Question

barriers to entry in accounting firm?

Answer 1

Barriers to entry in accounting firm are restrictions that are imposed to new competitors in a market place. Such restrictions typically impose a heavy initial expenditure on new entrants. The smaller accounting firms face considerable barriers to entry, such as the capital limitations and lack of capacity, while competing for the audits of big national and multinational public companies. First, smaller firms usually lack the technical expertise, staff resources, and global capacity to audit large multinational companies. Secondly, public companies and markets are likely to prefer the Big 4 due to their established reputation. Thirdly the increased insurance costs and litigation risk associated with auditing public companies often create disincentives for smaller firms to actively compete for big public company clients. Moreover certain state laws, such as state licensing needs, make it difficult for smaller firms that lack a national presence to compete.