Certified Public Accountant Firms Research Articles

A Study on Audit Failures by Certified Public Accounting Firms

Audit failure occurs when certified public accountants (CPAs) fail to disclose significant misstatement risks in the audit report. Such failures frequently lead to various degrees of social harm. Therefore, it is crucial to investigate the causes of audit failures to address these issues fundamentally and prevent their occurrence from different angles. This paper examines audit failures from four perspectives: chaotic audit pricing, inadequate audit preparation, substandard CPA audit competence, and insufficient supervision of auditors. It proposes specific methods to reduce audit failures, including optimizing pricing, enhancing pre-audit preparations, refining audit procedures, and improving audit supervision.

A Study on Audit Failures by Certified Public Accounting Firms

Audit failure occurs when certified public accountants (CPAs) fail to disclose significant misstatement risks in the audit report. Such failures frequently lead to various degrees of social harm. Therefore, it is crucial to investigate the causes of audit failures to address these issues fundamentally and prevent their occurrence from different angles. This paper examines audit failures from four perspectives: chaotic audit pricing, inadequate audit preparation, substandard CPA audit competence, and insufficient supervision of auditors. It proposes specific methods to reduce audit failures, including optimizing pricing, enhancing pre-audit preparations, refining audit procedures, and improving audit supervision.

Audit(or) type and audit quality in emerging markets: evidence from explicit vs. implicit restatements

Purpose This paper aims to examine the link between audit(or) type and restatements in Egypt, a complex and multifaceted auditing market. The usual big 4 versus non-big 4 comparison is insufficient as Egypt has a unique mix of private audit firms, one governmental agency (Accountability State Authority) and mandatory/nonmandatory audit services, including single, joint and dual audits. Design/methodology/approach The study uses a sample of listed companies in Egypt and analyzes the impact of auditor type and audit type on explicit, implicit and total restatements. The study uses logistic regression model to examine the underlying relationship. Findings Results show no relationship between auditor type and audit quality, positive association between non-big foreign CPA firms and total/implicit restatements and mixed results for the impact of dual audits on audit quality. The study found no link between auditor type and audit quality in Egypt. Egyptian audit firms linked to non-big 4 foreign Certified Public Accounting firms were positively linked to total and implicit restatements. Joint audits did not improve audit quality and were directly related to total and explicit restatements. Dual audits showed mixed results, positively associated with implicit restatements but inversely associated with explicit restatements. Originality/value The study provides valuable insights into the complexities of the auditing market in emerging markets and offers valuable insights for stakeholders in the financial statement users, audit firms and governmental agencies.

Beauty is in the eye of the employer: Labor market discrimination of accountants.

This research investigates labor market discrimination based on physical appearance in Israel’s Certified Public Accountant firms. Using a survey questionnaire, we showed that accountants in managerial positions prefer to hire more physically attractive candidates. This beauty premium is larger among the five biggest Certified Public Accountant firms and can be explained by the perception that attractive candidates possess essential traits for becoming successful accountants. An important implication of our results is that even among accounting firms, where professionalism is well defined, discrimination against candidates based on traits such as physical appearance can ineffectively eliminate suitably qualified interns.

Analysis of Social Media for Marketing CPA Services in Australia

Public accounting firms increasingly use social media to market their services. Determining which social media platforms are the best fit for the firm and its clients can be a challenge. This study examines the use of social media by major Certified Public Accounting firms in Australia, according to the following measures: revenue, number of partners, number of offices, and gender distribution among partners. Findings indicate that social media can play an important role in marketing CPA services. Social media use differs according to revenue and total partners, but not number of offices. In addition, the findings show a gender difference exists, that social media use varies by the firm’s gender make-up, as measured by the female proportion of the firm’s partnership.

Rethinking Quatrro’s execution strategy: capturing the small and medium-sized enterprise market

Learning outcomes The learning outcomes of this paper are to understand the supply side of the Business Process Outsourcing (BPO) model and how a firm can develop and capture a new market using Blue Ocean Strategy principles; understand how to use the four actions framework and eliminate/reduce/raise/create (ERRC) grid to develop a Blue Ocean market; evaluate three strategic alternatives available to a firm along with the benefits and challenges of each; map out the current strategy to inform possible future strategies and envision how one can use the BMC to re-invent the execution strategies of a disruptor; and discuss the opportunities for growth and the challenges therein in a dynamic global business environment. Case overview/synopsis Sri Rao, President of Market Development and Strategy of Quatrro Business Support Services (Quatrro), a BPO firm, weaved through the bustling streets of Gurgaon, India, to get to work early on a blistering summer day. It was the beginning of the new 2017 fiscal year and there was a sense of anticipation and uncertainty in the office to which he was headed. Quatrro offered outsourced finance, accounting and payroll solutions to small and medium-sized enterprises across the world, but mainly the USA. Arriving at his desk, Rao gazed out the window and reflected on Quatrro’s journey so far, the ups and the downs and the strategy for moving forward. Growth had been moderate with small deals. Local and regional Certified Public Accountant firms continued to provide stiff competition and the cost of acquiring new clients was high. There was a need to rethink Quatrro target markets and business development strategy. Quatrro’s annual board meeting was coming up in three weeks and Rao wanted to present a credible plan to accelerate Quatrro’s growth. He was worried that if the plan was not accepted by the board, any further investments in the business would be challenging and could even lead to the board directing Quatrro to divest. He believed they had run out of patience with a business that had a lot of potential but was not growing. He had one last opportunity to get Quatrro’s strategy right before his planned departure from the company in just a year’s time. Rao waited for his team to discuss their recommendations based on a presentation he had made to them two days ago. Complexity academic level Undergrad/MBAs. While most growth strategy cases focus on firms seeking to outsource services for efficiency and concentrate on value added to the core functions and competences, this case centers on the supply side and examines the BPO firm itself. It focuses on the technology service industry (as opposed to product/manufacturing), which while growing and significant is not often written about in cases, and finally, the case integrates an understanding of the Blue Ocean Strategy along with the Business Model Canvas allowing students to envision how one can use the BMC to re-invent a business strategy. It does so with a traditional Ansoff Matrix as the backdrop. Supplementary materials Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes. Subject code CSS 11: Strategy.

CPA FIRM’S CLOUD AUDITING PROVIDER FOR PERFORMANCE EVALUATION AND IMPROVEMENT: AN EMPIRICAL CASE OF CHINA

While CPA (Certified Public Accountant) firms utilize cloud auditing technologies to generate auditing reports and convey information to their clients in the Internet of Things (IoT) Era, they often cannot determine whether cloud auditing is a secure and effective form of communication with clients. Strategies related to cloud auditing provider evaluation and improvement planning are inherently multiple attribute decision making (MADM) issues and are very important to the auditor industry. To overcome these problems, this paper proposes an evaluation and improvement planning model to be a reference for CPA firms selecting the best cloud auditing provider, and illustrates an application of such a model through an empirical case study. The DEMATEL (decision-making trial and evaluation laboratory) approach is first used to analyze the interactive influence relationship map (IIRM) between the criteria and dimensions of cloud auditing technology. DANP (DEMATEL-based ANP) is then employed to calculate the influential weights of the dimensions and criteria. Finally, the modified VIKOR method is utilized to provide improvement priorities for performance cloud auditing provider satisfaction. Based on expert interviews, the recommendations for improvement priorities are privacy, security, processing integrity, availability, and confidentiality. This approach is expected to support the auditor industry to systematically improve their cloud auditing provider selection.

A hybrid multiple criteria decision making model of sustainability performance evaluation for Taiwanese Certified Public Accountant firms

Abstract Despite the increasing demand for sustainable development among Certified Public Accountant firms due to the more severe competitive environment, there is a dearth of research on a sustainability performance evaluation model for these firms' managerial decision-making. Therefore, by utilizing a multiple criteria decision-making model based on the Balanced Scorecard and combining Decision Making Trial and Evaluation Laboratory with Analytic Network Process and modified VlseKriterijumska Optimizacija I Kompromisno Resenje methods, this study sets up a model that can clarify the mutually influential relationships and comment weights of evaluation criteria, which have so far been ignored in prior studies on Certified Public Accountan firms' performances and the current situation of their sustainability performance. Based on interviews with partners of Taiwanese Certified Public Accountant firms, this paper finds that Client is the most important factor, followed by Internal processes, Learning and growth, and then Finance. The empirical result shows that client orientation rather than price-cutting may be a right strategy. In addition, more efforts are needed to improve Taiwanese Certified Public Accountant firms' sustainability performance. The results provide Certified Public Accountant firms’ decision-makers with a managerial reference for building sustainability performance evaluation systems and for seeking out the priorities in sustainability performance strategies.

Examining the Current Legal Environment Facing the Public Accounting Profession: Recommendations for a Consistent U.S. Policy

We examine the recent history and trends of U.S. auditor liability to third parties to help regulators and legislators develop policies to protect and maintain audit quality while limiting auditor liability exposure. Although the United States has yet developed a formal policy to address auditor liability, some European Union member countries and Australia, in varying degrees, support such limitation. Thus, we also explore current EU and Australian policies as examples of potential recommendations to U.S. policy makers. In light of a litigious environment, U.S. Certified Public Accounting firms generally accept potential clients only after analyzing potential risks, dismiss many risky clients, raise their total or hourly fees, spend more time examining attestation evidence, and perform other procedures to reduce their litigation risk. This risk arises largely from the federal and state legal systems, assuming that auditors can better absorb and control losses from misleading financial statements than can financial statement users. While culpable, this litigious environment led to the demise of two large international Certified Public Accounting firms—Arthur Andersen and Laventhol & Horwath. Is the global economy better off having fewer accounting firms with the capacity to perform international audits? A Public Company Accounting Oversight Board’s recent Exposure Draft would require auditors of issuers to expand significantly their audit reports beyond current Pass/Fail standards, which could increase audit firms’ disclosures and resultant liabilities. After examining U.S. federal and state statutes plus court decisions regarding auditor liability, we suggest methods to protect the public while allowing audit firms to thrive in these environments.

Exploring the Key Risk Factors for Application of Cloud Computing in Auditing

In the cloud computing information technology environment, cloud computing has some advantages such as lower cost, immediate access to hardware resources, lower IT barriers to innovation, higher scalability, etc., but for the financial audit information flow and processing in the cloud system, CPA (Certified Public Accountant) firms need special considerations, for example: system problems, information security and other related issues. Auditing cloud computing applications is the future trend in the CPA firms, given this issue is an important factor for them and very few studies have been conducted to investigate this issue; hence this study seeks to explore the key risk factors for the cloud computing and audit considerations. The dimensions/perspectives of the application of cloud computing audit considerations are huge and cover many criteria/factors. These risk factors are becoming increasingly complex, and interdependent. If the dimensions could be established, the mutually influential relations of the dimensions and criteria determined, and the current execution performance established; a prioritized improvement strategy designed could be constructed to use as a reference for CPA firm management decision making; as well as provide CPA firms with a reference for build auditing cloud computing systems. Empirical results show that key risk factors to consider when using cloud computing in auditing are, in order of priority for improvement: Operations (D), Automating user provisioning (C), Technology Risk (B) and Protection system (A).

Gender Equity in Accounting: How the CPA Profession Is Balancing the Numbers

Ripe with opportunities for growth, the accounting profession is struggling to identify leaders to fill the shoes of its retiring baby boomers. Although more diverse organizations typically outperform their peers and certified public accounting (CPA) firms hire approximately equal numbers of men and women, men hold more than three‐quarters of these firms’ leadership positions. Achieving gender equity in the profession's top ranks is challenging, particularly since organizational leaders tend to groom individuals who mirror themselves. CPA firms that utilize a conscious strategy to retain and develop female professionals, however, are beginning to balance the numbers. Their experiences offer valuable lessons for leaders of any organization striving for sustainable succession planning. © 2016 Wiley Periodicals, Inc.

An empirical study of returns to scale of CPA firms in the post SOX era

This paper performs empirical tests for the returns to scale pattern of certified public accountant (CPA) firms in the post Sarbanes–Oxley Act (SOX) era using data envelopment analysis. Analyzing a sample of 70 of the top 100 CPA firms from Accounting Today surveys over the 6 years period 2005–2010, we find that our sample CPA firms as a whole exhibit decreasing returns to scale in the post SOX era, suggesting that these CPA firms had exhausted scale economies by expansions through mergers and acquisitions and organic growth. Thus, these firms may consider stopping their expansion plans and downsizing or divestitures in order to improve their production efficiency.

Ethical leadership and Ba Ling: a survey on the perception of accounting interns in CPA firms

Purpose– This paper aims to investigate the relationship between ethical leadership and Ba Ling (霸凌) perceived by Certified Public Accounting (CPA) interns, and the influence of gender factor of leaders and followers on the relation. Moreover, Workplace Ba-Ling (职场霸凌, a derivation of workplace bullying) as a new conceptual idea, specifically extracted from Chinese context, is first taken into consideration.Design/methodology/approach– This research is based on the questionnaire responses of accounting interns enrolled in a university-CPA firms cooperative education programs, and the classical Ethical Leadership Scale and Negative Acts Questionnaire were applied in the survey to get empirical results.Findings– The empirical results reveal the fact that ethical leadership of the audit project teams is negatively related to workplace bullying perceived by the accounting interns working in the CPA firms. No significant impacts were found of the gender factor on workplace bullying and ethical leadership; however, the further breakdown of the gender factor into the four dimensions of the leader – follower gender differences lead to the significant difference of ethical leadership among the four redefined gender difference groups. The ranking order in terms of ethical leadership further proves that female leaders tend to show higher ethicality than male ones.Research limitations/implications– As public accounting industry has acted an important role throughout the drastic Chinese economic growth of more than three recent decades, this paper provides knowledge of the gender-differentiated relationship between ethical leadership and workplace bullying, which implies serious concerns to be given in the varied business and workplace contexts in China and other emerging economies.Originality/value– There has been an increasing literature trend discussing workplace bully in Western business studies; however, rarely has existing literature addresses this kind of issue in the emerging economies like China, where workplace ethics has become a commonly criticized concern with the fast economic growth in recent decades. Additionally, this paper proposes the new Chinese term of Ba Ling corresponding with the Western workplace bullying.

A survival analysis of tax professionals’ performance and internship experience

Purpose – The purpose of this study is to consider the effect of an internship experience on tax accountants’ professional performance. Design/methodology/approach – It uses survival analysis, a dynamic methodology that allows for more precise modeling than static traditional methods used to study promotion and turnover rates in the past. The hypotheses were tested using a longitudinal database obtained from the human resource departments of regional Certified Public Accountant firms located in the southeastern and mid-south areas of the USA. Findings – Results were mixed. As in previous studies on the effects of internships on subsequent professional performance, tax accounting professionals with a master’s degree and prior internship experience had significantly faster promotion rates than those professionals with a master’s degree and no internship experience. However, tax professionals with a master’s degree and prior internship experience did not demonstrate a significant difference in turnover rate when compared to the no-internship group. Practical implications – This research provides evidence that students, employers and institutions of higher education can use to guide them in their decisions regarding the effects of structured internships on professional performance – in this case, the professional performance of tax accountants. Originality/value – Previous research on tax professionals’ performance and internship experience made use of static research methodologies. This study uses the more dynamic methodology of survival analysis to see if different findings result.

A multi-criteria approach to CPA firm selection: a case study

The choice of a professional certified public accountant (CPA) firm is vital to organisational success. The appropriate selection of a CPA firm, and thus the ability to obtain relevant and useful professional advice, can either make or break a business. Evaluation and selection of a CPA firm represents a multi-criteria decision-making problem that entails both qualitative and quantitative criteria. This study proposes the use of the analytic hierarchy process (AHP) as a tool for assisting companies to evaluate various CPA firms. Data for our research project were collected from a non-profit organisation based in a large Western Washington city. Sensitivity analysis was also conducted to test the robustness of the decision. We are hoping that our findings will be valuable to companies in their CPA firm selection decisions.

English

This study investigates the effects of different leadership styles on organizational commitment in both the US and Taiwan along with CPA firms. The study sample consists of 137 respondents from among the Big-Four in the US and 247 respondents from the Big-Four in Taiwan. In addition to both promising future and royalty dimensions in organizational commitment, Americans are concerned with joy in their work while the Taiwanese emphasize policy recognition. Furthermore, Americans are identified as favoring supportive leadership while the Taiwanese prefer supportive and participative leaderships. Among other variables that influence organizational commitment excluding gender and education level, Americans have significant relationships to job field, age, and whether a CPA license is held; on the other hand, Taiwanese care about the working tenure and job level.   Key words: Certified Public Accountant (CPA) firms, organizational commitment, perceived leadership style. 

Performance evaluation of CPA firms in Taiwan from the perspective of industry-specific client groups

This paper explores the operating efficiency of certified public accounting (CPA) firms from the perspective of industry-specific client groups. The decision making units are 49 partnership CPA firms selected from the database of 2010 Public Accounting Firms Service Investigation Report. This paper integrates three analysis methods: Data envelopment analysis, an independent sample t test, and multiple regression analysis. It aims to offer the operators of CPA firms with a reference for improving operating efficiency. It also identifies important industry-specific client groups for the sustainable operation of the firms, and analyzes the impact of operating efficiency on operating revenue and total revenue. It is believed that the results of this paper could provide decision references for future client relationship management and exploitation of new client groups.

SUCCESSES AND FAILURES OF AICPA INITIATIVES: IMPACT OF DIVERSITY DECLINE ON MINORITIES

This is a qualitative research examining the impact of diversity in the Certified Public Accounting(CPA) profession and the successes and failures of the American Institute of Certified PublicAccountants (AICPA) initiatives to address this issue. It also examined current state of diversity inthe CPA profession and found that while the actual head count of minorities in the professionincreased, the percentage of representation dropped. The success of the initiative has been theability to convince schools to seek more diversity in recruitment. The AICPA initiatives failedbecause of lack of financial resources available to minorities to continue their education as well aslack of awareness. The research suggests ways of encouraging minority interest in the CPAprofession. Beside, this research examined the benefits of the initiatives, current AICPA goals aswell as future challenges. Despite the several initiatives proposals and implementations to attractminorities into the CPA profession, minority representation is still at its lowest. However, the futurelooks bright because minority owned firms are increasing even though there is a decreasingenrollment of minority accounting students in colleges. As the number of CPA firms increases,mentorship programs can be developed to help increase minority interest in the accountingprofession.

To Find Or Not To Find: Public Accounting Auditors Versus Governmental Auditors

This study examines the impact that the type of auditor (OfficeOffice of the Auditor General (OAG auditor) or CPA firm auditor) has on the number of compliance audit findings reported for select state agencies in a major Midwestern state. In the state studied, The OAG is responsible for conducting compliance audits of government agencies on at least a biennial basis. These audits are either performed by the Auditor General’s state auditors or by Certified Public Accounting (CPA) firms under contract to the OAG. A sample of agencies with audits that were sometimes performed by CPA firms and sometimes by OAG auditors was chosen. A statistical analysis concluded the number of compliance audit findings reported by OAG auditors was significantly higher than the number of compliance audit findings reported by CPA firm auditors, for the same set of state agencies.

Internal control reporting differences among public and governmental auditors: The case of city and county Circular A-133 audits

We investigate potential differences in audit reporting outcomes between Circular A-133 audits performed by governmental auditors vs. those performed by certified public accounting (CPA) firms. Specifically, we investigate the association between auditor type and the likelihood of auditor-disclosed internal control concerns. We employ a cross-sectional sample of 13,386 single audit reports of US cities and counties during 2004–2006. In contrast to prior literature, the results indicate that in the post-Sarbanes–Oxley environment, CPA firms appear more likely to issue audit reports that identify internal control concerns than are governmental auditors in the context of Circular A-133 audits. The differences are more pronounced for larger CPA firms.