Work

Are Unaudited Firms More Likely to Disregard Tax Payments Prior to Bankruptcy? Small‐Firm Evidence From Sweden

Year: 2026

Type: article

Abstract: ABSTRACT Proponents of mandatory auditing claim that auditing reduces the risk of tax evasion and that firms disregarding tax payments distort competition because they operate with lower costs than firms that meet their tax obligations. To investigate this, we analyse data from a credit reference agency to examine whether unaudited firms are more likely than audited firms to fail to pay income taxes and value‐added taxes up to 4 years prior to bankruptcy. We also examine the association between auditing and tax avoidance prior to bankruptcy and find mixed results, with some evidence suggesting that audited firms engage in greater tax avoidance than unaudited firms. In conclusion, our results indicate that auditing is associated with a higher likelihood of tax‐payment compliance among failing firms. At the same time, we find only limited evidence that auditing systematically affects tax avoidance behaviour or increases tax revenues through higher tax payments.

Source: International Journal of Auditing

DOI: 10.1111/ijau.70047

Authors: Irina Alexeyeva, Peter Frii, Ann‐Sofie Henrikson, Annina H. Persson, Oscar Stålnacke, Stefan Sundgren

Institutions: Umeå University, KTH Royal Institute of Technology, Hanken School of Economics

Language: English

Topic: Taxation and Compliance Studies

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $2,900