Article

Audit market structure and related changes in Taiwan: The effects of CPA qualification changes and mergers

National Taipei College of Business Department of Accounting Information Taipei Taiwan, ROC
Quality and Quantity (Impact Factor: 0.76). 06/2010; 44(4):691-712. DOI: 10.1007/s11135-009-9232-0

ABSTRACT There are four material structure changes over the certified public accountants (hereafter the CPA) industry in Taiwan since
1988. They are the relaxation of CPA qualification examinations in 1988, the merger of KPMG and Cooper & Lybrand (C&L) in
1999, the reduction of CPA examination pass rates in 2001, and the merger of T. N. Soong (TNS) and Deloitte & Touche Taiwan
(D&TT) in 2003. Thus, this study investigates how the four events make impact on the market concentration of CPA industry
and the market competition type. Empirical data are obtained from the Census Report of Public Accounting Firms in Taiwan (1989–2003).
Main findings show that the Big international accounting firms dominate the majority of the audit market. Besides, the Big
international (or Big Four) market concentration during 1992–1997 is lower than that in other periods after loosing the CPA
examination pass rates since 1988. Since tightening up of CPA examination pass rates in 2001, the Big international (or Big
Four) market concentration display an increasing trend. Finally, accounting firm mergers in 1999 and 2003 have all contributed
to the increase of market concentration of international (or Big Four) accounting firms.

KeywordsMarket share-Market concentration-Competition type-Accounting firms

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    ABSTRACT: Purpose ‐ This paper aims to explore the relationship between market share and performance of large accounting firms. It also investigates whether the performance of international accounting firms is better than that of non-international accounting firms. Design/methodology/approach ‐ This paper divides the empirical analysis into two stages. The first stage constructs a multiple regression model to explore the relationship between market share, international operations and the performance of large accounting firms. The second stage uses the Tobit regression model to identify the determinants of market share of international accounting firms. Findings ‐ Empirical results show that there is a significant, positive relationship between market share and performance, and that the performance of international accounting firms is better than that of non-international accounting firms. Second, from the perspective of business characteristics, the scope of the most international accounting firms is traditional auditing services; namely financial attestation and tax business services. Practical implications ‐ From the clients' viewpoint, market share is one of the key indices in determining the quality of the accounting firms' service. Originality/value ‐ As the market for auditing services in Taiwan is saturated, in the future, the accounting industry will be concerned with non-auditing services. It is suggested that the large accounting firms could follow the demand changes of their clients: employ professionals in various fields to provide specialized services, adjust the range of transnational and management consultant services, and operate management consultant services more aggressively. These measures would have advantages in a fiercely competitive market.
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