European study links tax-related audit disclosures to less multinational income shifting

A European study reported on October 9, 2026, links public audit disclosures about uncertain corporate tax positions to less income shifting by multinational companies. The finding matters because it suggests that a reporting rule intended to make audits more informative may also be associated with changes in corporate tax planning. The researchers describe an association; the evidence does not establish that the disclosures alone caused the change.

The paper, ‘Tax-Related Key Audit Matters and Changes in Multinational Income Shifting,’ appeared in The Accounting Review. Its authors examined whether companies whose auditors identified uncertain tax positions as key audit matters subsequently shifted less income between countries. The study reports a decline in income shifting in the current period and subsequent periods associated with those disclosures.

What the European company data covered

The researchers examined 207,792 affiliate-year observations from 8,389 companies and 45,909 affiliates in multinational groups headquartered in 25 European countries. The data covered 2012 through 2021. Included companies operated in multiple countries, had positive pretax income and made their financial statements publicly available. Those criteria define the companies to which the reported result directly relates.

According to the account published by North Carolina State University on Phys.org, the team combined financial, economic and tax information from the Amadeus financial reporting database, the International Monetary Fund’s World Economic Outlook Database and the Tax Foundation. The researchers used the different years in which European countries introduced expanded audit reports to examine changes in company behavior around the disclosures.

What an uncertain tax position disclosure tells readers

A key audit matter identifies an issue the auditor judged particularly significant in the audit and explains how it was addressed. For this study, the relevant issue was an uncertain tax position. Companies may maintain a tax reserve because an audit by tax authorities could ultimately lead to more tax being owed than they anticipated. The researchers focused on disclosures that made such positions visible in multinational groups’ audit reports.

The International Auditing and Assurance Standards Board said it released revised auditor-reporting standards in January 2015. Those standards required auditors of listed entities to communicate matters they judged most significant in the current-period audit and explain how they dealt with them. The board described the change as a response to calls from investors and other users for more informative auditor reports. That was the reporting rule’s stated purpose, separate from the tax behavior examined in the new study.

Goldman said the team chose to examine this specific kind of key audit matter because earlier research had found little effect from key audit matters on audit conduct or their usefulness to investors. A finding about uncertain tax positions therefore does not mean every type of expanded audit disclosure has the same relationship with company behavior. Other matters can concern different aspects of a business and may work differently.

Where the reported relationship was stronger

The study reports a stronger association for companies without financial constraints, in settings with stronger tax enforcement, and when disclosures identified specific risks and auditors provided explicit assurance. The authors interpret the pattern as consistent with public attention increasing scrutiny and reducing the expected benefit of uncertain tax-planning strategies. These differences across companies and settings also limit any simple claim that the reporting requirement has one uniform effect.

The study was written by Christof Beuselinck of IESEG School of Management, Goldman, Jochen Pierk of Erasmus University Rotterdam and Cinthia Valle Ruiz of IE Business School at IE University. Their analysis addresses income shifting within the European sample, rather than measuring how much extra tax governments collected. The available account gives no basis for assigning a tax-revenue figure to the reported change.

The evidence also does not show whether the same relationship holds outside the sampled European multinational groups or after 2021. The published account contains no response from affected companies, tax authorities or investors. For now, the result points to a specific relationship between tax-related audit reporting and multinational income shifting, with its wider reach and fiscal consequences unresolved.