Government Accounting Oversight And Corporate Tax Avoidance

Financial and accounting supervision is a crucial measure for modern governance in China and plays an important role in the modernization of the country’s governance system.The 18 th National Congress of the Communist Party of China included financial and accounting supervision in the country’s supervision system and placed it at a higher position in the 20 th National Congress.As a component of financial and accounting supervision,accounting supervision has become increasingly important in the development of the economic and social society and the capital market.However,due to the incompleteness of the Chinese accounting system and the insufficient attention paid by relevant departments,irregular accounting practices have occurred occasionally.In the context of a new era that has assigned financial and accounting supervision a new position and higher requirements,how effectively government agencies can perform accounting supervision has become key,and the scientific and rigorous evaluation of the effectiveness of government accounting supervision has become a focus of attention for both the practical field and the academic community in recent years.As the regulatory authority for accounting in China,the Ministry of Finance performs its function of accounting supervision through one important method: random checks on the quality of accounting information,with the aim of improving the quality of corporate accounting information.However,accounting fraud and tax avoidance behavior often go hand in hand,and low-quality accounting information can exacerbate the degree of information asymmetry in companies,further hiding management’s tax-avoidance self-interest behavior.Currently,the existing academic community is not paying enough attention to this policy,and no evaluation has yet been conducted that combines tax avoidance behavior with this policy.Therefore,this article takes random checks on the quality of accounting information as a pivot point and analyzes from the perspective of tax avoidance behavior,whether this system can further affect companies’ tax avoidance behavior.In terms of theory,this article first argues that the implementation of accounting information quality checks can play an external governance role.Specifically,accounting information quality checks can both improve corporate accounting information quality and bring about spillover regulatory effects,attracting the special attention of external market participants,and further achieve the effect of reducing information asymmetry.Reducing information asymmetry can increase the risk and cost of tax avoidance activities for companies,thus suppressing their tax-avoidance behavior.At the same time,this article also performs heterogeneous theoretical analysis on three aspects of company characteristics and regional characteristics,namely political connections,audit quality,and marketization,and proposes corresponding hypotheses.In terms of empirical research,this article organizes the problem data of companies revealed in the announcements of the Ministry of Finance’s accounting information quality checks from 2008 to 2017 and constructs a DID model for regression testing.This article’s research found that:(1)accounting information quality checks can effectively reduce the degree of tax avoidance by companies;(2)in companies with low political connections,poor audit quality,and lower marketization in their regions,the inhibitory effect of accounting information quality checks on the degree of tax avoidance is greater;(3)the mechanism test found that this external governance mechanism helps to reduce information asymmetry,increase the risk and cost of tax avoidance for companies,and reduce tax avoidance behavior.This article’s conclusion helps the government to have a more comprehensive understanding of the economic impact brought about by the implementation of government accounting supervision,and helps to coordinate the regulatory cooperation between different government subject departments.It promotes the organic connection between financial and accounting supervision and other supervisions,enabling each level and each department to have a targeted supervision and meet the new requirements of "innovation in supervision" and "prevention of major risks".