Discussant's response to "On the economics of product differentiation in auditing";

              Discussant's Response to "On the Economics of Product Differentiation in Auditing"
Howard R. Osharow
Arthur Andersen & Co.
Good afternoon ladies and gentlemen. First let me express my appreciation to the Symposium organizers for inviting me to start the discussion of such a difficult topic as product differentiation in auditing. I also want to express my appreciation to Dan and his coauthor for making this such a challenging opportunity. It has been a long time since I have thought of differentiation in auditing in terms of formulas like they use. While I have used some advanced mathematical techniques such as regression analysis to determine the reason-ableness of inventory levels for a chain of 400 drugstores, it has been many years since I have had to deal with sentences like "Given P', and a loss from Type I error, all assessed by the user, an optimum audit intensity, N*, can be calculated by performing a Bayesian preposterior analysis."
Many of you are familiar with the television program Star Trek. I want to tell you that after reading the paper several times I could finally sympathize with Dr. McCoy of the Starship Enterprise every time he had to try to treat an injury to Mr. Spock. Dr. McCoy was a very talented physician, but Mr. Spock was a rather unusual character. While, other than his famous ears, he looked human, we know his blood was green and his heart was where your liver might be. His various other physical differences from a normal human being made him quite a challenge to the doctor. I almost feel like I am playing Dr. McCoy to the paper's Mr. Spock.
In spite of these deficiencies in my upbringing, I am going to try to give you what I believe is a practitioner's view on product differentiation in auditing, with particular emphasis on the definition of the product itself. Unfortunately, time did not permit me to discuss the contents of the paper with Dan prior to this meeting. If I had, some of my comments and questions might be unnecessary. But, since our purpose here is to generate a discussion of the paper and its applicability to the world of auditing, I guess we will still be able to meet our objectives.
We should recognize that the academician and the practitioner tend to come at any problem from different perspectives. To paraphrase what they say about the English and the Americans, academics and practitioners are two profes-sions separated by a common interest. I have personally found trying to read and understand most academic papers to be an extremely frustrating experi-ence, especially when the topic seems to have applicability to what I am interested in, but the content leaves me absolutely dumbfounded. I have been heading our firm's audit research and development efforts for the last three
100