhibit higher levels of TPAG. Moreover, companies that employ more TPAG practices are likely to have lower firm risk because their transfer pricing transactions are efficient. This research also highlights that better audit quality indirectly reduces firm risk by influencing TPAG.
KW - ASEAN
KW - Audit quality
KW - Big-N
KW - firm risk
KW - Southeast Asian countries
KW - transfer pricing aggressiveness
UR - http://www.scopus.com/inward/record.url?scp=85163158277&partnerID=8YFLogxK
U2 - 10.1080/23311975.2023.2224151
DO - 10.1080/23311975.2023.2224151
M3 - Article
AN - SCOPUS:85163158277
SN - 2331-1975
VL - 10
JO - Cogent Business and Management
JF - Cogent Business and Management
IS - 2
M1 - 2224151
ER -