Public accounting firms' mix of service revenue and average productivity: Evidence using revenue per partner

Purpose – The purpose of this study is to examine the impact of public accounting firms' mix of service revenue on their average productivity measured by total revenue per partner. Design/methodology/approach – Using data from Public Accounting Report on top public accounting firms by revenue, an OLS regression model is applied by regressing revenue per partner on the percentage of revenue generated from auditing and attest, tax, management consulting, and other services independently. Findings – Results show that the proportion of auditing and attest service revenue is negatively associated with public accounting firms' productivity. However, the proportion of other services revenue, other than tax and management consulting services, is positively associated with productivity. Additional investigation shows that if public accounting firms provide other services in their mix of services, then tax and management consulting services do not contribute to these public accounting firms' productivity. Research limitations/implications – Results of this study cannot be generalized beyond the top 100 public accounting firms, and the measurement of revenue per partner ignores the exact number of partners within different service areas. Practical implications – Although auditing and attest services are considered core services of public accounting firms, they do not increase the productivity of the firm. Originality/value – This study helps in assessing whether average productivity of public accounting firms is affected by the proportion of a specific type of service in the post-SOX era.