Internal Governance Of The Accounting Firm Study

The internal governance will decide the level of quality management and risk control. And it can make the accounting firms develop healthily and stablely. It is also the basis of the accounting firms which can develop stronger and bigger.This paper analyzes the difference between internal governance of the accounting firms and ordinary corporate governance. It points out the special consideration of the internal governance of the accounting firms. The accounting firms have three special characters: the first is human combination. The second is that the managers and the owners of the accounting firms are almost the same ones. The third is that protecting the public interest is the most remarkable character of CPA (certified public accountants).This paper analyzes the development process of the internal governance of the accounting firms combined with the development history of the industry of CPA. It focuses on the study of the internal governance of the accounting firms after reform. It points out the existing problems of the internal governance through the case study, especially in the arrangements of the ownership. This paper analyzes the advantages and disadvantages of the two existing arrangements of the ownership of the accounting firms. The advantage of the partnership is that it can enhance quality control and the confidence of the public. The disadvantage of the partnership is that it will probably prevent the accounting firms from growing bigger. The advantage of the limited company is that it can encourage the accounting firms to grow bigger, but it will probably decrease the confidence of the public. And it also analyzes the advantages of the special common partnership. The special common partnership can control the audit quality while the accounting firms grow bigger.Under the background that the accounting firms want to grow stronger and bigger, this paper discusses the core problems regarding the internal governance: the ownership arrangement, the partner distribution and evaluation system, the balancing mechanism, the division management,information communication and disclosure. This paper points out the accounting firms should apply the following reform, including changing the ownership arrangement from the limited company into special common partnership, establishing the partner distribution system based on the performance evaluation, establishing the specialist committee, applying the same management standards to the divisions, establishing the mechanism and channel of information communication and disclosure to stakeholders. At the same time, this paper analyzes the importance of the partnership cultivation.As the relation between the internal governance and external governance can not be separated, this paper also studies on the affection of the external governance such as the industry regulation and industry self-management.On the basis of the study above, the paper provides some policy suggestion such as the reform of the existing ownership arrangements of the accounting firms, etc.