Analysis of overall technical efficiency, pure technical efficiency and scale efficiency in the medium-sized audit firms

This study uses the data envelopment analysis (DEA) to evaluate the operational efficiency of 173 medium-sized audit firms in 2005. The empirical result indicates that there are 24 audit firms with the overall technical efficiency value of 1. In terms of overall technical efficiency, pure technical efficiency and scale efficiency, the result shows that the average scale efficiency of all samples is higher than the average pure technical efficiency. Besides, 55 firms of 173 audit firms are in the stage of constant returns to scale, 18 firms are in the stage of increasing returns to scale, 100 of them are in the stage of decreasing returns to scale. Thus, most of medium-sized audit firms are in the stage of decreasing returns to scale. In addition, this paper finds that the larger the scale, the higher the above three efficiency values. The audit firms with higher business revenues have better operational efficiency. The overall technical efficiency and sale efficiency of the audit firms with branches are significantly higher than those without branches. The audit firms with larger number of employees and partners, they perform significantly better overall technical efficiency and sale efficiency. Finally, the audit firms with higher total expenditures also have significantly higher operational efficiency.