The Structure of the Public Accounting Industry – Why Existing Market Models Fail
Journal of Theoretical Accounting Research, 10(2), 43-67.
28 Pages Posted: 27 Nov 2014 Last revised: 22 Apr 2015
Date Written: January 1, 2015
The structure of the public accounting industry has been the subject of debate for decades. Both empirical and theoretical research has reached contradictory results and conflicting conclusions regarding which model of industrial organization describes the structure of the public accounting industry. Some research has concluded the industry is competitive and other research found it is oligopolistic. Obviously it cannot be both. This paper compares the structure of the public accounting industry with the economic models of industrial organization and discusses the reasons why current models fail to describe the structure of the industry. Previous research has failed to consider that the market for audit services was created by the government which was then subsequently subjected to the simultaneous regulation of both the supply and demand for audit services. The simultaneous regulation of both supply and demand distorts the market thereby rendering current models incapable describing the structure of the public accounting industry.
Keywords: public accounting industry, market structure, oligopololy, monopoly, competition
JEL Classification: M40, M41, M49, K33, L00, L16
Suggested Citation: Suggested Citation