The Effect of Big Data-Driven Tax Enforcement on Audit Pricing

Abstract

This study examines the influence of big data-driven tax enforcement on audit pricing by analyzing China's nationwide tax data initiative, the Golden Tax Project Phase III (GTP III). As governments enhance their ability to monitor tax compliance through digital technologies, the implications extend beyond taxation and into the realm of audit services. We explore how this reform affects auditor perceptions of risk, resource allocation, and ultimately the fees charged to clients. The study finds that enhanced tax data transparency reduces audit pricing due to a decline in the perceived risk of financial misstatements. These effects vary regionally and across industries, suggesting nuanced implications for audit firms, corporations, and policymakers.