The Research On Development Of Accounting Firm’s Size

Since the industry of certified public accountant (CPA) was reestablished inChina, the government sectors have been taking measures to promote thedevelopment of accounting firms. Put forward by relevant policies, the accountingfirms increase their scales through various models. After30years’ development, thescales of both Chinese CPA industry and of individual accounting firms have beenenlarged. However, compared with the Big4(PWC, DTT, KPMG and EY), Chineseaccounting firms still have a long way to go. Therefore, it would be of significance tostudy the expansion of Chinese accounting firms.The large-scale expansion of public accounting firms has always been a hot issueof both domestic and foreign researchers. Due to the disparity in scale betweendomestic and foreign accounting firms, foreign researchers focus more on theeconomic consequences and influences of large-scale expansion of foreign publicaccounting firms. However, the domestic researchers mainly pay attention to theresource consolidation after large-scale expansion. They seldom research on themotives, model selection and economic consequences of large-scale expansion ofdomestic accounting firms, let alone the comparative study of the foreign anddomestic accounting firms. In view of this, the thesis aims at putting forward someuseful suggestions for large-scale expansion of domestic accounting firms through asystematic comparative study of the large-scale expansion between domestic andforeign public accounting firms.The present thesis consists of six chapters. Chapter one is introduction, whereinthe research background and method are provided. Chapter two devotes itself to areview of relevant literature at home and abroad, finding the perspective for this study.In Chapter three, theoretical analysis is carried out: firstly, in light of the organizationability theory and transaction cost theory, the motives and model selection for thelarge-scale expansion of accounting firms are analyzed; secondly, the economicconsequences of accounting firms’ development in scale is analyzed according to Michael Porter’s model of "Five Competitive Forces" and industrial organizationtheory. Chapter four is mainly for the investigations of the motives and modelselection of the large-scale expansion of domestic and foreign accounting firms.Chapter five is a comparison of the economic consequences and differences betweendomestic and foreign accounting firms’ scale expansion, from the perspectives ofindividual accounting firms and accounting firm as a whole respectively. Finally, onbasis of the previous two chapters, the conclusion of the study is given, together withthe suggestions for the large-scale expansion of domestic accounting firms.Considering the economic consequences of individual accounting firms’large-scale expansion, and employing Porter’s model of the Five Competitive Forces,this thesis, based on both domestic and foreign audit markets, studies the effects ofaccounting firm expansion on the five basic forces which affect the firms’ competitiveadvantages. It is found from the analysis that the expansion model selections ofdomestic and foreign accounting firms differ owing to different expansion motives,and then will have different effects on the five competitive forces, and thus influencethe processes of their large-scale expansion. As the CPA industry is mainly affected bythe quality and quantity of individuals accounting firms, the status of the industry ingeneral of domestic and foreign accounting firms is different due to the differences ineconomic consequences of their expansion; the concentration ration and quality ofdomestic audit market are inferior to the foreign market. Consequently, Chineseaccounting firms need to accelerate their large-scale expansion.The contribution of this thesis first goes to the novelty of the researchperspective; it improves the researches within this field from the perspective ofcorrelation between the motives of accounting firm expansion and its model selection.Secondly, this research is a comprehensive study that investigates both domestic andforeign audit markets, surveys the large-scale expansion motives, model selection andeconomic consequences of the accounting firms, and proposes suggestions for thelarge-scale expansion of Chinese accounting firms in future.