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An International Meeting of American Accounting
Association
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An Exploration of the Cost Characteristics of the Taiwan Accounting Service Industry in a Changing Environment |
Tai - Cheng Shih
Yuan Ze University
Yann - Ching Tsai
National Taiwan University
Abstract: In the late 1980s, the Ministry of Examination, responsible for conducting CPA exam affairs, determined to loosen the passing threshold of CPA exam to respond to increasing demand for accounting services in modern Taiwan. That led to a large amount of qualified CPAs flooding into the audit market and promoted competition in the profession. However, the regulation authority managed to promote audit quality and thus encouraged local accounting firms expanding their operating scale by firms-merger. Observing these contradicting phenomena, the authors of this study intend to estimate the cost functions for the accounting firms during the period of 1989 to 2000 by applying the Translog cost function model, proposed by Christensen, Jorgensen, and Lau (1973), on Taiwan’s official survey data. Specifically, this paper estimates the range of scale economies and scope economies for accounting firms in order to examine the impact that the government lifted the entry barrier on the industry