This study aims to explore the moderating effect of audit quality on the relationship between integrated reporting quality (IRQ) and corporate tax avoidance practices of European companies.
Using the feasible generalized least squares (FGLS), the author examined the joint impact of IRQ and audit quality on corporate tax avoidance practices between 2013 and 2022, with audit quality as a moderating variable. The sample consisted of 348 companies from the STOXX Europe 600 index, with data from the Thomson Reuters database. Robustness analyses included an alternative measure of the dependent variable and controlled for the effect of legal system.
The results reveal a significant negative joint impact of IRQ and audit quality on corporate tax avoidance practices. Furthermore, audit quality significantly improves the relationship between IRQ and corporate tax avoidance practices by negatively moderating it.
This paper contributes to the literature by examining how audit quality moderates the relationship between IRQ and corporate tax avoidance. The findings offer valuable insights for researchers, managers, regulators and policymakers, highlighting how IRQ and audit quality influence corporate tax practices and promote socially responsible engagement.
Findings highlight the role of IR and audit quality in promoting tax transparency, fostering fairer taxation and reinforcing corporate accountability and sustainable development.
This study fills a gap in the literature by exploring the joint effect of IRQ and audit quality on tax avoidance. Furthermore, methodologically, to the best of the author’s knowledge, it is among the first to measure audit quality using three proxies in identified models.
