Question

In most countries, a national accounting profession controls access to the profession while legislation prevents anyone other than its members from auditing public corporations. These conditions increase the accounting profession's power through which of the following?

a) Legislation
b) Regulation
c) Monopoly
d) Competition

Answer 1

A legal monopoly, created by legislation and regulation, gives the accounting profession exclusive rights to audit public corporations, similar to how the U.S. Postal Service has a monopoly over first-class mail delivery.

Step-by-step explanation:

These conditions increase the accounting profession's power through a legal monopoly. In this scenario, legislation creates a barrier to entry, which means that only members of the national accounting profession can perform certain audits, similar to how the U.S. Postal Service is the only organization legally permitted to deliver first-class mail. This regulated monopoly ensures that the accounting profession can control the provision of auditing services for public corporations, ensuring that those who have the necessary qualifications and adhere to professional standards are conducting such audits. The nature of this control is not due to heightened competition, but rather due to a lack of it, enforced by regulation and legal constraints.