Income Distribution System For Accounting Firm Arrangements

Income allocation system established mainly focuses on traditional enterprises rather than knowledge-led enterprises such as public accounting firm at present. Human capital is the most important economic element in public accounting firms. The features of accountant firms determine the features of its income allocation. In the accounting firms income is allocated between human capital and financial capital. Human capital should claim get a greater share than that at present as their contribution has become greater and greater. A reasonable allocation can not only prevent the shirking of human as well as the abuse of substantial capital, but also promote the originality on auditing technique and methods.The development of capital market makes modern economy more dependent on accounting information and makes auditing service to be needed in a wider scope and auditors face unprecedented high risk. In order to reduce audit risk and improve audit quality, the main measure is to set up an effective incentive and constrain mechanism. Regard of matching risk with revenue, the auditors should gain a fairly high pay that matches with the high risk that they really bear. The present problem is that auditors neither hold the risk of their auditing nor get an accordingly pay. So it is necessary for accountant firms to establish a system of individual quality guarantee, to build up professional risk funds, and to recognize deferred revenue responding to the delayed-risk.In order to prevent the auditors short-sighted actions which will defame the public and the firms' development, and to promote the auditor's activity and creativity, the firms can convert the human capital into stock or stock option. At last in order to build up quantitative model and allocation box to assess the effectiveness of income allocation, we need analyze correlation of economic factors' contribution ratios and their allocation ratios.