| Licensing laws in the accounting profession have become increasingly restrictive in recent years. Although advocates of regulation cite the need to protect the public, evidence from other professions suggests that the public is not well served by licensure. The tendency of state legislators and other regulatory policy makers to accept professional accounting group arguments without question suggests the need for a reasoned assessment of licensing's effects on the market for accounting services. This assessment requires a market segmentation approach to accounting services--one that distinguishes licensure's effects on large, publicly-traded corporations (and the national accounting firms that audit them) from the small business environment.;The evidence indicates that (1) accountants have used licensing laws to create and maintain monopoly privileges, but whether these have resulted in monopoly rents is not clear; (2) licensure does not appear to increase the quality of service received by consumers; (3) a Cadillac effect may exist in public accounting. In addition, a less restrictive alternative to licensure--certification--would probably convey the same benefits as licensure but at less cost to the users of accounting services. Therefore, the study concludes, the public interest is not advanced by restrictive accountancy laws.;A descriptive licensing model, derived from the literature review, serves as the basis for examining several facets of the licensing problem in accountancy. Various methodologies are used, including historical analysis and time series regressions. |
