Regulation and Markets in a
Certification Society: The
Case of Financial Reporting
Karim Jamal and Shyam Sunder
Carnegie Mellon University
August 25-26, 2006
Summary




Examination of audit certification in the broader
context of certification activities in the economy
Extent and nature of certification services
– Ubiquity of certification and conflicts of interest
– Fineness of certification categories (2-100)
– Merits of fineness of categorization
Field study of unregulated market for certification
of baseball cards
– Twenty three firms
– Market value and strictness of grading services
Implications for corporate governance, auditing
Regulatory Attempts to
Improve Auditing



Seven decades of regulation under the SEC
Major changes in regulation in 2002 (SOX)
– Ban on certain consulting services for audit clients
to minimize conflict of interest
– Corporate governance reforms to promote auditor
independence
– Transfer of responsibility for setting auditing
standards to a government agency (PCAOB)
– Transfer of responsibility for oversight of auditing
to a government agency (PCAOB)
Controversy over whether these reforms improve
auditing (Kinney et al., 2004)
A Broader Context for
Examination of Auditing




Certification services are widely available in
many sectors of the economy (Power 1994)
Try to understand audit market as a special case
of markets for certification services
Great variations on the range and characteristics
of certification services
– 2-100 point scales
– Cross-selling of services by certifiers
– Assessing the quality of certification service
– Competition in markets for certification services
Implications for regulation of audit services, and
recent reforms
Extent of Certification Services

In 1996, US Government documented
93,000 national standards developed by 80
government and 604 private agencies
(Jamal and Sunder 2006)
 National and international standards cover
virtually all aspects of the economy (Jamal
and Sunder 2006)
 To what extent are standards
accompanied by availability of services to
certify compliance?
The Audit Society






“Audit explosion” in society (Power 1994): education,
healthcare, government supported activities
Demand for audit fueled by political demands for
accountability and control (Power 1999)
U.S. audit firms attempted to expand and re-label their
“assurance” services into other sectors of the economy in
the 1990s (Elliott 1998)
Retail customer as the new client for services
Audit firms failed in attempt to expand into e-commerce
assurance market: could not compete with the business
models of BBB Online and TRUSTe (Jamal, Maier and
Sunder 2003)
Attempt to empirically assess the extent of availability of
certification services
Sample Selection

Selected a sample of 817 items sold online
and offline during June 12-July 25, 2004
– 400 items from eBay.com (online)
– 358 items from BLS Producer Price Index
– 59 items from BLS Consumer Price Index
Types of Certification Services






Expert opinion about compliance with formal
written standards (91%)
Expert opinion in absence of formal standards
(7%)
Ratings given by lay people (no standards) 1%
Popularity/activity meters (best-seller lists for
books, music, films, TV, etc.) 0.5%
Total: 99.5% have some kind of certificate
All four kinds of certification available for 40%
Table 1: Certification Services for Products Sold Online and Offline in the US
PANEL A
EBay
(N=400)
PPI/CPI
(N=417)
Total
(N= 817)
% of Total
(817)
Expert Opinions Based on Written Standards
344
399
743
91%
Expert Opinions Without Written Standards
45
14
59
7%
Lay People Ratings
5
3
8
1%
Meter
3
0
3
0.5%
No Certification / Rating
3
1
4
0.5%
All Certification Available (Expert Opinions Based on Written
Standards, Expert Opinions Without Written Standards, Lay People
Ratings, and Meters)
221
101
322
40%
Expert Opinions Based on Written Standards only
4
110
114
14%
Expert Opinions Based on Written Standards, Lay People Ratings
and Meter
33
57
90
11%
Expert Opinions Based on Written Standards and Expert Opinions
Without Written Standards
47
34
81
10%
Expert Opinions Based on Written Standards, Expert Opinions
Without Written Standards, and Lay People Ratings
17
34
51
6%
Expert Opinions Based on Written Standards, and Meter
8
28
36
4%
Expert Opinions Based on Written Standards, Expert Opinions
Without Written Standards, and Meter
11
15
26
3%
Expert Opinions Based on Written Standards, and Lay People
Ratings
3
20
23
3%
All other combinations
56
18
74
9%
Panel B: Detailed Breakdown of Certification
Activities
Extent of Certification




Results suggest support for Power’s
characterization of ours as a “audit society”
AICPA failed in its attempt to fill what they
thought were empty spaces in the market for
assurance services
Although Power (1994) focused his study on the
public sector, the certification is also ubiquitous
in the private good space
Demand for certification for private goods must
be driven by broader economic forces, not just
politics
Data Obtained from One
Official Partner of eBay (XYZ)







128 experts
Offer opinions on 1,850 separate items
$9.95 fee for basic service
$29.95 for enhanced service
Experts do not follow any written standards
Opinions do not reference any written standards
Provides descriptions of experts (accreditation
by professional institutes, education, related
business, relevant experience): two examples
Appraiser Information
Name:
Location:
# of Appraisals Completed:
Thomas Joyce
ILLINOIS, UNITED STATES
978
Appraiser in 75 category(s)
Category(s)
Books, Maps, Manuscripts and Periodicals
About Thomas Joyce
Thomas has been a professional rare book dealer for nearly thirty
years. He is the regular book/map/manuscript appraiser for "The
Appraisal Fair" on HGTV.
Organizations
Member: Antiquarian Booksellers Association of America,
International League of Antiquarian Booksellers, The Midwest
Antiquarian Booksellers Association
Appraiser Information
Name:
Location:
Website:
# of Appraisals Completed:
Anita Bartlett-Picarella
NY, UNITED STATES
Bartlett and Picarella
275
Appraiser in 144 category(s)
Category(s)
Fine art, paintings, sculptures, etc.
About Anita Bartlett-Picarella
Anita is the president and senior certified appraiser in the firm
Bartlett and Picarella. She received her Bachelor of Science
degree from St. John's University in NY. She continued her
education taking Sotheby's American Decorative Art program
and continued her studies with the Bard Graduate School of
Decorative arts attending symposiums, seminars and doing
independent study.
Anita is an avid attendee at numerous workshops and private
study groups relating to art and appraising. She lectures
nationwide on the subject of "Standards and Methodology of Fine
Art Appraisals"
Certifications




Board Member, Thomas Paine National Historic
Association
State Certified by the New York and New Jersey
Departments of Economic Development
Certified Better Business Bureau Member, Bronxville
Chamber of Commerce
Senior Certified Member, Appraisers Association of
America
Organizations
IRS Qualified Appraiser Appointed Neutral Appraiser by Supreme
Court, County of Westchester
Self-Assessment of XYZ’s
Experts





128 experts as of July 12, 2004
39% had formal accreditation from a
professional body
25% formal relevant educational
credentials
70% ran a business in the products for
which they provided certification
Only 9% reported themselves to be
hobbyists
Table 2: Qualifications of Experts Providing Opinions on XYZ Website
Accreditatio
n
Educatio
n
Business
Hobby
1. Art and Antiquities (n=14)
64%
50%
71%
7%
2. Books, Maps, Manuscripts (n=5)
20%
20%
80%
20%
3. Clocks, Watches and Timepieces (n=4)
25%
25%
100%
0%
4. Clothing, Linens, Rugs and Quilts (n=6)
33%
17%
100%
0%
5. Coins, Stamps, Numismatics (n=7)
29%
14%
100%
0%
6. Electronics (n=3)
33%
0%
67%
33%
7. Famous People (n=4)
25%
0%
100%
0%
8. Furniture and Accessories (n=8)
50%
0%
75%
13%
9. Glass (n=5)
40%
20%
100%
0%
10. Guns, Knives and Swords (n=5)
60%
0%
100%
0%
11. Jewelry (n=6)
50%
33%
83%
0%
12. Knick Knacks and Collectibles (n=7)
14%
28%
86%
0%
13. Music (n=4)
25%
25%
75%
0%
0%
100%
100%
0%
15. Photography, Cameras, Projectors (n=3)
33%
67%
67%
33%
16. Porcelain, Ceramic and Pottery (n=10)
50%
20%
60%
20%
17. Silver (n=7)
43%
29%
71%
14%
18. Sports (n=6)
17%
17%
67%
33%
19. Tools, Kitchenware & Equipment (n=3)
33%
0%
100%
0%
20. Toys, Dolls, Games (n=9)
44%
11%
78%
0%
21. Transportation (n=4)
25%
25%
25%
25%
22. Wine (n=2)
50%
50%
50%
0%
23. General Appraisers (other) (n=6)
33%
67%
83%
17%
Total (n=128)
50 (39%)
14. Nature’s Treasures (n=1)
32 (25%)
101(79%
12 (9%)
Fineness of
Ratings/Certification





Auditor reports are essentially pass/fail
Auditor gains a broad understanding of the
quality of internal controls, governance,
accounting policies, estimates, and disclosure
The coarse pass/fail grading does not attempt to
convey this detailed information to the client
No incentives for companies to report more
Shouldn’t a finer report be more informative to
the clients
Implications for Auditing





Conflict of interest appears to be pervasive in certification
services in general (79%), not confined to auditing
Confirm Moore et al. (2006)
Do we (the academic researchers) fall in this category?
Conflict of interest as a norm, not exception
Unacceptability of consulting services to audit clients in a
regulated market (Francis 2004) contrasts sharply with this data
from unregulated domains
– Clients pay cash for opinions/assessments of self-proclaimed
experts who have known conflicts of interest
– Is it possible that clients have other means of protecting themselves
from self-serving advice, and find it worthwhile to pay for such
services?
– Could clients of audit services do the same?
– Could the prohibition of consulting services to audit clients be a
case of regulatory overkill?
Economic Theory



Dubey and Geanakoplos (2005): In general, an
optimal grading scheme should have an
intermediate level of fineness
– Coarse reports have less information and do not
motivate the reporting agent to exert more effort
– Fine reports magnify the consequences of
measurement errors
– 3-10 point grading scale may be optimal
Grading scheme should create a small elite
Absolute grading schemes dominate relative
Data on the Fineness of
Government Standards








Visited websites of 80 departments of the federal
government that set standards (Toth 1996)
We able to access standards of 64 (80%) of these agencies
Examined the standards for fineness
53/64 (83%) set minimum requirements (pass/fail only)
11/64 (17%) use finer grading (e.g., AAA beef)
Given lack of funds and authority, agencies my be induced
to use finer scales of quality
SEC’s shortage of staff/funding does not seem to induce
finer scales from that agency
DG: Most federal agencies use absolute standards, but do
not set elite grades or use intermediate fineness scales
(FDA is an exception)
Greater Variability in Fineness
of Scales in Private Standards





Pass/fail (e.g., UL)
Multiple seals (TRUSTe for e-commerce privacy,
Jamal, Maier, Sunder 2003, 2005)
10-100 point rating scales (baseball cards,
Consumer Reports on cars)
Often characterized by competition among rival
standards and scales
Rating scales as a dimension of competition
among services (Jin, Cato and List 2004)
Market for Baseball Card
Certification Services

Jin, Cato and List (2004)
– Dominant player is PSA: 1991, 10-point scale with 1 point
inc., not graded on curve, 10% cards get 10 (no super elite
grade)
– BGS: 1999, 10-point scale with ½ point inc., numerical and
qualitative labels (mint), subgrades for corners, centering,
surface, edges; 0.1% cards get 10, publishes grade
distribution on-line; three brands of service (BVG, BGS, and
BCCG)
– SGC: 1999, smaller market share, 100-point scale
(confusion, conversion table to 10-point scale)
– 20 other smaller players (Table 3), largely consistent with DG
predictions (no curve, intermediate fineness, super elite)
Name
Year
Found
ed
Scale
Catego
ries
Gradin
g Cost
Guara
ntee
Cro
sssell
er
Feature
1. Accugrade
(ASA)
1988
13
$5-15
No
No
Invented 10-point
scale + First
online rating
agency
2. Professional
Sports
Authentication
(PSA)
1991
10
$9-50
Yes
Yes
Membership Fee
($99 – get 6 cards
graded free) +
Largest Market
Share
3. KSA
1996
14
$12-19
No
No
Canadian
4. American
Authentication
(AAI)
1996
10
$12-22
No
No
5 card minimum
per order
5. Finest Grading
(FGS)
1997
14
$5-25
No
Yes
Value Pricing
Card Shows
6. Map Industries
1998
14
$8
No
No
Free Shipping
7. Beckett Grading
Service (BGS)
–Vintage Grading
(BVG)
–Collectors Club
(BCCG)
1999
19
$8-25
$9-26
$5
Yes
Yes
Price guide +
provide subgrades for
centering,
corners, edges,
and surface
8. Sportscard
Guaranty (SGC)
1999
18
$7- 50
No
Yes
Started with 100point scale
9. The Final
Authority (TFA)
1999
19
$5-13
Yes
No
Value Pricing
11. Advanced
Grading (AGS)
2000
11
$9-25
No
No
Top view holders
12. Mint Grading
Services
2000
18
$6-20
Yes
No
Customer
chooses grade. If
MGS disagrees,
pay $1 only
13. CTA Grading
Experts
2000
11
$10-30
No
No
Computer
grading
14. Bear Stats
Grading (BSGS)
2002
14
$10-20
No
No
Value Pricing
15. Global
Authentication
(GAI)
2002
19
$6-20
No
Yes
Former PSA
Experts + Dealer
Focused
16. Pro Sports
Grading (PRO)
---
22
$9-50
No
No
2 experts grade
each card
17. Professional
Grading Service
(PGS)
---
19
$5-35
Yes
No
Help to post on
eBay
18. World Class
Grading (WCG)
---
20
$5-20
Yes
No
Value Pricing
19. Champs
Grading Service
(CGS)
---
10
$2-3
Yes
No
Racing
Specialists
20. Grade Tech
---
21
$14-50
No
No
Computerized
grading
21. Premier
Grading (PGI)
---
20
$6-20
No
No
Value
22. Gem Trading
- Gem Elite
---
9
$8-15
$12-19
No
No
Value
23. Sports
Memorabilia
---
19
$6-8
No
No
Value / Older
Cards
Comparison with the Market
for Audit Services

Only binary pass/fail reports, little further detail
permitted
 Possible bases for auditor reputation: size, care
in client selection, monitoring GAAP compliance,
premium services
 If the purpose of SOX is to convey information
about internal controls, will switch from pass/fail
to graded report on IC, governance, quality of
accounting methods and governance give better
value to investors?
 The current system suppresses the detailed
knowledge gained by the auditor; more
consistent with govt. not private markets
Value of Certification in Sports
Card Market





Prospective sellers of sports cards can hire a certification
agency to grade and certify their merchandise before
selling
Issuers of securities are required to hire auditors to add
credibility to their FSs
Independence and audit quality are difficult to observe in
the audit market
Baseball card market includes pure and multi-service
certifiers, allows a cleaner measure of “audit quality” in
grading strictness, observation of an unregulated market
and dimensions of competition (e.g., value pricing,
computer grading, multiple experts grading the same card,
letting customers choose their own grade)
Anxiety about race-to-the-bottom and independence in
accounting (Dye and Sunder 2001)
Data for Assessing the Value of
Certification Services




321,045 cards traded on eBay during August 19September 3, 2004
Partitioned cards by decades of origin, singlerookie, graded-ungraded (Table 4)
Randomly selected 1,000 rookie and 1,000 singles
cards from graded cards
Market shares of six major firms (Table 5) in the
sample of graded cards (PSA 78 in singles, 39
rookie; BGS 6 singles, 34 rookie) Tables 5A, B
Table 4: Baseball Card Certification Services
(Baseball Cards Traded on eBay, N=321,045)
Singles (272,399 cards)
Issue
Date
Grade
d
UnGrade
d
Pre1930s
1,935
2,933
1930s
1,376
1940s
Total
Rookies (48,646 cards)
%Grade
d
Grade
d
UnGrade
d
Tota
l
%Grade
d
4,868
40%
----
----
----
----
1,689
3,065
45%
----
----
----
----
417
1,448
1,865
22%
20
218
238
8%
1950s
6,160
22,869
29,029
21%
59
606
665
9%
1960s
7,291
28,007
35,298
21%
161
750
911
18%
1970s
6,858
14,171
21,029
33%
303
1,221
1,52
4
20%
1980s
3,692
8,533
12,225
30%
5,470
6,378
11,8
48
46%
1990s
2,693
25,163
27,856
10%
3,669
9,578
13,2
47
28%
2000s
1,356
135,808
137,16
4
1%
2,608
17,605
20,2
13
13%
Total
31,778
240,621
272,39
9
11%
12,290
36,356
48,6
46
25%
Assessing Strictness of
Grading







Jin, Cato and List (2005) gave the same 212 cards to PSA,
BGS and SGC online and to three offline dealers
Average scores: 8.5 for BGS and two dealers; 8.7 for PSA
and one dealer, and 8.9 for SGC (BGS tighter cut-offs,
precise); Table 5C
Tables 5A and B: empirical frequencies in our sample (selfselection bias): BVG’s premium service stands out (GAI,
SGC)
Becket’s value brand (BCCG) is lower priced, also has
relaxed standards
GEM gives the top grade of 10 to 73% percent of the singles
cards
In rookie Table 5B: roughly similar results
Is the market able to adjust itself for differences in grading?
Table 5C: Frequency of Grades Given by 3rd Party Certification Services in Field Experiment
(Source: Jin et al., 2005, Table 2)
3rd
Party
Grader
PSA
BGS
SGC
Kevin
Rick
Rodney
Total
Total
No. of
Cards
10
212
212
212
212
212
212
11
0
13
0
0
0
24
9.5
0
1
11
1
13
9
8.5
8
7.5
Grade
7
134
40
134
40
57
120
525
124
49
129
92
62
456
66
43
11
37
45
25
227
3
3
4
3
2
15
1
2
2
1
2
0
8
6.5
0
0
0
0
0
6
5.5
5
0
0
0
0
1
2
3
0
0
0
0
0
0
0
0
0
0
0
0
0
4.5
0
0
0
0
0
4
Average
Score
0
0
0
0
1
0
1
8.7
8.5
8.9
8.5
8.5
8.7
8.6
Table 5A: Frequency of Grades Given by 3rd Party Certification Services
(For a Sample of 1,000 Graded Single Baseball Cards)
Grade
3rd Party
Grader
Market
Share
%
10
9.5
9.0
8.5
8.0
7.5
7.0
6.0
5.0
<
5
Total
Average
Score
PSA
78.1
69
1
149
0
283
0
129
61
33
56
781
7.5
BGS
3.2
0
11
10
7
1
0
0
1
0
2
32
8.5
BCCG
1.8
9
0
8
0
0
0
0
1
0
0
18
9.3
BVG
1.1
0
0
2
0
0
0
0
3
2
4
11
5.1
GEM
1.1
8
0
0
0
3
0
0
0
0
0
11
9.5
GEM-E
0.3
1
2
0
0
0
0
0
0
0
0
3
9.7
SGC
5.3
2
0
3
2
7
4
6
8
12
9
53
6.1
GAI
4.6
0
1
3
3
12
3
8
5
4
7
46
6.6
PGS
1.5
0
0
6
2
6
0
0
1
0
0
15
8.3
Other
3.0
13
3
4
0
2
2
3
1
1
1
30
8.7
Total
100
102
18
185
14
314
9
146
81
52
79
1000
Table 5B: Frequency of Grades Given by 3rd Party Certification Services
(For a Sample of 1,000 Graded Rookie Baseball Cards)
Grade
3rd Party
Grader
Market
Share %
10
9.5
9.0
8.5
8.0
7.5
7.0
6.0
5.0
<
5
Total
Average
Score
PSA
36.8
105
0
159
0
80
0
17
4
2
1
368
8.9
BGS
22.7
1
85
73
37
13
14
1
1
1
1
227
8.9
BCCG
10.4
87
0
16
0
0
0
0
1
0
0
104
9.8
BVG
0.9
0
0
0
2
0
1
0
1
2
3
9
5.3
GEM
11.6
116
0
0
0
0
0
0
0
0
0
116
10.0
GEM-E
4.2
42
0
0
0
0
0
0
0
0
0
42
10.0
SGC
2.9
4
0
13
6
4
1
1
0
0
0
29
8.8
GAI
2.3
2
9
8
2
1
0
0
1
0
0
23
9.1
PGS
1.6
16
0
0
0
0
0
0
0
0
0
16
10.0
Other
6.6
33
2
20
8
2
0
0
0
1
0
66
9.4
100%
406
96
289
55
100
16
19
8
6
5
1000
Total
Pricing and Value of Baseball
Card Certification Services






PSA charged a $99 membership fee (dropped recently)
Table 3: Price varies ($2-50), extra for faster turnaround
For each graded card in the sample, we located an
ungraded card matched by player, maker, year of issue,
single-rookie)
For unrated cards, we gathered price estimates from
Beckett Baseball Card Monthly Guide (August 2004, Issue
#234 online)
For rated cards, we recorded player, year, maker, grader,
grade, buyer reputation, seller reputation, number of bids,
and selling price
Table 6: Gross and net returns on baseball card grading
services provided by six major service providers
Table 6:
Average Returns to Grading of Rookie Cards (by Grader and Decade of Issue)
Rater
2000+
Gr.=9
%
1990’s
Gr.= 9
%
1980’s
Gr.=9
%
1970’s
Gr.= 9
%
-----
44
86
176
-----
-----
-----
55
124
128
-----
303
-----
201
(27)
(65)
(1)
-----
(2 )
25
47
178
(50)
(53)
(5)
683
112
(14)
(15)
(11)
(3)
(68)
(72)
(25)
20
80.6
(23)
154
(38)
(24)
-----
-----
-----
-----
2000+
Gr. =10
%
1990’s
Gr.=10
%
Number
of
Cards
Gross
Return
%
Net
Return
%
BGS
227
264
46
333
-----
GAI
23
198
92
185
SGC
29
125
4
PSA
368
238
BCCG
104
GEM
116
1980’s
Gr.= 10
%
Returns to Audit
Rater
Gross Return
Net Return
BGS
264%
46%
GAI
198%
92%
SGC
125%
4%
PSA
238%
(2%)
BCCG
112%
(14%)
GEM
80.6%
(23%)
Gross and Net Returns to
Certification





Gross returns are positive for all six services
Net returns: positive for strict graders (BGS,
GAI); about zero for medium graders (SGC and
PSA); negative for lenient graders (BCCG, GEM)
Older cards earn a higher return than more recent
cards
Grade 10 cards earn a higher return
Overall it is better to get a rating of 9 from a strict
grader than a rating of 10 from a lenient grader
Table 7: Regression Analysis
Ri = 1+ 1Yeari + 2Gradei + 3GPSAi + 4GBGSi + 5GBecketti
+6GGAIi + 7GGEMi + 8GSGCi + ei
Regression (990)df, R2 = 0.1747, p < 0.001. (Adjusted R2 = 0.168)
Intercept
Year
Coefficient
Std Error
108.68
12.60
T Statistic
8.63 ***
-0.058
0.006
-8.97 ***
Grade
0.72
0.06
12.65 ***
GPSA
0.37
0.16
2.22**
GBGS
1.12
0.18
6.25***
GECKETT
-0.18
0.19
-0.98
1.21
0.31
3.87 ***
GGEM
-0.73
0.18
-3.97***
GSGC
0.48
0.28
1.68*
GGAI
*** p <0.001
** p < 0.01
* p < 0.05
Regression Analysis






Table 7: Year, grade and identity of grader have a significant
effect on net return from the certification service
Certification service is more valuable for older cards
(selection effect?)
The returns are ranked by strictness of grading scales,
negative for the lenient graders
Easy grade of 10 from GEM does no good for the value of
the card
No race to the bottom
Beckett able to provide different brands of service, and
market is able to differentiate among them without getting
confused
Back to Auditing





Regulatory objectives of auditing (quality of certification,
independence, etc.)
In baseball card market 17/23 offer only certification
services but six (including all major) players offer related
services (pricing guides, dealers, magazines, shows) as
well as handle other collectibles
Cross-sellers dominate the market and are able to collect
premium price for their service, yielding positive net returns
to their clients
Independence appears to be neither necessary nor
sufficient condition for high quality service in this
certification market
Why?
Skepticism about Deregulation






Will a deregulated market for auditing function properly
(race to the bottom, Dye and Sunder)?
Recent policy changes (PCAOB) have gone in the other
direction
Lenient graders generate negative returns to their clients
Jamal, Maier and Sunder (2003) on market for privacy seals
in e-commerce dominated by higher quality
Does cross-selling of services promote or inhibit grade
inflation?
What are the real reasons for poor enforcement of GAAP by
audit firms?
Concluding Remarks




Evidence on ubiquity of certification
Certification by government agencies is mostly
binary (pass/fail)
Private certification has finer scale
Field study of baseball card grading market
– Dominated by cross sellers (conflict of interest)
– Multiple dimensions of competition
– No race to the bottom
Open Questions

Will the tough auditors win or lose?
 Precision of grading – Significant? Should
auditors issue more nuanced reports?
 Does it pay to get audited (vs. reputation,
warranty and disclosure)
 Will de-regulated audit market lead to
quality differentiation?