Discussant's response to "The relative importance of auditing to the accounting profession: Is auditing a profit center?";

              Discussant's Response to "The Relative Importance of Auditing to the Accounting Profession: Is Auditing a Profit Center?"
Zoe-Vonna Palmrose
University of California at Berkeley
Oh, we still have a few national institutions of trust left . . . Lawrence Welk, Walter Cronkite, Roy Rogers, penicillin, Mary Tyler Moore, Price Waterhouse, and hot chicken soup. But everything is under scrutiny, including our own existence.1
The Walker and Doll paper discusses forces behind, and consequences of, increased competition in the audit services market, using the question—"Is auditing a profit center?" Some might find this question inappropriate, because it appears to undermine the profession's reason for existence. Others might find it curious to question the viability of a service over which the profession has a virtual monopoly. However, I found the question both interesting and useful, even before recent events made it timely.2 In my opinion, scrutinizing the role of auditing in the Big Eight's scheme of services can enhance our understanding of the market.
My comments focus on two major areas. First, I comment on what appears missing or only implied in this discussion of competition, specifically some benefits of competition. Here, recognize that I am biased. I view competition as generally a good thing. Of course, this view comes easily since I am removed from the upheavals and uncertainties of life in the trenches. I sympathize with individuals facing difficulties imposed by competitive forces. And, I am curious to understand these forces. But I lack empathy towards laments for "the good old days of auditing"—days of excess demand and fundamental impediments to competition. My comments on the benefits of competition reflect these biases.
Second, my comments focus on issues raised by Walker and Doll relating to quality and pricing of audit services. The profession debates whether auditing is a commodity. Extant empirical research encompasses a similar question—"Are audit services homogeneous or differentiated?" My comments on quality and pricing of audit services reference insights from portions of this research.
Benefits of Competition
Increased efficiencies represent a major benefit of competition. Walker and Doll mention improvements in audit efficiencies, primarily through use of
1 Bombeck, E., "Will America Regain Its Trust?" Newsweek (November 19, 1979), p. 138
2 Berton, L., "Andersen Chief of Consulting Relieved of Role," The Wall Street Journal (May 19,
1988), p. 2
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