The post-SARBOX accounting industry, Part IV
Malcolm McLelland
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Parts I-III of "The post-SARBOX accounting industry" suggest that real accounting industry revenues and unit output volumes were growing substantially more slowly post-SARBOX, and that real accounting industry output prices are decreasing markedly post-SARBOX. Since the primary input to production of accounting industry services is professional labor, to get a more complete idea of what's going on in the accounting industry it's worthwhile examining professional compensation costs and related factors. Interestingly, although revenues are growing--albeit more slowly--in the post-SARBOX period, total professional compensation in the accounting industry is actually decreasing since around 2001:
Not only is total professional compensation decreasing during this time period, but the total number of professional employees employed in the accounting industry is decreasing as well:
... as are total professional hours worked:
... as are hours worked per professional:
Finally, and perhaps a bright spot in what seems to be a fair amount of bad news about the accounting industry, average real professional compensation per hour worked has increased post-SARBOX:
But since most professionals in the accounting industry are full-time, salaried employees, the increase in the average professional wage rate per hour worked seems most likely to be largely the result of decreases in the hours worked per professional rather than an actual increase in compensation rates.
What explains the (more slowly) increasing accounting industry revenues in the post-SARBOX period when at the same time total professional compensation--the cost of the industry's major produciton input--is substantially decreasing? Could it be that the industry has, for some reason, been able to increase it profits despite substantial decreases in output prices? How does this reconcile with the casual observation that there appears to be excess demand in the professional accounting labor market (e.g., accounting firms complain the demand for qualified accountants substantially exceeds supply ni recent years)? Is it possible that the rosy outlook on accounting careers published in recent years is actually not so rosy? We'll continue to explore such questions as the series continues.
(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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