Public Sector Accounting and Budgeting

Public Sector Accounting and Budgeting

The impact of tax auditing on earnings persistence irregularity: The role of economic volatility

Document Type : Original Article

Authors
Mohammadreza Abbasi Astamal 1
Mohammad Farsi 2
Maryam Erfan Esfanjani 3
1 Assistant Professor., Department of Accounting, Va.C.,Islamic Azad University, Varzaghan, Iran.
2 MSc., Department of Accounting, Ahar Branch, Islamic Azad University, Ahar, Iran.
3 MSc., Department of Accounting, Seraj Institute of Higher Education, Tabriz, Iran.
10.22034/psab.2025.226544
Abstract
The present study aims to examine the impact of tax auditing on the persistence of corporate earnings, considering the role of economic fluctuations. The statistical population consists of 130 companies listed on the Tehran Stock Exchange during the years 2018 to 2023, encompassing a total of 780 observations. To analyze the data and test the hypotheses, a multiple regression method based on panel data was employed. The findings indicate that tax auditing does not have a significant effect on the stability of operating cash flows and cannot be considered a determining factor in the steadiness of these flows. However, this type of auditing exhibits an inverse relationship with the persistence of return on equity, return on assets, and gross profitability. Examination of the role of economic fluctuations also revealed that this variable only has a significant and negative effect on the relationship between tax auditing and the persistence of return on equity, while no significant impact was observed in other relationships, including the persistence of operating cash flows, return on assets, and gross profitability. Overall, the effect of tax auditing on the financial stability of companies depends on the type of indicator and the prevailing economic conditions, and it does not have a uniform nature.
Keywords
Tax auditing
Earnings persistence irregularity
Economic volatility

Subjects

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  • Receive Date 21 June 2025
  • Revise Date 20 July 2025
  • Accept Date 05 August 2025