Auditors' Opinions and Tax Aggressiveness in Brazilian Companies

Abstract

This study examines the influence of independent auditors' opinions on the tax aggressiveness of companies listed on the Brazilian stock exchange (B3) from 2017 to 2022. Tax aggressiveness, viewed as corporate strategies to reduce tax burdens, is measured through three key metrics: book-tax differences (BTD), effective tax rate (ETR), and tax rate on value added (TTVA). The study analyzes the length, readability, and tone of auditors' opinions to determine whether these factors correlate with tax aggressiveness. The findings indicate that informational variables, such as opinion length, readability, and tone, do not show significant correlations with tax aggressiveness metrics. This suggests that the standardization of audit reports, mandated by regulatory practices, may limit auditors' ability to reflect specific nuances in companies' tax practices. Nevertheless, the tone of the opinion showed slight potential to reveal implicit perceptions about companies’ tax strategies, hinting at an indirect relationship between tone and tax aggressiveness. The study underscores the need for diverse methods and measures when assessing corporate tax management. While standardized reports may limit the detail provided on tax practices, qualitative aspects like tone could offer subtle insights. These findings encourage further research to explore alternative methods, including advanced linguistic analysis, to capture nuances in audit opinions and their potential links to tax strategies.