Auditors and regulation

The financial auditing system provides a decent mechanism to regulate the financial reporting of companies. Interesting that such an instance exists of a state-less distributed regulation system that does seem to work - at least better than one can expect from state regulators. Three questions I'd like answered:

1. Is there any other instance of such a regulation system?
2. Why cant this work in other areas that require regulation? (For eg, I dont see the state regulating building construction efficiently or effectively)
3. How did this financial auditing system come into being?