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An International Meeting of American Accounting
Association
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Passing rate of CPA examination, human capital and audit market |
Tsung_yi Tsai
National Yunlin University of Science and Technology and Lecturer at Shin Chien University
Chung - Cheng Yang
National Yunlin University of Science and Technology
Abstract: In this paper, we try to construct the production function of human capital, audit quality and audit revenue in public accounting industry in order to examine the impact of increased passing rate of CPA on the audit market in Taiwan. To observe these phenomena, we adopt the cross-sectional regression analysis during the period of 1989 to 1998 by using Translog production function model. The survey data are collected from the "Census Reports of CPA firms in Taiwan" done by Department of Statistics, Ministry of Finance, Taiwan. Empirical results show that the increased passing rate of CPA examination triggers lowballing among public accounting industry. Additionally, we also find that small CPA firms are easy to engage in price war. In the long-run, CPA firms can increase audit revenue by offering audit quality in virtue of on-the-job training and professional experience. In total, the open policy of passing rate of CPA examination has positive effects on the audit market in Taiwan.