The relationship between large audit firms and sole practitioners : mutual perceptions

Abstract

Purpose: - This study seeks to ascertain the working relationship between the large audit firms and the local sole practitioners, and to establish the mutual perceptions of such working practices. Design: - Based on insights obtained from literature, two interview schedules were prepared, one for sole practitioners and one for large audit firms. Separate semi structured interviews were held with a sample of sixteen local practitioners, consisting of eight sole practitioners and eight Big Four audit firm representatives. Findings: - Overall, this study found that the relationship between the big firms and sole practitioners was to an extent strained and that the mutual perceptions indicated by the parties were partly conditioned by such strain. A range of working relationships was found to be in existence between the parties. The status of some these relationships might be understood as indicative of a splitting profession. Contact between the two parties was also found likely to be greater if a prior relationship within an audit firm had already been in existence. Both sides perceived the client market to be segmented into two; also in the local context large audit firms' profit margins seemed to be affected by the fees charged by sole practitioners. On their part sole practitioners maintained that they were struggling to keep up to date professionally and at the same time coping with their work load. With respect to regulation and disciplinary activities sole practitioners were less satisfied with the support obtained from the profession than their larger counterparts. In addition both parties agreed that new graduates were increasingly looking towards large audit firms for their employment. Value: - In the absence of local research on the subject, it is hoped that this study of the large audit firm/sole practitioner relationship sheds further light on the characteristics and traits of the accountancy profession in Malta, and provides recommendations based on the findings. One recommendation emanating from this study is for the two sides to strengthen their communication.