We examine the relationship between tax-related accounting misstatements and changes in the uncertain tax benefits accrual account in the year of the disclosure of a misstatement. We find that the disclosure of a tax-related misstatement is associated with an increase in unrecognized tax benefits during that year. We show that the increase in unrecognized tax benefits in the year of disclosure is from uncertain tax positions taken in prior periods. Overall, this finding is consistent with increase in financial reporting conservatism upon disclosure of tax-related accounting misstatement.
We thank the two anonymous reviewers for their comments and suggestions. We are grateful to Gregory Martin (UNC Charlotte) for helping with propensity score matching code.
Tanyi, P.N., Klaus, J.P. and Burton, H. (2020), "Tax-Related Accounting Restatements and Tax Contingency Reporting", Hasseldine, J. (Ed.) Advances in Taxation (Advances in Taxation, Vol. 27), Emerald Publishing Limited, pp. 43-72. https://doi.org/10.1108/S1058-749720200000027002Download as .RIS
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