To read the full version of this content please select one of the options below:

External accountants’ business advice and SME performance

Peter John Carey (School Accounting, Economics and Finance, Deakin University, Melbourne, Australia)

Pacific Accounting Review

ISSN: 0114-0582

Article publication date: 7 April 2015

Abstract

Purpose

This study aims to investigate whether “small- and medium-sized enterprises” (SMEs) benefit from their external accountants’ business advice through enhanced firm performance. Most SMEs draw on external support, and their main advisors are external accountants (Bennett and Robson, 1999). The resource-based view of the firm suggests that firms will seek external support if they perceive a gap in their internal resources.

Design/methodology/approach

Data were collected from a questionnaire mailed to a random sample of Australian SMEs, defined as businesses having between 5 and 200 full-time employees.

Findings

An analysis of 380 survey respondents confirms a positive relationship between the voluntary purchase of business advice and SME performance, and that SME performance is further enhanced when business advice is purchased jointly with auditing. These relationships apply to the small (5-49 employees) but not to the medium-sized (50-200 employees) businesses. Findings are consistent with smaller firms having narrower resource bases and thus a greater need to source business advice.

Practical implications

The accounting profession has long encouraged a broadening of its service base, and evidence that small businesses perceive a performance benefit from their accountants’ business advice provides support for the profession’s strategy.

Originality/value

This research extends the empirical literature investigating the link between the business advice of an external accountant and SME performance. It explains small firms’ demand for business advice by extending the application of the resource-based view of the firm and provides new evidence consistent with “knowledge spillover” from auditing to business advice in the small firm environment.

Keywords

Acknowledgements

The author is grateful for comments received for earlier versions of this paper from seminar participants at City University of Hong Kong and Monash University, and at the American Accounting Association, the International Symposium on Audit Research and the Accounting Association of Australia and New Zealand annual conferences. The comments of Roger Simnett and financial assistance in the form of an AU$10,000 research grant from CPA Australia are much appreciated.

Citation

Carey, P.J. (2015), "External accountants’ business advice and SME performance", Pacific Accounting Review, Vol. 27 No. 2, pp. 166-188. https://doi.org/10.1108/PAR-04-2013-0020

Publisher

:

Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited