Dissertation > Economic > Economic planning and management > Accounting > Accounting Organization and system

Research on Compensation Incentive Mechanism in Accounting Firm

Author XuZuo
Tutor DengChuan
School Zhejiang University of Finance
Course Accounting
Keywords Performance Appraisal Compensation Incentive Mechanism Accounting Firm Partner
CLC F233
Type Master's thesis
Year 2012
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With the increase of China’s economic power, accounting firms will face to a broader future. Parts of them have developed rapidly. However, due to the increasingly complexity of market environment and competition, accounting firms have encountered a number of problems in the development: their market share, revenue and quality customers are far below the international "Big Four"; their audit quality is low; their employees are more mobile ,which is the biggest problem. If an accounting firm wants to be the industry leader, talent should take its primary concern.Through the survey of pay to "Big Four" and domestic accounting firms, we found that after hundreds of years of development, "Big Four" have maturing pay system, thorough performance appraisal system, a wealth of staff training and team activities and transparent promotion mechanism, which make "Big Four" as the holy land of accountants. However, their huge pressure of work and reduced overtime pay bring a lot of criticism. There are a lot of problems in the compensation incentive mechanism of domestic accounting firms Most of them set only one indicator, business development, in performance appraisal system, decoupling with the firm’s strategic planning. Domestic accounting firms also pay less attention to employee training and corporate culture. These problems will cause a brain drain and danger for long-term development. To resolve these problems, t is necessary for accounting firms to establish a scientific compensation incentive mechanism.Firstly, we summarize correlative conclusions of other researchers. Then we discusses the importance and feasibility of performance assessment combined with a variety of incentive theory and characteristics of accounting firms. We point that performance assessment is the key to attract talent, ensure fair distribution and reduce internal conflicts. It is also the key for the strategic development. In this paper, we design different performance assessment and compensation incentive mechanism for general staff and partners. For general staff, we divide their payment into alary, performance pay, basic welfare and performance welfare, for partner, we divide their payment into performance pay, extra pay and bonus. We focus on professional capacity, teamwork, customer relations and self-development in a program unit. Compensation committees will determine the final outcome and related performance criteria for the allocation after self-evaluation and team evaluation. Finally, we use a specific case to analysis how to use the improved compensation incentive mechanism and the results

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