The Impact of Audit Quality on Tax Evasion and Avoidance

The Impact of Audit Quality on Tax Evasion and Avoidance

AbstractThis dissertation explores the effect that of audit quality has on tax compliance as well as avoidance behaviour in firms. Prior literature has concluded that elements of auditor quality such as auditor independence greatly impact theon quality of auditing. The previous studies concluded that high-quality audits substantially increase tax compliance as they identify and assure control over aggressive tax avoidance behaviours. Yet, audit quality however is a function of organizational traits like executive pay, ownership structure and political connections. These factors may counteract or reinforce the effect of audits on tax compliance. The findings call for an integrated approach, including clear due diligence policy and robust audit regulations coupled with strict regulatory standards as well as corporate governance frameworks to promote transparency and accountability. Recommendations are provided for practicing auditor independence, financial regulations and internal controls, professional ethical standards for promoting tax evasion as well adequate fiscal compliance regulations.

Table of Contents

TOC o "1-3" h z u Abstract PAGEREF _Toc170570964 h 2Chapter 1: Introduction PAGEREF _Toc170570965 h 51.1. Background and Rationale PAGEREF _Toc170570966 h 51.2. Research Objectives PAGEREF _Toc170570967 h 71.3. Research Questions PAGEREF _Toc170570968 h 71.4. Structure of the Dissertation PAGEREF _Toc170570969 h 8Chapter 2: Literature Review PAGEREF _Toc170570970 h 102.1. Audit Quality PAGEREF _Toc170570971 h 102.2. Tax Evasion and Avoidance PAGEREF _Toc170570972 h 132.3. Impact of Audit Quality on Tax Compliance PAGEREF _Toc170570973 h 172.4. Gaps in the Literature PAGEREF _Toc170570974 h 21Chapter 3: Methodology PAGEREF _Toc170570975 h 253.1 Introduction PAGEREF _Toc170570976 h 253.2 Research Philosophy PAGEREF _Toc170570977 h 253.3 Research Approach PAGEREF _Toc170570978 h 273.4 Research Method PAGEREF _Toc170570979 h 283.5 Search Strategy and Keywords PAGEREF _Toc170570980 h 293.6 Inclusion and Exclusion Criteria PAGEREF _Toc170570981 h 303.7 Data Analysis PAGEREF _Toc170570982 h 313.8 Ethical Consideration PAGEREF _Toc170570983 h 323.9 Data Extraction PAGEREF _Toc170570984 h 333.10 Limitations of the Methodology PAGEREF _Toc170570985 h 343.11 Overview of Chapter PAGEREF _Toc170570986 h 35Chapter 4: Research Findings PAGEREF _Toc170570987 h 364.1 Introduction PAGEREF _Toc170570988 h 364.2 Results PAGEREF _Toc170570989 h 364.2.1 Characteristics of Selected Studies PAGEREF _Toc170570990 h 364.2.2 Theme Table PAGEREF _Toc170570991 h 394.3 Findings PAGEREF _Toc170570992 h 394.3.1 Exploring How Audit Quality Impacts Tax Avoidance Strategies and Practices in Corporations PAGEREF _Toc170570993 h 394.3.2 Examining the Role of Corporate Governance, Including Ownership Structures and Executive Behaviours, on Tax Practices PAGEREF _Toc170570994 h 424.3.3 Understanding How Audit Quality Affects Corporate Governance, Executive Decisions, and Compliance PAGEREF _Toc170570995 h 46Chapter 5: Conclusion and Recommendation PAGEREF _Toc170570996 h 495.1. Conclusion PAGEREF _Toc170570997 h 495.2. Recommendations PAGEREF _Toc170570998 h 51References PAGEREF _Toc170570999 h 53

Chapter 1: Introduction

1.1. Background and RationaleAudit quality and tax evasion and avoidance are a subject of interest in financial reporting and economic policy. As per Yopie and Elivia (2022) suggest that, audit quality influences the quality of financial statements, the level of financial reporting transparency and users confidence. Quality audits ensure that financial statements are not misleading and do not contain material misstatements arising from error or fraud, hence, increasing stakeholders' (e.g. investors, regulators and the public) confidence (Kuncoro & Surjandari, 2023).

While many people may use the terms tax evasion and tax avoidance as being similar, they are two distinct forms of taxes terminologies. Income concealment, overstating deductions, or having money in foreign accounts is considered tax evasion (Itan & Artamevia, 2022). It is a deliberate and unlawful attempt at cutting taxes. However, tax avoidance involves legally manipulating the tax system to minimize the amount of tax paid through legal tax planning. As posted suggested by Wulandari and Sudarma (2022), tax evasion is legal to avoid taxes as much as it is unethical, especially if it translates to a loss of money for governments.

It is established that audit quality plays a part in tax evasion and avoidance. Tax evasion is a phenomenon that has impacts on the world economy and so is tax avoidance (Ichwantoro et al., 2022). Taxes are, therefore, important because they act as the main source through which governments fund services and developments. Umniyatul Izza et al. (2023) have asserted that evasion of taxes and aggressive tax avoidance lead to a decline in the tax revenue thus creating deficits that may slow the provision of government services. This problem is worse in underdeveloped countries where there are few resources and inadequate facilities to collect taxes.

Moreover, it has been discussed in the research of Sumarni and Maiza (2022) that better quality audits lead to enhanced quality of financial statements, and fewer instances of tax evasion and avoidance. The auditors go through records and look for disparities and potential cases of tax evasion. This is because audits that reveal company tax fraud guarantee compliance among the companies. Auditors might also deter tax fraud by suggesting the necessary financial practices and policies to organisations (Hidayat, 2022).

In recent years, auditors have faced criticism for their efforts in detecting and preventing tax fraud and avoidance. Large corporate frauds and financial calamities have emphasized the need for good audits (Handoyo et al., 2022). Due to the need to ensure that auditors provide quality services and are accountable, regulatory agencies across the world have enhanced the auditing standards and criteria. In addition to this, Soltani (2022) has emphasized in his study that the SoX in the United States and similar regulations in other countries aim at enhancing financial reporting and audits.

Therefore, Sihono and Munandar (2023) have recommended in their research that at the local level, weak audit processes influencesinfluence the level of tax evasion and avoidance. As will be seen in many of the countries that have been sampled, weak audit processes undermine the efficiency of the tax system. This can reduce audit quality due to among other reasons; lack of experience, inadequate funds and conflicts of interest. The lack of proper audits raises the likelihood of tax evasion and avoidance going unnoticed and thus not being addressed (Hamza et al., 2023). That may lower the government revenue and raise inequality in the population.

The consequences of tax evasion and tax avoidance have social and economic implications. Such activities, as a result, are capable of eradicating public confidence in the tax system and organizations (Fitrifiani & Oktris, 2023). That is, self-assessment, perceived fairness, threats of penalty, and auditor independence might be affected by business and rich peoples refusal to pay taxes as required. It has been evaluated by Sherly (2022) that this is unadulterated political immaturity that violates the social compact and will result in non-compliance and therefore low tax revenues.

Most firms are global, hence, tax evasion and evasion are a global vice. Studies, such as by Sherly (2022) show that large global companies employ complicated strategies to optimize the results of the national legislation in the field of taxation. Auditing and tax enforcement require international cooperation and synchronization. To solve such problems, there are international organizations such as the OECD that are creating global tax transparency and cooperation standards (Fitri et al., 2023).

Therefore, audit quality and tax evasion and avoidance are two critical factors that affect both the international and domestic economy. Professional and effective audits are critical for financial statements credibility and reliability, as well as for combating and identifying tax evasion and non-compliance (Fauziah & Widiyati, 2022). To comprehend the legal and ethical consequences of tax evasion and avoidance it is pertinent to distinguish between the two. Thus, regulatory organisations, auditors and firms have to enhance audit quality for financial reporting openness and confidence. It has been highlighted in the research of Shehata et al. (2023) that the evasion and avoidance of taxes have negative economic and social impacts hence the need to have strong audit measures to complement the taxation system. Therefore, there should be enhancements in audit quality and accountability so that there is economic stability and social justice.

Relevance of the Study

The relevance of this study on audit quality and its effects on tax evasion and avoidance is significant within the realms of financial reporting and economic policy. As Yopie and Elivia (2022) highlight, audit quality profoundly influences the integrity of financial statements, transparency in financial reporting, and overall user confidence. High-quality audits ensure that financial statements are accurate and free from material misstatements, whether due to error or fraud, thereby boosting stakeholder confidence, including that of investors, regulators, and the public (Kuncoro & Surjandari, 2023). It is crucial to distinguish between tax evasion and tax avoidance, as they are often mistakenly used interchangeably. Tax evasion involves illegal activities such as income concealment, overstating deductions, or holding money in foreign accounts (Itan & Artamevia, 2022). In contrast, tax avoidance is the legal manipulation of the tax system to minimize tax liabilities through strategic tax planning. Although legal, tax avoidance is often seen as unethical, particularly when it results in substantial losses for governments (Wulandari & Sudarma, 2022).

The interplay between audit quality and tax practices is pivotal, as both tax evasion and avoidance significantly impact the global economy. Taxes serve as the primary revenue source for governments, funding essential services and development projects. According to Umniyatul Izza et al. (2023), tax evasion and aggressive tax avoidance can lead to substantial declines in tax revenue, creating deficits that hinder the provision of government services, a problem exacerbated in underdeveloped countries with limited resources and inadequate tax collection infrastructure. Sumarni and Maiza (2022) further emphasize that high-quality audits enhance the reliability of financial statements and reduce instances of tax evasion and avoidance. Effective audits involve scrutinizing financial records for discrepancies and potential tax fraud, thus ensuring compliance among companies. Auditors can also play a preventive role by recommending sound financial practices and policies (Hidayat, 2022).

Despite the importance of audits, auditors have faced criticism for their perceived shortcomings in detecting and preventing tax fraud and avoidance. High-profile corporate frauds and financial crises have underscored the necessity for rigorous audits (Handoyo et al., 2022). Consequently, regulatory agencies worldwide have strengthened auditing standards and criteria to ensure accountability and the delivery of quality audit services. For instance, the Sarbanes-Oxley Act (SoX) in the United States and similar regulations in other countries aim to enhance financial reporting and audit practices (Soltani, 2022).

At the local level, weak audit processes can exacerbate tax evasion and avoidance. Sihono and Munandar (2023) note that in many countries with sampled data, ineffective audit processes undermine the efficiency of the tax system, leading to reduced audit quality due to factors such as lack of experience, inadequate funding, and conflicts of interest. Ineffective audits increase the likelihood of undetected tax evasion and avoidance, ultimately lowering government revenue and contributing to societal inequality (Hamza et al., 2023).

The social and economic implications of tax evasion and avoidance are profound. These activities can erode public confidence in the tax system and the credibility of organizations (Fitrifiani & Oktris, 2023). The refusal of businesses and wealthy individuals to pay their fair share of taxes undermines self-assessment, perceived fairness, threat of penalties, and auditor independence, leading to non-compliance and reduced tax revenues. Sherly (2022) describes this behavior as political immaturity that violates the social compact.

Given the global nature of many firms, tax evasion and avoidance are international issues. Large multinational companies often employ complex strategies to exploit national tax laws (Sherly, 2022). Addressing these challenges requires international cooperation and harmonization of auditing and tax enforcement standards. Organizations such as the OECD are working towards creating global standards for tax transparency and cooperation (Fitri et al., 2023).

Research Gap

Despite extensive research on audit quality, tax evasion, and tax avoidance, there remains a significant gap in understanding the specific mechanisms through which audit quality influences corporate behavior in tax compliance. Prior studies have established the general importance of audit quality in ensuring accurate financial reporting and maintaining stakeholder confidence (Yopie & Elivia, 2022; Kuncoro & Surjandari, 2023). They also differentiate between tax evasion, which is illegal, and tax avoidance, which, though legal, can be ethically questionable (Itan & Artamevia, 2022; Wulandari & Sudarma, 2022). However, the literature has not sufficiently addressed the direct causal links and specific practices through which high-quality audits deter tax evasion and minimize aggressive tax avoidance. This study aims to fill this gap by investigating how audit quality directly affects corporate tax practices and compliance, thereby providing more in-depth insights into the role of auditors in enhancing economic stability and social justice. By exploring these mechanisms, this research contributed to a deeper understanding of how regulatory frameworks and compliance can be improved through enhanced audit practices, addressing the shortcomings identified in existing studies (Hamza et al., 2023; Sihono & Munandar, 2023).

1.2. Research Objectives

This study aims to investigate how audit quality affects tax evasion and explores its impact on tax avoidance. By examining these relationships, the research seeks to understand the mechanisms through which audit quality influences corporate behavior. High-quality audits can deter tax evasion by ensuring accurate financial reporting and compliance with tax regulations. Additionally, robust audit practices can mitigate tax avoidance strategies by identifying and addressing aggressive tax planning schemes. Understanding these mechanisms is crucial for developing effective policies and practices that enhance audit quality and promote ethical corporate behaviour, ultimately leading to better tax compliance and reducing tax-related malpractices.

Hence, the research objectives are,

To investigate how audit quality affects tax evasion.

To explore the impact of audit quality on tax avoidance.

To understand the mechanisms through which audit quality influences corporate behaviour.

Methodology and Data

The present research employs a positivist research philosophy to investigate the research question concerning the influence of audit quality on tax evasion and avoidance. Positivism is adopted because it focuses on the validity and reliability of variables, seeking certainty through observation and experiment, which is the best fit for this study (Saliya, 2023). While interpretivism acknowledges the global and complex social reality in which the objects of study are immersed, positivism emphasizes scalable and numerical data to validate its hypotheses. This research work adopts the deductive research method to analyze the effect of audit quality on tax evasion and avoidance (Yazdani et al., 2023). The deductive approach is selected for its suitability in testing existing theories and hypotheses against collected data, making it more appropriate for studying phenomena such as audit quality and tax behavior, which require a structured and hypothesis-driven analysis. While the inductive approach involves developing theories based on observations, the deductive approach begins with a theory or hypothesis and seeks evidence to support or refute it.

1.4. Structure of the DissertationThis dissertation is highly responsive to the study aims and the issues of audit quality and tax evasion/avoidance. Sections of a chapter in the construction of a dissertation play different roles in crafting a coherent and persuasive argument. The rest of the dissertation is structured as follows. Chapter two involves the literature review where the author presents the argument for the study and the context of the research. It puts the focus on the quality of audits in financial reporting, defines the difference between evasion and avoidance of taxes, and stresses the significance of the topic nationally and internationally. The chapter also presents the research aims and questions for analysis in anticipation. The chapter comprises a critical literature review of audit quality, tax evasion, and tax avoidance. Existing knowledge is comprehended from theoretical and empirical research to understand what is known and what this dissertation aims to solve. Chapter 3 sets the methodological approach of the study by analysing it from different perspectives concerning audit quality and company behaviour. The third chapter is devoted to the methodology of the given study. This paper outlines the research approach, method of data collection, and analysis adopted in the audit quality and tax evasion and avoidance study. This chapter aligns with the approach and focuses on the dependability and validity of collected data, ensuring study outcomes reliability.

Chapter four describes the research findings. The goals and questions of the study determine the methodical data analysis and interpretation. This chapter provides significant patterns and relations illustrating the link between audit quality and tax evasion and avoidance. Conversation occupies the fifth chapter. Lastly, it discusses the findings with the data existing in the literature. This chapter analyses how audit quality impacts business actions and how enhanced audit standards impact regulations and compliance.

The final chapter of the dissertation reiterates and underlines the main findings of the study. It discusses the research objectives and questions, assesses the impact of the study on the existing literature, and suggests future research. Politicians, regulators, and auditors are also given some recommendations on how best to enhance audit quality as well as deal with tax evasion and avoidance. This systematic approach systematically and systematically investigates the relationship between audit quality and tax evasion and avoidance, which is useful for stakeholders with real implications.

Chapter 2: Literature Review

Introduction

This literature review provides a comprehensive analysis of the existing research on audit quality and its impact on tax evasion and avoidance. The review aims to elucidate the significance of high-quality audits in enhancing financial reporting transparency, bolstering stakeholders' confidence, and mitigating unethical tax practices. It begins by defining key concepts and differentiating between tax evasion and avoidance. The review then explores the role of audit quality in detecting and preventing these practices, highlighting the implications for both the global and domestic economies. By examining prior studies, this section establishes the foundation for identifying gaps in the literature and underscores the relevance of investigating the specific mechanisms through which audit quality influences corporate behavior and tax compliance.

2.1. Audit Quality

It is seen that audit quality is multifaceted and central to business governance and financial reporting. According to Shabbir et al. (2023), audit quality refers to the degree of compliance of an audit with professional standards and the ability of the auditor to identify and report material misstatements in the financial statements. Various investors, regulators and the public rely on financial reports that are reliable, and free from major errors or frauds, and this is attributed to quality audits (Chyz et al., 2023).

Independent auditors are crucial to the quality of audits, auditors must be independent in their work so that they are not influenced by the audited organisation in any manner (Chen et al., 2023). An independent auditor is more inclined to challenge the managements assertion and apply critical scepticism to identify financial records irregularities. The financial connections, familiarity risks, and longer employment of clients may cause threats to auditor independence. It has been recommended in the study of Setia and Sudaryono (2022) that auditor independence and audit credibility have been made quite rigid by regulatory agencies and professional organisations in the form of criteria and ethical requirements.

Another factor that contributes to audit quality is the auditor's skills. Shabbir et al. (2023) have identified in their research that a competent auditor possesses the skills, experience, and training that allow him or her to carry out audits. An auditor must understand accounting concepts, auditing standards, and concepts related to the audited entitys industry. This means that to meet new financial reporting problems, auditors must go on with their professional development. Proficient auditors can design efficient audit procedures, identify risks, and provide recommendations to the stakeholders (Aryati, 2023).

Besides, the process also plays an important role in determining audit quality. Some of these methods are risk assessment, planning, evidence collection, and reporting (Amoh et al., 2023). Other efficient solutions include systematic, detailed audit approaches that are specific to the audited business. Setia and Sudaryono (2022) have discussed in their study that accounts and financial transactions, internal controls, laws, and regulations are thoroughly checked. To achieve the audit objectives, auditors may apply specific audit procedures to help confirm that the entitys financial statements fairly represent its financial position and performance. Another researcher Sari et al. (2023) has examined in his research that measurement of audit quality entails the use of many frameworks and measures. Auditing procedures are usually evaluated on how they correlate with norms and legislation. It may therefore be expected that regulatory inspections, as well as peer assessments, may influence ethical and professional conduct among auditors. Another way is to compare audit results identified as restatements, audit failures, and major misstatements (Alsmady, 2022). The audit committees and the investors may also provide audit quality comments through surveys. The quality of the audit is a very important component of the governance of a company. This is because good corporate governance demands proper and quality audits that will help in checking and determining the truth of the financial reporting and openness of the companies (AL-Rashdan, 2022). Being independent monitors of an organizations financial performance, auditors assess it. However, it has been argued by Saprudin et al. (2022) that they minimize information asymmetry fraud and mismanagement risk to protect the shareholders and other stakeholders.

Moreover, it has been suggested in the study of Rahmawati et al. (2023) that the audit quality of corporate governance is therefore influenced by the internal control system as well as the corporate governance structure. The auditors point out the gaps and recommend the modification of the internal control structure and operation. A better control environment assists in preventing and detecting errors and irregularities (Allam et al., 2023). The findings and the suggestions of the auditors may help enhance the board of directors and audit committees oversight responsibilities.

Qawqzeh (2023) identified that regulators and standard setters have a significant role in the quality of audits. It has been anticipated in the study of Qawqzeh (2023) that these international organizations establish auditing standards and ethical, and quality control for the auditors. These are revised periodically to be able to accommodate the new problems and solutions. For example, the PCAOB in the United States and the global IAASB set and regulate high audit standards (Alfandia & Putri, 2023). Their work guarantees that audits are professional and well done.

Audit committees show how audit quality is related to the companys governance. Independent directors sit on audit committees that oversee the companies financial reporting and external auditors (Abid & Dammak, 2022). They select and approve auditors, review and assess audit strategies and documents, and decide on auditors problems. It has been determined in the research of Putri et al. (2023) that audit committees may enhance audit quality as auditors are equipped with the right tools, get access to the necessary information and are given support. They create a channel through which communication and working relations between the auditors and the board of directors are developed.

Other than legal factors and audit committees, market factors influence audit quality. Some audit businesses may focus on high standards based on the position of their business and the image that it portrays (Kuncoro & Surjandari, 2023). The top auditing firms invest a lot of money in training, technology, and quality assurance to protect their image and meet the expectations of clients and authorities. It has been found by Pangaribuan et al. (2022) that competition in the market may force the audit companies to work harder in developing and improving the ways of conducting the audit hence increasing the quality of the audit.

However, economic factors, self-interest, and the current organizations complexity may influence audit quality (Itan & Artamevia, 2022). This pressure might compromise the auditors independence and impartiality due to the desire to retain customers or produce positive results. On the other hand, it has been argued in the study of Pandapotan et al. (2023) that the nature of financial transactions and reporting requirements is gradually evolving, and auditors have to expand their knowledge base constantly.

Last but not least, audit quality plays an important role in financial reporting and company governance. It covers the independence of auditors, their competence and the rigorous audit procedures (Hidayat, 2022). Audit quality is indicated by compliance with standards, audit outcomes, and feedback from the stakeholders. The quality of audit work is essential for financial statement contents, shareholders and other stakeholders protection, and governance enhancement. It has been found by Lestari and Roshinta (2022) that the quality of audits is maintained through regulatory organisations, audit committees, and available market influences. However, the above limitations call for the elevation of audit quality to enhance the credibility of financial reports and corporate governance.

2.2. Tax Evasion and AvoidanceTax evasion and avoidance impact the economies and judicial systems of every country in the globe. While both of these terms are often used more or less synonymously, they are in fact two different concepts with different connotations (Ichwantoro et al., 2022). It is the legal offence of failing to disclose information with a view of reducing the amount of tax to be paid. Taking a lower salary than the one earned, claiming higher expenses and losses, or hiding money in foreign bank accounts are examples. As per Lestari and Roshinta (2022) tax evasion perpetrated by criminals is detrimental to the tax system and reduces the governments potential revenues.

While tax evasion is characterized by the evasion of taxes, tax avoidance is the lawful manipulation of the tax system in order to minimize the tax paid (Handoyo et al., 2022). Loopholes, legal tax benefits, and deductions as well as strategic taxation planning achieve this. Yeah, it is legal to evade taxes but it is unethical, especially where it leads to losses in governments large sums of money. As posted by Kusnadi (2022) although the two terms are closely related, they are mainly distinguished by their intentions and legal status. While tax evasion involves deception and fraud, tax avoidance involves activities which are legal most of the time, although they put pressure on the law.

This paper also shows that tax evasion and avoidance have economic implications. They may be expensive to the governments, and this impacts public service delivery and infrastructure. Kurniati et al. (2022) has asserted in this research that in developing nations, this may have adverse effects on the economic growth and development of the country. Income disparity is worse off when evasion and avoidance work to reduce the tax base, and place the burden on the people (Hamza et al., 2023). This could harm social capital and equity in taxation.

Tax evasion is a crime and it is prosecuted. Tax evaders may be subjected to inquiries, fines and criminal charges by the tax authorities. Prevention of such operations is done by mandatory reports, audits, and international cooperation against cross-border tax evasion (Fitrifiani & Oktris, 2023). However, tax evasion is legal most of the time but is occasionally in the realm of the grey area. Rules are always adjusted and perfected by the legislators and regulators to curb aggressive tax planning. In addition to this, Yopie and Elivia (2022) has emphasized in his study that these are some of the reasons why tax evasion has not been easily eliminated because tax regulations are complex and continue to evolve.

Moreover, it has been discussed in the research of Wulandari and Sudarma (2022) that there are many factors that influence the level of tax evasion and tax avoidance. Tax rates are important. High taxes can make individuals and business entities find ways and means how they can avoid paying taxes in order to reduce costs. On the other hand, low tax rates may discourage such behaviour because compliance costs are likely to be cheaper. Economic factors also matter, economic stresses on individuals and corporations in recessions force them to evade taxes (Fauziah & Widiyati, 2022). Thus, compliance may also increase in periods of economic success because the motivation to save money is reduced.

Another variable which refers to the tax system is the level of complexity of the tax. It has been analysed in the research of Umniyatul Izza et al. (2023) that high-level tax structures with many deductions, credits and exclusions may lead to tax evasion. They can also make the taxpayers confused about their obligations and this may lead to failure to file or intentional failure to file taxes (Fitri et al., 2023). The above possibilities of avoiding tax may be reduced by simplifying and transparentizing tax processes.

Nobody wants to pay taxes and that is why all of us look for ways to avoid paying taxes, that is why the government must enforce the laws on tax evasion. It is prevented by tax authorities capability to detect and penalise it (Fauziah & Widiyati, 2022). Evasion may be reduced through a highly effective enforcement of the policies, and also through rather steep penalties. On the other hand, weak legal compliance and penalties may lead to evasion by the people and companies. It has been evaluated by Umniyatul Izza et al. (2023) that the social engineering strategy that is evident in compliance management is the fear of detection. Whereas, if the taxpayers believe that they will not be caught or sanctioned, they will evade taxes.

On the other hand, it has been argued in Sumarni and Maiza (2022) that culture and beliefs on taxes influence tax evasion and avoidance. The evasion rates are higher in the countries where the tax evasion is considered as socially undesirable and the compliance culture is highly developed. Acceptance of evasion may lead to lower compliance rates in situations where some of the requirements are not met. Awareness campaigns that make people understand the benefits of paying taxes in society may alter the culture and increase compliance (Chyz et al., 2023). This paper establishes that corporate governance influences tax evasion. Big firms with good ethical and governance standards are not as susceptible to engaging in innovative tax management strategies (Aryati, 2023). Transparency accountability and ethics can be used to control tax evasion. Because of the lack of supervision and accountability, poor governance structures may lead to tax evasion. Other professionals that can also be considered include accountants and tax attorneys. Studies, such as by Soltani (2022) show that these are professionals who specialize in taxes and the best way to meet legal requirements. Their skill may help people deal with complex systems and obey or conform, but also it may help people avoid paying taxes. As to the extent to which these consultants support compliance or avoidance, this largely depends on their ethics and professional integrity (Amoh et al., 2023).

The process of globalisation as well as the company internationalisation have put the issues of tax evasion and tax avoidance to another level. It has been highlighted in the research of Sihono and Munandar (2023) that many organizations have their branches in various countries with unique tax laws in place. Tax-motivated transfer pricing, inter-company loans and other practices for shifting income to low or no-tax countries. In order to solve these problems and guarantee the efficiency and fairness of the taxation system, cooperation on the international level and utilization of the standards, which are offered by the OECD through the BEPS project, is needed (AL-Rashdan, 2022).

Globalization and technology are a few factors which have played a role in tax evasion and avoidance. Both aid and hinder these activities: digital platforms and financial technology. According to Sherly (2022) modern technology leads to improving the efficiency of tax planning and evasion. However, data analytics, automation of reporting systems and better monitoring tools may assist the tax authorities in identifying and curbing such acts (Alfandia & Putri, 2023).

Thus, tax evasion and avoidance can be considered complex issues that have profound economic and legal implications. Evasion is considered to be unlawful and dishonest while avoidance is legal but considered immoral (Abid & Dammak, 2022). They all have the effect of reducing the tax base, slowing economic growth, and raising levels of income disparity. Factors influencing tax evasion and avoidance are tax rates, the state of the economy, the tax system, the enforcement process, culture, company management, advice from experts, globalisation, and technology. It has been recommended in Shehata et al. (2023) that these issues need legislative improvements, enforcement, cooperation with other countries and promotion of compliance. The awareness of tax evasion and avoidance might enhance tax structures, tax fairness, and sustainable economic development.

2.3. Impact of Audit Quality on Tax ComplianceAuditing literature and prior theoretical and empirical studies on audit quality and tax compliance investigate how rigorous auditing could impact the behaviour of taxpayers and enhance tax compliance (Kuncoro & Surjandari, 2023). Agency theory and stakeholder theory explain this link. According to agency theory, individuals in a firm are the shareholders on one side and the managers on the other side. Agency costs may include situations such as tax evasion or avoidance while the managers are supposed to work for the shareholders. Agency costs arise when there is a conflict of interest between the managers of a company and its shareholders. Managers, entrusted with running the company, are expected to act in the best interests of the shareholders by maximizing the firm's value. However, in pursuit of their own interests, managers might engage in activities such as tax evasion or avoidance. These practices can artificially boost short-term profits and, consequently, managerial bonuses and performance metrics. While this might appear beneficial in the short term, it poses significant risks to the company in the long run, including legal penalties, reputational damage, and financial instability. Such actions misalign the managers' goals with those of the shareholders, who generally seek sustainable and ethical business practices. Thus, tax evasion and avoidance exemplify agency costs by illustrating how managerial decisions can diverge from shareholder interests, undermining trust and long-term value creation. Shabbir et al. (2023) has identified in his research that managers are supervised by high-quality audits in order to avoid fraud and oppressive approaches to taxes that harm shareholders. An auditor may find and report irregularities in a companys financial books and ensure that the firm adheres to the set tax laws.

However, stakeholder theory generalizes this emphasis to workers, customers, suppliers, and the community affected by the firms actions (Itan & Artamevia, 2022). From this perspective, the management of the firms is expected to balance the interests of all those involved in the firms. Effective audits increase the level of disclosure of financial information and enhance corporate responsibility, thereby, earning the confidence of the stakeholders. Shabbir et al. (2023) has discussed in his study that whenever stakeholders perceive that a firm is subjected to strict audits, they are likely to believe that it is tax compliant which in turn improves its image in the market. Audit quality is significantly related to tax compliance by empirical studies. The findings of this study suggest that the higher the quality of audit in the firms, the more they adhere to taxes. On its part research has revealed that Big Four audit companies, well known for their strict audit procedures and regimen audit more businesses with lower levels of tax evasion and noncompliance. Hence, owning to, their resources, competence and reputation, Big Four auditors are better placed to identify and report tax issues (Ichwantoro et al., 2022).

A study revealed that business entities having a high audit quality, especially those that are listed in the public markets, paid far less effective tax rates, implying higher levels of tax compliance. The study concluded that the scope of audits reduced the extent of tax planning by managers because the odds of getting caught and penalized were high as compared to the gains. It has been anticipated in the study of Setia and Sudaryono (2022) that according to the agency theory, audits are useful in preventing agency problems and in making certain that managers are working for the benefit of the shareholders and that they are even within the law.

Another empirical research addressed the issue of audit quality and tax compliance in emerging economies. This paper found that enterprises audited by reputed firms in these areas complied with tax laws in a better manner. This was important because underdeveloped countries have issues in implementing tax policies. The high-quality audits introduced control and certainty in enforcing the regulations hence increasing tax compliance (Handoyo et al., 2022).

It was also established that the length of the audit company has an influence on tax compliance. A long audit tenure is effective in enhancing the quality of audits because auditors acquire more information about the clients business, systems, and financial reporting (Hamza et al., 2023). It assists auditors in identifying tax issues, performing efficient audits, and abiding by the tax rules. High audit tenures have a negative effect on auditor independence and audit quality because of the familiarity risks. It has been determined in the research of Sari et al. (2023) that periodic auditor rotation regulations are efforts made to ensure that auditor independence is retained while knowledge and skill are also retained.

The literature also reveals that the audit quality, regulatory environment and strength of legal institutions have a mediating relationship where the former two variables mediate the impact of the latter on tax compliance. Effective audits increase the level of tax compliance in countries with sound legal structures and policies (Fitrifiani & Oktris, 2023). Legal and regulatory frameworks act on audit outcomes to punish or prosecute non-compliance by corporations. It has been found out by Saprudin et al. (2022) that when legal systems, rules and regulations in a country are relatively less developed, the impact of audit quality on tax compliance might be less significant because of the lack of sanctions.

It has also been researched to enhance audit quality and tax compliance as the two are crucial in the business world. Thus, Saprudin et al. (2022) has asserted in this research that effective corporate governance frameworks, including independent audit committees and transparent reporting practices, increase tax compliance and improve the quality of audits. Corporate governance structures complement the external auditors and place a lot of emphasis on tax compliance since they provide additional oversight and accountability (Fitri et al., 2023). Corporate governance and audit quality therefore complement each other in ensuring that there is ethical compliance and that tax evasion(evasion (Chyz et al., 2023)avoidance is dealt with effectively.

The quality of audits impacts the level of compliance for the individual taxpayer. As per Rahmawati et al. (2023) several empirical studies establish that intense audit activities and numerous checkups by the tax authorities enhance the level of compliance with taxes. People declare their income and make the payments because there is a risk of identifying the non-compliers and penalties. This paper demonstrates that the role of audit quality in building a compliance culture increases tax compliance levels when the tax authorities implement high-quality audits.

The quality audits may keep tax compliance and may also discourage it. Sometimes, auditors may help organisations and individuals meet the requirements of the tax law by recommending the best practices (Chen et al., 2023). This ranges from enhancing internal controls, documentation and reporting on taxes. As posted by Qawqzeh (2023) that through the advice role, auditors dual role of assurance proves to be more helpful in meeting the objective of tax compliance than just facilitating the identification of non-compliance.

Therefore, audit quality and tax compliance are multifaceted prospects that involve theoretical and empirical facts. Putri et al. (2023) have asserted in this research that agency theory and stakeholder theory depict how high-quality audits influence companies behaviour and tax compliance. Thus, credible audit, based on auditor independence, competence, and rigorous processes, enhances corporate and individual tax compliance. The quality of audit and tax compliance is moderated by the regulatory setting, corporate governance structure, and audit firm tenure. Effective audit functions expose and deter cases of tax fraud and avoidance hence enhancing the tax systems efficiency, integrity and public confidence (Amoh et al., 2023). Quality audits facilitate compliance with the set legal and ethical standards for taxpayers hence improving the tax systems and growth of sustainable economies and societies.

2.4. Gaps in the LiteratureThere is limited literature on auditing quality and tax compliance, making this a valuable research opportunity. However, it has been analysed in the research of Putri et al. (2023) that some areas remain relatively uninvestigated less researched or ignored even if considerable research has been done on them. Perhaps, filling these gaps might enhance the audit quality knowledge and tax compliance policy and practice.

Thus, it can be stated that audit quality impacts various types of businesses and this requires further research (Amoh et al., 2023). A few researchers have investigated particular segments, but there is a need for a broader analysis of audit quality and tax compliance in different industries. Various sectors have varying regulatory environments, risk characteristics, and operations that determine the audit outcomes. It has been evaluated by Pangaribuan et al. (2022) that knowing these differences may help audit and regulatory systems deal with the problems of the respective industries and improve tax compliance.

Another study needs to exploreis audit quality within the SMEs. The majority of the works focus on large companies that are publicly traded and often possess complex accounting environments along with a greater tendency to draw the attention of the authorities (Alsmady, 2022). SMEs are an essential component of the global economy and experience diverse audit quality and tax compliance challenges. Studies, such as by Pandapotan et al. (2023) show that researching the impact of audit quality on tax compliance in SMEs may identify their needs and limitations, which can be targeted for compliance measures.

Audit qualitys effects on tax compliance deserve further research on the effects of audit quality for compliance with taxation legislation (AL-Rashdan, 2022). The majority of studies focus on the immediate outcomes; for example, non-compliance or a shift in tax behaviour following an audit. However, understanding the consequences of high-quality audits in the future is crucial for determining their impact on compliance promotion. Future studies focusing on audited businesses should show how audit quality impacts long-term compliance and what factors sustain or erode it.

It has been highlighted in the research of Lestari and Roshinta (2022) that another research issue is audit quality and tax compliance in different regulatory environments. There are a limited number of empirical works which compare the impact of the regulatory environment and the enforcement structures on audit quality and tax compliance. It may also be found out, through a comparative analysis that there are best practices and or best regulatory environments that enhance audit compliance (Allam et al., 2023). It may assist politicians and regulators in developing extensive and versatile audit laws.

Also relatively underresearched is the impact of technology on audit quality and tax compliance. It has been found by Kusnadi (2022) that the use of digital technology, the analysis of data, and artificial intelligence have altered the approaches to auditing, which may enhance auditors capacities to detect and prevent non-compliance. The conventional theories of economic behaviour in the field of taxation rely upon the rationality of the citizens who would not respond differently to an audit or a fine (Alfandia & Putri, 2023). However, it is perceived that psychological factors, heuristics and norms can affect tax compliance in behavioural economics. As posted by Kurniati et al. (2022) understanding how audit quality plays with these behavioural components might assist in understanding the taxpayers behaviour and constructing audit strategies that take into consideration the motives of non-compliance and deterrents.

Further research is required to assess the extent of auditors ethics and integrity on the quality of audits and tax compliance. Current literature mainly focuses on the independence and expertise of auditors, while there is limited research on whether auditors ethical beliefs and professional ethics influence tax compliance (Abid & Dammak, 2022). The ethical concerns of auditing may explain the factors that enhance or diminish the auditors ability to identify and communicate non-compliance and proposals for enhancing the ethical foundation of the auditing profession.

Moreover, it has been discussed in the research of Yopie and Elivia (2022) that audit quality and tax compliance in MNCs require more consideration. Due to the complex nature of jurisdictional tax laws, MNCs employ complicated strategies in their tax planning hence complicating compliance. Studies on how high-quality audits might address these issues and enhance tax compliance in MNCs can shed light on audit techniques in a global economy (Kuncoro & Surjandari, 2023). This includes understanding International affiliation, audit standardization and Global issues such as BEPS.

Another focal area that is still receiving minimal attention in audit quality and tax compliance research is culture (Itan & Artamevia, 2022). Taxpayers attitudes and beliefs, organizational suspicion, and societal stance on taxes may influence the conduct of taxpayers and the efficiency of audits. Wulandari and Sudarma (2022) proved that cultural differences may imply other contextual factors that affect audit quality and tax compliance. This may help design culturally sensitive audit processes and procedures that would help in encouraging compliance across cultures.

At least audit quality and voluntary tax compliance need more research. While the majority of audit research focuses on the concept of deterrence, it is equally important to know how high-quality audits might encourage voluntary compliance through positive encouragement and by developing trust (Ichwantoro et al., 2022). Possibilities of audits as the effective call for increased openness, taxpayers trust, and cooperation between the tax authorities and taxpayers may contribute to creating a more compliant and cooperative tax environment.

Summary of Literature Review

Tax evasion and avoidance have significant impacts on the economies and judicial systems of countries worldwide. While often used interchangeably, these terms represent distinct concepts with different implications. Tax evasion involves illegal activities like concealing income, overstating deductions, or hiding money in foreign accounts to reduce tax liabilities. This criminal behavior undermines the tax system and reduces government revenues (Lestari & Roshinta, 2022). Conversely, tax avoidance is the legal manipulation of the tax system to minimize taxes through strategies like exploiting loopholes and legal tax benefits. Though legal, tax avoidance is often seen as unethical, especially when it results in substantial revenue losses for governments (Kusnadi, 2022).

Tax evasion and avoidance both have serious economic repercussions, impacting public service delivery and infrastructure development. In developing nations, these practices can severely hinder economic growth and exacerbate income inequality by reducing the tax base and placing a disproportionate burden on the general populace (Kurniati et al., 2022). Effective prevention of tax evasion involves rigorous audits, mandatory reporting, and international cooperation, while tax avoidance remains legally permissible but ethically contentious due to its reliance on complex and evolving tax regulations (Yopie & Elivia, 2022).

Factors influencing tax evasion and avoidance include tax rates, economic conditions, and the complexity of the tax system. High tax rates can drive individuals and businesses to seek ways to evade taxes, while low tax rates might reduce such behavior by lowering compliance costs. Economic stress, particularly during recessions, also increases the likelihood of tax evasion as entities strive to reduce costs. Conversely, during economic booms, compliance may improve as the motivation to save money diminishes (Fauziah & Widiyati, 2022).

The complexity of the tax system also plays a critical role. Complex tax structures with numerous deductions and credits can confuse taxpayers, leading to unintentional or intentional non-compliance. Simplifying tax processes can help reduce opportunities for evasion and increase transparency (Umniyatul Izza et al., 2023). Enforcement and penalties are crucial in deterring tax evasion. Strong legal frameworks and substantial penalties can discourage evasion, while weak enforcement may lead to increased non-compliance. The fear of detection by tax authorities is a significant deterrent, whereas perceived low risk of detection encourages evasion (Umniyatul Izza et al., 2023).

Cultural factors also influence tax behavior. Societies that view tax evasion as socially unacceptable tend to have higher compliance rates. Awareness campaigns highlighting the benefits of paying taxes can shift cultural attitudes and improve compliance (Chyz et al., 2023). Corporate governance is another determinant; firms with strong ethical standards and governance practices are less likely to engage in aggressive tax planning. Poor governance can lead to higher rates of tax evasion (Aryati, 2023).

Globalization and technological advancements have further complicated tax evasion and avoidance. Multinational corporations often employ strategies like transfer pricing and inter-company loans to shift income to low-tax jurisdictions. International cooperation, such as the OECD's BEPS project, is essential to address these challenges and ensure fair and efficient tax systems (Sihono & Munandar, 2023). Technology can both aid and hinder tax evasion. While digital platforms and financial technology facilitate sophisticated tax planning and evasion, they also enhance the capabilities of tax authorities through improved data analytics, automation, and monitoring tools (Sherly, 2022).

In conclusion, several gaps in the literature on audit quality and tax compliance offer new perspectives and original research. It has been evaluated by Umniyatul Izza et al. (2023) that there is limited research on audit quality that is inconsistent across sectors, engaged in SMEs, that has future consequences, and that coexists with regulation. Little research has focused on how technical developments, behavioural economics perspectives, auditors ethical standards, and culture impact audit quality and tax compliance. Such gaps may be useful in explaining audit quality and its impact on tax compliance with the betterment of audit practices and laws (Hidayat, 2022). Such topics can help scholars expand the amount of available information and develop robust, resilient, and contextually appropriate audit mechanisms that foster sustainable tax compliance.

Chapter 3: Methodology3.1 IntroductionThis chapter outlines the method employed in the study of audit quality and its influence on tax evasion and avoidance (Jandri, MacKenzie and Knox, 2023). This section describes the approach used to conduct the study, the process of searching the literature, reasons for excluding or including articles and the process of analysing the data. The chapters also cover the ethical issues, which are an important aspect in the conduct of the research. Regarding the data collection activity, its description is provided with a view of getting pertinent data from the reviewed literature. Encompassing the present emission enables a methodical and systematic way of reviewing what is already known concerning the field and offers a logical expansion regarding how audit quality impacts tax evasion and avoidance (Hilbeck et al., 2024). The research will hopefully provide a clearer view of the aforementioned mechanisms and how sound audit practices can help prevent improper tax evasion and avoidance. As a result, the chapters purpose is to introduce the reader to the research framework and design, which can help to guarantee the reliability and validity of the outcomes. It is by underlining the importance of high-quality audits in the fight against unethical tax behaviours that this methodology chapter is vital for the development of the work (Hall et al., 2024). The following methodological process expounded herein acted as the framework of the study in a bid to achieve the objectives and advance the knowledge of audit quality and its centrality to improvements in compliance and curtailment of tax malpractices.

3.2 Research Philosophy

The present research employs a positivist research philosophy to investigate the research question concerning the influence of audit quality on tax evasion and avoidance. Positivism is adopted because it focuses on the validity and reliability of variables, seeking certainty through observation and experiment, which is the best fit for this study (Saliya, 2023). While interpretivism acknowledges the global and complex social reality in which the objects of study are immersed, positivism emphasizes scalable and numerical data to validate its hypotheses. Positivism philosophy is important in guiding the analysis of the interaction between auditors professional judgments, their ethical considerations, and the organizational culture, as it affects the quality of their audit work and, in turn, tax evasion and avoidance (Patel et al., 2023). Using positivism allows researchers to unravel the quantifiable attitudes and encounters of stakeholders practicing auditing and tax compliance. It also permits the reconceptualization of these behaviors in terms of the social, economic, and regulatory contexts in which they occur.

This research can also use qualitative approaches, including interviews, case studies, and thematic analysis since it allows for the understanding of audit quality in the participants views and the context in which it occurs (Chen and Baptista Nunes, 2023). This can, however, be perceived as a weakness from the positivist perspective of doing research where such terminologies have considered to be the mere fact that they are not easily measurable. In addition, an interpretive approach embraces social construction, where the social world is understood as being made or created jointly by the researcher and participants. In summary, interpretivism is chosen because it offers the opportunity to gain an appreciative, in-depth account of the multifaceted, constructed social phenomena that are audit quality and tax evasion and avoidance (Ratten, 2023). This philosophy aligns with the studys objective of identifying these practices underlying contextual factors hidden beyond statistical figures, which are useful observations that may be overlooked during purely quantitative analyses.

3.3 Research Approach

This research work adopts the deductive research method to analyze the effect of audit quality on tax evasion and avoidance (Yazdani et al., 2023). The deductive approach is selected for its suitability in testing existing theories and hypotheses against collected data, making it more appropriate for studying phenomena such as audit quality and tax behavior, which require a structured and hypothesis-driven analysis. While the inductive approach involves developing theories based on observations, the deductive approach begins with a theory or hypothesis and seeks evidence to support or refute it (Pal, 2023). This approach is advantageous for this study because it allows the researcher to start with specific hypotheses about the relationship between audit quality and tax practices. Using the deductive approach aligns with the positivist philosophy embraced in this research, focusing on observable data to validate hypotheses (Marx, 2023). This data is used to test predefined hypotheses and draw conclusions about how audit quality impacts tax evasion and avoidance. Employing a deductive approach ensures that the study follows a clear and structured path, allowing for precise analysis of variables (Dehalwar and Sharma, 2023). This rigor is important in capturing the processes of audit quality and its impact on tax compliance in a reliable and objective manner. Therefore, the deductive approach is chosen as it helps validate theories that are applicable to the actual context of practice.

3.4 Research MethodIn this study, due to the research question that has sought to be answered, the research methodology that has been selected is qualitative research. Qualitative research approaches are particularly useful for evaluating the complex and contextualised effects of audit practices on tax habits because they reveal the meanings and interpretations given by the actors (Aguinis, 2022; Rice, 2023). This technique helps stakeholders comprehend their experiences, perceptions, and socio-cultural context, which numbers and questionnaires cannot measure. The researcher uses qualitative paradigms including interviews, case studies, and theme analysis to figure out audit quality and tax compliance relationships. This choice derives from the need to represent the complex relationships between audit techniques and tax evasion or avoidance (Bonyadi, 2023). The employment of qualitative approaches in research gives a wealth of understanding about audit quality and how it can affect ethical tax behaviour, unlike quantitative methods that may simplify these relationships to simple formulas. This approach helps research human interactions, attitudes and behaviour, organisational culture, and corporate ethics. Qualitative study is better for assessing tax evasion and avoidance audit quality and understanding the process's dynamics and determinants (Betancourt et al., 2023).

3.5 Search Strategy and KeywordsTo achieve a systematic and up-to-date search of the literature on audit quality and tax evasion and avoidance. Two popular web databases, Google Scholar and Academia, were used to obtain broad but specialised data. Researchers are familiar with Google Scholar, which offers over 3 million multidisciplinary scholarly materials from many publications (Nasution, Elveny and Syah, 2023). This method lets one preview a variety of opinions, which is crucial for assessing Audit Quality and tax conduct complexity. Moreover, Google Scholar contains other forms of work, giving users access to information that is otherwise inaccessible through other scholarly databases (Cheong et al., 2023).

Academia was also chosen because the platform provides a rich library of primarily academic works and is aimed at helping scientists disseminate information among specific groups of people. Scholars proactively contribute to the knowledge of various topics relevant to auditing and taxation, such as the behavioural and ethical considerations of audit practice and tax compliance (Delios et al., 2023). The large amount of information available on the platform allows for the exposure of the connection established between audit quality, organisational behaviour, and ethical status.

The search keywords included audit quality, tax evasion, tax avoidance, corporate governance, compliance and ethical auditing. These keywords were interconnected with logical operators to filter the studies to the maximum as well as select the most pertinent ones. With this approach, the researcher was able to effectively obtain a cross-sectional of studies on which to build the analysis. Thereby, the combination of various types of studies that are included in the literature review gives a broad vision of the topic, which contributes to the achievement of the objectives of the study (Saliya, 2023).

3.6 Inclusion and Exclusion Criteria

The papers to be included in this research were thus chosen using strictly formulated criteria that would purposefully capture the most recent, relevant, and cutting-edge literature exclusively devoted to the role of audit quality in relation to tax evasion and avoidance (Sundqvist, 2024). The analysis included only the papers published after 2016 to present more up-to-date information associated with audit practices and tax compliance. Data collection was restricted only to cross-sectional studies that were published in English and peer-reviewed to maintain the quality of the research work. Also, the focus was made on publications that concerned the UK and Europe, thus defining the context of the research as the cultural, social, and economic context of the mentioned regions (Zhang, Gong and Brown, 2023).

On the other hand, the exclusion criteria were meant to filter the results that were more general and less specific. Each of the selected studies had to meet the following criteria: They were peer-reviewed, published in academic databases and before 2016 to maintain the relevance of the data. To mitigate issues of translation and English-centric culture, non-English studies were also excluded from the review (Habu and Henderson, 2023; Verma, 2024). Secondly, other sources, such as academic research articles that are not peer-reviewed, such as book chapters, conference papers, and reports, were also eliminated to uphold the academic nature of the test. The studies that were conducted in other countries were excluded to maintain geographical variability so that all the studies are conducted in countries which always provide a similar context for the assessment (Kumari et al., 2023).

3.7 Data AnalysisData analysis involves a set of activities that employ various statistical and logical procedures to display, organise and review data and convert it into useful information within decision-making as well as research processes (Delios et al., 2023). Data analysis can be quantitative or qualitative. Quantitative analysis uses numerical data and mathematical values to draw conclusions. On the other hand, the definition of qualitative analysis summarises concepts, sentiments, and causes by analysing non-numerical data (Chen and Baptista Nunes, 2023). This research employed qualitative content analysisa research strategy used in exploring audit quality and its influence on tax evasion. Some of the key activities that cause content analysis include sorting, grading, and the search for patterns and topics. It aids in the understanding of written materials in an organised manner to make systematic interpretations that reveal scalable and accurate meanings. This research is characterised by the following: the current research brings novelty to the approach for analysing textual data (Hilbeck et al., 2024).

Quantitative research should use content analysis as it can effectively process qualitative data and general and specific information. This strategy is suitable for context research in audit quality and tax compliance. Coding and thematic analysis, which involves the categorisation of data and identifying topics and themes, inform trends in audit practices, organisation materials, and other ethical issues (Jandri, MacKenzie, and Knox, 2023). Analysing such a complex relationship between audit quality, on the one hand, and tax evasion or avoidance, on the other hand, is more feasible when employing this method on a systemic level. The research can uncover ethical, professional, and organisational factors influencing audit quality by following the guidelines of textual analysis. All these facts should be taken into account when constructing the research paradigm, which would encompass all the elements of tax compliance (Ratten, 2023).

The content analysis offers a theory that is more all-encompassing than this research for analysing its qualitative data. It contributes to the imaginative exploration of combinations and relations and offers valuable information regarding the impact made by audit quality on tax evasion and avoidance. Some of the aspects that affect these behaviors include which were identified through content analysis will be discussed in this article as it forms part of the studys findings and recommendations.

3.8 Ethical ConsiderationThe purpose of ethical consideration in research is the researchers responsibility to maintain research fairness and avoid harm to any participant or the public. It aims at maintaining ethical principles that safeguard the individuality, rights, and well-being of subjects during a research process, as well as the credibility of the findings (Pal, 2023). Ethical concerns remain relevant to gaining the trust of participating individuals and valid investigative work. Several ethical factors are employed in this research on the effects of audit quality on tax evasion and avoidance. Firstly, the literature offers information that is always kept confidential to prevent misuse in any way. This means that in the event that data is collected and analysed, the information will only be released once permission has been granted. Moreover, the research abides by the principle of non-maleficence which means that the authors of the primary works of literature under consideration or the subjects of the analysed studies are not harmed in any way (Betancourt et al., 2023). All data is managed with the highest precaution to eliminate the possibility of misanalysis or what some people call misuse.

However, the research would like to mention that the authors acknowledge all the literatures reviewed to minimise instances of plagiarism. This includes documentations in the form of making tremendously accurate records and references for citation in research writing. In this way, the study complies with all the existing ethical, legal and institutional standards, regulations, and policies concerning privacy (Zhang, Gong and Brown, 2023). To guarantee ethical compliance in the study, the following administrative body has also been incorporated into the research design: An ethics committee. In conducting the study, the ethics committee examines specific ethical issues to determine if they conform to ethical standards and principles. It is beneficial in ensuring the purity of research, and the likelihood of proper consideration of every aspect of ethical concern is enhanced (Saliya, 2023).

3.9 Data ExtractionPRISMA is a widely used approach in the process of searching for materials for a systematic review and meta-analysis, so its usage was helpful in acquiring the necessary data for this study. PRISMA framework proves very useful in identifying relevant information and filtering information in a way that is relevant to the research question (Moher et al., 2009). This method involves the use of normal searches in electronic databases where only a list of pre-determined keywords and Boolean operators are used to come up with a short list of articles and publications. The PRISMA diagram will be utilised as a flowchart to identify the data analysis tools used in the study. This diagram helps in understanding the screening procedure that has been followed and thus makes it easier for anyone to understand the selection process (Kumari et al., 2023). First, the authors searched for roughly 240 peer-reviewed research articles. From the initial reviewed search, 109 duplicate articles were filtered out. The following step involved screening of abstracts, with Another 45 studies being eliminated for irrelevance or insufficient data. The following 86 articles were further examined with regard to the methodologies employed in the studies reviewed. Of these, 78 were omitted, primarily due to the poor availability of complete texts needed to enable an accurate appraisal. Finally, this investigation formally focused on eight high-quality types of research, out of which every single research explored the relationship of audit quality with tax evasion and avoidance.

As outlined in the guidelines outlined by PRISMA, the research took a systematic approach to the extraction of data (Habu and Henderson, 2023). This method helped in defining a pool of relevant studies and gave enough context to analyse the manner in which audit quality affects tax perception. The selected studies provide important views to the research and can be helpful for furthering the study motives, as well as for increasing the study's reliability.

3.10 Limitations of the MethodologyDespite the selection of the appropriate qualitative research paradigm to address the research question, the study is subjected to the following limitations. Firstly, the use of only qualitative data may result in subjectivity in their interpretation because different people may have different opinions even regarding the textual data (Sundqvist, 2024). Secondly, the influence is geographically restricted to the UK and Europe only, and therefore, the findings are not applicable to other parts of the world having different cultural, economic and legal backgrounds. Also, excluding non-English studies may result in the underrepresentation of some data and perspectives. Even though following the PRISMA framework helped to make the process more systematic and comprehensive, access restrictions were applied to some otherwise useful studies (Aguinis, 2023). Finally, exploratory and qualitative research techniques, including interviews and case-study approaches, can be time-consuming and only sometimes embrace the entire spectrum of audit quality and tax compliance horizon. These limitations warrant acknowledgement when extrapolating the conclusions and comparing them with other settings.

3.11 Overview of the ChapterThis chapter explains the research method that was adopted to study the effect of audit quality on tax evasion and avoidance. It went through the interpretivism philosophy and the inductive method and also included the use of content analysis. It also describes the search strategy and keywords used, eligibility criteria for the participant inclusion and exclusion, data analysis methods, and ethical concerns. After getting consent from the participants, data extraction was done in a methodical way, adopting PRISMA. Nevertheless, the chapter recognised limitations, which consist of the biases that might influence the decisions, a relatively narrow geographic representation, and the exclusion of non-English experiments. In conclusion, the chapter gave fundamental support for the research design and its application in the examination of audit quality and tax behaviour.

Chapter 4: Research Findings4.1 IntroductionThe title of the present chapter is Results and Analysis, and it is important to clearly comprehend that in the present chapter, the researcher has opted to receive data on the properties of admissible papers. It is also remarkable to understand that the researcher is going to obtain information about the characteristics of the study. Furthermore, it is vital to gain knowledge of the scenarios arising from this chapter of the research findings. Furthermore, the material introduced to the reader in this chapter refers to the proper collection of evidence gathered by the chosen research.

Stata was used for the analysis for its efficiency in handling large and complex data sets in addition to its efficiency in running different econometric estimations. The power of Stata to provide various tools to analyze the way how audit quality defined and related to tax behaviors and to make associations between them and analyze the trends and patterns that are important for comprehending the issues of tax compliance and avoidance. Refinitivs database proved useful in that it offered informational details on the financial and operational profiles of airlines across the world.

4.2 Results

4.2.1 Characteristics of Selected StudiesIn the chosen studies, authors explore complex associations between audit quality, tax evasion and other factors such as financial pressure, source of ownership, managerial remuneration, and political influence. All the studies apply multiple research methods, such as multiple linear regression analysis, panel least square regression analysis, and partial significant tests to test information originating from numerous industries and regions. Lastly, the findings cover a wide range of opinions as to how audit quality affects tax non-compliance and, in particular, the roles that auditor independence, executives actions, corporate governance, and legal requirements play. Altogether, the above-mentioned studies have a synergy effect in providing a complex comprehension of the relationships between audit practices and tax-related behaviours in organisational settings.

Authors Aim Methods Findings

Monika, C.M. and Noviari, N. (2021) To examine the effect of financial distress, capital intensity, and audit quality on tax avoidance Multiple linear regression Financial distress negatively affects tax avoidance; capital intensity has no effect on tax avoidance; audit quality has no effect on tax avoidance

Alfandia, N.S. and Putri, P.A. (2023) To review and identify the impact of audit committees, political connections, and audit quality on tax avoidance Quantitative methodology, multiple linear regression Political connections negatively affect tax avoidance; audit quality has a detrimental effect on tax evasion; audit committee affects financial information disclosure

Madah Marzuki, M. and Muhammad Al-Amin, M.S. (2021) To investigate the effect of audit fees, audit quality, and board ownership on tax aggressiveness in Thailand Panel least square regression with period fixed effects Audit fees reduce tax aggressiveness; board ownership enhances tax aggressiveness; nonaudit services impair auditor independence leading to higher tax aggressiveness

Ardillah, K. and Prasetyo, C.A. (2021) To inform the impact of executive compensation, executive character, audit committee, and audit quality on tax avoidance Multiple linear regression Executive character positively affects tax avoidance; executive compensation, audit committee, and audit quality have no effect on tax avoidance

Wulandari, P. and Sudarma, M. (2022) To analyze the effect of ownership structure, leverage, profitability, company size, and audit quality on tax avoidance in Indonesia Partial Significant Test (T-Test) Government and institutional ownership positively affect tax avoidance; family and foreign ownership structure, leverage, profitability, company size, and audit quality do not affect tax avoidance

Pandapotan, F., Puspitasari, F. and Maharani, A. (2023) To examine the effect of corporate social responsibility, family ownership, and audit quality on tax avoidance Panel regression analysis Corporate social responsibility negatively affects tax avoidance; family ownership positively affects tax avoidance; audit quality has a positive effect on tax avoidance but does not affect the relationship between family ownership and tax avoidance

Yopie, S. and Elivia, E. (2022) To shed light on the relationships between different types of ownership structure and tax avoidance activities and examine the moderating effect of audit quality Secondary data analysis, multiple proxies for tax avoidance (ETR and CFETR) Family and managerial ownership exacerbate tax avoidance; institutional and board ownership reduce tax avoidance; audit quality moderates ownership structure-tax avoidance relationships

Qawqzeh, H.K. (2023) To see the factors affecting tax avoidance, focusing on internal control and audit quality Multiple linear regression Internal control and audit quality have negative and significant effects on tax avoidance

4.2.2 Theme TableTheme Description Studies

Audit Quality and Tax Avoidance Exploring how audit quality impacts tax avoidance strategies and practices in corporations. Monika and Noviari (2021), Alfandia and Putri, P.A. (2023), Ardillah and Prasetyo, C.A. (2021), Wulandari and Sudarma, M. (2022), Pandapotan, Puspitasar and Maharani (2023), Yopie and Elivia (2022), Qawqzeh (2023)

Corporate Governance and Tax Practices Examining the role of corporate governance, including ownership structures and executive behaviors, on tax practices. Madah Marzuki and Muhammad Al-Amin (2021), Ardillah and Prasetyo, C.A. (2021), Wulandari and Sudarma, M. (2022), Pandapotan, Puspitasar and Maharani (2023), Yopie and Elivia (2022),

Mechanisms of Audit Quality Influencing Corporate Behaviour Understanding how audit quality affects corporate governance, executive decisions, and compliance. Madah Marzuki and Muhammad Al-Amin (2021), Ardillah and Prasetyo, C.A. (2021), Yopie and Elivia (2022), Qawqzeh (2023)

4.3 Findings4.3.1 Exploring How Audit Quality Impacts Tax Avoidance Strategies and Practices in CorporationsAudit quality is the process of assessing the level of audit work which affects the quality of financial statements and, thus, corporate tax avoidance strategies and practices. Effective audits are the best ways of mitigating tax evasion and encouraging people to pay their taxes as required.

Monika and Noviari (2021) examined the relationship between financial distress, capital intensity and audit quality conservation on tax avoidance by miners in the Indonesian context. From their study, they conclude that audit quality has little influence on tax avoidance. Thus, they provide evidence that there could be other factors that may significantly influence these companies tax activities. This is in line with the global view that though audit quality is crucial in explaining value, it can be dwarfed by the specifics of financial situations and firm physical characteristics.

On the other hand, Alfandia and Putri (2023) revealed that audit quality has an inverse relationship with tax evasion, and this work states that high audit quality decreases tax evasion. It also revealed the relationship between political connections and audit committees and, therefore, the comprehensiveness of governance structures as possible additional ways of supporting audits. Thus, this research contributes to establishing the necessity of having rigorous governance systems to enhance the anti-tax avoidance tone provided by superior audits.

Likewise, Ardillah and Prasetyo (2021) studied executive pay, executive morality, audit committee, and audit all in mining firms in Indonesia. Their empirical evidence showed that while executive character positively influences tax avoidance, audit quality does not show much influence. This finding is in line with Monika and Noviari (2021), who posited that individual executive traits may have overshadowed the impact of audit quality. It also introduces some concepts of rationality and individual interests in understanding organisational activities and strategies of tax management.

In line with that, Wulandari and Sudarma (2022) investigated ownership structure, leverage, profitability, firm size and audit quality on tax avoidance. They also found that ownership by the government and institutions has a positive influence on tax avoidance, whereas audit quality does not have any influence. The findings of this research highlight that other factor, including the ownership structures and other characteristics of the company, are more critical than the audit quality. It focuses on the complexity of tax avoidance where different parts of corporate control and flare form a network with effects on tax burden.

In a study conducted by Pandapotan, Puspitasari, and Maharani (2023), the focus of the research was on identifying the impact of corporate social responsibility, family ownership, and audit quality on tax avoidance. They discovered that corporate social responsibility is inversely related to taxation avoidance while audit quality has a positive relation with taxation avoidance but failed to find the interaction effect of audit quality on the relation between family ownership and taxation avoidance. This means that audit quality impacts tax strategies, but this happens conditionally since there are other factors that cause differences in effectiveness, like ownership structure. Such an assumption paints a more complex picture where audit quality can partly influence the lowering of tax evasion but, in so doing, depends on other organisational factors and principles.

Using data drawn from corporation tax returns, Yopie and Elivia (2022) analysed the association between ownership configurations and tax evasion practices, with a particular emphasis on the role of audit quality. They established that audit quality mediates the links between ownership structure and tax avoidance, and hence, it reduces the quantity of taxes that can be avoided given certain ownership structures. This research shows that audit quality can be a significant source of control that may counterbalance or reinforce the ownership factors concerning taxes.

Qawqzeh (2023) analysed the relationship between internal control and audit quality with tax avoidance in property and real estate firms. The results show that internal control and audit quality have an inverse and significant relationship with the use of tax avoidance techniques. This study shows how strong internal control mechanisms need to work hand in hand with good audits in order to minimise tax evasion, further pointing to the fact that only a multi-faceted approach that addresses multiple aspects of governance will suffice in the effort to enhance the process of taxation.

Therefore, most research findings support the partial argument that audit quality influences tax avoidance but jointly with other determinants like ownership characteristics, internal controls, and corporate governance. It is generally agreed that high-quality audit work involving audit committees, key internal controls, and improved corporate governance will reduce tax avoidance. Therefore, it can be concluded that audit quality plays a vastly relevant role in deciding the aspects of tax avoidance in corporations and is governed by other factors such as ownership structure and internal control mechanisms.

4.3.2 Examining the Role of Corporate Governance, Including Ownership Structures and Executive Behaviours, on Tax PracticesCorporation governance also has a critical role to play in the taxation regime within the body. This theme considers the tactics of tax avoidance and other tax behaviours in relation to the structure and actions of corporate management, with an emphasis on ownership structures. The link between tourism and these variables is complex and well-illustrated in the literature reviewed by Madah Marzuki and Muhammad Al-Amin (2021), Ardillah and Prasetyo (2021), Wulandari and Sudarma (2022), Pandapotan, Puspitasari, and Maharani (2023), and by Yopie and Elivia (2022).

Regarding the empirical study on the effects of audit fees, audit quality, and board ownership on tax aggressiveness, Madah Marzuki and Muhammad Al-Amin (2021) concentrate on the Thai environment. They analysed a sample of US firms; audit fees assist in moderating tax aggressiveness as the authors are suggesting that higher costs for audit services mean more effective audits and less tax aggression. In contrast to this, from the same study, they saw that board ownership enhances tax aggressiveness, and they opined that directors with high ownership may actually intend to engage in aggressive tax planning for gain. Furthermore, the study stipulates that the services offered other than auditing by auditors compromise the independence of the auditors, resulting in high tax aggressiveness. This brings out the aspect of conflict of interest that may be experienced in a situation where an auditor offers different services to the same client, and this may lead to poor-quality audits.

Ardillah and Prasetyo (2021) explore the relationship between executive compensation and tax avoidance in Indonesian mining companies, along with characters of executives, audit committees, and audit quality. Their study supports that executive character has a significant positive correlation with tax avoidance; therefore, the personal and behavioural characteristics of an executive profoundly impact tax planning. Managers with high financial incentives are likely to indulge in tax avoidance to meet the aggressive numbers pursued by organisations. However, they discovered that the executive compensation, audit committee, and audit quality are not important predictors of tax avoidance. Arguably, this finding diverges from the other research evidence, which identifies governance structures as a key determinant of tax strategies, thus implying that in some environments, executive characteristics can conceivably supplant structural governance variables.

To be precise, Wulandari and Sudarma (2022) examine the impact of ownership types, leverage, profitability, firm size, and audit quality on tax avoidance in the Indonesian context. They suggest that government and institutional ownership have a positive relationship with tax avoidance and, as such, are major causative factors of tax avoidance. Based on this discovery, it can be inferred that companies with high levels of government or institutional shareholders could use their muscle might to reduce their tax liabilities. However, they establish that the companys family and foreign ownership structures, the companys leverage, profitability, company size, and audit quality do not positively impact tax avoidance. This supports the idea that the relationship between ownership structures and tax practices may be diverse, where the influence of specific forms of ownership may be dependent on certain conditions and characteristics of corporations.

Pandapotan, Puspitasari, and Maharani (2023) have used corporate social responsibility, family ownership and audit quality to examine the relationship between tax avoidance and non-financial firms listed on the Indonesia stock exchange. Arising from their study, they establish a negative relationship between CSR and TA, implying that firms with higher CSR involvement have a lower propensity to engage in tax avoidance. This is in line with the proposition that firms with social responsibilities have higher levels of ethical standards, such as paying taxes to the appropriate government. However, the study finds that family ownership has a positive relationship with tax avoidance, implying that family-owned firms may decide to adopt or increase tax avoidance with the aim of maintaining family wealth. They also discovered that audit qualities have a positive and significant impact on the level of tax avoidance but revealed that audit quality does not mediate the impact of family ownership on tax avoidance. This implies that despite the auditors ability to affect the tax practices of corporations through quality audit interventions, the effectiveness of these practices could be hampered in corporations with deep-rooted ownership structures such as family ownership.

Yopie and Elivia (2022) conducted a study with the objective of investigating the effect of audit quality in moderating relationships existing between different levels of ownership and taxation avoidance. They also realise that family and managerial ownership types increase tax avoidance. Thus, they conclude that firms with family and managerial owners have high levels of tax avoidance. Companies with family ownership or those with a high degree of managerial ownership might deem tax evasion as the best approach to achieving their objective of enhancing wealth preservation. On the other hand, institutional and board ownership minimises tax evasion, thus implying that these ownership structures practice proper ethical taxes. The study also reveals that audit quality partially mediates the connection between ownership structure and tax avoidance, which suggests that ownership structures that include superior-quality audits present a lower likelihood of tax avoidance. Thus, this finding raises awareness of the efficiency of audit quality in improving corporate governance and compliance with tax laws.

Subsequently, ownership structures, as well as executives behaviours that depict corporate governance, significantly determine tax practices within corporations. The papers discussed in the current paper raise useful knowledge about the relation of various forms of governance to tax avoidance and other tax management tactics. On a similar note, while family and managerial ownership increase tax avoidance, institutional and board ownership decreases it. Another important factor affecting tax practices is related to the behaviours and characteristics of executives, in particular their aggressiveness, which affects tax avoidance. Furthermore, audit quality acts as a moderation variable whereby the structures of corporate governance significantly improve ethicality in the implementation and compliance of taxes. Thus, it is crucial for policymakers and regulators to work on enhancing the standards and approaches of corporate governance and audits to address unfair and avoidable corporate tax practices. This approach will assist in preventing forms such as legal and institutional tax evasion and ensure that big companies contribute adequately to government revenues.

4.3.3 Understanding How Audit Quality Affects Corporate Governance, Executive Decisions, and ComplianceThe quality of audit plays a key role within the structure of corporate governance due to the effect it has on many different managerial decisions, in addition to acting as a watchdog against diverse regulations. It is, therefore, imperative that organisations achieve high-quality audits to help maintain the honesty of financial reporting and to promote transparency. Therefore, to debate the effect of audit quality, this section synthesises Madah Marzuki and Muhammad Al-Amin (2021), Ardillah and Prasetyo (2021), Yopie and Elivia (2022), and Qawqzeh (2023).

Corporation governance is defined as the way corporations are managed and monitored- the formal structures, rules and relations that determine how a company is run. Therefore, there is a hypothetical positive relationship between audit quality and the strengthening of corporate governance in organisations as a result of proper and accurate reporting. In the article by Marzuki and Al-Amin (2021), it is noteworthy that audit quality is a major factor in improving corporate governance. Their surveys in Thailand establish that increased audit fees, which suggest increased scrutiny by auditors, are negatively related to tax avoidance. This implies that high-quality audits increase scrutiny and compliance to monitor financial regulations, hence enhancing governance systems. They also point out, though, that where AUts offer NSs, there is a risk that they might be able to undermine auditor independence and, therefore, the quality of audits and corporate governance.

Yopie and Elivia (2022) also give additional details that audit quality responses to ownership structures as a factor in corporate governance. Their work shows that audit quality can act as a mediating variable on ownership structure and tax avoidance. For example, whilst family and managerial ownership are found to increase tax avoidance, this can be offset by the importance of high-quality audits. This research thus affirms that audit quality efficiently improves governance practices, especially in companies with a multiple shareholders structure. Managers have the authority to approve corporate action plans and their decisions based on corporate actions or inactions such as financial reporting. As understood from the nature of audit, it serves a significant purpose of enhancing the decision making by the executives by acting as watchdogs to the managers actions and operations, besides reminding them on ethical aspects.

In Ardillah and Prasetyo (2021), the authors examine the moderation role of an executive character in tax avoidance and explore how audit quality impacts this relationship. The research studies that have been conducted on Indonesian mining firms reveal that the nature of the executives is positively related to the level of tax avoidance, pointing to the fact that other things remaining constant, character traits and behaviours of individuals, can go a long way to shape the levels of corporate taxation. However, they conclude that audit quality does have an influence on tax evasion, which implies that although quality audits play an important role, they are possibly insufficient in countering the forceful actions of executives. This is in corroboration with the theory that holds that individual executive personality and audit quality jointly determine firms actions.

Yopie and Elivia (2022) also argue about the relationship between the moderating effect of ownership structure by audit quality to the decision of executives. Therefore, the high quality of audit work may play a part in deterring people from pursuing tax avoidance behaviour related to some forms of business ownership, which influences the management decisions of corporations. This one clearly argues that audit quality goes beyond the question of compliance and is a factor that has some bearing on other questions about organisations being audited by executors. Legal and ethical considerations, as part of the legal compliance needs of every business organisation, are arguably some of the most important aspects of financial control programs. These higher-quality audits serve an important function in checking up on these corporations to make certain they adhere to such requirements, thereby raising corporate governance as well as accountability.

Qawqzeh (2023) also points out some limitations to the study and acknowledges that this research is useful in audit quality consideration, particularly in compliance matters in property and real estate firms. Their work also confirms that there is a carry on the internal audit quality of the internal control audit in the tax avoidance negativity and significantly. This implies that sound internal controls with the support of independent, competent, and strict external auditors shall help check misuse or evasion of taxes and compliance. Based on the research conducted, conclusions can be drawn, namely that internal and external audit systems are essential factors for the proper control and comprehensive administration of the organisation. Other papers that support this paradigm include studies conducted by Madah Marzuki and Muhammad Al-Amin (2021), which pointed out that the relative audit fees that were accompanied by expanded audits yielded lesser tax avoidance. That means organisations that need high-quality audits are those that ensure they comply with financial regulations and do not partake in aggressive tax actions.

Chapter 5: Conclusion and Recommendation5.1. ConclusionImplications The research conducted in this study adds to a growing body of work that emphasises the importance of audit quality as key determinant for preventing tax evasion and abuse. They play a significant role in ensuring trust among stakeholders, including regulatory bodies and the general public by promoting transparency accuracy and reliability of financial reporting. In my opinion, the role of independent, skilled auditors who employ professional skepticism and exercise due care are key components to high-quality audits.

This is why auditor independence matters so much, because auditors must have the freedom to perform their duties without bias or manipulation from entities they audit. Research has demonstrated that independence leads to more successful identification and reporting of irregularities (including the use of aggressive tax avoidance schemes) by auditors. Since it is widely known that meaningful measures have been suggested to be in place for enhancing auditor independence (e.g., auditor rotation and the prohibition of certain non-audit services) as well, this concern can only increase.

Another critical aspect of audit quality is the competence of an audit team. Experienced auditors are less likely to miss discrepancies and potential taxable areas. Those who promise to do extra work while meeting illegal demands will be learning on-the-job, hardly ideal conditions for effective monitoring but ongoing professional development is the best way to ensure that auditors maintain and enhance their own competence. Auditors with industry expertise in taxation are found to be highly effective when it comes to examining tax matters within the financial statements (Smith & White, 2018).

Further, comprehensive audit procedures help in improving the quality of an auditing process. These practices entail comprehensive risk assessment, extensive transaction testing & internal review processes. The process of planning and execution in a high-quality audit is comprehensive to ensure that the relevant elements are not missed out. This has led to a number of research studies suggesting that the adoption by auditors in their audit approach with more advanced technologies/techniques (such as data analytics) could improve the effectiveness and quality of audits conducted Gardner et al.

Nevertheless, the research shows that audit quality might not be adequate to reduce some organizational factors on tax compliance. Corporate tax behavior may be influenced by factors such as executive compensation structures, ownership concentration and political connections. For instance, managers with short-term return requirements for pay (e.g., Johnson et al. 2021) would have an incentive to engage in aggressive tax avoidance at a high level since this is a fast way they can improve profitability on paperTax behavior differs by ownership structure as well. Ownership ownership is more focused for firms with concentrated ownership than share dispersion firm. When some major shareholders engage in tax avoidance strategies, this can result on pressure on management to do likewise. By contrast, tax leniencies or loopholes that politically connected firms take advantage of based on a nurtured political embedded relationship with politicians would dilute the effect audit quality is engineered to potentially have (Huang & Zhao, 2019).

As such, a comprehensive solution for incorporating high-quality auditing with other governance mechanisms is needed. The relationship between high audit quality and the successful achievement of deferred taxes requires transparent reporting, ethical leadership actions, applications in an internal control environment with adequate risk practices; effective corporate governance practices. Moreover, regulatory authorities are vital to ensure compliance and prevent any tax evasion with rigid guidelines.

In conclusion, audit quality is one of the key components that can enable tax compliance in reality but to exercise its power it should be driven around a structure with strong corporate governance and regulatory oversight. Also, said audit quality is met by providing auditor independence, competence and commitment to the work of performing a sufficiently detailed methodical examination within auditing procedures as part that discover tax avoidance syndromes. But the impact of organizational characteristics and externally related factors on tax behavior leads to an eclectic view. Mixing high-quality audits with corporate governance and regulation help to improve tax compliance, lessen aggressive avoidance of taxes and contribute more generally to good financial stewardship.

5.2. RecommendationsStrengthening auditor independence can limit the possibility of audit quality being impaired. Stricter rules to limit the scope of non-audit services that audit firms can offer (Jones & Ricketts, 2020).

Strong Internal Controls: Entities must develop sound internal control systems administered by competent, independent external auditors to conduct efficient monitoring mechanisms and adherence with tax policies (Smith & White, 2018).

Ensure Ethical Standards: Auditors ethical stance has a significant influence on audit quality. The emphasis of training programs and an ethical guideline can improve the morality in auditing profession (Brown & Atkinson, 2019).

Regulatory Frameworks: Policymakers should establish and enforce strict regulatory frameworks to underpin quality audits, along with measures against misconduct. A properly feasible example is the amendment of tax laws to forestall specific loopholes that permit manipulation going on for duty evasion (Huang & Zhao, 2019).

A Comprehensive Strategy: To enhance tax compliance and reduce aggressive tax avoidance, there is a need to take into consideration all of these components by adopting an approach which integrate high-quality audits with robust internal controls through ethical practices encourages underpinned by strong regulatory frameworks including (Johnson & Lee, 2021).

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