Tax Register Data for Audit and Tax Research

I am applying for funding to work on detailed Norwegian tax register data together with Professor Langli (BI). The proposed topics relate to (1) auditor independence and (2) tax avoidance. Research 1: Auditor Independence Using a New and Direct Proxy for Independence The external auditor plays a crucial role in promoting financial reporting quality, because auditors lend credibility to accounting information. In other words, the external audit potentially reduces agency costs between firms (managers) an d external parties. However, outsiders cannot be expected to trust a company?s reported financial information without confidence in the auditor?s independence. The question of auditor independence has received increased attention from regulators, academic s, and practitioners around the world in recent years due to highly publicized audit failures. I propose to examine auditor independence using a much more direct proxy for such ?bonding? ? the audit partner?s income and wealth. This has not been done in the literature before and potentially offers a great contribution to both practice and research. Research 2: Tax Avoidance Multinational firms can avoid taxes through structured transactions among different jurisdictions, such as reallocating taxable i ncome from high-tax jurisdictions to low-tax ones. This type of income shifting significantly reduces tax revenues of governments in high-tax jurisdictions and potentially hinders domestic economic growth and other social benefits. Prior research has me asured tax avoidance using firms? effective tax rate. However, this measure is clearly extremely crude and does not necessarily capture tax avoidance. The motivation behind this study is to use the extremely detailed tax register data to first come up wit h a better empirical proxy for tax avoidance, then test how well the existing proxy works, and and finally test for specific tax avoidance activities using our more direct measure.