Client Advocacy in the Global Economy: A Comparison of U.S. and Indian Tax Professionals

This study experimentally investigates the effects of confirmation bias underlying staff-level tax research on supervisors' initial assessments and recommendations made during the review process for tax research memoranda. The theoretical framework underlying our hypotheses posits that tax professionals strive to make recommendations that meet both accuracy and advocacy objectives. Participants in our study addressed a client scenario in which both objectives could not be met because the client-preferred position did not have a “realistic possibility” of being successfully defended on its merits. In this context, we find that supervisors are more persuaded by an unbiased memo correctly concluding that the client-preferred position is not appropriate than by a biased memo reaching the same conclusion. This result suggests that when tax research memoranda are not consistent with the client advocacy objective, professionals are more persuaded by memoranda that fulfill their accuracy objective. On the other hand, we also find that supervisors are more persuaded by a biased memo incorrectly concluding in favor of the client's preferred position than by a biased memo correctly concluding that the client-preferred position is inappropriate. This result suggests that, when neither memorandum meets the accuracy objective, supervisors are more persuaded by memoranda that offer encouragement that their advocacy objective might be met than by those that do not. Finally, results also indicate that supervisors act to correct confirmation bias by requesting more rework of staff who prepare biased memos than of staff who prepare unbiased memos.

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Do Clients Share Preparers' Self-Assessment of the Extent to Which They Advocate for Their Clients?

Accounting Horizons ◽

10.2308/acch.2007.21.4.411 ◽

2007 ◽

Vol 21 (4) ◽

pp. 411-422 ◽

Cited By ~ 17

Author(s):

Teresa Stephenson

Keyword(s):

Large Firms ◽

Self Assessment ◽

Significant Difference ◽

Tax Professionals ◽

Tax Gap ◽

Tax Audit ◽

Client Advocacy ◽

Tax Preparers ◽

Local Firms

A conflict between the tax preparation services that tax preparers provide and the services taxpayers seek is demonstrated in the literature: tax professionals equate client advocacy with aggressive tax positions while taxpayers hire preparers to increase accuracy and reduce the probability of tax audit. Although this difference has been demonstrated at the large firms, more than half of tax preparers are at regional and local firms. This study examines tax preparers, self-employed or from local and regional firms, and their clients using an established scale—the recently developed Mason–Levy Advocacy Scale. This research measures the understanding taxpayers have of their tax preparers' self-assessed levels of client advocacy. A practically small but statistically significant difference is found. Advocacy is found to be equal between CPAs and non-CPAs—counter to prior research. Also, CPA clients and non-CPA clients are found to have similar perceptions regarding the aggressiveness of their preparers. The implications to practice are that more conservative tax preparation may satisfy clients with less risk and cost. Additionally, less aggressive tax positions will help to close the tax gap.

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DISCUSSION OF The Role of Client Advocacy in the Development of Tax Professionals’ Advice

Journal of the American Taxation Association ◽

10.2308/jata.2010.32.1.53 ◽

2010 ◽

Vol 32 (1) ◽

pp. 53-57

Author(s):

Jennifer K. Schafer

Keyword(s):

Tax Professionals ◽

Client Advocacy

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Do Tax Professionals Act Like Auditors when Evaluating Tax-Related Audit Evidence?

Behavioral Research in Accounting ◽

10.2308/bria-2020-013 ◽

2021 ◽

Author(s):

Donna D. Bobek ◽

Laura N. Feustel ◽

Scott D. Vandervelde

Keyword(s):

Income Tax ◽

Team Member ◽

Financial Statement ◽

Functional Area ◽

Professional Skepticism ◽

Tax Professionals ◽

Audit Evidence ◽

Client Advocacy

The audit of the financial statement income tax accounts is ultimately the responsibility of the audit engagement team; however, tax professionals are often involved because of their knowledge of the tax functional area. Auditors are expected to exercise professional skepticism and independence when performing audits, while tax professionals are expected to be advocates for their tax clients. This study investigates whether the auditor and/or tax professionals’ typical role influences how they evaluate evidence on an audit engagement, especially when provided evidence by individuals with whom they are closely affiliated. The results of an experiment with experienced auditors and tax professionals, suggest that despite differing in their trait skepticism and client advocacy attitudes, tax professionals and auditors make similar judgments when in the role of an audit engagement team member. We also find evidence both auditors and tax professionals are more persuaded by individuals with whom they have a closer affiliation.

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The Influence of Client Preferences on Tax Professionals' Search for Judicial Precedents, Subsequent Judgments and Recommendations

The Accounting Review ◽

10.2308/accr.1999.74.3.299 ◽

1999 ◽

Vol 74 (3) ◽

pp. 299-322 ◽

Cited By ~ 73

Author(s):

C. Bryan Cloyd ◽

Brian C. Spilker

Keyword(s):

Information Search ◽

Income Tax ◽

Confirmation Bias ◽

Psychological Research ◽

Professional Standards ◽

Tax Professionals ◽

Tax Returns ◽

Federal Income Tax ◽

Client Advocacy ◽

Advocacy Role

Tax professionals provide valuable services to clients by reducing uncertainty about how clients should report transactions on their tax returns. To reduce uncertainty, tax professionals research applicable authorities (e.g., judicial precedents) and provide assessments to clients of the level of authoritative support for client-favorable positions. Tax professionals have strong incentives to make accurate assessments of the strength of client-preferred positions so that clients will understand the level of risk associated with the reporting position. Further, tax professionals must make accurate assessments of authoritative support in order to maintain compliance with tax professional standards and Federal income tax regulations. Incentives notwithstanding, psychological research on confirmation bias suggests that tax professionals' client advocacy role may inhibit professionals' ability to search objectively for relevant tax authority which, in turn, might inhibit their ability to accurately assess authoritative support. We report the results of two studies that examine causes and effects of confirmation bias in tax information search. In study 1, we find that subjects' information searches emphasized cases with conclusions consistent with the client's desired outcome (i.e., positive cases) over cases inconsistent with the client's desired outcome (i.e., negative cases), despite the fact that positive cases were no more similar to the client's facts. Additional analyses indicate that the extent of this confirmation bias was positively related to their assessments of the likelihood that a neutral court would resolve the issue in the client's favor and this in turn increased the strength with which they recommended the client's preferred tax position. Results of study 2 indicate that confirmation bias induced by client preferences can be strong enough to not only result in inaccurate assessments of authoritative support for the client-favored position, which is problematic in and of itself, but also to lead tax professionals to make overly aggressive recommendations.

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The Role of Client Advocacy in the Development of Tax Professionals’ Advice

Journal of the American Taxation Association ◽

10.2308/jata.2010.32.1.25 ◽

2010 ◽

Vol 32 (1) ◽

pp. 25-51 ◽

Cited By ~ 30

Author(s):

Donna D. Bobek ◽

Amy M. Hageman ◽

Richard C. Hatfield

Keyword(s):

Decision Making Process ◽

Client Characteristics ◽

Attitude Theory ◽

Primary Responsibility ◽

Evidence Evaluation ◽

Tax Professionals ◽

Decision Outcomes ◽

Client Advocacy ◽

Context Specific

ABSTRACT: A primary responsibility of tax professionals is to be an advocate for their clients (AICPA 2000). Prior studies have shown mixed results on how the advocate role influences tax professionals’ decision processes and outcomes (e.g., Cloyd and Spilker 1999; Davis and Mason 2003; Barrick et al. 2004; Kahle and White 2004). In this study, we consider how advocacy may be at least partially context-specific, introduce the construct of client-specific advocacy, and thoroughly examine the influence of advocacy attitudes on a number of steps in the judgment and decision-making process. Consistent with attitude theory, we report experimental results that suggest client characteristics influence tax professionals’ advocacy attitudes. We also find that client-specific advocacy influences process variables such as the weighting of evidence and decision outcomes such as the recommendation of tax advice. The results of the study indicate that tax professionals may be unintentionally influenced by client attributes when making judgments and may have difficulty separating their advocacy and evidence evaluation roles.

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A Comparison of U.S. and Offshore Indian Tax Professionals' Client Advocacy Attitudes and Client Recommendations

Journal of the American Taxation Association ◽

10.2308/atax-51502 ◽

2016 ◽

Vol 38 (2) ◽

pp. 51-66 ◽

Cited By ~ 9

Author(s):

Brian C. Spilker ◽

Bryan W. Stewart ◽

Jaron H. Wilde ◽

David A. Wood

Keyword(s):

Tax Professionals ◽

Client Advocacy ◽

The U.S ◽

Jel Classifications

ABSTRACT This study compares the client advocacy attitudes of U.S. tax professionals who do U.S. tax work in the U.S. and Indian tax professionals who do U.S. tax work offshore. We find that experienced U.S. tax professionals have stronger client advocacy attitudes than experienced Indian tax professionals, while the client advocacy attitudes of inexperienced U.S. and inexperienced Indian tax professionals are not significantly different. Further, client advocacy attitudes of experienced U.S. tax professionals are stronger than advocacy attitudes of inexperienced U.S. tax professionals while the client advocacy attitudes of experienced Indian tax professionals are not different from advocacy attitudes of inexperienced Indian tax professionals. We also provide evidence that the client advocacy attitudes of experienced U.S. tax professionals are positively associated with their recommendations of the client-preferred position, while the client advocacy attitudes of experienced Indian tax professionals are not related to their client recommendations. Given the increasing number of Indian tax professionals performing U.S. tax work, our findings should be of interest to researchers, taxing authorities, firms, and taxpayers. JEL Classifications: M40; M41; M55; H20; C90.

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Financial alchemists and financial shamans

Behavioral and Brain Sciences ◽

10.1017/s0140525x17002096 ◽

2018 ◽

Vol 41 ◽

Cited By ~ 1

Author(s):

Samuel G. B. Johnson

Keyword(s):

Global Economy ◽

Money Management

AbstractProfessional money management appears to require little skill, yet its practitioners command astronomical salaries. Singh's theory of shamanism provides one possible explanation: Financial professionals are the shamans of the global economy. They cultivate the perception of superhuman traits, maintain grueling initiation rituals, and rely on esoteric divination rituals. An anthropological view of markets can usefully supplement economic and psychological approaches.

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