The first, and most obvious, of the effected areas is competition. Within competition several points are discussed. Foremost, the implications advertising has on public accounting, the model of perfect competition versus the model of monopolistic competition. Secondly, the relationship between firm size and the firm's 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

In the area of audit services, small firms have little to offer to differentiate themselves from their larger counterparts who can now freely move in and perform the service at a lower price. This, unfortunately, will be a byproduct of the advertising era. Smaller firms only hope is to emphasize "personalized service" in tax and full service areas in hope that audit services can result. The major drawback is small firms are offered little room for growth because of the expense involved. Advertising in public accounting causes perspective clients to become bottom line oriented meaning the firms with the most available revenue to dump into advertising, coupled with the resources to offer lowest fees are the ones that grow. Big Six firms and large regional firms hold these resources. As a result these firms will grow while small firms struggle.

Now that the differences are established, the resulting issues in public accounting can be discussed. The first area deserving discussion is the relationship between firm size and advertising expenditures. A study, found in Fundamental Accounting Principles by Kermit D. Larson, CPA, made of CPA firms in Britain in 1985 declared, "the most dramatic contrast between advertisers and non-advertisers was their size" (Larson 122). The obvious reason for this anomaly is availability of resources. Larger firms have, at their disposal, a much larger profit level; therefore advertising expense is easily included only marginally affecting bottom line. This implies larger firms to have gained a great deal more from inclusion of advertising than small firms. Consequently, small firms could be pushed out of the picture entirely in the area of audit services.

for the pre-advertising era because it most closely resembles the market structure in an extreme sense. The elements of monopolistic competition are as follows: product differentiation, the presence of large numbers of sellers, and non-price competition. Although accounting services between firms offer very little service differentiation, the absence of advertising serves 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 differentiation, many sellers, and price as the only means of distinguishing one firm's service from another.

The second pricing strategy is cut-rate pricing, which provokes similar questions. In his article Ponemon states the following: "It is no longer unusual to find firms willing to take on work at substantial discounts from standard fee levels. While there may be justifications for performing services at reduced rates during off-peak periods in special situations such as for non-profit institutions or similar organizations, the extent to which this practice has grown canno

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Approximate Word count = 1963
Approximate Pages = 8 (250 words per page double spaced)