| Summary: | Tax aggressiveness, an important issue in corporate business, reflects a company's strategies to minimize tax liabilities, which often border on legal and ethical boundaries. This behavior has significant implications for tax authorities and financial regulators. The prevalence of creative accounting in global financial markets is especially pronounced in the Asia-Pacific region, with financial reports reflecting the firm's management to optimize resources. This study investigated the impact of firm specific characteristics and audit quality on corporate tax aggressiveness among Malaysian industrial firms between 2016 and 2021. To measure tax aggressiveness, this study relied on effective tax rates. Using panel data methodology, this study analyzed 522 firm-year to achieve the research objectives. Consequently, our findings revealed that audit quality, firm performance and firm size demonstrated a high propensity for tax aggressiveness. However, firm leverage did not have any significant influence on tax aggressiveness. The insights from this study offer valuable guidance for financial regulators and tax authorities seeking to comprehend the interplay between financial and tax reporting decisions. Additionally, the study provides theoretical support for the agency theory by showing that external monitoring, represented by audit quality, is required to reduce corporate tax aggressiveness.
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