Accounting Ethics
Accounting EthicsAccounting Ethics
When examining the effect of open marketing on the
profession of
accounting it is important to view it from three
perspectives: the
client's, the profession's, and society's. Additionally,
two key areas
that are affected by marketing must be addressed,
these are concerning competition, and ethical implications.
Marketing in
public accounting is here to stay therefore making an
argument against its
existence would be fruitless; however, in order to achieve
maximum benefit
to the firm, the client, and s ociety more stringent
guidelines must be
implemented at the firm level.
The first, and most obvious, of the effected areas is
competition.
Within competition several points are discussed. First, the
implications
advertising has on public accounting-- the model of perfect
competition
versus the model of monopolistic compet ition. Secondly,
the relationship
between firm size and advertising expenditures. Thirdly,
the effect of
advertising on firm specialization, the implications of
client turnover on
public accounting practice.
Before making the comparison, a brief explanation why the
two
models are chosen is in order. Monopolistic competition has
been chosen
for the pre-advertising era because it most closely
resembles the market
structure in an extreme sense. The elements o f
monopolistic competition
are as follows: product differentiation, the presence of
large numbers of
sellers, and nonprice competition. Although accounting
services between
firms offer very little service differentiation, the absence
of
advertising serve s as a replacement because clients are not
necessarily
aware that other options are easily attainable. The
post-advertising era
is explained through the model of perfect competition for
which the
qualifications are as follows: very little or no service d
ifferentiation,
many sellers, and price as the only means of distinguishing
one firms
service from anothers.
In a perfectly competitive market the price of a particular
service is established solely by the interaction of market
demand and
supply. (Thompson p.277) When market demand for accounting
services
increases the resulting demand shifts right causing pri ces
to increase
returning the market back to equilibrium. However when
supply increases,
such is the theoretical effect of adding advertisement to
public
accounting practice, the supply curve shifts right causing
prices to fall.
The model of monopolistic competition is also price
sensitive,
however only at the firm level. For example, the CPA firm
of XYZ has an
established clientele base and uses referrals as its sole
means of growth.
They increase prices only as their cost o f providing the
service
increases and therefore are able to maintain their client
base. In this
example a gently downsloping demand...
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