An Exploratory Study of Profit Reporting Differences of Publicly Owned Professional Service Firms and Partnerships

Mark Pickering

Australian Accounting Review, 2015, vol. 25, issue 3, 262-278

Abstract: type="main">

There has been a trend for large professional service firms (PSFs) to move away from the traditional partnership structure to other ownership forms such as publicly owned companies. Research on the relative performance of these ownership forms has been constrained by the lack of availability of financial information for partnerships, and proxy revenue-based measures used have resulted in conflicting findings. This paper seeks to guide future research by exploring accounting reporting differences between partnerships and publicly owned PSF companies in order to identify adjustments required for comparison and implications for performance measures used. This paper reviews the literature and examines the annual reports of two Australian publicly owned accounting companies and one large accounting partnership; pre-initial public offering pro forma reporting in the prospectus of one of the companies identifies significant profitability reporting differences across ownership forms. The findings also suggest that the lower revenue per professional and per person for publicly owned PSFs found in prior studies may be offset by significantly lower salary costs. The paper concludes that significant value can be achieved by further analysis of profitability across ownership forms and suggests data requirements to inform the development of further case studies and large-scale surveys of financial performance.

Date: 2015
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