Global Journal of Management and Business Research, D: Accounting and Auditing, Volume 22 Issue 2

b) The Relationship Between Taxation and Accounting Data Manipulation: The Tax Burden Reduction's Hypothesis Financial and accounting information is of interest to internal (management, employees) and external stakeholders (such as shareholders, creditors, tax authorities, etc.) (James, 2009). However, firms may produce and provide either wrong or little information on their activities (Seca-Assaba, 1998). That could be the case in a declarative tax system. To find a solution to this issue, tax returns may go through rigorous controls. Specifically, the tax audit of a firm is triggered from the returns filed with the tax authorities. Indeed, based on the information provided, the company is subject to a particular observation on situations such as: the existence of significant deficits (Floret, 2014), recurrent negative results and inconsistencies, a discrepancy between the turnover resulting from the VAT declarations and the one reported in the income tax return (Sassi, 2013; El Arif, 2019). This situations induce suspicions of accounting data manipulation, especially whenever firms seek to reduce their tax burden. They occur with acuity in developing countries, countries where information asymmetries between economic actors are very high (Ngongang, 2015). They are also significant in small and medium-size enterprises which maintain an even stronger informational discrepancy (Lefilleur, 2009; Thus, one of the real causes of aggressive accounting lies in the conflicts of interest between the producers of financial information and the tax authorities. Indeed, managers seek to maximize shareholders’ value (Bogliolo, 2000; Denglos, 2008), and shareholders' interest is to maximize their wealth (Egbunike and Ezelibe, 2015). In this case, paying less tax would allow investor-shareholders to obtain more dividends and capital gains. On the other hand, the country's tax authorities would like to collect more and more taxes. Thus, to avoid taxes, companies will on the one hand manage and disclose different tax information to the authorities than to the stakeholders, and on the other hand they will use tax shelters to avoid tax payments (Nisha and Rifat, 2019). However, it can be noted that companies that benefit from a tax advantage due to the discretionary management of their results, find themselves faced with an adjustment. As a result, they may suffer a charge, composed of the tax charge actually due and a penalty. They will then make a trade-off between the advantage of a tax gain at the moment, which the use of discretionary power gives (high level of discretionary regularization), and the possible burden to be borne in the future in case of tax repression. The level of tax liability is likely to encourage the management of accounting data. Thus, managers are more likely to use their discretion to encourage increased spending in order to achieve a lower taxable income. At the very least, it can be noted that the effective tax rate is a function of income, which in turn depends on the level of accruals. Therefore, it can be assumed that the effective tax rate and the accrual book values move in the same direction. The higher the tax liability, the better the managers manage their accounting data. Thus, from the perspective of information asymmetries and positive accounting theory, as well as tax theory, we hypothesize that the tax burden is positively and significantly related to the management of accounting data by firms in Cameroon . Considering that the effective tax rate is a function of the firm's turnover/results, and that the latter attracts the attention of the tax auditor as it becomes more and more consistent, it worth noting that firms with a high level of turnover/results are under the spotlight. Consequently, in order to avoid tax repression resulting from audits, they will proceed less and less with the management of accounting data. In other words, firms with high levels of effective tax rate make less use of their discretion in producing financial and accounting information. Thus, we hypothesize that the relationship between effective tax and accounting data management is non-linear: it is positive at a certain level of effective tax and becomes negative when the effective tax rate becomes higher . Furthermore, considering the theory of information asymmetry, the positive theory of accounting, as well as the theory of taxation, and taking into account the mandatory and non-negotiable side of the tax law, a variation in the level of taxes would automatically lead to a variation in the level of discretionary power. The producers of financial and accounting information being unable to vary the legal requirements, they will therefore make more use of their discretionary powers, in order to adjust the tax burden to the objective to be achieved. As a result, the level of accruals value could define the actual tax paid. Thus, we also hypothesize that there is a reverse causality in the Taxation and Accounting Data Management: An Empirical Study in Cameroon 69 Global Journal of Management and Business Research Volume XXII Issue II Version I Year 2022 ( )D © 2022 Global Journals Kay, 2010). Thus the hypothesis of accounting manipulation for tax reasons comes to life. Furthermore, it has been proven that fiscal policies form an incentive for strategic earnings management (Zmijewski and Hagerman, 1981). Firms use their accounting discretion to obtain a tax level that is appropriate for them (Duvall, Jennings, Robinson, and Thompson, 1996). The tax system is thus a precursor of the manipulation of accounting figures. In order to increase the cash flow available to capital providers and thus maximize shareholder wealth, cash outflows are limited. A mean to achieve this goal is to reduce the amount of income tax, by entering into account higher expenses than they "normally" would have been (Breton and Schatt, 2006). We can therefore conclude that the level of taxes is a factor likely to encourage the manipulation of accounting data, and incite the tax fraud (Djeudja and Tedomzong, 2017).