IDEAS home Printed from https://ideas.repec.org/a/ids/ijmefi/v14y2021i4p363-372.html
   My bibliography  Save this article

Scale efficiency and marginal revenue product at the audit service level: evidence from Korea

Author

Listed:
  • Sang-Lyul Ryu
  • Jayoun Won

Abstract

This paper aims to evaluate scale efficiency and the marginal revenue products (MRP) of labour in the Korean accounting industry. Around the world, the fierce competition in the accounting industry has required accounting firms to adjust their input mix or increase scale efficiency in audit services. A translog revenue function is estimated to represent the technological relationship between audit fees and audit professionals' input hours. The sample comprised 1,025 individual audit services for two years from 2014 to 2015. The estimation of the model indicates that decreasing returns-to-scale prevailed in audit services throughout the sample period. However, when we broke down the sample into Big4 and non-Big4 audits, scale efficiency existed only in the Big4 audits. This implies that the non-Big4 audits were likely to be under-compensated for their audit hours. The estimated MRP signifies that partners were likely to be under-compensated compared to their contribution to audit fees.

Suggested Citation

  • Sang-Lyul Ryu & Jayoun Won, 2021. "Scale efficiency and marginal revenue product at the audit service level: evidence from Korea," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 14(4), pages 363-372.
    • Handle: RePEc:ids:ijmefi:v:14:y:2021:i:4:p:363-372
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=116979
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijmefi:v:14:y:2021:i:4:p:363-372. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=218 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.