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This paper aims to investigate the association between political connections and the audit report lag and whether related party transactions moderate the association between the two.

An ordinary least square regression is estimated whereby audit report lag is regressed on political connections, related party transactions and the interaction between the two. Data on the number and amounts of RPTs are hand-collected from audited financial reports. A firm-year observation is politically connected if at least one large shareholder (controlling at least 10 per cent of the votes directly or indirectly) or board member or commissioner is a current or former Member of Parliament, a minister or head of local government or closely related to a politician or party.

Findings show that the audit report lag is relatively short for politically connected firms but increases when such firms conduct both operating and loan-type related party transactions. This suggests that auditors understand the incentives for, and the implications of, related party transactions and hence exert additional audit efforts in scrutinizing financial statements: activities that will increase the audit report lag.

Although a large body of empirical research exists on the determinants of audit report lag, none has examined the impact of political connections. This paper further contributes to the auditing literature by documenting auditors’ evaluation of related party transactions in a developing country.

The purpose of this paper is to examine the challenges faced by Indonesian tax auditors in auditing multinational transfer prices of intangible assets. This study then explores the suitability of mechanisms currently used by Indonesian tax auditors to ensure appropriate tax audit adjustments.

The authors use a qualitative research method involving semi-structured and open-ended interviews with the tax auditors in Indonesia. The authors also include some Indonesia court decisions pertinent to the research question above.

Findings indicate that Indonesian tax auditors face a number of difficulties during the audit of transfer pricing cases derived from intangible property, including a lack of transparency in taxpayers’ bookkeeping; limited taxpayer cooperation in providing data and documents; transfer pricing regulations; and problems related to organization and human resources. The study also finds that Indonesian tax auditors and tax officials handle transfer pricing cases by using a legal basis as reference and by performing a number of activities, including among others, comparable analysis.

The findings of this study should assist policy makers to improve the quality of transfer pricing audit. Also, tax auditors and account representatives who do not have enough experience in auditing transfer pricing cases derived from intangible property rights might use the outcomes of this study as a guide for dealing with those cases.

Given the interest in better understanding the economic effects of political connections, this paper aims to review empirical studies in the accounting and finance domain investigating the effects of firms’ political connections on management’s decision in non-US settings.

Key words used to search for relevant studies include “political connections” linked with “tax avoidance,” “earnings quality” “voluntary disclosure.” The authors consult several editorial sources including Elsevier, Electronic Journals Service EBSCO, Emerald, Springer, Palgrave Macmillan, Sage, Taylor & Francis and Wiley-Blackwell. The authors’ search yields 46 published studies since 2006.

The review reveals a prevalence of studies conducted in Asia. A narrative synthesis of empirical findings shows mixed effects of political connections on earnings management, as measured by accrual-based or real earnings management practices. Mixed evidence also exists for the association between political connections and reporting policy (e.g. corporate social responsibility reporting). The review also reveals that firms with political ties adopt an aggressive tax policy aimed at reducing effective tax rates and are more likely to choose a Big 4 auditor.

The review discusses the political connections literature focusing on studies outside of the USA and the effect of such connections on decision-making by management. It identifies some limitations of this literature and offers guidance for future research avenues. The synthesis suggests that political connections can adversely or beneficially impact management’s decisions depending on the legal, institutional and cultural characteristics prevailing in a particular setting.