There's a paper being presented at this year's American Accounting Association annual conference in San Francisco on tax aggressiveness and accounting fraud, written by Clive Lennox (Nanyang Technological University), Petro Lisowsky (University of Illinois at Urbana-Champaign) and Jeffrey Pittman (Memorial University of Newfoundland).

ABSTRACT: There are competing arguments and mixed prior evidence on whether tax aggressive firms are also aggressive in their financial reporting. Our research contributes to resolving this issue by examining the links between aggressive tax planning and the incidence of alleged accounting fraud. After relying on several proxies for tax aggressiveness using effective tax rates and book-tax differences (as well as a common factor extracted from these measures), we generally find that tax aggressive firms are less likely to commit accounting fraud, even when we isolate the 1995-2001 period. However, our results are sensitive to how we measure tax aggressiveness. Consequently, although we mainly find that tax aggressive firms are less likely to fraudulently manipulate their financial statements, we are in a stronger position to conclude that our analysis does not support prior research implying that aggressive financial reporting coincides with aggressive tax reporting.

Full text is also available.  Lisowsky is a bit of a legend in tax/accounting circles for his paper, Inferring U.S. Tax Liability from Financial Statement Information, which used a clever model to derive the tax liability from publicly available information. And this paper may also create waves, given its dramatic findings.  You see, it rather puts to the sword the central hypothesis of the likes of Prem Sikka and Richard Murphy - that companies are all bad and will do their utmost to overstate income and underreport/underpay taxes.  For, the paper finds that companies that are aggressive with their taxes tend not to be aggressive in their financial reporting.

That's the complete opposite of what Sikka/Murphy would claim about companies!

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Filed under: Academic research, Taxation with tags american accounting association, clive lennox, financial reporting aggressiveness, fraud, jeffrey pittman, petro lisowsky, prem sikka, richard murphy, tax aggressiveness