Investigating the Effects of Financial Reporting Readability on Tax Evasion and accrual quality

The information in the financial statements should be in a way that helps investors evaluate the performance of management in terms of maintaining and optimizing the use of resources According to the management ambiguity hypothesis, managers intending to conceal the bad news or their poor performance attempt to present financial reports in such a way that are not simply understandable to investors and stakeholders. Moreover, since tax evasion is profitable for companies, financial statements may be published ambiguously so that the respective auditors cannot discover the facts. This study investigated the impact of financial reporting readability on accrual quality and tax evasion. For this purpose, 174 companies listed on the Tehran Stock Exchange in the 2011–2012 period were selected as the sample via the systematic removal method. The results of the dynamic panel data analysis showed that higher financial reporting readability reduces tax avoidance, but does not significantly affect accrual quality.