Table 7.

Random Audits and Flow-through Conversions

	(1)	(2)	(3)	(4)	(5)	(6)
	DV: Convert to S-Corp			DV: Apply for Flow-through EIN
Audited	0.010	0.043***	-0.006	-0.008	0.020	-0.022*
	(1.10)	(2.63)	(-0.61)	(-0.85)	(1.20)	(-1.80)
Intercept	0.068***	0.063***	0.070***	0.110***	0.089***	0.120***
	(11.39)	(6.12)	(9.60)	(15.28)	(7.70)	(13.21)
Sample	Full sample	Noncompliant firms	Compliant films	Full sample	Noncompliant firms	Compliant firms
N	5.016	1.596	3.420	5.016	1,596	3A20
R-Squared	0.000	0.006	0.000	0.000	0.001	0.001
Cross Equation Tests on Audited Coefficient
(2) vs (3):		0.049**
		(2.55)
(5) vs (6):		0.042**
		(2.02)

This table shows the extent to which firms that filed a Form 1120 in 2010 convert to a flow-through organizational form following a random audit. The specification is a linear probability model, where the dependent variable is Convert to S-Corp in columns 1–3 and Apply for Flow-through EIN in columns 4–6. The independent variable of interest is Audited, which indicates whether a firm was audited as part of the National Research Program. No control variables are included, as both the audit and control firms were selected randomly. The sample consists of 2508 audited firms and 2508 control firms (one observation per firm). Observations are weighted using the sampling weights (inverse probability of being selected) to generalize the results to the population. All variables are defined in Appendix 1. Robust t-statistics are presented below the coefficients in parentheses. ***, **, * denotes statistical significance at the 10, 5, or 1% level, respectively.