Tax Audit Effectiveness: Detection of Tax Sheltering Through Implication Book Tax Differences on Earnings Management

S K Rahayu

ICOBEST 2022 - Empowering World Optimism and Revitalization Through Scientific Framework - ISBN


The objectives of the study were to (1) analyze the effectiveness of tax audits by detecting earnings management and tax sheltering and those carried out by audited taxpayers, (2) to examine the effect of Book Tax Difference on earnings management, and (3) to examine the impact of earnings management on tax sheltering. This research uses a quantitative approach with philosophical considerations of positivism, belongs to applied research, and includes descriptive research. The research design used is correlational research, namely testing and estimating the relationship of many variables either partially or simultaneously by using the multiple regression method of panel data. This study uses panel data regression analysis with (1) Common Effects using an ordinary least square (OLS) approach, (2) Fixed Effects using a dummy variable technique, (3) Random Effect Model (REM) or Generalized Least Square techniques. The research data was obtained from the Financial Statements of Manufacturing Companies listed on the IDX (2017-2020). The results of this study indicate that Earning Management is influenced by Book Tax Difference, Tax Sheltering is influenced by Earning Management, and the effectiveness of tax audits can be achieved by detecting earnings management and tax sheltering and by audited taxpayers. The novelty of this research is that the understanding of earning management and tax sheltering practices by taxpayers can be supported by providing access for tax examiners to audited financial statements and financial audit information.

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