lu - 2006 - does opinion shopping impair auditor independence and audit quality

Does Opinion Shopping Impair Auditor Independence and Audit Quality?. In addition, auditor switching decreasespotential understatements and increases potential overstatements in finan-ci

Vol 44 No 3 June 2006

Printed in U.S.A.

Does Opinion Shopping

Impair Auditor Independence

and Audit Quality?

T O N G L U ∗

Received 7 October 2004; accepted 22 October 2005

ABSTRACTThis study investigates how companies’ threats to dismiss auditors and theirengagement in opinion shopping influence auditor independence and au-dit quality, which in turn affect misstatements in financial statements It alsoexamines how outsiders’ reactions to auditor switching influence opinionshopping The results indicate that neither the predecessor auditor’s nor thesuccessor auditor’s independence is compromised by dismissal threats andopinion shopping Further, the successor auditor’s audit quality exceeds thepredecessor auditor’s audit quality In addition, auditor switching decreasespotential understatements and increases potential overstatements in finan-cial statements, and the capital market’s and the successor auditor’s reac-tions to auditor switching reduce the benefits of opinion shopping to com-panies Additionally, the study sheds some light on the potential effects ofboth the Sarbanes-Oxley’s restriction on non-audit services and mandatoryauditor rotation or retention The paper also derives a rich set of empiricalimplications

∗University of Houston This paper is based on my dissertation at the University of Minnesota I am very grateful to my advisor, Chandra Kanodia, for his guidance I also thank the members of my dissertation committee, Regina Anctil, Andrea Moro, and especially Frank Gigler, for their advice I gratefully appreciate the constructive comments by the anonymous referee This paper has also benefited from the comments of Philip Berger (the editor), Haresh Sapra, Raghu Venugopalan, and workshop participants at the University of Minnesota.

561 Copyright , University of Chicago on behalf of the Institute of Professional Accounting, 2006

1 Introduction

The recent explosive growth in auditor switching is exemplified by the factthat in 2004, more than 1,600 companies changed their outside account-ing firm, an increase of 78% over 2003 Moreover, 61 companies changedauditors at least twice in 2004, and the 2,514 changes during 2003 and

2004 represents more than one-fourth of all U.S publicly traded companies(Taub [2005]) Whereas some auditor switches occur for legitimate reasonslike client firm growth, others are driven by opinion shopping, which “isgenerally understood to involve the search for an auditor willing to sup-port a proposed accounting treatment designed to help a company achieveits reporting objectives even though that treatment might frustrate reli-able reporting” (SEC [1988]) To date, debate continues in the financialcommunity, academic literature, and popular press as to the most effectiveway of curbing opinion shopping Whereas the Sarbanes-Oxley Act of 2002required the General Accounting Office to study the potential effects ofmandatory auditor rotation in strengthening auditors’ resistance to opin-ion shopping threats, some scholars advocate a policy of mandatory auditorretention to mitigate companies’ opinion shopping opportunities (Lennox[1998])

Legislators’ and regulators’ attention to auditor switches apparently sults from two concerns: (1) impairment of the reliability of reported ac-

re-counting numbers because of auditors’ failure to detect misstatements in

financial statements (an issue of “audit quality”) and (2) expansion of portunities for earnings management by unscrupulous managers because

op-of auditors’ failure to deal appropriately with detected misstatements (an sue of “auditor independence”) Audit quality refers to the probability that the auditor will detect misstatements, while auditor independence refers to the

is-probability that the auditor will refuse to support detected misstatements.The concern is that companies’ threats to dismiss auditors and their engage-ment in opinion shopping might damage auditor independence and auditquality, thereby precipitating materially misstated financial statements andultimately harming capital market investors

Most debate over opinion shopping has so far revolved around tory auditor rotation versus mandatory auditor retention However, beforeanswering the questions of whether and how the government should inter-vene, the status quo free market setting in which companies can voluntarilyswitch auditors should be investigated first Therefore, several more prim-itive economic questions must precede the issue of public policy: Are thepredecessor auditor’s and the successor auditor’s independence impaired

manda-by dismissal threats and opinion shopping? Is the successor auditor’s auditquality lower than the predecessor auditor’s audit quality? Are misstatements

in financial statements increased by opinion shopping? Can companies foolthe capital market and the successor auditor and reap the full benefits ofopinion shopping? This paper contributes to the research stream by ad-dressing these crucial questions

Dye [1991] and Teoh [1992] are important forerunners of this paper inthat they too investigate auditor switches resulting from auditor-client dis-agreements in a capital market setting However, there are two important dif-ferences between those studies and this study Whereas Dye [1991] presentswhat might be termed a “vindication seeking” view of auditor switches inwhich auditor replacement is done by “good” firms, my theory integratesboth “vindication seeking” and “opinion shopping.” Similarly, whereas

Teoh [1992] focuses on auditor switching after public disclosure of audit

opinions, my investigation concentrates on firms’ shopping for opinions

before their public release.

My model introduces two opposing forces that influence auditors’ cisions: auditor fee and legal liability Auditor fees are potential auditorbenefits from repeat audit business and non-audit services, while legal li-abilities are those that may be imposed on auditors when the rosiness

de-of a client’s portrayal turns out to be gloomy Auditors are assumed tochoose their audit quality and attestation so as to maximize the differ-ence between the expected auditor fee and legal liability, less the auditcost The firm is assumed to maximize its price in the capital market, lessthe auditor fee, by choosing the proposed accounting report, the audi-tor fee, and the auditor switching strategy, thereby influencing its audi-tor’s audit quality and attestation, and thus misstatements in audited ac-counting reports The price in the capital market depends on inferencesthat traders make from audited accounting reports; the beliefs of tradersare consistent with the firm’s and the auditor’s equilibrium choices Infor-mational differences in reports induce a change in the behavior of mar-ket prices, which in turn induces changes in the firm’s and the auditor’sdecisions The results in my paper depend on informational differences

in audited accounting reports caused by different directions and degrees

of misstatements, which are affected by auditor independence and auditquality

The study’s primary findings are as follows First, neither the sor auditor’s nor the successor auditor’s independence is compromised by

predeces-dismissal threats and opinion shopping Second, the successor auditor’s

audit quality exceeds the predecessor auditor’s audit quality Third, auditor switching decreases potential understatements and increases potential over-

statements in financial statements Fourth, both the capital market’s and the

successor auditor’s reactions to auditor switching reduce the benefits of

opin-ion shopping to companies

The first two findings contrast starkly with the popular belief that dismissalthreats and opinion shopping impair auditor independence and audit qual-ity, which implies that a policy of mandatory auditor rotation or retention

is called for Rather, my analysis suggests that proponents of such publicpolicies fail to recognize the corporate governance role of capital marketprices in disciplining excessive client pressure

Nevertheless, the results on auditor independence and audit quality

do not necessarily imply that opinion shopping is innocuous Rather,

as the third finding asserts, auditor switching may decrease one type ofmisstatement (understatements) but increase the other (overstatements).

On the other hand, a policy of mandatory auditor retention, which forbidsauditor switching for a fixed duration, may prevent correction of under-statements Furthermore, I show that, when auditor switching is feasible,

in the preswitching period, firms prefer auditor conservatism; however, as aresult of mandatory retention, firms with better prospects would prefer audi-tor aggressiveness instead Thus, in evaluating alternative policy proposals,legislators and regulators must carefully investigate the trade-off betweenunderstatements and overstatements

The fourth finding extends the points made earlier and implies thatmandatory auditor rotation may take away valuable information from out-siders In a free market, auditor switching is voluntary and so is itself in-formative to outsiders: the capital market and the successor auditor extractuseful information from auditor switching to assess the firm’s financial con-dition This finding shows that outsiders’ assessments and consequent re-actions reduce the benefits of opinion shopping to companies; in somecases, they even preclude opinion shopping In contrast, mandatory rota-tion, which forces all types of firms to switch auditors after a fixed duration,suppresses the information content of auditor switching, thereby possiblyproviding a cover for opinion shopping and encouraging overstatements.Thus, my analysis suggests that requiring mandatory auditor rotation may

be dysfunctional

The analysis also sheds some light on the potential effects of banningmost auditor-provided non-audit services, which is required by the Sarbanes-Oxley Act of 2002 I show that, (1) given auditor conservatism, the ban im-pairs audit quality; (2) given auditor aggressiveness, the ban improves auditquality; and (3) a severe restriction on non-audit services makes attestationsconservative

In addition to the above main results, the analysis provides a framework

to both explain systematically many extant empirical findings and derive

a rich set of new empirical predictions These empirical implications clude (1) the likelihood, behavior, and consequences of auditor switching;(2) the properties of and the asymmetric price responses to audited ac-counting reports; (3) the determinants and consequences of auditor con-servatism and audit quality; and (4) comparisons of the predecessor andsuccessor auditor’s fees and their impacts on auditor conservatism and auditquality

in-The remainder of the paper is organized as follows Section 2 scribes the model Section 3 characterizes equilibrium reporting, attes-tation, and capital market price, and section 4 characterizes audit qual-ity in the absence of auditor switching Section 5 outlines both theequilibrium in the presence of auditor switching and the firm’s equi-librium auditor switching strategy Section 6 investigates auditor feesbefore and after auditor switching Finally, section 7 presents possibleextensions of the model Proofs of propositions are contained in theappendix

de-2 The Model

I study a financial accounting and auditing setting in which a firm providesthe capital market audited financial statements on its profitability The firmhas a decreasing returns to scale technology that produces stochastic returns

Specifically, by investing k in the firm’s technology, capital market investors

receive a positive return of 2√

k with probability p and a zero return with

probability 1 − p The profitability parameter p takes the value p G with

probability 1 − x and the value p B with probability x, where 1 ≥ p G > p B≥ 0

and 1 >x > 0 Because the value of p is unobservable to investors, the firm

is required to publish report G or B to indicate whether p is p G or p B Based

on the report and other available information, the capital market prices the

firm at m.

To ensure its consistency with the firm’s underlying financial tion, the accounting report must be audited by an auditor before its re-lease The auditor’s audit technology produces audit evidence on the

condi-firm’s profitability parameter p The audit evidence can be either clusive or uninformative Uninformative evidence, denoted by p0, where

con-p0= Pr(p G )p G + Pr(p B )p B, provides no incremental information, and itcan also be interpreted as two pieces of conflicting evidence In contrast,

conclusive evidence, either p G or p B, unmistakenly identifies the value of

p and so can be used to check for misstatements in the client’s proposed

report In the real world, the audit technology is not always able to duce conclusive evidence, a feature that the model captures by assuming

pro-that the conclusive evidence is produced with probability q and the formative evidence is produced with probability 1 − q The probability of

unin-obtaining conclusive evidence—or equivalently, the probability of detecting

misstatements, q—is referred to as “audit quality.” This audit quality q can

be increased by devoting more resources to the audit technology Letting

C(q) denote the audit cost required to achieve a certain level of q, C(q) is

increasing and convex in q with C (0) = 0, C(0) = 0, and C(1) = ∞.Audit evidence helps auditors make informed attestations The auditor

must give either an unmodified audit opinion, U , in support of the client’s report or a modified audit opinion, M , stating disapproval of it The prob-

ability that the auditor refuses to support detected misstatements is here

termed “auditor independence.” Thus, auditor independence would be promised if an auditor with the audit evidence p B supported the report G.

com-However, no issue of auditor independence exists when the audit evidence

is uninformative because such evidence cannot reveal any misstatement

To induce an unmodified opinion on its preferred report, the firm luresthe auditor with future audit and non-audit services The total auditor fee

from these business opportunities is denoted by F 1If the auditor is unwilling

1F does not include the fee for the current audit engagement The current period audit fee

is required to be noncontingent on the current period audit opinion and so it is not modeled here Results from a setting in which the current period audit fee is formally modeled are available upon request.

to support its report, the firm may threaten to take away the business tunities and appoint a new auditor As a countervailing force against client

oppor-pressure, a legal liability, L, is imposed on any auditor giving an unmodified opinion, U , on the firm’s report G when the subsequently realized return

to investment turns out to be zero

The sequence of events is as follows:

1) The firm chooses an auditor fee, F

2) The firm’s profitability parameter, p, is realized.

3) The auditor chooses an audit quality, q, and then receives the audit

evidence

4) The firm and the auditor decide on the accounting report, G or B, and the audit opinion, U or M

5) The firm decides whether to switch auditors If the firm switches

auditors, it chooses an auditor fee, F , for the new auditor and the

sequence of events goes back to stage 3 and continues onward; if thefirm does not switch auditors, the accounting report and the auditopinion are released

6) Capital market investors price the firm at m and make an investment

to the auditor; and all else are public information

In terms of the decision-makers’ objectives, the firm maximizes its tation of the market price less the auditor fee by choosing the report, the fee,and whether to switch auditors; the auditor chooses his or her audit qualityand attestation to maximize the expected auditor fee less the expected legalliability, net of the audit cost; and the capital market investors choose theirinvestments to maximize their expected return on investments

expec-3 Reporting, Attestation, and Capital Market Price

The characterization of equilibrium in the absence of auditor switchingbegins with an outline of the firm’s reporting strategy, the auditor’s attesta-tion decision, and the capital market’s pricing rule

Letting ˆp denote the investors’ assessment of the firm’s profitability

param-eter, p, on the basis of the accounting report and other available information,

an investment of k will produce a positive return of 2√

k with probability ˆ p

and a zero return otherwise Therefore, the investors’ objective function—their expected return on investments—is 2√

k ˆ p − k The first-order

condi-tion with respect to k implies that the optimal level of investment is ˆ p2

Inserting this value of k into the objective function yields ˆ p2, which equalsthe equilibrium price in a competitive capital market:

m = ˆ p2. (1)

Equation (1) expresses the market price as a function of the market belief.How the market forms its belief, ˆp, depends on its understanding of the

auditor-client interactions that produce audited accounting reports, whichthe following text elaborates

Recall that the auditor is torn between auditor fee and legal liability when

facing the client’s favorite report, G: disapproving G jeopardizes the auditor fee, F , whereas supporting G risks legal liability, L Thus, the auditor assesses

the litigation risk on the basis of the audit evidence When the evidence is

conclusive (p G or p B), the auditor’s expected legal liability when supporting

G is (1 − p G )L or (1 − p B )L When the evidence is uninformative, the auditor uses the prior expectation of p, p0, to assess the expected legal

liability, which is (1 − p0)L Comparing the expected legal liability with

the expected auditor fee, the auditor decides whether to support the client

firm’s preferred report, G Because (1 − p G )L < (1 − p0)L < (1 − p B )L, only four cases need be considered: (1) F ≤ (1 − p G )L, (2) (1 − p G )L ≤

F ≤ (1 − p0)L, (3) (1 − p0)L ≤ F ≤ (1 − p B )L, and (4) (1 − p B )L ≤ F Case (1): F ≤ (1 − p G )L In this extreme case, the auditor fee is too small

to cover even the smallest expected legal liability; so the auditor refuses

to approve report G regardless of audit evidence Therefore, the firm is forced to issue report B no matter what its profitability Yet such a report

B contains no information whatsoever about p and is thus ignored by the

capital market, which then uses its prior belief about p, p0, to price the firm

according to equation (1): m = p2

0

Case (4): (1 − p B )L ≤ F In this other extreme case, the auditor fee is

so large that it can cover even the largest expected legal liability; therefore,the auditor approves whatever report the client prefers regardless of audit

evidence However, once again, such a report, either G or B, contains lutely no information about p and is therefore ignored by the market Thus,

abso-as in cabso-ase (1), the market uses its prior belief, p0, to price the firm: m = p20.Cases (1) and (4) indicate that excessive legal liability or excessive auditorfee leads to “uninformative accounting,” in which accounting reports pro-vide no incremental information on the firm’s financial condition Thus, themarket’s belief given uninformative accounting is the same as the market’sbelief prior to the release of accounting reports:

Additionally, by equation (1), the market price prior to the release of counting reports is

Because reports from uninformative accounting make no impression on the

capital market, the firm will not choose a fee, F , to induce uninformative

accounting That is, uninformative accounting is not an equilibrium Rather,

if informative reports are to be produced, the tension between auditor feeand legal liability must not be lopsided, as shown in the two remaining

p q

aggressive accounting

1 – x

x

F IG 1.—Conservative and aggressive accounting.

cases

Case (2): (1 − p G )L ≤ F ≤ (1 − p0)L In this case, audit evidence matters

to the auditor Recall that the favorable evidence, p G, implies that the client is

a high-profitability firm, whereas the unfavorable evidence, p B, implies that

the client is a low-profitability firm; while the uninformative evidence, p0,may correspond to either a high- or low-profitability firm When the evidence

is favorable (p G ), the auditor fee exceeds the legal liability ((1 − p G )L ≤

F ), so the auditor approves report G When the evidence is unfavorable

(p B ) or uninformative (p0), the legal liability exceeds the auditor fee (F ≤ (1 − p0)L < (1 − p B )L), so the auditor disapproves G and the firm has

to issue B Clearly, in case (2), a high-profitability firm’s financial condition (p G ) might be understated (reported as B), whereas a low-profitability firm’s

financial condition would not This type of accounting, with such asymmetric

understatements—here termed “conservative accounting ”—is illustrated in

figure 1

Based on its understanding of the auditor-client interaction, the market

makes its rational inferences If report G is issued, the market believes that the auditor has identified the firm as a high-profitability type, p G, so its belief

given G is ˆ p G = p G If report B is issued, the market believes that either the firm is a high-profitability type, p G (the probability of which is 1 − x), not so identified by the auditor (the probability of which is 1 − q) or the firm is a low- profitability type, p B (the probability of which is x) Therefore, the market’s belief given B is, by Bayes’ Theorem, ˆ p B =(1 − x)(1 − q ) p G + xp B

1 − (1 − x)q 2Inserting theexpressions for the market’s beliefs, ˆp G and ˆp B, into equation (1) yields the

2Section 4 provides an explanation of how the market rationally infers audit quality, q, on

the basis of observable information.

market prices given G and B, denoted by m c

G and m c

B, respectively (The

superscript c denotes conservative accounting.)

Case (3): (1 − p0)L ≤ F ≤ (1 − p B )L The analysis for this case is similar

to that for case (2) The auditor’s attestations in case (3) differ from those

in case(2) only when the evidence is uninformative (p0)—because auditor

fee exceeds legal liability ((1 − p0)L ≤ F ), the auditor approves G Clearly,

in case (3), a low-profitability firm’s financial condition (p B) might be

over-stated (reported as G), whereas a high-profitability firm’s financial condition

would not This type of accounting with such asymmetric overstatements,

here referred to as “aggressive accounting ,” is illustrated in figure 1 From figure 1, given aggressive accounting, the market’s rational belief given B

is ˆp B = p B , and its belief given G is ˆ p G = (1 − x) p G + x(1 − q )p B

1 − xq Inserting theexpressions for ˆp G and ˆp B into equation (1) yields the market prices given

G and B, denoted by m a

G and m a

B , respectively (The superscript a denotes

aggressive accounting.)

The above results are summarized in the following proposition

PROPOSITION1 a) (Conservative accounting) When (1 − p G )L ≤ F ≤ (1 −

p0)L, a high-profitability firm p G publishes report G if it is detected by the auditor but B otherwise, a low-profitability firm, p B , publishes B, and the market prices given

G and B, respectively, are

b) (Aggressive accounting) When (1 − p0)L ≤ F ≤ (1 − p B )L , a low-profitability

firm, p B , publishes report B if it is detected by the auditor but G otherwise, a

high-profitability firm, p G , publishes G, and the market prices given G and B, respectively,

c) Regardless of the accounting type, the auditor approves G when the audit evidence

is p G and disapproves G when the audit evidence is p B ; when the audit evidence is

p0, the auditor disapproves G given conservative accounting and approves G given aggressive accounting.

Proposition 1 and figure 1 directly imply the following results:

COROLLARY1 a) Auditor independence is not compromised.

b) A lower (higher) F relative to L results in auditor conservatism (aggressiveness) c) Pr (misstatements) is decreasing in q.

d) Pr (misstatements | conservative accounting) < Pr (misstatements | aggressive counting) if and only if Pr (p G ) is sufficiently low.

ac-e) The report G produced from conservative accounting is more informative than G duced from aggressive accounting; the report B produced from aggressive accounting

pro-is more informative than B produced from conservative accounting.

f) Pr (G | conservative accounting) < Pr (G | aggressive accounting).

Corollary (1a) states that auditor independence is maintained in

equi-librium: the auditor approves G when the audit evidence is favorable and disapproves G when the audit evidence is unfavorable That is, the audi-

tor refuses to support detected misstatements This important conclusionresults from the corporate governance role of market prices Supposingthat a low-profitability firm is identified by the auditor, to induce the au-ditor’s attestation to its favored report—that is, to compromise auditorindependence—the low-profitability firm must offer a huge auditor fee to

allay its auditor’s legal liability concern (F ≥ (1 − p B )L) However, such a

huge fee destroys the financial report’s credibility in the eyes of the tal market, which then ignores these rosy reports in its pricing of the firm.Consequently, anticipating the market’s rational pricing, the firm does notfind it worthwhile to offer its auditor a huge fee in return for nothing ex-tra from the market Thus, the market’s pricing regulates excessive clientpressure on the auditor, and auditor independence is maintained in equilib-rium In equilibrium, misstatements in financial statements may only survivewhen the auditor receives uninformative evidence; however, as discussed

capi-in section 2, this issue is not one of auditor capi-independence but of auditquality

A poorer audit quality implies a greater likelihood of uninformative dence and consequently a greater likelihood of errors in attestations Whenthe auditor fee is small relative to the legal liability, litigation risk concernsprovide incentives for auditors to err on the side of conservatism Specif-ically, when in doubt, the auditor disapproves the client’s more favorablereport and may unknowingly force a high-profitability firm to issue a lessfavorable report Thus, auditor conservatism may result in understatements

evi-in fevi-inancial statements, leadevi-ing to conservative accountevi-ing On the otherhand, when the auditor fee is large relative to the legal liability, lucrativebusiness opportunities provide incentives for auditors to err on the side

of aggressiveness That is, when in doubt, the auditor approves the client’smore favorable report and may unknowingly allow a low-profitability firm

to issue a more favorable report Thus, auditor aggressiveness may lead tooverstatements, causing aggressive accounting Overall, as Corollary (1b)shows, the tension between the auditor fee and legal liability determinesauditor conservatism/aggressiveness and in turn leads to accounting con-servatism/aggressiveness.3

Clearly, conservative accounting may hurt “good” firms and aggressiveaccounting may hide “bad” firms Thus, the less likely the firm is to be a

3 Even though many factors contribute to accounting conservatism/aggressiveness, this study focuses on one factor: auditor conservatism/aggressiveness Whereas Gigler and Hem- mer [2001] and Venugopalan [2004] study cases in which these two types of accounting are exogenous systems, this paper addresses a case in which they are endogenous outcomes.

“good” firm, the fewer misstatements conservative accounting will produce(Corollary (1d)) Because aggressive accounting may produce overstate-ments, a rosy report from aggressive accounting is not as reliable as a rosyreport from conservative accounting By the same token, because conser-vative accounting may produce understatements, a gloomy report fromconservative accounting is not as reliable as a gloomy report from aggressiveaccounting (Corollary (1e)).

Proposition 1 also directly implies the following results concerning capitalmarket prices

COROLLARY2 a) (price ranking) m a

d) The asymmetries in (b) and (c) are decreasing in q.

Corollary (2b) states that, (i) given conservative accounting, the tude of the price response to good news is larger than that to bad news,and (ii) given aggressive accounting, the magnitude of the price response

magni-to bad news is larger than that magni-to good news Corollary (2c) states that, (i)given good news, the magnitude of the price response given conservativeaccounting is larger than that given aggressive accounting, and (ii) givenbad news, the magnitude of the price response given aggressive accounting

is larger than that given conservative accounting These asymmetries resultfrom the differential information content of audited financial reports condi-tional on the type of accounting (Corollary (1e)) Specifically, conservativeaccounting produces asymmetric understatements, and aggressive account-ing produces asymmetric overstatements Thus, asymmetric accounting trig-gers asymmetric price responses Because a higher audit quality decreasesthe asymmetric misstatements in reports (Corollary (1c)), it decreases theasymmetries of price responses (Corollary (2d))

As previously mentioned, legislators and regulators have two concerns

related to auditor’s decisions: (1) how the auditor deals with detected

mis-statements (an issue of auditor independence) and (2) how likely the

audi-tor is to detect misstatements (an issue of audit quality) Therefore, having

established that auditor independence is maintained in equilibrium, thediscussion now turns to audit quality

4 Audit Quality

A higher audit quality increases the chances of informative audit evidenceand helps the auditor make more informed attestations Nevertheless, ahigher audit quality necessarily comes at a higher audit cost In view of this

trade-off, the auditor chooses the audit quality, q, to maximize the pated payoff from the subsequent attestation, less the audit cost, C(q) Be-

antici-cause the auditor’s anticipated payoff from attestations depends on the type