Of the signals that may cause a taxing authority to audit a company's transfer price,which one is the most important?

Question

Quizplus · Accepted Answer

Unexpectedly low profit is the most important signal that may cause a taxing authority to audit a company's transfer price. This is because a company reporting low profits may indicate that it is intentionally shifting income to lower tax jurisdictions through transfer pricing. In contrast, higher profits may also trigger an audit, but this may be due to a variety of factors such as superior management, good market conditions or technological advances. The nature of the business and the location of the parent company are also factors that may contribute to a transfer pricing audit, but they are not the most important ones.

Of the Signals That May Cause a Taxing Authority to Audit