Logo image
Back
THE EFFECT OF DETECTION RISK ON UNCERTAIN TAX POSITION REPORTING: EXPERIMENTAL EVIDENCE
Book chapter

THE EFFECT OF DETECTION RISK ON UNCERTAIN TAX POSITION REPORTING: EXPERIMENTAL EVIDENCE

Robert Lee and Anthony P. Curatola
Advances in Taxation, pp 177-198
01 Jan 2015
DOI: https://doi.org/10.1108/S1058-749720150000022005

Abstract

Business & Economics Business, Finance Social Sciences
To better detect potential audit issues, since 2010, the Internal Revenue Service has required firms to file a separate schedule individually disclosing each of their uncertain tax positions (UTPs). This study uses an experiment to examine how this increase in detection risk from the newly created IRS schedule influences both a firm's tax reporting and financial reporting concurrently. We find that corporate tax professionals were more likely to recommend an UTP when their firm had a strong UTP reporting quality, regardless of the detection risk level of the reporting environment. However, we find an interaction effect for the recording of the tax reserve. In a low detection risk environment, corporate tax professionals recorded a higher (lower) tax reserve when their firm had a weak (strong) UTP reporting quality. However, in a high detection risk environment, corporate tax professionals recorded a lower (higher) tax reserve when their firm had a weak (strong) UTP reporting quality. Overall, the results provide insight into the dual nature of UTP reporting and the determinants that influence each reporting behavior.

Metrics

11 Record Views
2 citations in Web of Science
1 citations in Scopus

Details

InCites Highlights

Data related to this publication, from InCites Benchmarking & Analytics tool:

Collaboration types
Domestic collaboration
Web of Science research areas
Business, Finance
Logo image