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The Impact of Tax Services on Auditors’ Fraud-Risk Assessment

✍ Scribed by Michael Favere-Marchesi

Publisher
Elsevier Science
Year
2006
Tongue
English
Weight
146 KB
Volume
22
Category
Article
ISSN
0882-6110

No coin nor oath required. For personal study only.

✦ Synopsis

This study examined whether providing tax services to an audit client affects auditors' fraud-risk assessment. A case was administered to audit partners and senior managers of small-and medium-sized firms that provide both audit and tax services. Participants were asked to assess the risk of fraudulent financial reporting for a hypothetical audit client. The provision of tax services and the size of the client fees in relation to the audit partner's annual billings were varied and participants were randomly assigned to three experimental conditions.

Consistent with expectations, auditors whose firm also provided tax services to the audit client reported a significantly lower fraud-risk assessment than auditors whose firm provided no tax services to the audit client. Further, with the provision of tax services to the audit client, auditors' fraudrisk assessment was inversely related to the relative size of the client fees.

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