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Accounting Ethics
When examining the effect of open marketing on the profession of accounting it is
important to view it from three perspectives: the clients, the professions, and societys.
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
