The Research Of Activity-based Costing Management In Public Accounting Firm

With the development of social economy and science and technology, the internaland external environment which enterprise facing has been developed. Compare withtwo or three decade years ago, automation in the enterprise is increasing,manufacturing expenses is sharply rising. According to the number of traditionalstandard such as man-hours to allocate the costs of manufacturing expenses, result asthe cost information used for decisions is becoming more and more irrelevant. At thesame time, enterprises face fierce competition, consumer demand diversity and smallbatch production trends made cost which has nothing to do with the number ofproduct increase. All these require companies to accurately calculate cost informationand cost management. Activity-Based Costing (ABC) was born to solve the problemsof distortion of traditional costing and costing information as well as lack ofcorrelation between costing and strategies. In order to "do bigger and stronger", theCPA firm must calculate the business cost accurately and cost management. ABC is acalculation method based on units of activity, it is meant to measure the cost ofactivities and cost objectives as well as evaluate the results of activity and use ofresource through a dynamic follow-up of activities. Activity-Based CostManagement(ABCM), which promotes a continuous improvement and analysis ofvalue-added activities within an enterprise, optimizes business, makes managementdecisions on activity cost pricing and carries out effective management on operatingresults based on the accurate costing information as calculated by ABC, meanwhile italso provides a good base for enterprise to carry out customer profitabilitymanagement.This article carries out research upon insight of ABC(M) theories and theconditions for application. Different from general application of ABC inmanufacturing in the past，this article creatively analyses the necessity and feasibilityof application of ABC(M) in CPA firms as incorporated with the market environmentand business characteristics, and proves the possibility of its application throughcalculation and analysis of an actual case. The article firstly introduces the origin ofABC method and the current research status within China as well as overseas, andraises issues of ABC(M) been applied within a CPA firm. It then analyses the costmanagement status of CPA firms, after which it introduces the basic theories of ABC and the method of calculation as well as the theories of ABCM. Through applicationand research of an actual case based on ABC(M) been applied within a CPA firm, thisstudy get a conclusion that activity-based costing is available in the service industrylike accounting firm. Through ABC measuring, we found that audit projects withinhigh proportion of working hours are easy to be overestimated. Audit projects withinlow proportion of working hours are easy to be underestimated. Through ABM, wesuggest the public accounting firm to improve its audit process, the staff hold theauditing quality, to reduce the waste of resources. In addition, we can use the costinformation provided by ABC to analysis the customer profitability and audit productpricing decisions.