File Download
There are no files associated with this item.
Links for fulltext
(May Require Subscription)
- Publisher Website: 10.2308/accr.2005.80.2.677
- Scopus: eid_2-s2.0-18944389736
- WOS: WOS:000228788200012
- Find via
Supplementary
- Citations:
- Appears in Collections:
Article: Profit sharing in an auditing oligopoly
Title | Profit sharing in an auditing oligopoly |
---|---|
Authors | |
Keywords | Audit Partnership Oligopoly Profit-Sharing Rules Specialization |
Issue Date | 2005 |
Publisher | American Accounting Association. The Journal's web site is located at http://aaapubs.aip.org/accr/ |
Citation | Accounting Review, 2005, v. 80 n. 2, p. 677-702 How to Cite? |
Abstract | This paper examines how partners in an audit firm can use profit-sharing rules to induce optimal partner behavior from the firm's point of view, taking into account the strategic competition of firms in an auditing oligopoly. We use a linear contracting framework to investigate the effects of profit-sharing rules on individual partners' various decisions, including their pricing strategies and effort choices. We assume that efficient audits of different types of clients require different effort profiles with respect to degree of partner cooperation. For example, the audit of a complex company requires different amounts of partner collaboration than does the audit of a simple company. Moreover, since it is too costly for an enforcement party, such as the head office of an audit firm or a court, to verify each client's type in order to resolve compensation disputes among the firm's partners, it is reasonable to assume that client type cannot be contracted upon for partner compensation purposes. Given this assumption, we derive conditions under which there exists an equilibrium in which audit firms strategically choose different profit-sharing rules to specialize in different types of clients, thereby earning positive economic profits. Our analysis provides insights into the strategic competition among the big audit firms, and helps to explain the observed differences in the compensation plans of these firms and in the nature of their client portfolios. |
Persistent Identifier | http://hdl.handle.net/10722/177941 |
ISSN | 2023 Impact Factor: 4.4 2023 SCImago Journal Rankings: 4.640 |
ISI Accession Number ID | |
References |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Liu, X | en_US |
dc.contributor.author | Simunic, DA | en_US |
dc.date.accessioned | 2012-12-19T09:40:54Z | - |
dc.date.available | 2012-12-19T09:40:54Z | - |
dc.date.issued | 2005 | en_US |
dc.identifier.citation | Accounting Review, 2005, v. 80 n. 2, p. 677-702 | en_US |
dc.identifier.issn | 0001-4826 | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/177941 | - |
dc.description.abstract | This paper examines how partners in an audit firm can use profit-sharing rules to induce optimal partner behavior from the firm's point of view, taking into account the strategic competition of firms in an auditing oligopoly. We use a linear contracting framework to investigate the effects of profit-sharing rules on individual partners' various decisions, including their pricing strategies and effort choices. We assume that efficient audits of different types of clients require different effort profiles with respect to degree of partner cooperation. For example, the audit of a complex company requires different amounts of partner collaboration than does the audit of a simple company. Moreover, since it is too costly for an enforcement party, such as the head office of an audit firm or a court, to verify each client's type in order to resolve compensation disputes among the firm's partners, it is reasonable to assume that client type cannot be contracted upon for partner compensation purposes. Given this assumption, we derive conditions under which there exists an equilibrium in which audit firms strategically choose different profit-sharing rules to specialize in different types of clients, thereby earning positive economic profits. Our analysis provides insights into the strategic competition among the big audit firms, and helps to explain the observed differences in the compensation plans of these firms and in the nature of their client portfolios. | en_US |
dc.language | eng | en_US |
dc.publisher | American Accounting Association. The Journal's web site is located at http://aaapubs.aip.org/accr/ | en_US |
dc.relation.ispartof | Accounting Review | en_US |
dc.subject | Audit Partnership | en_US |
dc.subject | Oligopoly | en_US |
dc.subject | Profit-Sharing Rules | en_US |
dc.subject | Specialization | en_US |
dc.title | Profit sharing in an auditing oligopoly | en_US |
dc.type | Article | en_US |
dc.identifier.email | Liu, X: acliu@hku.hk | en_US |
dc.identifier.authority | Liu, X=rp01079 | en_US |
dc.description.nature | link_to_subscribed_fulltext | en_US |
dc.identifier.doi | 10.2308/accr.2005.80.2.677 | - |
dc.identifier.scopus | eid_2-s2.0-18944389736 | en_US |
dc.relation.references | http://www.scopus.com/mlt/select.url?eid=2-s2.0-18944389736&selection=ref&src=s&origin=recordpage | en_US |
dc.identifier.volume | 80 | en_US |
dc.identifier.issue | 2 | en_US |
dc.identifier.spage | 677 | en_US |
dc.identifier.epage | 702 | en_US |
dc.identifier.isi | WOS:000228788200012 | - |
dc.publisher.place | United States | en_US |
dc.identifier.scopusauthorid | Liu, X=8409667100 | en_US |
dc.identifier.scopusauthorid | Simunic, DA=8409667000 | en_US |
dc.identifier.issnl | 0001-4826 | - |