Yi-Fang Yang and Yahn-Shir Chen
The purpose of this paper is to examine the direct and interactive effects of audit service quality and audit market concentration on performance of public accounting firms in…
Abstract
Purpose
The purpose of this paper is to examine the direct and interactive effects of audit service quality and audit market concentration on performance of public accounting firms in Taiwan.
Design/methodology/approach
Empirical data of this study come from registered public accounting firms in Taiwan, an industrial data. From the perspective of industrial economics and based on the structure-conduct-performance paradigm (Cowling and Waterson, 1976), this study use OLS to test the linear regression equation.
Findings
Empirical results indicate that both audit service quality and audit market concentration have positive effects on performance. The interaction terms between audit service quality and audit market concentration are positively related to performance.
Practical implications
This documents that human capital is the core resource in public accounting firms which could enhance performance through higher audit service quality under intense market competition. Specifically, facing increasingly competitive audit market, public accounting firms response to the hostile situation by employing auditors with higher educational level, more work experience, with professional licenses, and taking more continuing professional education.
Originality/value
Few previous researches consider the effects of either market concentration or audit service quality on firm performance. This study simultaneously examines the relation among audit service quality, audit market concentration, and performance of public accounting firms. With the results, this study contributes knowledge to human resource and quality management-related literatures.
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Yahn-Shir Chen, Enny Susilowati Mardjono and Yi-Fang Yang
To maintain auditor independence, Section 201 of the Sarbanes–Oxley Act of 2002 (SOX) imposes restrictions on audit firms in rendering management advisory services (MASs) to audit…
Abstract
Purpose
To maintain auditor independence, Section 201 of the Sarbanes–Oxley Act of 2002 (SOX) imposes restrictions on audit firms in rendering management advisory services (MASs) to audit clients. Responding to the requirement, audit firms establish a strategic alliance with consulting companies to expand their scope of services to alleviate the impairment of auditor independence. Taiwan follows the spirit of SOX in related laws and regulations. To investigate the effects of SOX on Taiwanese auditing industry, this study aims to examine the relationship between MASs and operating performance of audit firms.
Design/methodology/approach
This study obtains empirical data from the 1989–2017 Survey Report of Audit Firms in Taiwan, published by the Financial Supervisory Commission (FSC). FSC administers the survey across all registered audit firms annually to collect business information on the auditing industry for macro-economic analysis and industrial policy development. The authors group audit firms into three categories: national, regional and local firms. Based on the structure-conduct-performance (S-C-P) theoretical framework, this study establishes the following cross-sectional regression equation to test the authors’ hypotheses.
Findings
Main results indicate that national firms have better post-SOX firm and alliance performance. Both firm and alliance MASs contribute more to the performance of national firms after SOX.
Practical implications
This study claims that national firms establish alliance with consulting companies for resource sharing but regional and local firms for tax-saving.
Originality/value
Consistent with the economic theory of regulation and resource-based theory, SOX matters in Taiwan.