With the publication of Responsible Finance and Accounting: Performance and profit for better business, society and planet, a spotlight on the featured research of book contributor Professor Anastasios Elemes, ESSEC Business School.
Profit Shifting: How do the big audit firms fare? by Tom Gamble and Anastasios Elemes.
Clients often call upon big auditing firms to find ways to optimize taxes and provide tax clearance solutions to cushion the impact of high tax rates in the countries in which they operate. But what about the auditing firms’ approach to their own tax affairs?
We interviewed Prof. Anastasios Elemes, professor of Accounting at ESSEC Business School, whose research on this barely covered question appears in the recent book Responsible Finance and Accounting published by Routledge.
Audit firms present themselves as a series of member firms that are locally owned and independent, says Elemes. But despite disincentives to doing so, Big 4 networks shift income among their member firms, much in the same way as their clients practice.
“Income shifting in Big 4 networks,” continues Prof. Elemes, “takes place through regional coordination centres that pool the income of local member firms and then redistribute it in forms of income that enjoys preferential tax treatment relative to ordinary income – e.g. dividends.”
Why is this important in the context of responsible finance & accounting?
This could prove risky for big audit firms in terms of reputation, for being accorded professional status, public interest expectations are placed upon the activities of tax accountants and consultants. “These expectations are unlikely to be met if those who are hired to advise the former on tax matters themselves embody aggressive proclivities in this regard,” states Elemes.
Moreover, Prof. Elemes hopes that his research will bring impact in the form of greater scrutiny of audit firms’ tax affairs at both network and partner levels. “If I had to offer a message,” states Prof. Elemes, “it would be for Big 4 firms practicing what they preach when it comes to international tax planning.”
Discover Prof. Anastasios Elemes and his chapter Auditing the Auditors: How do audit firms manage their own tax affairs? included in the book:
Responsible Finance and Accounting: Performance and profit for better business, society and planet
Useful links:
- Link up with Anastasios Elemes on LinkedIn
- Read a related article: Social contribution and profit – are companies facing a trade off?
- Discover ESSEC Business School
- Apply for the ESSEC GMBA or EMBA.
Learn more about the Council on Business & Society
The Council on Business & Society (The CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business and society including sustainability, diversity, ethical leadership and the place responsible business has to play in contributing to the common good.
Member schools are all “Triple Crown” accredited AACSB, EQUIS and AMBA and leaders in their respective countries.
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- IE Business School, Spain
- Keio Business School, Japan
- Smith School of Business, Canada
- Stellenbosch Business School, South Africa
- Trinity Business School, Trinity College Dublin, Ireland
- Warwick Business School, United Kingdom.
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