How asymmetric information, moral hazard, and adverse selection may impact the perception of risk.

• Moral hazard: Corporations may be concerned about moral hazard if they hire accountants without a CPA. Moral hazard occurs when one party in a transaction has more information than the other party. In this case, the accountant may have more information about their skills and abilities than the corporation. This could lead the accountant to take risks that they would not take if the corporation had more information.
• Adverse selection: Corporations may be concerned about adverse selection if they hire accountants without a CPA. Adverse selection occurs when the less desirable entities in a group are more likely to be selected. In this case, the accountants who are less qualified or who are more likely to engage in unethical behavior may be more likely to apply for jobs without a CPA requirement.

In addition to these factors, corporations may also be concerned about the liability associated with hiring accountants without a CPA. If an accountant without a CPA makes a mistake, the corporation could be held liable for any damages that result. As a result, corporations may be willing to pay the higher salary for a CPA in order to reduce their liability risk.

Here are some reasons why corporations do not lower their explicit payroll cost by hiring accountants without a CPA:

• Asymmetric information: Corporations are often not able to perfectly assess the skills and abilities of accountants without a CPA. This is because accountants without a CPA do not have to pass a rigorous exam or meet certain educational requirements. As a result, corporations may be hesitant to hire accountants without a CPA because they do not know if they have the necessary skills and abilities.