The post-SARBOX accounting industry, Part III
Malcolm McLelland
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It was shown in "The post-SARBOX accounting industry, Parts I and II" that both accounting industry revenue and output growth rates were substantially lower in the post-Sarbanes-Oxley environment. It's of course possible that accountants and auditors are now working smarter (fewer hours delivering more valuable services), not harder (more hours delivering less valuable services), suggesting we're simply observing measurement error in the Bureau of Economic Analysis' data on accounting industry output volume. One way to see if this seems to be the case is to look at a time series graph of the accounting industry's deflated output price index (i.e., the average price per unit of work output deflated by the GDP price deflator; think something like "real price per hour of productive work"):
Wow! It certainly does not look like the accounting industry is providing more valuable services in the post-Sarbanes-Oxley environment; quite the opposite. The substantial decrease in the deflated output price index suggests the accounting industry is providing a mix of services substantially less valuable than those provided previously. Not exactly what many people tend to think about the accounting industry, is it?
But it's still not clear what's going on in the accounting industry. Is the accounting industry simply staffing-up to provide low value Sarbanes-Oxley compliance work, etc.? We'll explore this in more detail in future segments.
(Note: This posting draws on my joint research with co-authors, Matt Anderson and Greg Gerard, presently titled "Sarbanes-Oxley and the shrinking accounting labor market: Exploring potential causes and their implications".)
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