Project Management

The Role Of External Accountants In Start-Up Firms

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Executive Summary

Examining survey responses compiled from individuals in the process of starting a business, this study investigates factors influencing an entrepreneur's choice to hire an accountant to prepare financial statements for the nascent firm. It is found that the probability of an accountant being used is increasing in the accounting work experience of the entrepreneur, but no such results for accounting education. Exploring the role of information asymmetry and agency costs, the support for hypotheses that start-ups with or expecting outside arms-length owners and external funding are more likely to use an accountant. Non-owner employees and organization as a limited liability company also increase the likelihood of using a professional accountant.

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