Book-Tax Differences, Corporate Governance Effectiveness and Audit Quality: An Interactive Effects

In this article, we aim to answer the important questions of whether the corporate governance effectiveness affects the relationship between book-tax differences (BTDs) and audit quality. We also aim to determine whether the variability between BTDs and audit quality is moderated by corporate governance index (CGI). The primary aim of the present study is to contribute to improving the existence of an interaction between BTDs, audit quality, and CGI. This study uses a sample of 28 nonfinancial listed Tunisian companies and covers an eight-year period from 2005 to 2015. To test the hypotheses of this research, a generalized least squares (GLS) and ordinary least squares (OLS) regression was applied. The results obtained show that, for the Tunisian companies, a positive association between BTDs and audit quality. The current study also provides evidence that corporate governance moderates the relationship between BTDs and audit quality. The findings may be of interest to the academic researchers, practitioners and regulators who are interested in discovering the quality of corporate governance practices and tax practices in Tunisian context. The findings of this study can help Tunisian regulators in creating corporate governance disclosure requirements. The findings also provide the African business community insights concerning audit quality, tax practices, and corporate governance. This article extends the existing literature, by examining the inter-relationship between corporate governance, BTDs, and audit quality. (c) 2019 Wiley Periodicals, Inc.