The Mediating Role of Audit Quality on The Relationship Between Earnings Management and Corporate Tax Avoidance
DOI:
https://doi.org/10.37231/jmtp.2025.6.2.465Keywords:
corporate tax avoidance, earnings management, effective tax rate, audit quality, tax planningAbstract
Corporate tax avoidance has garnered significant interest from management, shareholders, policymakers, and academics due to its dual impact: serving as a critical source of government revenue and a substantial expense for corporations. This study investigates the intricate relationship between earnings management, audit quality, and corporate tax avoidance. By employing a proposed model, the study establishes a causal link between earnings management and corporate tax avoidance, with audit quality serving as a mediating factor. Utilizing secondary data from 806 Malaysian companies listed on Bursa Malaysia from 2016 to 2021, the findings reveal a significant positive correlation between earnings management and corporate tax avoidance. Furthermore, the results indicate that audit quality mediates this relationship, underscoring the importance of rigorous and independent audits in mitigating aggressive tax strategies and enhancing financial transparency. The study's implications for corporate governance and regulatory policies are discussed, alongside its limitations and suggestions for future research.
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