MASs, alliance and performance: an evidence of SOX effects
ISSN: 0268-6902
Article publication date: 29 March 2022
Issue publication date: 21 April 2022
Abstract
Purpose
To maintain auditor independence, Section 201 of the Sarbanes–Oxley Act of 2002 (SOX) imposes restrictions on audit firms in rendering management advisory services (MASs) to audit clients. Responding to the requirement, audit firms establish a strategic alliance with consulting companies to expand their scope of services to alleviate the impairment of auditor independence. Taiwan follows the spirit of SOX in related laws and regulations. To investigate the effects of SOX on Taiwanese auditing industry, this study aims to examine the relationship between MASs and operating performance of audit firms.
Design/methodology/approach
This study obtains empirical data from the 1989–2017 Survey Report of Audit Firms in Taiwan, published by the Financial Supervisory Commission (FSC). FSC administers the survey across all registered audit firms annually to collect business information on the auditing industry for macro-economic analysis and industrial policy development. The authors group audit firms into three categories: national, regional and local firms. Based on the structure-conduct-performance (S-C-P) theoretical framework, this study establishes the following cross-sectional regression equation to test the authors’ hypotheses.
Findings
Main results indicate that national firms have better post-SOX firm and alliance performance. Both firm and alliance MASs contribute more to the performance of national firms after SOX.
Practical implications
This study claims that national firms establish alliance with consulting companies for resource sharing but regional and local firms for tax-saving.
Originality/value
Consistent with the economic theory of regulation and resource-based theory, SOX matters in Taiwan.
Keywords
Citation
Chen, Y.-S., Mardjono, E.S. and Yang, Y.-F. (2022), "MASs, alliance and performance: an evidence of SOX effects", Managerial Auditing Journal, Vol. 37 No. 5, pp. 521-541. https://doi.org/10.1108/MAJ-05-2021-3164
Publisher
:Emerald Publishing Limited
Copyright © 2022, Emerald Publishing Limited