Publication Date


Document Type


First Advisor

Kieso, Donald E.

Degree Name

M.S. (Master of Science)

Legacy Department

Department of Accountancy


Accounting--Law and legislation


The public accounting profession presently faces a problem which partially stems from a study conducted by the legal counsel of the American Institute of Certified Public Accountants. The study centered around a rule included in the profession's code of ethics which expressly prohibits members of the A.I.C.P.A. from engaging in the practice of competitive bidding. The study resulted in a recommendation by the Institute's legal counsel to repeal Rule 3.03 on competitive bidding. This recommendation was made because the lawyers studying the issue felt the rule violated the federal antitrust laws. Legal advice disclosed that a ruling against the public accounting profess Ion was "highly probable" if this rule was ever challenged in the courts. Based upon the advice of two different law firms the American Institute took the next logical step of repealing Rule 3.03 by obtaining a vote of its membership. However, the ensuing vote by the A.I.C.P.A. membership fell just short of the two-thirds majority necessary to repeal the rule. Therefore, the problem which now exists is what to do about a rule which may violate a federal law but is considered essential by a substantial minority of A.I.C.P.A. members. The purpose of this study was to evaluate the competitive bidding rule of the public accounting profession. The study attempted to present both the arguments for and against repeal of Rule 3.03, as well as the views of members of other professions on the subject of a rule prohibiting competitive bidding. The data for this study were obtained through library research, review of A.I.C.P.A. publications, and personal interviews. The library research dealt mainly with articles reflecting the events leading up to the adoption of Rule 3.03, while the A.I.C.P.A. publications were used to gain the views of Institute members concerning Rule 3.03. The personal interviews were conducted with members of four professions—law, medicine, architecture, and financial analysis—in an attempt to gain their profession's view on a rule prohibiting competitive bidding. The results of the interviews showed definite opposition on the part of these professions to the practice of competitive bidding. The major conclusion of this study is that so long as a legal threat persists the public accounting profession should do further research on the subject of competitive bidding. Research efforts might be directed toward the development of a clearer definition of competitive bidding and delineation of what constitutes a bid, an estimate, and a negotiated fee. The nature of the public accounting profession should be compared to the nature of other professions to determine the similarity or dissimilarity in their functions and characteristics relative to competitive bidding and fee setting practices.


Includes bibliographical references.


vii, 77 pages




Northern Illinois University

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