The effects of multiple accountability pressures on tax return preparation decisions

Abstract

Tax practitioners are accountable to multiple parties with divergent objectives when carrying out their function as both client advocates and Internal Revenue Service (IRS) agents. In addition, tax practitioners are employed by firms that simultaneously demand client satisfaction and tax law compliance. Thus, firm pressure may serve to magnify the level of goal incongruence faced by tax practitioners. This study measures the sources and levels of accountability pressure felt by practitioners. In addition, the study investigates how tax return behavior is affected by multiple sources of accountability pressure. A survey of 227 tax professionals is used to measure accountability pressure and responses to various tax scenarios. Results indicate that significant accountability pressure exists from respondents' firms to comply with the tax law and to please tax clients. Additionally, tax practitioners from larger CPA firms report feeling more accountability pressure from their employers. Finally, while the amount of reported accountability pressure differs across several demographic variables, actual tax return behavior seems to be affected only by the accountability pressure felt from respondents' firms to comply with the IRS.