The relationship of auditor characteristics and aggressive tax planning among public listed companies in Malaysia

This study objective is to investigate the relationship between auditor characteristics and aggressive tax planning among public listed companies in Malaysia. In this regard, the effect of auditor size, auditor opinion and audit fees on aggressive tax planning was examined. The sample of the study includes 220 listed companies in the Bursa Malaysia. The period of study was three years from 2017 to 2019 whilst firm size, leverage, and return on assets are the control variables used. The results of this research were determined in three hypotheses. The three hypotheses that explore the relationship between auditors’ characteristic with aggressive tax planning were not confirmed. But the results showed a significant relationship between the leverage and return on assets with aggressive tax planning which support Hoffman's tax planning theory where corporations seek to reduce the tax burden by using loans that increase debt burden and reduce profit revenue. Tax authorities should focus more on leverage and return on assets to identify aggressive tax planning, as this study shows a significant relationship between both variables. This study also has limitations, such as using public listed companies in Bursa Malaysia and therefore it is not applicable to other countries' institutional systems. Results are dependent on how accurately the proxies reflect effective tax rates, and the impacts of the auditor's connections with the management of the companies were not examined.