A Study On The Partners’ Unified Profit Pool Sharing Under The Background Of Integrated Management Of Accounting Firms

In recent years,with the policy of "grow bigger and stronger accounting firms",Chinese firms have made great progress in scale development by merging and setting up branch offices.However,accounting firms are not good at managing total offices,which leads to frequent problems and serious reduction of audit quality.In May 2022,the Ministry of Finance issued Measures for the Integrated Management of Accounting Firms,requiring accounting firms to implement substantive and unified management of their branches,internal departments and business teams.In the integrated management evaluation index system attached to the document,the index "all partners distribute profits in the unified profit pool" accounts for a relatively high score,which is the only specific index with a maximum score of 50 points.Therefore,it can be seen that the issue of partners distributing profits in the unified profit pool is of great significance.The uniform profit pool allocation system of partners under the background of integrated management is a problem worth exploring.Therefore,this paper starts with literature review to understand the internal governance and management of professional service organizations,the management of accounting firms’ total offices and the profit distribution of the firm’s partners.Secondly,it expounds the principal-agent theory,transaction cost theory,intergenerational investment theory,human capital portfolio theory and sharing economy theory,which lays the foundation for the subsequent theoretical analysis and policy suggestions.Then,theoretical analysis is carried out,including: the nature and characteristics of accounting firms,the internal needs and theoretical analysis of the integrated management of accounting firms,the partners’ interest distribution method,the partners’ unified profit pool distribution system under the background of integrated management objectives,principles and distribution method design.Then,this paper takes Tianshi International Certified Public Accounting Firm as a case to conduct field research and interview to understand its implementation of the unified profit pool allocation system for partners.Through quantitative analysis of customer risk management and audit quality,this paper discusses the effect of the implementation of the unified profit pool allocation system for partners in Tianshi International.Finally,based on the results of theoretical analysis and research interviews,this paper puts forward suggestions on the unified profit pool allocation system of partners under the integrated management of accounting firms.The conclusions of this paper are as follows:(1)The most important asset in accounting firms is human capital,so the profit distribution should be based on human combination.The uncollagability and unobservability of human capital require that human capital rent should be charged in the early stage of partner’s career to ensure prudent practice.The characteristics of different business types in accounting firms are different,which leads to their different profit distribution.(2)Under the background of integrated management of accounting firms,the goal of the unified profit pool allocation system for partners is to strengthen audit quality and achieve sustainable development of the firm.The main principles followed are to give consideration to the balance between quantity and quality,individual and collective,qualifications and incentives,efficiency and fairness,and the balance between audit business and non-audit business.The number of equity points method is a profit distribution method suitable for the above objectives and principles.Under the background of integrated management,the advantages of the partner unified profit pool distribution system include: promoting the generation inheritance of accounting firms and realizing sustainable development;Spread the risk and maximize the firm’s interests;Ensuring auditor independence and audit quality;Promote cooperation among partners;(3)Through field interviews,this paper learns that Tianshi International adopts equity points method to distribute profits among partners,and conducts performance assessment according to four indicators: business undertaking,business undertaking,audit quality and cost rate.At the same time,Tianshi International solves the problem of inconsistent ideas through internal training of partners,solves the incentive problem of partners by adding and lowering points and setting special rewards for lead partners,reflects the consideration of partner qualifications through equity base points and partner levels,and reflects different types of business characteristics through performance assessment differences.Through the analysis of archives,this paper finds that the quality of clients and audit has been improved to some extent after the implementation of the unified profit pool allocation system for partners in Tianshi International Certified Public Accountants.This paper proposes the following suggestions: to promote the consistency of partners’ ideas,establish the firm’s corporate culture and cultivate partners internally;On the suggestion of unified profit pool distribution method,the method of equity points is adopted to carry out the subsequent profit distribution,introduce the reduction point mechanism and set up seniority points.In terms of the suggestions on performance assessment,we should attach importance to the audit quality factor,avoid excessive incentives to individuals,relax the requirement of task quantity of consulting business,and add non-financial indicators into performance assessment.