Is Accounting Information Comparability Improved After Accounting Firm Mergers?

Comparability is vital to the usefulness and decision relevance of accounting information.Under the same accounting system,the same or similar economic matters and transactions of different enterprises should generate similar financial reports.Using the unified Accounting Standards for Chinese Business Enterprises,the difference of accounting information comparability between companies mainly stays in the implementation of accounting standards differences:First,caused by professional judgments,the second is the violation of accounting standards,which both involved with accounting firms.On the one hand,accounting firms set their own unique work manual to unify their own audit standards,accounting standards and implementation of the audit,so the professional judgment of accounting treatment made by the same accounting firm would have much smaller differences.On the other hand,the accounting firm’s audit behavior as an important means of suppressing adverse selection,with their own work processes and standards to carry out audit testing can found the distorted or manipulated accounting information behaviors of the audited company.A series of policies encourage accounting firms to become bigger and stronger by merger and reorganization in a short time.Under the opportunity,the domestic firms with security began to merge with others from time to time.As a result,the number of accounting firms decreased,the scale expanded and the concentration of CPA industry has been significantly improved.With the configuration and renewal of the merger,the accounting firm’s culture and business philosophy,internal work standards has been unified,which can reduce the professional differences on the judge of the accounting treatment.Furthermore,The merger of the firm will lead to the increase of risk quasi-rent and the improvement of the independence of the auditors,so that the possibilities of the customer’s handling of the violation of accounting standards will be reduced.Therefore,the accounting information comparability of the financial reports audited by the same accounting firms between different firms will be more comparable than those who are audited by different accounting firms.In addition,the most important resource of accounting firms is human resources,the configuration of human resources especially the certified signing auditors,may affect the merger and thus affect the comparability of financial statements.Certified signing auditors are in charge of the entire audit activities,providing guidance and supervision on the auditing.In this paper,we consider about the merger of accounting firms between 2008-2011 as the research objects to investigate whether the accounting information comparability has been improved after the merger.We use accrual differences to measure accounting information comparability.We find that the post-merge accounting information comparability is significant increased.Furthermore,We find that the degree of configuration after the merger has a positive effect on the accounting comparability,that is,with the more reallocation of certified signing auditor,the larger of the increase in accounting information comparability will be.Our findings offer some empirical evidences of "Bigger and Stronger" policies in auditing industry by Chinese government,and contribute to the broader literature of accounting information comparability from the level of company.