(2009) argue that the engagement office that contracts with the client has primary responsibility for the audit, including overseeing work performed by other offices. The same logic is likely to apply to tax services. The first measure, is similar to the office size variable in Francis and OFFICESIZE_TAX Yu (2009). We expect offices providing comparatively more tax services to have more resources and trained personnel to deal with complex tax issues. The second measure, is intended to capture the importance of the tax function compared to the OFFICE_TAXFOCUS importance of the audit function within each office. We also expect offices providing comparatively more tax services, measured by the ratio of tax revenue to audit revenue, to have more resources and trained personnel to deal with complex tax issues. The definition of these variables is as follows: = Natural logarithm of one plus the sum of tax fees for each OFFICESIZE_TAX audit firm in a given a given MSA (city) and industry (two-digit SIC) market; and, = Total tax fees divided by total audit fees for for each audit firm in a OFFICE_TAXFOCUS given a given MSA (city) and industry (two-digit SIC) market. Using these alternative definitions, we find mixed results. Our tax avoidance proxies and are not associated with or CETR, BTD, DTAX OFFICESIZE_TAX OFFICE_TAXFOCUS, consistent with the majority of our matched and fixed-effects tests. Conversely, is ETR positively associated with both of these expertise alternatives, implying that tax avoidance is in firms lower that acquire services from offices with relatively more tax services offered. This evidence is inconsistent with the results of our cross sectional analysis in Table 3, Panels A and B, which suggest that tax avoidance is higher for clients of specialist auditors.
(2009) argue that the engagement office that contracts with the client has primary responsibility for the audit, including overseeing work performed by other offices. The same logic is likely to apply to tax services. The first measure, OFFICESIZE_TAX is similar to the office size variable in Francis and Yu (2009). We expect offices providing comparatively more tax services to have more resources and trained personnel to deal with complex tax issues. The second measure, OFFICE_TAXFOCUS is intended to capture the importance of the tax function compared to the importance of the audit function within each office. We also expect offices providing comparatively more tax services, measured by the ratio of tax revenue to audit revenue, to have more resources and trained personnel to deal with complex tax issues. The definition of these variables is as follows: OFFICESIZE_TAX = Natural logarithm of one plus the sum of tax fees for each audit firm in a given a given MSA (city) and industry (two-digit SIC) market; and, OFFICE_TAXFOCUS = Total tax fees divided by total audit fees for for each audit firm in a given a given MSA (city) and industry (two-digit SIC) market. Using these alternative definitions, we find mixed results. Our tax avoidance proxies CETR, BTD, and DTAX are not associated with OFFICESIZE_TAX or OFFICE_TAXFOCUS, consistent with the majority of our matched and fixed-effects tests. Conversely, ETR is positively associated with both of these expertise alternatives, implying that tax avoidance is lower in firms that acquire services from offices with relatively more tax services offered. This evidence is inconsistent with the results of our cross sectional analysis in Table 3, Panels A and B, which suggest that tax avoidance is higher for clients of specialist auditors.