English (United Kingdom)

https://curated-unify.zendy.io/wp-json/zendy-region/v1/featured_content/oa?rat=en

https://curated-unify.zendy.io/wp-json/zendy-region/v1/highlighted_journal/

Global: Zendy Plus annual

Presents the access of premium content as premium feature

Premium Content

Presents the keyphrase highlighting as premium feature

Keyphrase Highlighting

Presents the summarisation as premium feature

Summarisation

Insights

Presents the pdf analysis as premium feature

PDF Analysis

Presents the zaia usage as premium feature

ZAIA

Global: Zendy Tools annual

Global: Zendy Free Plan

Global: Zendy Tools monthly

Global: Zendy Plus monthly

This study examines how a U.S. firm’s involvement in offshore financial centers (OFCs), by setting up subsidiaries or affiliates in OFCs, is associated with audit fees. After controlling for tax aggressiveness, firm strategy, international operation, and other firm characteristics, we find that U.S. multinational enterprises (MNEs) with OFC operations pay higher audit fees than U.S. MNEs without OFC operations. In addition, a greater extent of OFC operations is further associated with higher audit fees. This result is robust to using different measures of OFC involvement and controlling for issues of self-selection, endogeneity, and joint determination effect of audit and non-audit fees. We also find that a higher level of OFC operations is associated with higher audit risk, as measured by internal control weaknesses and the probability of financial reporting-related litigation. Further analysis shows that the audit fee increasing effect of OFC involvement is unlikely to be driven by corporate tax planning strategy and tax rate differential between the U.S. and OFCs, but driven by the regulatory arbitrage opportunities and secrecy policies of OFCs. In sum, this paper contributes to the literature on audit fees and OFCs.

Involvement in Offshore Financial Centers and Audit Fees: Evidence from U.S. Multinational Firms