Accounting Firm Size and Culture: An Institutional Theory Perspective from Non-Big 4 Partners with Big 4 Experience
Posted: 10 Jul 2020
Date Written: May 31, 2019
Abstract
To peer into the black box of accounting firm culture, we conduct a questionnaire of audit, tax, and advisory/consulting partners at non-Big 4 firms with and without former experience at Big 4 firms. We use the conceptual framework of institutional theory – coercive, mimetic, and normative forces (DiMaggio and Powell 1983; Fogarty 1992) to understand how different cultures emerge in Big 4 and non-Big 4 firms and how firm culture, in turn, affects organizational outcomes in these firms. Our findings show how firm culture and the regulatory environment can shape perceptions of service quality. Specifically, non-Big 4 firms are perceived to have greater partner involvement in client engagement and staff development, an entrepreneurial approach to client work, and staff with generalist rather than specialist experience. In comparison, Big 4 firms are perceived to have a more transactional culture focused on growing revenue, prioritizing high revenue/fee clients, a more structured approach to client work, and staff with deep specific technical or industry specialization. Overall, Big 4 firms are perceived as more individualistic whereas Non-Big 4 firms are perceived as more team-oriented. We also find mixed results on whether and how accounting professionals’ former Big 4 experience benefits non-Big 4 firms (e.g., business development; legitimacy with clients). While the archival audit literature continues to debate whether non-Big 4 firms provide lower or similar quality as compared to the Big 4 firms, our findings shed light on how the external environment and firm culture may lead to different approaches and definitions to service quality between the two types of firms, which in turn can help explain the inconsistencies in archival research.
Keywords: audit quality; firm size; firm culture
JEL Classification: M14; M40
Suggested Citation: Suggested Citation