J 2009 From Inspection To Auditing Menniken

AOS 682 No.
of Pages 26, Model 3G

28 July 2009 Disk Used
ARTICLE IN PRESS
Accounting, Organizations and Society xxx (2009) xxxxxx
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Contents lists available at ScienceDirect
Accounting, Organizations and Society

journal homepage: www.elsevier.com/locate/aos
From inspection to auditing: Audit and markets as linked ecologies
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3 Andrea Mennicken *
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4 London School of Economics and Political Science, Department of Accounting and Centre for Analysis of Risk and Regulation, Houghton Street, London WC2A 2AE, UK
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a r t i c l e i n f o a b s t r a c t
1 7
0
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9 This paper studies the roles that images and ideas of market creation played in the re-artic- 11
ulation of relations between government, audit expertise and professional organisation in 12
post-Soviet Russia. It examines the change from state-led inspection to market-oriented 13
auditing between 1985 and 2005, and analyses this in terms of the notion of linked ecol- 14
ogies. The paper queries the relationship between audit and neoliberal modes of govern- 15
ing (Miller, P., & Rose, N. (1990). Governing economic life. Economy and Society, 19(1), 131, 16
Miller, P., & Rose, N. (2008). Governing the present: Administering economic, Social and per- 17
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sonal life. Cambridge: Polity Press, Power, M. (1997). The audit society: Rituals of verication.
Oxford: Oxford University Press). It argues that we should be careful not to see audit as an
unproblematic expression of neoliberalism. Investigating the dynamics and conicts
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19
20
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accompanying attempts to establish auditing as a site for governmental reform, this paper 21
examines the manifold ways in which the meaning of markets and the roles of auditing in 22
them can be unsettled, reinvented and transformed. The paper analyses how auditing was 23
made marketable, and investigates how projects of post-Soviet audit development came to 24
be carried forward, shifted and changed through new enterprising selves and their newly 25
founded audit and consulting rms. The paper concludes with a more general discussion of 26
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the implication of these ndings for our understanding of the dynamics of professionalisa- 27
tion, and the changing of relations between politics and expertise. 28
2009 Published by Elsevier Ltd. 29
30
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31 Audit in transition Ministry of Finance.2 Over the last 10 years, Russias audit 43
32
rms have achieved remarkable growth rates. In 2001, the 44
33 1989 That was the nascent stage of Russian audit. The auditing business grew by approximately 60% in terms of 45
34 task that we set at that time was to master that busi- revenue (excluding the then Big Five companies).3 In 2007, 46
35 ness and lay the groundwork for commercial success the total revenue of Russias 150 largest audit groups 47
36 doing it. So the challenge we faced was to create the (excluding the Big Four) increased by 37.4%, and reached a 48
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37 market for our services and then prove to this market total of approximately 37 billion Roubles.4 This paper anal- 49
38 that it cannot exist and develop without us. (Andrey yses the rise and expansion of auditing in post-Soviet Russia, 50
39 Dubinsky, CEO, BDO Unicon, Russia)1
40 Since the collapse of the Soviet Union, auditing has become
41 one of Russias most successful business sectors. In January
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2
See Svedeniya o raspredelenii auditorov, auditorskikh organizatsiy i
42 2008, more than 6400 audit rms were registered with the
individualnykh auditorov po federalnym okrugam [Information about the
spread of auditors, audit organisations and individual auditors across
federal regions], issued by the Russian Ministry of Finance on 25.01.2008.
Cf. http://www1.minn.ru/common/img/uploaded/library/2008/02/sved-
audit2007.pdf (accessed in November 2008).
3
See business journal Ekspert, No. 14, 08.04.2002.
4
* Tel.: +44 (0)2078494641; fax: +44 (0)2079557420. See article Business audit in Russia which was published in the
E-mail address: a.m.mennicken@lse.ac.uk journal Kommersant and translated by GAAP.RU on 22.10.2008. Cf.
1
See www.bdo.ru/eng/company/history/ (accessed in May 2007). www.gaap-ifrs.com/news/gaap_ifrs/2293 (accessed in November 2008).
0361-3682/$ - see front matter 2009 Published by Elsevier Ltd.

doi:10.1016/j.aos.2009.07.007
Please cite this article in press as: Mennicken, A. From inspection to auditing: Audit and markets as linked ecologies. Accounting, Organiza-
tions and Society (2009), doi:10.1016/j.aos.2009.07.007
AOS 682 No. of Pages 26, Model 3G
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2 A. Mennicken / Accounting, Organizations and Society xxx (2009) xxxxxx
51 and draws particular attention to the complex relationships multiple elements that are neither fully constrained nor 97
52 that were formed between auditing practice and the ideas fully independent. An ecology is characterised by its set 98
53 and instruments of marketisation. Investigating the dynam- of actors, its set of locations and the relation it involves be- 99
54 ics and conicts accompanying attempts to establish audit- tween these (Abbott, 2005b, p. 245). According to Abbott, 100
55 ing as a site for a reform of modes of governing, this paper the particular social structures and locations of an ecology 101
56 examines the manifold ways in which the meaning of mar- are not pre-existing positions: It is the process of con- 102
57 kets and the roles of auditing in them can be unsettled, rein- structing the relations between actors and locations that 103
58 vented and transformed. in fact constitutes and delimits both actors and locations. 104
59 Utilising a linked ecologies approach (Abbott, 1999, Analytically and empirically, the relational process is prior 105
60 2005b; Fourcade, 2006; Fourcade & Khurana, Forthcom- (Abbott, 2005b, p. 248). A linked ecologies approach thus 106
61 ing; Ong, 2005; Star, 1995; Star & Griesemer, 1989; Wise, underscores that audit and markets, and the boundaries 107
62 1988), this paper queries the relationship between audit that come to be formed around them, only exist in relation 108
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63 and neoliberal modes of governing (Miller & Rose, 1990, to other arenas of economic, political and social activity 109
64 2008; Power, 1997; Rose, 1993, 1999). It argues that we (for this point see also Burchell, Clubb, & Hopwood, 110
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65 should be careful not to see audit as an unproblematic 1985; Gendron, Cooper, & Townley, 2007; Miller & OLeary, 111
66 expression of neoliberal government. Following Power 1994; Power, 1997; Radcliffe, 1998; Robson, 1991; Robson, 112
67 (1994, 1997), the paper agrees that audit is more than Humphrey, Khalifa, & Jones, 2007). The relationship be- 113
68 a series of mundane techniques. Auditing should also be tween audit and markets, to borrow from Barry, Osborne, 114
69 understood as an idea, a pervasive logic which has a life and Rose (1996, p. 13), is not automatically one of func- 115
70 over and above specic practices (Power, 1994, p. 3). tionality or cooptation. Instead of a single source of 116
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71 Yet, the logic of audit is itself far from unproblematic, change, such as problematisations of Soviet planning, it is 117
72 stable and readily dened. Nor is it exclusively wedded the multiplicity of different factors that are to be attended 118
73 to neoliberalism (Kipnis, 2008; Strathern, 2000). We to, the assemblage, network or eld of actors, 119
74 should be careful not to overstate the transformative instruments and ideas involved in post-Soviet audit and 120
75 power of audit. In post-Soviet Russia, the rise of ideas market reform (Callon, Millo, & Muniesa, 2007; Chua, 121
76 of Western-oriented auditing did not automatically lead 1995; DiMaggio & Powell, 1983; Gendron et al., 2007; La- 122
77
78
79
to an end to the earlier Soviet inspection practice. The
Russian business of auditing has, at least partially, been
built into the very same structures that reformers argued
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tour, 2005; Miller, 1991, 2008; Miller & OLeary, 1994;
Ong & Collier, 2005; Power, 1997; Quattrone & Hopper,
2005; Robson et al., 2007; Suddaby, Cooper, & Greenwood,
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80 needed to be changed. Further, we need to recognise the 2007). 126
81 multiple nature of neoliberalism itself. A variety of phe- A linked ecologies approach emphasises change, inter- 127
82 nomena can become embraced under the label of neolib- nal dynamics and the overlapping and interpenetrating of 128
83 eralism (see e.g. Burawoy et al., 2000; Harvey, 2005; Ong, previously distinct worlds. Rather than focusing on the 129
84 Q2 2006).5 With the help of a linked ecologies approach, this ways in which different arenas, networks or elds give rise 130
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85 paper seeks to draw attention to the multiple and refracted to the emergence of a particular accounting technology 131
86 nature of neoliberalism, and connected ideas of post-Soviet such as value-added accounting or discounted cash ow 132
87 audit and market creation. Focussing on the multiplicity analysis (Burchell et al., 1985; Miller, 1991) attention is 133
88 of voices (OMalley, Weir & Shearing, 1997) within the focused on the ways in which arenas and elds themselves 134
89 project of post-Soviet audit reform itself, the paper aims come to be interlinked and reworked. Emphasis is placed 135
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90 not only to enhance our understanding of the specicities on the modes and processes of mediation and co-produc- 136
91 of Russian audit expertise. It also seeks more generally to tion between different arenas or elds (see also Miller & 137
92 contribute to our understanding of how neoliberal modes OLeary, 2007; Wise, 1988).6 138
93 of governing are played out and contested in non-Western In the case studied, markets for audit were actively cre- 139
94 contexts. ated, crafted and shaped, not only by the Russian govern- 140
95 Following Abbott (2005b, p. 248), linked ecologies ment, but also by the newly founded audit rms and 141
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96 have to be understood in terms of interactions between their representational instruments. Emphasis was shifted 142
from auditing as an abstract mechanism designed to help 143
develop markets, to the marketisation of audit organisa- 144
5
Following Harvey (2005, p. 2), this paper denes neoliberalism in the tions. Auditing itself came to be marketised and seen as a 145
rst instance as a theory of political economic practices that proposes that
human well-being can best be advanced by liberating individual entrepre-
platform for entrepreneurial self-realisation. The new audit 146
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neurial freedoms and skills within an institutional framework characterized entrepreneurs themselves, in cooperation with the govern- 147
by strong private property rights, free markets, and free trade. As a
technology of government (Ong, 2006; Rose, 1993, 1999), neoliberalism
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seeks to recongure relationships between governing and the governed, In this respect, a linked ecologies approach can also help overcome
power and knowledge, and sovereignty and territoriality (Ong, 2006, p. 3). some of the limitations that have been ascribed to the concept of elds in
Yet, it cannot be reduced to a uniform global condition (ibid., p. 14). As institutional analysis (DiMaggio & Powell, 1983; Suddaby et al., 2007;
Ong points out, neoliberal forms are often in tension with local cultural Wooten & Hoffman, 2008). Ecological analysis helps to see elds no longer
sensibilities and national identity (ibid., p. 12). Neoliberal reform agendas, as containers for the community of organisations, but as a relational
such as marketisation policies in post-Soviet Russia, create spaces for space, an intertwined constellation of actors who hold differing perspec-
experimentation with market reforms, which are not seldom accompanied tives and competing logics (Wooten & Hoffman, 2008, pp. 138140). As
by local resistance, exceptions and mutations (Burawoy, 2001; Burawoy Abbott points out, it is in many ways a much loser and empirical model and
et al., 2000; Burawoy & Verdery, 1999; Hoffman, 2006; Kipnis, 2008; Sigley, an attempt to nd regularity in a social world rst imagined as utterly
2006). uid (Abbott, 2005a, p. 6).
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A. Mennicken / Accounting, Organizations and Society xxx (2009) xxxxxx 3
148 ment, created the markets they sought to rule. A linked spired by Western discourses of neoliberalism and pro- 195
149 ecologies approach draws attention to such changing rela- gressiveness8, we should be careful not to take such 196
150 tions and dynamics between Soviet and post-Soviet, old discourses at face value and to assume that they are trans- 197
151 and new, global and local audit denitions and marketisa- planted unchanged. The transition from inspection to audit- 198
152 tion attempts, and helps scrutinise the changing interplays ing is neither a one-way process of change, nor are its 199
153 between auditing and markets. It makes us aware that the objectives as clearly dened as is often suggested by main- 200
154 market relevance of auditing is not xed, nor should it be stream audit theories. The transformations that the Russian 201
155 presumed. It has to be actively built and rebuilt. And as and other Eastern European societies underwent, and con- 202
156 studies of changes in Western audit practices have made tinue to undergo, are grounded in a complex reworking of 203
157 us aware (see e.g. Curtis & Turley, 2007; Gendron et al., old relations, past and present, Soviet and post-Soviet, socia- 204
158 2007; Jeppesen, 1998; Robson et al., 2007), such processes list inspection and imagined new audit worlds (Burawoy & 205
159 of dening and redening are likely to be the site of signif- Verdery, 1999; Kelemen & Kostera, 2002; Stark, 1996; Stark 206
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160 icant struggles, where outcomes are only provisional, and & Bruszt, 1998). 207
161 where they can be challenged and changed more than A few studies have described and analysed the emer- 208
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162 once. gence of Western-oriented accounting professionalism(s) 209
163 A linked ecologies approach asks us to develop a more in developing and post-colonial economies (Annisette, 210
164 complex and dynamic account of the relations between 2000; Hammond, Clayton, & Arnold, 2008; Neu, Ocampo 211
165 different and sometimes competing programmes of post- Gomez, Graham, & Heincke, 2006; Sian, 2006; Uche, 212
166 Soviet governmental reform, audit development and mar- 2002), and there is an emerging body of literature examin- 213
167 ket creation. It seeks to make room for the complexities ing the specicities of new audit practices in Eastern Eur- 214
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168 and paradoxes that derive from attempts to spread and uti- ope and Russia (see e.g. Bychkova, 1996; Enthoven, 215
169 lise somewhat ambiguous and ill-dened Western con- Sokolov, Bychkova, Kovalev, & Semenova, 1998; Kosmala, 216
170 cepts of neoliberal government, marketisation and 2007; Kosmala MacLullich & Sucher, 2004; Mennicken, 217
171 auditing. In so doing, it is distinct from population ecology 2008; Samsonova, 2009; Sucher & Bychkova, 2001; Sucher, 218
172 approaches that, for instance, have been put forward in Moizer, & Zelenka, 1998). Yet, little attention has been de- 219
173 organisational theory (e.g. Hannan & Freeman, 1989). In voted so far to analysing the linkages that have formed be- 220
174
175
176
contrast to Hannan and Freemans population ecology ap-
proach, a linked ecologies approach is neither functionalist,
nor does it make a priori strong assumptions about the ac-
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tween ideas and instruments of audit, and wider processes
of local and global market creation, and how such pro-
cesses may or may not contribute to the changing of rela-
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177 tors, their properties and surroundings that it seeks to tions between government, authority and expertise (Rose, 224
178 study. Abbotts denition of linked ecologies draws on 1993). There have been few studies of what happens when 225
179 the early Chicago School in sociology (Abbott, 1999; Goff- previously state-administered accounting and audit ex- 226
180 man, 1963; Hughes, 1971) and is very closely related to perts become, as Rose (1993, p. 285) has put it, relocated 227
181 constructivist ecological analyses, which have been carried within [an imagined, added AM] market governed by the 228
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182 out in the context of science and technology studies (Aker- rationalities of competition, accountability and consumer 229
183 a, 2007; Star, 1995; Star & Griesemer, 1989; Star & Ruhle- demand. This paper seeks to redress this relative over- 230
184 der, 2001; Wise, 1988) and anthropology (Ong, 2005, 2006; sight by considering how linkages between audit, markets 231
185 Ong & Collier, 2005).7 and modes of governing were established, challenged and 232
186 A linked ecologies approach highlights the multiple changed, and with what effects. 233
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187 determinations of audit and market ecologies, and it prob- The remainder of the paper investigates how projects of 234
188 lematises the trajectories of their change (see also Ong & post-Soviet market and audit development were carried 235
189 Collier, 2005). This implies that the move from socialist forward, shifted and changed at government level, and at 236
190 inspection to market-oriented auditing cannot be concep- the level of new enterprising selves and their newly 237
191 tualised as a period of change from one stage to the next, founded audit and consulting rms. There were many fac- 238
192 organised around certain predened notions of market tors driving the development of audit expertise that went 239
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193 rationality, economic progressiveness and regulatory beyond the demand from rms and investors for mecha- 240
194 effectiveness. Although Russias reformers were largely in- nisms of corporate control and accountability. Western- 241
oriented auditing was brought into existence before inves- 242
tors could articulate their control demands. Capital mar- 243
kets were virtually absent, and Russian audit 244
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As Akera (2007) put it, the notion of (linked) ecologies makes it possible
to incorporate the various advances in constructivist scholarship into the
8
sociological study of the occupations and professions. Within science and Particularly in the early 1990s, Russia submitted itself to a range of
technology studies, Star (1995), Star & Griesemer, 1989; Star & Ruhleder, neoliberal reform measures, commonly referred to as shock therapy
2001) and Akera (2007) have used an ecological metaphor to attend to the (Arbatov, 2001; Bogomolov, 2001). These measures sought to minimise
contingency, indeterminacy and complexity of knowledge production, and direct state intervention and included the removal of price controls,
to explore linkages between knowledge and its various contexts. In privatisation, the cutting of government spending, and proposals for a
anthropology, Ong (2005, 2006) used the notion of ecologies of expertise Western-oriented accounting and audit reform aimed at making nancial
and eco-system to draw attention to situated entanglements of markets reporting more useful for economic decision-making. The reforms0 were
and neoliberalisms in East-Asia. And in accounting, Miller & OLeary (2000) propagated by Western economic advisers (Jeffrey Sachs, Anders A slund,
wrote about eco-systems in value reporting, investigating the roles of Andrei Shleifer) and multilateral institutions, such as the IMF, World Bank
technical analysts in the organising and composing of nancial information and OECD (Boycko, Shleifer, & Vishny, 1995; IMF et al., 1991; Lieberman,
ows. Nellis, Karlova, Mukherjee, & Rahuja, 1995; OECD, 2005).
ARTICLE IN PRESS
245 entrepreneurs and their audit rms, in cooperation with expertise. The paper revisits Cooper and Robsons (2006) 306
246 government, created and shaped the markets they sought reminder that professional rms, particularly large inter- 307
247 to rule. Alongside these changes, market ideals changed national rms, are increasingly important in accounting 308
248 too. Markets came to be viewed as a space for experimen- professionalisation and regulatory processes (see also 309
249 tation, something to be actively ordered and organised, Dezalay & Sugarman, 1995; Greenwood & Suddaby, 2006; 310
250 rather than an abstract mechanism of economic Greenwood, Suddaby, & McDougald, 2006; Hanlon, 1998; 311
251 coordination. Hinings, Greenwood, & Cooper, 1999; Robson, Willmott, 312
252 These changing interplays and shifts are now examined Cooper, & Puxty, 1994; Robson et al., 2007; Suddaby 313
253 in ve main steps. The next section provides a brief outline et al., 2007). It is argued that we need to redirect attention 314
254 of research methods and the empirical materials collected. away from questions of professional association, towards 315
255 Section 2 traces the beginnings of audit development in instruments and activities of internationalisation and mi- 316
256 post-Soviet Russia. It describes and analyses how pro- cro-differentiation to recognise the diverse ways in which 317
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257 grammes and discourses of market-oriented audit reform audit expertise is organised, staged and legitimised. This 318
258 were articulated at government level following Gorba- suggests the need for more comparative and micro-socio- 319
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259 chevs calls for Perestroika [Restructuring] in the late logical studies of audit and audit cultures to appreciate 320
260 1980s. It shows how Western-oriented audit reform pro- their multiplicity, and to better understand how ideas of 321
261 posals were inextricably linked to Russias wider transition neoliberalism, audit and market creation are played out, 322
262 from a planned to a market economy. Auditing, to quote transformed and subverted in day-to-day practices. 323
263 Rose (1999, p. 150), became involved in discourses aimed
264 at transforming the Soviet ethos of government from
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265 one of bureaucracy to one of business, from one of plan- Methods and materials 324
266 ning to one of competition, from one of command and con-
267 trol to one of choice, self-regulation and individual Following Denzin and Lincoln (2000, pp. 46), in the 325
268 responsibility. The subsequent sections scrutinise these context of this study, a qualitative research approach was 326
269 neoliberal dreams and schemes (Miller & Rose, 1990), adopted that can be understood as bricolage where differ- 327
270 and examine how market and audit ideals came to be ent sets of representations are assembled and different 328
271
272
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shifted, translated and reworked.
Section 3 analyses attempts to operationalise the ab-
stract market and audit reform programmes through the
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methods of investigation are employed to develop an in-
depth understanding of the eld. Different methods were
utilised to facilitate a multi-layered understanding of the
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330
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274 foundation of state-independent, commercial audit rms. issues connected to processes of marketisation and post- 332
275 It is shown how commercial auditing and state-indepen- Soviet audit reform, and display their multiple and re- 333
276 dent audit rms came to be advanced as vehicles able to fracted nature. In the collection of the empirical materials, 334
277 transform the ailing Soviet inspection apparatus, opera- the study involved archival research, in-depth interview- 335
278 tionalise goals of market-oriented reform, economise ing and participant observation methods. The document 336
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279 mechanisms of state administration and increase regula- analysis covers the period from 1985 to 2008. Besides legal 337
280 tory efciency. We observe a shift from programmes pro- documents, Soviet and post-Soviet accounting and audit 338
281 moting audit as a state-independent institution of control journals (Bukhgalterskii uchet, Auditorskie Vedomosti), So- 339
282 and oversight, to programmes seeking the marketisation viet and post-Soviet accounting and audit textbooks, news- 340
283 of auditing itself. Section 4 analyses how post-Soviet audit- papers (Vedomosti, Finansovaya gazeta, Nezavisimaya 341
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284 ing was made marketable. It is shown how the market rel- gazeta, Izvestiya, Kommersant daily, Moscow Times) and 342
285 evance of auditing had to be actively built, with tools that business magazines (Ekspert, Kommersant, Prol) were 343
286 were not necessarily directly related to audit and inspec- analysed. 344
287 tion activities. Audit had to be turned into an economic As representatives and creators of programmatic 345
288 business before audit itself could take place, and audit knowledge (Radcliffe, 1999, p. 338), professional, legal, 346
289 ideas came to be merged with Western marketing and con- academic and other documents provided a good starting 347
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290 sulting expertise. Western audit and consulting rms (par- point in understanding the specicities of post-Soviet audit 348
291 ticularly the then Big Six), together with their marketing reform and market creation, and were an important source 349
292 instruments, became important reference points in the in the analysis of the ways in which the signicance of 350
293 erection of boundaries between the present and the past, auditing and markets was articulated and produced. The 351
294 the production of public visibility and the creation of document analysis was complemented with 48 in-depth 352
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295 new systems of audit representation and intra-occupa- interviews (Wengraf, 2001), carried out in Moscow be- 353
296 tional differentiations. Yet, former Soviet calculative prac- tween 2001 and 2002, and several periods of participant 354
297 tices and inspection technologies were not entirely observation (Spradley, 1980). Participant observations 355
298 changed or replaced; rather, they were rewrapped and re- made it possible to link the collected interviews and other 356
299 staged, with the help of Western ideas and instruments of materials to the contexts within which they were pro- 357
300 market creation technologies of ranking, branding and duced, and they helped to better understand the diverse 358
301 organisational management. ways in which ideas of audit and market-oriented develop- 359
302 Section 5 concludes the paper with a discussion of the ment were articulated, interrelated, and reworked. The 360
303 more general implications of these ndings for our under- interviews were conducted with former Soviet nancial 361
304 standing of the dynamics of audit professionalisation and inspectors, Russian auditors, state regulators, representa- 362
305 the changing relations between markets, politics and tives of new professional associations, academics, repre- 363
ARTICLE IN PRESS
364 sentatives of large Western accounting rms, multilateral auditing organisation.9 This change from state-led inspec- 421
365 organisations (World Bank), and other international organ- tion [reviziya] to commercial auditing [audit] had its roots 422
366 isations (Association for Certied Chartered Accountants, in a combination of different demands and problematisa- 423
367 International Centre for Accounting Reform in Russia). Par- tions questioning not only old practices of Soviet nancial 424
368 ticipant observations were carried out in two large Russian inspection but much more widely the Soviet regime of cen- 425
369 audit rms (for two months and two and a half months tral planning, command and control. Paraphrasing Power 426
370 respectively) and the International Centre for Accounting (1995), the emergence of auditing in Russia can be seen as 427
371 Reform (for one month). Most interviews were conducted closely linked to the transformation of regulatory styles 428
372 in Russian and transcribed in Cyrillic. For the purpose of and attempts to reinvent post-Soviet government in accor- 429
373 this paper, quotes taken from Russian language interviews dance with Western market ideals. As the Deputy Director 430
374 and documents were translated into English by the author. of one of todays biggest Russian audit rms comments: 431
375 Where the translation of a specic term was ambiguous, 432
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376 the original Russian term has been added in brackets next
The idea of auditing was born with Perestroika in the 433
377 to the English translation.
late 1980s. With the emergence of market economic
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434
378 The paper assembles multiple visions of auditing and
structures auditing also emerged. Before that, what 435
379 marketisation to navigate through the different, at times
did we have? We had a planned economy. And we 436
380 controversial, perspectives and voices attached to post-So-
had government controls. The government controlled 437
381 viet audit and processes of market creation. In Russia, the
prots and calculated taxes. We had bookkeepers, but 438
382 idea of audit was born with Perestroika in the late 1980s.
no accountants or nancial directors. In theory all that 439
383 The Soviet government advanced audit as an institution
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existed, but it wasnt called the economics of an enter- 440
384 for dealing with economic and social transition. Here, audit
prise. [. . .] We had nancial reports, we had accounts, 441
385 came to constitute much more than a reaction to nancial
but these were statistics, not really economic facts. In 442
386 control deciencies. It was seen as a way through which
reality, it didnt really mean very much. This system 443
387 Russias government and economy could be re-organised
didnt require the work of auditors, but we did have 444
388 according to Western constructs of global capitalism and
inspectors [revizory]. 445
389 market-oriented development, and it is to these early
390
391
392
beginnings of post-Soviet audit development, and the
intertwinement of audit with wider programmes of gov-
ernmental reform, that we now rst turn.
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In Russia, auditing was introduced as part of broader re-
form programmes aimed at economic liberalisation, priva-
tisation, and the repositioning of the (post-)Soviet state.
446
447
448
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Socialist forms of rule had been called into question, and 449
new market-oriented modes of governing, including audit- 450
393 From state administration to market-economic ing, came to be put forward to redene the roles of the 451
394 methods of governance state, enhance efciency, reduce bureaucracy and extend 452
rationalities of market-oriented exchange and accountabil- 453
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395 An important ofcial point of departure for Russian ity (see e.g. Danilevsky, 1991; IMF, IBRD, OECD & EBRD, 454
396 audit development was constituted by the Soviet govern- 1991; Lieberman et al., 1995). 455
397 ment in January 1987, with the approval of regulations Yet, the move from state nancial inspection to state- 456
398 for joint venture operations (Decrees No. 48 and 49 of 13 independent commercial auditing did not take the form 457
399 January 1987). Here, for the rst time, the term audit of a clear-cut break. In the late 1980s, state nancial 458
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400 [audit] was used in a legal context to replace the term of inspection practices began to be reframed under the label 459
401 nancial revision [reviziya]. Inter alia, the decree states: of auditing without it being clear where the reform at- 460
tempts were heading. The meaning of the word audit and 461
402 In order to exercise their oversight rights, the partici-
what distinguished auditing from old Soviet inspection 462
403 pants in the joint enterprise are to be provided, in the
practices had to be worked out, again and again. And 463
404 procedure specied in the articles of incorporation,
important reference points in working out distinctions be- 464
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405 with information relating to the operations of the enter-

tween socialist inspection and market-oriented auditing, 465
406 prise and the status of its assets, as well as information
came not only to constitute Western audit technologies 466
407 on prots and losses. The joint enterprise may have an
(such as audit risk models and audit sampling procedures), 467
408 auditing commission [auditorskaya kommissiya] that
409 is formed in the procedure specied in the articles of
410 incorporation. Audits of joint enterprises nancial, eco-
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The rst Soviet audit rm was founded in September 1987, under the
411 nomic, and commercial operations are performed for a
leadership of the Soviet Ministry of Finance (Antonov, 1989). The rm was
412 fee by a Soviet self-nanced [khozraschetny] auditing founded as a shareholding company [aktsionernye obshestvo], but the
413 organization [auditorskaya organizatsiya]. (Quoted Soviet state was still its exclusive stockholder. Between 1987 and 1988, all
414 from Boguslavsky & Smirnov, 1989, p. 194.) joint venture enterprises that operated in the Soviet Union had to undergo
audits by Inaudit. In March 1988, this monopoly was dissolved and
415 From this point on, nancial controls were no longer exclu- managers of joint ventures were allowed to choose their auditors them-
416 sively carried out through the control apparatus of the selves (Geron, 1989, p. 11). During this time, the rst private Russian audit
417 state. Self-sustaining, state-independent [khozraschetny] businesses also emerged. In 1989, for example, Unicon, was founded, in
1990, FBK, in 1991Rufaudit, and in 1992 Rusaudit and Topaudit. In 2002,
418 auditing organisations entered the picture of nancial reg-
these rms belonged to the top ten Russian audit rms in terms of number
419 ulation. The nancial controls of joint ventures were to be of employees and revenues (see article in journal Prol, 11 March 2002, p.
420 carried out for a fee, payable by the inspected entity to the 80).
ARTICLE IN PRESS
468 but also the commercial nature of audit itself. Government inspections were an integral part of Soviet governmentality 520
469 ofcials, academics and Soviet audit practitioners saw in rooted in ideals of central planning, surveillance, command 521
470 the commercial nature of auditing one of the most dening and control and social equity. The Great Soviet Encyclopaedia 522
471 features distinguishing it from socialist state inspection [Bolshaya Sovetskaya Entsiklopediya] (Vvedensky, 1955, p. 523
472 (Danilevsky, 1987a, 1991; Suyts, Akhmetbekov, & Dubrovi- 175), for example, states: 524
473 na, 2001). From the beginning, audit (in contrast to socia-
In the USSR, nancial inspections [reviziya] support the 525
474 list inspection) came to be placed in the context of
consolidation of socialist lawfulness and state 526
475 market-oriented business activities. Audit and markets
discipline. 527
476 were viewed as inextricably interlinked, as mechanisms
477 of control and coordination, which mutually condition In Krasnovs (1987, p. 14) study of the history of socialist 528
478 and reinforce each other. But this did not mean that old control we read: 529
479 inspection practices ceased to exist. The auditing profes- 530
F
480 sion-to-be came to inhabit multiple, contradictory con-
In a socialist society, control fulls the role of an instru- 531
481 texts. As Stark (1996) would put it, we observe the
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ment to consolidate socialist forms of social life, where 532
482 interweaving of multiple justicatory principles, a recom-
private property does not exist. [. . .] Socialist [nancial] 533
483 bination of old and new, with actors manoeuvring through
control is directed towards the liquidation of oppres- 534
484 a multiplicity of different legitimating principles, building
sion and exploitation. 535
485 new market-oriented institutions (such as auditing) not
486 on, but with the ruins of the past. In accordance with these ideologically motivated deni- 536
487 During Soviet socialism, nancial controls, so-called tions of socialist state inspection, Western auditing was 537
PR
488 revisions [reviziya]10, were set up as an integral part of viewed as a means of control that was inherently linked 538
489 the planning apparatus of the Soviet state. The organisation to capitalism private enrichment, exploitation, inequality 539
490 of the controls was centred on the objective of nancial plan and individual responsibilisation (Kramarovsky, 1970, p. 540
491 fullment, in particular with respect to the observance of 9). A Soviet nancial dictionary, in 1988, still described 541
492 state-set costing plans (Chumachenko, 1985; Kramarovsky, auditing as an activity that serves the interests of monop- 542
493 1987a; Krasnov, 1987; Mitrofanov, 1965). Soviet inspectors olist capital and deepens class divisions (Garetovskii, 543
494
495
496
worked as state servants, and they received their orders
either from the Soviet Ministry of State Control, the Ministry
of Finance, the branch ministries or other, local governmen-
D
1988, p. 49).
Problematising Soviet command and control

544
545
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497 tal control organs. The main objectives of the state nancial
498 inspections were to ensure that assets were not misused, In the late 1980s and early 1990s, this picture began to 546
499 that outputs were not misappropriated and that accounts change. On 11 March 1985 Mikhail Gorbachev was elected 547
500 were prepared in accordance with the rules and procedures General Secretary of the Communist Party of the Soviet Un- 548
501 set out by the government. The controls consisted mainly of ion (CPSU). At the 27th Congress of the CPSU in February 549
EC
502 detailed, highly formalised checks of procedural compliance. 1986, Gorbachev called for radical reforms in the economy. 550
503 For example, it was checked whether bookkeeping rules had Perestroika [economic restructuring] and Glasnost [policy of 551
504 been properly applied, whether forms had been correctly maximal publicity, openness and debate] came to be cor- 552
505 lled out, whether stamps and signatures were in the right nerstones of Gorbachevs reform policies (Gorbachev, 553
506 place and whether the documentation of production cycles 1987). An immense struggle for economic and political re- 554
RR
507 was complete (see e.g. Kramarovsky, 1970; Mitrofanov, form had begun, which was aimed at moving gradually (as 555
508 1965). Further, inspection work itself was subject to a de- far as proved necessary) in the direction of a market econ- 556
509 tailed plan. The inspectors had to follow a detailed annual omy, democratisation, openness, political freedom and 557
510 state inspection plan which set out control objectives, time more Western-friendly thinking in foreign policy (slund, 558
511 frames, and allowable failure rates (Chumachenko, 1985; 1991). 559
512 Danilevsky, 1987a). But nancial inspections were not only At the Central Committee Plenum in June 1987, a re- 560
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513 an integral part of the Soviet planning apparatus; they were form programme was adopted which promoted a shift 561
514 also part of Soviet communist ideology. Party ofcials, aca- from primarily administrative to primarily economic 562
515 demics and other actors involved in the political governance management methods at every level (Gorbachev, 1987, 563
516 of the Soviet state portrayed nancial inspections as an p. 33). Gorbachev and his advisors problematised the se- 564
517 important instrument to facilitate the realisation of social- vere centralisation of the Soviet management system 565
UN
518 ism (Chumachenko, 1985; Kramarovsky, 1970, pp. 513; being, as he put it, regulated down to the last detail, 566
519 Krasnov, 1987; Mitrofanov, 1965, pp. 316). State nancial strictly posing tasks and allotted budget sums (Gorba- 567
chev, 1987, p. 46). He and other Perestroika proponents, 568
10 like Aganbegyan, argued for the broadening of the rights 569
It should be noted that the term revision has been, and still is, widely
used in the conduct of nancial audits in German-speaking countries, as and economic autonomy of enterprises, the enhancement 570
well as a number of other continental European countries, such as Denmark of competition, self-responsibility and self-administration 571
(see e.g. Christiansen & Loft, 1992). The Germanic word Revision and the (Aganbegyan, 1988, 1989; Gorbachev, 1987; slund, 572
Russian word reviziya have both been derived from Latin [revidere, 1991). Centralised economic management was to be re- 573
revisio]. Revidere, in Latin, refers to general processes of checking. In
post-Soviet Russia, the term reviziya has been replaced with the term
organised in the interests of enterprises (ibid.), more 574
audit to signal the Western re-orientation of the formerly state-led freedom was to be granted to managers, genuine eco- 575
system of nancial control. nomic incentives were to be introduced (ibid., p. 90), 576
ARTICLE IN PRESS
577 and measures were to be invented making prot a concern, only to a very limited extent meet the requirements of 630
578 encouraging self-government [samoupravlenie] and enhancing state discipline, preventing mismanagement 631
579 more initiative and creative endeavour (ibid., p. 34). In and guaranteeing the preservation of socialist property. 632
580 the reform programme we can read: The inspections and controls are not seldom of a super- 633
cial, formal character and do not exhibit the required 634
581 [. . .] Ministries, state committees and other state
positive inuence on the work of the associations, enter- 635
582 departments are required to resolutely change forms
prises, organisations and institutions as they should do. 636
583 and methods of managing associations, enterprises
584 and organisations. [They are required] to change from Subsequent to the resolution, the major Soviet accounting 637
585 administrative to primarily economic methods [of man- journal Bukhgalterskii uchet began to publish a series of arti- 638
586 agement and control]; to provide the necessary condi- cles discussing the current situation of the inspection appa- 639
587 tions and scope for the adoption of economic ratuses, and reconrming the need for reform. The debate 640
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588 accounting procedures [khozraschet], self-nancing started cautiously, but over the years, and encouraged by 641
589 [samonansirovanie] and self-management [samo- Gorbachevs Perestroika politics (19851991), the articles 642
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590 upravlenie]. (Article 4, Resolution N7283-XI, Supreme became stronger in their critique and reform requests. In 643
591 Soviet, 30 June 1987, The perestroika of the manage- November 1985, for example, the journal published an arti- 644
592 ment of the national economy) cle that openly problematised the administrative focus of 645
the inspections and their lack of economic analysis: 646
593 With the term khozraschet government ofcials referred
647
594 to economic methods of governance and management,
595 economic cost accounting, the operation of a business on Many of the reports [akty] that are prepared by the con- 648
PR
596 a self-sustaining basis (meaning without state subsidies) trol and inspection apparatuses do not contain a deep 649
597 and prot orientation (Corten, 1992, p. 63). The term has analysis of the economic situation of the controlled 650
598 existed in the Russian language since the 1920s, but gained enterprises and associations [. . .]. The inspectors usu- 651
599 new signicance in the early years of the Gorbachev era. ally spend only a very limited amount of time [on the 652
600 Under the Perestroika movement, the mechanism of controls], which does not allow them to come to a thor- 653
601 khozraschet was (re-)introduced to provide enterprises ough understanding of the particularities of the ways of 654
602
603
604
with more accountability, economic independence and
planning autonomy (Aganbegyan, 1988, 1989; Gorbachev,
1987). Organisations were encouraged to plan their -
D
documentation [dokumentooborota] and the specicity
of the nancial and economic activities of the controlled
enterprises [. . .]. In many cases the controls and inspec-
655
656
657
TE
605 nances and production independently, and in 1988, follow- tions are carried out to meet [their own] plan require- 658
606 ing the earlier approval of regulations for joint venture ments and are of a quite formal [ritualistic] nature. 659
607 operations, the Law on Co-operatives was adopted, which (Zhurko, 1985, p. 24) 660
608 made forms of private entrepreneurship for the rst time
In the subsequent years, the journal published more and 661
609 more widely allowable and promotable.
more articles, emphasising the indispensability of a funda-
EC
662
610 During this phase of Perestroika politics, also the system
mental re-organisation of nancial inspection and control. 663
611 of state nancial inspection [reviziya] came to be problema-
Between 1985 and 1990, almost every monthly issue of 664
612 tised, openly discussed and criticised. Restrained criticisms
the journal contained at least two or three contributions 665
613 had already been formulated in the 1960s and 1970s, but
criticising the existing inspection practices and calling for 666
614 under the Perestroika movement it had become possible,
reform. These contributions were written by parties outside 667
RR
615 for the rst time, to discuss these issues in a wider forum,
the inspection apparatus (e.g. academics), as well as by the 668
616 and with less pressure to conform to Marxist-Leninist ideol-
people within it. Between 1985 and 1990, Yuri Danilevsky, 669
617 ogy. The discussions commenced as far back as April 1981,
for example, who was at that time the head of the major 670
618 when the Council of Ministers of the USSR issued a resolu-
nancial control division [kontrolno-revizionnoe upravle- 671
619 tion that set out, according to the title, Measures for the
nie] of the Soviet Ministry of Finance, published nine arti- 672
620 improvement of control and inspection work in the minis-
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cles in the journal Bukhgalterskii uchet carrying titles such 673

621 tries, departments and other ofces of governmental man-
as Financial control and the economy (Danilevsky, 674
622 agement [organy upravleniya].11 The resolution criticised
1987a), Improving control and inspection work (Danilev- 675
623 the work of the existing inspection institutions profoundly:
sky, 1987b) and Financial control: what it should become 676
624 The Council of Ministers of the USSR notes that the [. . .] (Danilevsky, 1990). Other publications were headed with 677
625 controls of the nancial and economic activities of asso- titles such as Enhancing the effectiveness of departmental 678
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626 ciations, enterprises, organisations and other institu- controls, Improving controls for the reliability [dostover- 679
627 tions continue to show serious deciencies. The nost] of accounts, Cadres of a new type and About the 680
628 ministries, departments and other ofces carrying out perestroika of control and inspection work.12 681
629 inspections and controls are still not very effective and The criticisms within these articles focused on decien- 682
cies in the educational and training programmes of nan- 683
11
See resolution [postanovlenie] N 325 of the Council of Ministers of the
USSR from 02.04.1981. In 1980, ve years before Gorbachev was elected
12
General Secretary of the CPSU, he had already received full membership of The articles quoted above were published in the following issues of the
the Politburo, and reform needs had been articulated then particularly journal Bukhgalterskii uchet: December 1985, June 1986, October 1986, and
within the circles of the Young Communist League (Komsomol) (slund, June 1988. The articles represent only a small fraction of the total number
1991; Gorbachev, 1997). of articles that were published on this topic during that time.
ARTICLE IN PRESS
684 cial inspectors, the internal fragmentation of the control 1990). In the accounting journal Bukhgalterskii uchet we 738
685 and inspection systems, and the limited impact of inspec- read: 739
686 tions on enterprise management. Some articles addressed
The transition towards a market economy poses new 740
687 the superciality of state controls and pointed out the
requirements to the control over nancial-economic 741
688 low morale of inspectors in the workplace (e.g. Zhurko,
activities of different enterprises. [. . .] [State-indepen- 742
689 1985). Others talked about the scarcity of nancial and hu-
dent] audit controls make the work of state institutions 743
690 man resources to full inspection tasks, or found fault with
easier; they also make the work for enterprises easier. 744
691 the lack of internal quality controls (Kundrotas, 1988,
[. . .] Audits are important to signal the healthiness of 745
692 1989). To put these criticisms into perspective, it is impor-
an enterprise; [. . .and] audit rms help to build up 746
693 tant to understand that, in the Soviet Union, nancial
and organise market relations. (Bukhgalterskii uchet, 747
694 inspectors (similar to bookkeepers) did not enjoy a partic-
1991, No. 8, p. 40) 748
695 ularly high status. In comparison to other occupations,
F
696 they were relatively lowly paid and not considered to be An article published in an earlier issue of the journal states: 749
751
697 well educated (Bailey, 1973; Kramarovsky, 1987b; Shar- 750
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698 ova, 1986, 1990; Solovev, 1988; Zhurko, 1985). In addition, Completely new forms of control should accompany the 752
699 the inspection apparatus was well known for its bulkiness market economy; one form of those [new controls] is 753
700 and fragmented management structures. Since the late auditing. [. . .] In developed countries, audit services 754
701 1930s, it was frequently pointed out that the apparatus make up one of the strands of big business. A thoughtful 755
702 lacked coordination and suffered from duplication of ef- adoption of these services in our country could have a 756
703 fort.13 This was partly the case, because nancial controls huge social and organisational impact on the improve- 757
PR
704 were embedded in a variety of different state structures, ment of the management of industry in our developing 758
705 which were not very well connected with each other. The market economy. [. . .] It is necessary to learn quickly 759
706 accounting department of an enterprise, for instance, was and intensively more about Western audit expertise. 760
707 subject to a series of different controls (see e.g. Campbell, (Bukhgalterskii uchet, 1991, No. 1, pp. 3839) 761
708 1974). On the one hand, the department was subject to con- Danilevsky, the former head of the inspection division of 762
709 trols of the relevant branch ministries. On the other hand, the Soviet Ministry of Finance, writes: 763
710
711
712
the Gosbank (the Soviet Central Bank) would send out its
own inspectors to ensure that the prices employed by the
accountants were in accordance with those xed by the gov-
D
The development of market relations, and particularly
764
765
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713 ernment. In addition, the Ministry of Finance sent control- shareholding forms of property, call for the need to 766
714 lers that came in to check that the payments and revenues establish a system of [state] independent, external 767
715 were made in line with the overall nance plan.14 nancial control [audit]. (Bukhgalterskii uchet, 1991, 768
716 Following the criticisms and stimulated by the market- No. 3, p. 4) 769
717 oriented reforms undertaken elsewhere, reformers argued Western auditing came to be seen as a necessary response 770
EC
718 for the need to make state nancial inspections more eco- to the envisaged market reforms. It was called upon to 771
719 nomic, less bureaucratic, and more relevant to the inter- strengthen the accountability of enterprises, to enhance 772
720 ests of enterprises. Economic methods of inspection their autonomy, and to promote regimes of economic cost 773
721 were to be developed, moving nancial control away from accounting and self-governance. The next section takes a 774
722 a focus on correct weight, quantity and other administra- closer look at this nexus between auditing, audit rms 775
RR
723 tive planning measures, to an emphasis on quality, ef- and market-oriented reform demands. It analyses the mu- 776
724 ciency and prot and loss calculation (see in particular tual intertwinement of audit and markets and their estab- 777
725 issues No. 1 to 5 and 10, 1989, and issues No. 1 and 4, lishment as linked ecologies (Abbott, 2005b). It is shown 778
726 1990, of Bukhgalterskii uchet). In this context, Western that auditing was not only called upon to build markets. 779
727 commercial auditing came to be seen as an important ref- The market-oriented nature of auditing itself came to be 780
728 erence point (Danilevsky, 1990, 1991, 1995a, 1995b). Wes-
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viewed as an indispensable element of its effectiveness. 781

729 tern commercial auditing came to be regarded as a possible Looking at the West and large Western audit rms, partic- 782
730 mechanism for accelerating processes of governmental ularly the then Big Six, auditing itself was to be structured 783
731 modernisation and downsizing. Seen as a central element in accordance with principles and images of market ratio- 784
732 in Western market infrastructures, auditing should help nality, to make it state-independent, economic and user- 785
733 promote economic thinking and market-oriented devel- oriented. This did not mean that old inspection practices 786
UN
734 opment, not only outside but also within the inspection completely disappeared. Rather, they came to be re-articu- 787
735 apparatus. It should help stimulate market-oriented lated within the new market ideals. 788
736 change and contribute to the dissolution of the Soviet state
737 monopoly over nancial control (Danilevsky, 1991; Shpig,
Audit, audit rms and neoliberal reform demands 789
In April 1991, Boris Yeltsin, in his function as Chairman 790

13
See in particular the article by Kramarovsky (1987b), which provides a of the Supreme Council of the Russian Soviet Republic, an- 791
comprehensive account of the control and inspection problems that were nounced in the Russian newspaper Nezavisimaya gazeta: 792
discussed in the journal Bukhgalterskii uchet between 1937 and 1987.
14
For a more detailed analysis of these issues see Chumachenko (1985) We [the government] have to return to our people eco- 793
and Krasnov (1987). nomic and legal rights and freedom. [. . .] We have to 794
ARTICLE IN PRESS
795 develop conditions for a return of Russia to the system regulations and standards (Danilevsky, 1991, 1994; IMF 842
796 of the world market and world culture. (Nezavisimaya et al., 1991, p. 53). On the other hand, auditing activities 843
797 gazeta, 02.04.1991) themselves were to be organised along principles and 844
images of market rationality. To enhance their effective- 845
798 Particularly between 1989 and 1992, Soviet and later post-
ness, so it was believed, nancial inspections had to be de- 846
799 Soviet transformation policies came to be grounded in be-
tached from the apparatuses of political rule (Rose, 1993, 847
800 liefs that processes of radical marketisation, liberalisation
p. 285). Financial audit experts were to be relocated within 848
801 and privatisation could transform Russias highly bureau-
(imagined) markets governed by the rationalities of com- 849
802 cratised, statist economic system, including its unwieldy
petition, accountability and consumer demand. As Dani- 850
803 inspection apparatus, into a dynamic, competitive capitalist
levsky (1991, p. 6) writes: 851
804 economy (Gaidar, 2003; slund, Boone, Johnson, Fischer, &
852
805 Ickes, 1996; IMF et al., 1991; Sachs & Warner, 1995; World
F
806 Bank, 1996). Gorbachev acknowledged that there is no The activities of auditors should be guided by legisla- 853
807 alternative to shifting to the market (Pomer, 2001, p. 2), tion and private [sobstvenny] and economic [khoz- 854
raschetny] interests. Conditions of competition within
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808 and Yeltsin championed immediate transformation of 855
809 Russian socialism into laissez-faire capitalism (ibid., p. the auditing business allow economically for quality 856
810 1). As Pomer (2001, p. 4) recalls, on 2 January 1992, by pres- in the carrying out of inspections [revizii] and controls. 857
811 idential decree, coordination of the economy by central In turn, enterprises have the possibility to choose a 858
812 planning was terminated most price controls were lifted, qualied partner (auditor) who is independent from 859
813 doors to foreign trade and capital ows were thrown open, the departmental inspectorates, and the government 860
PR
814 and government spending was cut sharply: The goal was is given the possibility to ensure control over the reli- 861
815 immediate transition to unfettered markets, thereby allow- ability [dostovernost] of nancial statements and the 862
816 ing the market to guide the economy without government correctness of tax calculations without having to spend 863
817 interference. The supposedly successful capitalist societies its governmental budget resources. 864
818 of Western Europe and the United States became important
State-independent, self-nanced commercial audit rms 865
819 reference points for what post-communist Russian society
[khozraschetnye auditorskie organizatsii] came to be iden- 866
820 aspired to become (Bogomolov, 2001; Lane, 2002; Pickles
821
822
& Smith, 1998). To quote Bogomolov (2001, p. 53): D
tied as the main instruments through which market-ori-
ented reform objectives could be realised:
867
868
869
TE
823 Gorbachevs intent to transition to the market was met
The development of a web of audit rms can lay down 870
824 by the West with beguiling offers to share knowledge
the beginning of a genuine establishment of economic 871
825 and experience. A steady stream of economists arrived
principles of nancial control, based on contractual, 872
826 from abroad, bringing advice avidly assimilated by young
commercial relations between the auditors and the con- 873
827 reformers. Chicago School neoliberalism was in vogue.
trolled enterprises and other organisations. (Danilevsky,
EC
874
828 Russian admirers, hastening to disown the communist
1991, p. 6) 875
829 faith, were won over. Many of these proselytes became
830 even more orthodox than their new ideological heroes.15 Audit rms came to be advanced as entities through which 876
the old Soviet control system could be adapted to the 877
831 The market reform programmes induced new ways of
requirements of a the market economy (Itkin, 1991, p. 878
832 thinking about nancial control and regulation, including
RR
20); through which reliable [dostoverny] nancial infor- 879

833 auditing. Simultaneously, auditing came to be located out-
mation could be produced allowing for the enhancement 880
834 side and inside markets. On the one hand, Western
of capital market efciency and evaluation and forecast- 881
835 auditing came to be seen as an element of market-inde-
ing of consequences of economic decision-making (Sher- 882
836 pendent institutional infrastructure supporting the estab-
emet & Suyts, 2001 [1995], p. 11). Such beliefs, to a great 883
837 lishment of market relations amongst enterprises, and
extent, were rooted in highly idealised Western accounts. 884
CO
838 between enterprises and investors. As a mechanism of

Western discourses on audit functionality were called 885
839 independent control, auditing should help prevent asset
upon to promote and legitimate the rise of commercially 886
840 stripping, improve the presentation of nancial informa-
organised audit expertise (Danilevsky, 1991, 1995a, 887
841 tion, and ensure compliance with new market-oriented
1995b; Sheremet & Suyts, 2001 [1995]; Solovev, 1988; 888
Terekhov, 2001; Tsyplenkov, 1994).16 Further, the large Q3 889
UN
15
The neoliberal reform programme outlined by Western economic
advisers, such as Sachs, slund and Shleifer, and multilateral institutions,
16
such as the OECD, World Bank and IMF, recommended the rapid liberal- In 1993, for example, one of the rst Russian commercial audit rms
isation of foreign trade, scal austerity and swift privatisation (IMF et al., Kontakt (later FBK) initiated the translation of Robertsons audit textbook
1991; Lieberman et al., 1995; World Bank, 1996). It was informed by the so- [Robertson, 1976: Auditing. Burr Ridge: Business Publications]. In 1995, the
called Washington Consensus, neoliberal reform policies aimed at scal economics professors Terekhov and Sokolov translated the fth edition of
stabilisation, privatisation and liberalisation outlined by the World Bank Arens and Loebbeckes textbook [Arens & Loebbecke, 1991: Auditing, an
and IMF in the late 1980s to rescue states in economic crisis (Harvey, 2005). integrated approach. Englewood Cliffs: Prentice Hall]. In the same year,
Following the Western recommendations, on 2 January 1992, Yegor Gaidar Sokolov translated the Audit Framework by Adams [Adams, 1993: Audit
(then acting Russian prime minister), launched the so-called shock Framework. London: ACCA]. In addition, a translation of Carmichael and
therapy programme promoting laissez-faire capitalism through the Beniss Auditing Standards and Procedures Manual appeared [Carmichael
sudden removal of price controls, the liberalisation of trade and large- & Benis, 1994: Auditing Standards and Procedures Manual 1994. London:
scale privatisation (Arbatov, 2001). John Wiley, also translated in 1995].
ARTICLE IN PRESS
890 international accounting rms had opened their rst ofces meaning and roles of this institution [of auditing] did 934
891 in Russia in the late 1980s (Cooper, Greenwood, Hinings, & not exist. The procurators [inspectorates] would assign 935
892 Brown, 1998). The presence and economic success of the auditors and the auditor would do the controls [for 936
893 then Big Six strengthened beliefs that the establishment of them]. Auditing was seen as an instrument that could 937
894 private audit rms constituted an appropriate response to be employed to delegate control, state controls. And it 938
895 the political and economic reform demands. In the eyes of was just fashionable, instead of setting up a control- 939
896 the Russian reformers and new auditors, the big rms dem- inspection apparatus within the state structures, to cre- 940
897 onstrated the need for professional services (Pyatenko, ate such an apparatus through audit rms. In the West 941
898 1998, p. 9), and they set an example of how auditing ought that exists, so why shouldnt we have the same? 942
899 to be organised. Ernst and Young established their rst of-
Soviet inspection practices, thus, began to be reframed un- 943
900 ces in Moscow in 1989. Coopers and Lybrand, Arthur Ander-
der the label of auditing, but without it being clear where 944
901 sen and KPMG followed in 1990, and Deloitte and Touche
F
the reform attempts were heading. Reform activities were 945
902 launched their Russian ofces in 1992. Subsequent to the
based on a range of ideas about what Western auditing in 946
903 joint venture regulations in 1987, the international account-
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Russia might look like, without these ideas being anchored 947
904 ing rms had followed new Western joint venture partners
rmly in agreed, uncontroversial denitions of auditing. In 948
905 into Russia, as most of them needed a Western audit for
the beginning, the term auditing was primarily used to 949
906 their Western parent companies (Cooper et al., 1998).17 La-
demarcate a new control area, namely the control of com- 950
907 ter, from 1990 onwards, the big rms, along with newly
mercial operations carried out by joint ventures and other 951
908 founded Russian audit rms, conducted also audits for co-
entities with mixed or exclusively private funding, rather 952
909 operatives and banks.18 The activities of the Big Six, the
PR
than to denote changes in actual inspection practice and 953
910 opening up of the Soviet Union for foreign direct investment,
technology. A former state nancial inspector, who in 954
911 and the introduction of new forms of private property rein-
2002, at the time of this interview, was Deputy Director 955
912 forced beliefs that the old Soviet inspection apparatus
of one of the Big Four audit rms in Moscow, remembers: 956
913 needed to be replaced with a system of commercial auditing
957
914 run by private audit rms.
915 Yet, the actual working of auditing still needed to be g- When we heard the word audit for the rst time we 958
916
917
918
ured out. As Power (1997, p. 42) would put it, the efcacy
of auditing was a priori assumed. Neither the actual work-
ing of audit, nor its technologies were problematised. As
D
were confronted with a series of new questions.
Amongst other things, we asked ourselves what we
should look at [when carrying out audits]. The major
959
960
961
TE
919 the following remark of a former employee of the Soviet control organ at that time was the Ministry of Finance; 962
920 Ministry of Finance19 illustrates, the advent of auditing, at we worked with their questions. [. . .] And, obviously, 963
921 rst, had the appearance of a fashion. Economic reformers what we did during these times, that wasnt an audit 964
922 deemed it to be more appropriate to control commercial, in the sense as we understand it today. It was more like- 965
923 market-oriented operations through commercial audits the procedures were more like. . . [. . .] More like the 966
EC
924 rather than the old system of state inspection without con- inspections you carried out before? Yes, yes, exactly. 967
925 sidering what the exact implications of such a change would
The practical meaning of audits, and what made them dis- 968
926 be:
tinct from governmental inspections, still had to be worked 969
927 Because the government [. . .] allowed the foundation of out. This problem arose partly out of the general obscurity 970
928 enterprises with foreign capital, and even further, the that, as Power (1997) shows, characterises the business of 971
RR
929 foundation of enterprises with capital from capitalist auditing, whether in the East or the West. It arose also out 972
930 countries, it would have looked very strange, if a part of a lack of rst-hand experience in Western auditing and 973
931 of the state control apparatus would have controlled resistance accompanying the reform attempts. On the one 974
932 these organisations. [. . .] At that time it was quite fash- hand, auditing had become attached to neoliberal reform 975
933 ionable to set up audit rms. An understanding of the demands, ideals of market-coordinated action, competition 976
CO
and laissez-faire. On the other hand, there were still many 977
voices, within and outside government, seeking to restore 978
17
The joint venture law from 1987 stimulated the rise of auditing, as it
the old command and control regime and state authority. 979
required that joint venture partners underwent an audit, instead of the Old inspection ideals, coalescing auditing with ideas of 980
traditional state inspections. However, the law itself is only one factor lawfulness [zakonnost], juridical enforcement and gov- 981
among many that contributed to Russian audit development. The law itself ernmental oversight, rather than market accountability 982
UN
does not explain the rise of auditing. For this, we have to look at the wider
and consumer rights, lived on (see e.g. Shpig & Lazurenko, 983
conditions of its emergence, including political changes, problematisations
of state nancial control and the opening of Russia to the West. 1991). 984
18
A new Banking Law, adopted in December 1990, stated that the Moreover, the neoliberal ideas and programmes of mar- 985
nancial statements of commercial banks were to be checked by an ketisation themselves were not as homogeneous as, at rst, 986
independent audit organisation. Also the Enterprise Law and the revised they may have appeared. We cannot speak of one unitary 987
Law on Co-operatives, issued in 1990, introduced audits as a means of
external nancial control and required these to be conducted by commer-
neoliberal or market logic (Harvey, 2005; Ong, 2006). 988
cial auditing organisations. Rather, we have to acknowledge the multiple visions and 989
19
In 2002, when this interview was conducted, the interviewee worked rationales that can become connected to audit, marketisa- 990
as a partner for a Big Four audit rm in Moscow and was responsible for the tion and neoliberal reform ideas. In the name of the mar- 991
development of internationally oriented accounting and audit
ket and neoliberalism, a range of different ideas and 992
methodology.
ARTICLE IN PRESS
993 instruments can get mobilised, which put different empha- responsibility, or changes in inspection technology. People, 1052
994 sis on different aspects of neoliberal government (Aldridge, including accountants and auditors, as Stark and Bruszt 1053
995 2005; Hirschman, 1992). In the case of Russia, marketisa- (1998) aptly point out, were not wondering how to transit 1054
996 tion, and neoliberalism respectively, came to be dened to the market. They were more concerned about how to 1055
997 as opposite to planning and bureaucratic coordination, at survive with the resources at hand and how to cope with 1056
998 the same time market-oriented reform policies themselves the high degrees of institutional uncertainty. Thus, mar- 1057
999 required a lot of organisation and re-regulation. At an ab- ket-oriented reform programmes did not result in clearly 1058
1000 stract level, neoliberalism and marketisation came to be identiable pathways of change. Rather, as the following 1059
1001 understood as freedom to self-organisation, individual sections show, they opened up spaces for experimentation 1060
1002 responsibilisation and increased accountability (Gorba- and pluralisation. Auditing itself came to be implied in 1061
1003 chev, 1987; slund, 1995; see also Rose, 1999). At the level such spaces of experimentation and pluralisation. At gov- 1062
1004 of audit organisation, they came to be interpreted in terms ernment level, demands for auditing had been articulated, 1063
F
1005 of economic calculation, rationing, and competition (Dani- but tasks of audit still had to be dened, and differences 1064
1006 levsky, 1990, 1991; but see also Kurunmki & Miller, between socialist inspection and market-oriented auditing 1065
OO
1007 2006). At the beginning of Russias transition to capitalism, to be worked out. 1066
1008 the market came to be regarded as a disciplining and The market relevance of auditing had to be actively 1067
1009 civilizing mechanism (Gaidar, 2003; Gorbachev, 1987; built and rebuilt, with tools that are not necessarily di- 1068
1010 Hirschman, 1992; Hirschman, 1997 [1977]; IMF et al., rectly related to calculative prociency or actual degrees 1069
1011 1991). Later, when many of the reforms did not turn out of scrutiny. Russian audit entrepreneurs and their rms ac- 1070
1012 as planned, the market came also to be seen as merely tively participated in the construction of the markets they 1071
PR
1013 opening up possibilities for bare prot seeking, opportu- sought to rule. Audit had to be turned into an economic 1072
1014 nistic enrichment, free riding and ruthlessness (Burawoy, business before audit itself could take place, and audit 1073
1015 2001; Klein & Pomer, 2001). Following a linked ecologies ideas came to be merged with Western marketing and con- 1074
1016 approach, we need to make more room for such multiple sulting expertise.20 Western marketing instruments (client 1075
1017 views and interpretations that came to be attached to audit questionnaires, audit rm ratings, advertisements, bro- 1076
1018 and processes of marketisation. chures etc.) came to be used to erect boundaries between 1077
1019
1020
1021
Further, abstract, idealised discourses about marketisa-
tion and auditing alone cannot help us explain how audit-
ing, and new audit rms respectively, came to work (or not
D
the present and the past, gain public visibility and build
up new systems of audit representation.21
The next section describes and analyses how auditors
1078
1079
1080
TE
1022 work). Nor can they add to our understanding of the many actively tried to make audit marketable. It shows how 1081
1023 shifts, contradictions, dynamics and tensions accompany- auditors sought to reinvent themselves as market actors 1082
1024 ing attempts to transform post-socialist inspection in the through references to managerial efciency, economic suc- 1083
1025 light of Western market ideals. For this, we have to look cessfulness, client care and competitiveness. Projects 1084
1026 at the messy translation of the ideals. A linked ecologies aimed at increasing professional status and external recog- 1085
EC
1027 approach, as put forward in this paper, seeks to unravel nition came to be carried forward at the level of audit rms 1086
1028 the manifold connections that came to be established be- and their positioning in the emerging audit market (e.g. via 1087
1029 tween audit reform programmes and different instruments audit rm ratings, client questionnaires and other market- 1088
1030 and ideals of marketisation. Ecological analysis, as Wise ing instruments). Notions of good or bad, professional or 1089
1031 (1988, p. 77) has put it, draws attention to the particular unprofessional, auditing came to be linked to audit rm 1090
RR
1032 modes of mediation through which societal concerns be- size, audit rm branding, and corporate inuence. In this 1091
1033 come projected into the very local concerns of a particular context, large Western professional services rms (particu- 1092
1034 domain of activity. In so doing, ecological analysis asks us larly the then Big Six and other large mid-tier accounting 1093
1035 not only to analyse the governmental programmes that rms) came to function as role models, as market organisa- 1094
1036 gave rise to audit. It also asks us to investigate how the tions to compete with and learn from. They came to be 1095
1037 market and audit reform requests came to be re-articu- seen as strongholds of Western audit and marketing exper- 1096
CO
1038 lated at local level, translated and shifted into sub-pro- tise, with structures at their disposal through which, so it 1097
1039 grammes, counter-programmes, and attached to
1040 technologies involved in the day-to-day construction and
20
This, of course, is not only a specicity of auditing in post-Soviet Russia.
1041 legitimation of claims to audit expertise.
Discourses seeking to redene and market auditing in consulting terms also
took place in the West, in the 1980s and early 1990s, particularly before the
UN
1042 Changing relations between politics and expertise Enron scandal (see e.g. Jeppesen, 1998; Robson et al., 2007). Yet differently
from the West, in Russia discourses about consulting emerged at the same
1043 In post-Soviet Russia, particularly in the early 1990s, time when auditing was introduced, and not as something that was added
on to audit.
1044 many reformers believed that new market institutions 21
In the context of this paper, systems of audit representation are dened
1045 (including auditing) would arise almost automatically, if as systems of signifying practices and symbolic systems (Hall, 1997)
1046 institutions of the old system were destroyed (see e.g. Boy- through which audit meanings are produced, and which help position audit
1047 cko et al., 1995). Yet, the anticipated transition did not rms and auditors as market actors in envisaged audit markets. This paper
1048 come about (Burawoy & Verdery, 1999; Pickles & Smith, argues that symbolic systems play an important role in creating possibil-
ities of what auditing is and who auditors are. Discourses and systems of
1049 1998). The reforms carved space for new forms of private representation construct places from which auditors and audit rms can
1050 entrepreneurship, but did not automatically lead to greater position themselves and from which they can speak to each other and
1051 degrees of accountability, transparency and individual larger publics.
ARTICLE IN PRESS
Table 1
Number of registered and licensed audit rms in Russia.
1996 1997 1999 2000 2001 2007 2008

Approximate number of registered and licensed audit rms in the ca. ca. ca. ca. ca. ca. ca.
Russian Federationa 3289b 4329b 4708b 6600b 7500b 7100c 6400c
a
Figures from 1996 and 1997 give information about issued audit rm licenses. Figures from 19992001 provide information about licensed and
actually operating [deystvuyushchie] audit rms, small partnerships as well as sole traders. Figures from 2007 and 2008 relate to registered audit rms
only, which since 2002 need to have at least ve nationally certied auditors amongst their staff.
b
Source (19962001): Reports on audit development and audit rm licensing issued by the Russian Ministry of Finance, published in Finansovaya Gazeta
No. 43, 18.10.1996; Auditorskie Vedomosti No. 1, 1997, p. 5; Finansovaya Gazeta No. 4, 22.01.1999; Finansovaya Gazeta No. 36, 06.09.2000; Auditorskie
Vedomosti No. 2, 2001, p. 23.
c
Source (20072008): Svedeniya o raspredelenii auditorov, auditorskikh organizatsiy i individualnykh auditorov po federalnym okrugam [Information
F
about the spread of auditors, audit organisations and individual auditors across federal regions], issued by the Russian Ministry of Finance on 25.01.2008
and 01.01.2007. Cf. http://www1.minn.ru/ru/accounting/audit/basics/programs/ (accessed in March 2009).
OO
1098 was hoped, at least parts of the emerging Russian audit vices. Subsequent to the Temporary Rules, audits became 1130
1099 market could be remodelled, modernised and connected mandatory for a large number of companies.23 Audits came 1131
1100 to the West. to be ofcially relocated within commercial, state-indepen- 1132
1101 The meaning of markets and the roles of auditing in dent audit rms, which were free to decide on the forms, 1133
1102 them, thus, was reworked. Attention came to be shifted methods and contents of the checks they carried out.24 1134
PR
1103 away from textbook ideals seeing auditing as a mechanism Groups of audit experts and audit organisations ofcially 1135
1104 to reduce information asymmetry, to enhance accountabil- were put into competing positions. Audit services were 1136
1105 Q4 ity and to add credibility to nancial reports.22 Auditing redened as commercial, tradable good. Auditing itself came 1137
1106 was redened as platform for corporate development, con- to be seen as entrepreneurial activity [predprinima- 1138
1107 sulting activities and entrepreneurial self-realisation. With telskaya deyatelnost], and auditee organisations were free 1139
1108 this, also market ideals changed. Markets were no longer to choose among a host of newly established audit suppliers. 1140
1109 seen as an abstract mechanism of economic coordination, Between 1991 and 1996, the number of new audit rms 1141
1110
1111
but as a space for experimentation, which needed to be ac-
tively created, crafted and shaped, by the audit rms them-
D
increased rapidly. In 1991, at the early beginnings of Rus-
sian audit development, an auditing conference was held
1142
1143
TE
1112 selves and their representational instruments. in Moscow in which more than 180 audit rms partici- 1144
pated (Terekhov, 2001, p. 64). A few years later, the num- 1145
1113 Making audit marketable ber of audit rms amounted to more than 2000 (ibid.). In 1146
1996, more than 3000 audit rms operated in Russia, and 1147
1114 Until 1993, auditing itself remained a largely unregu- by 2001 this number had increased to 7500 (see Table 1 1148
EC
1115 lated business. In 1994, this situation was changed. The below).25 1149
1116 government adopted Temporary Rules on Auditing, which Yet, to both the new audit producers and consumers it 1150
1117 for the rst time laid out a denition of auditing, and of- was still not entirely clear what distinguished auditing 1151
1118 cially granted audit rms a key position within the system from former inspection activities apart from the new com- 1152
1119 of economic and nancial control that was to be reformed. mercial attributes. What one could or should demand from 1153
RR
1120 The Temporary Rules dened auditing as: mandatory audit services still had to be specied. Relations 1154
between auditor and auditee had to be gured out, and 1155
1121 [. . .] entrepreneurial activity of auditors (audit rms) evaluation criteria for good auditing to be dened. Differ- 1156
1122 involving independent, non-governmental controls of ent attempts began to be undertaken by the new audit 1157
1123 accounting (nancial) reports, payment and settlement entrepreneurs and their founded audit rms to make audit 1158
1124 documents, tax declarations and other nancial obliga-
CO
1125 tions and requirements of economic entities and the

1126 provision of other auditing services. (Quoted from Dani-
1127 levsky, 1994, p. 9) 23
Audits became mandatory for unlimited joint-stock companies, banks,
1128 The adoption of the Temporary Rules constituted an insurance companies, stock exchanges, investment institutions, charitable
funds, joint ventures and companies with a turnover of more than 500,000
1129 important further step in the marketisation of audit ser- minimum monthly salaries (ca. 7 Million USD) or total assets in excess of
UN
200,000 minimum monthly salaries (ca. 3 Million USD) (Enthoven et al.,

1998, p. 87). These requirements were specied in a governmental
resolution from 7.12.1994 (No. 1355). According to the Russian business
journal Prol in March 2002 more than 20% of all businesses had to
22
See e.g. Danilevsky, Shapiguzov, Remizov, and Starovoytova (2002), undergo mandatory audits (Prol, 11 March 2002, p. 78).
24
Sherement and Suyts (2001 [1995]), Suyts et al. (2001). Sheremet and Suyts See Article 13 of the Temporary Rules: Auditors and audit rms have the
(2001 [1995]) wrote one of the rst Russian audit textbooks for students at right to dene methods and forms of audit controls themselves, provided that
the Moscow State University. Following Western textbooks (Arens and they do not conict with the legal framework of the Russian Federation.
25
Loebbecke (1995), Adams (1995), Robertson (1993)) and principal agenct The auditors interviewed in this study came from a variety of different
theory, they describe auditing as a device to overcome information backgrounds. Some had worked in science labs as mathematicians; some
asymmetries, to increase the trustworthiness of nancial information, had an engineering or background. Others had taken MBA degrees abroad.
to evaluate and forecast the consequences of different economic deci- Only a few had formerly worked as state nancial inspectors; and many
sions and to enhance capital market efciency. had only received their university degrees some years ago.
ARTICLE IN PRESS
1159 reputable and marketable, to position themselves in the and instruments of market creation, representation and 1219
1160 emerging post-Soviet audit market, and redene their organisational management. 1220
1161 identity in accordance with market ideals. In this context,
1162 attention was drawn in particular to marketing expertise Doctors who heal 1221
1163 and market-oriented instruments of audit rm representa- 1222
1164 tion public advertisements, audit rm rankings, press Here [in Russia] you nd rms who really perform 1223
1165 articles etc. to communicate, ground, sell and legitimate audits and you have rms who just call themselves 1224
1166 claims to new competence, mark differences between So- audit rms. That is a big difference. You have doctors 1225
1167 viet and post-Soviet audit practices, establish new grids who heal. They know what they are doing; they are 1226
1168 of classication, and distinguish real from quack experienced. But you also have people who just wear 1227
1169 professionals. white collars. They just take your money and give you 1228
1170 Attempts aimed at making audit reputable (and thereby
F
a certication that you are healthy and that you are 1229
1171 marketable), thus, were not only rooted in the develop- not going to die soon. (Director of a large Russian audit 1230
1172 ment of a new knowledge base, Western-oriented audit rm) 1231
OO
1173 methodologies and traditional mechanisms of professional An auditor comes to a rm to express his opinion. He 1232
1174 regulation (e.g. professional standards, ethical codes and does not come with the objective to punish or ne. He 1233
1175 certicates). At least equally important were activities comes with the objective to nd out whether there 1234
1176 and instruments of marketing and branding aimed at the are any shortcomings; and he will inform the manage- 1235
1177 publicising and general promotion of auditing and audit ment of the company about these shortcomings, which 1236
1178 rms. Activities and instruments aimed at making auditing means that we dont penalise. (Senior Auditor of
PR
1237
1179 widely presentable and communicable came to the another large Russian audit rm) 1238
1180 fore. New forms of market representation were invented An auditor thats not just a person who comes to 1239
1181 to make auditing and audit rms publicly known, con- express an opinion on the nancial statements; people 1240
1182 struct status hierarchies between small and large rms, expect him also to tell them how things should be done, 1241
1183 reinforce ideas of market-guided auditor choice, and dem- they expect advice. [If you] say that an audit is about 1242
1184 onstrate competitiveness. In this context, ideals of auditing the support [podderzheniye] of a true and fair view, 1243
1185
1186
1187
came to be intertwined and reframed with ideas and
instruments of consulting, management and marketing.
The following passages examine how auditing and market
D
the management of a company would not understand
this. And they dont care. They think: If we hire auditors
and pay them money, they ought to tell us how all this
1244
1245
1246
TE
1188 ideals came to be carried forward, shifted and changed [the accounting] should be done, so that we dont face 1247
1189 through the new audit entrepreneurs, their audit rms problems with the tax authorities. If an auditor does 1248
1190 and representational instruments. Three instances of not help the enterprise to get the accounting and com- 1249
1191 post-Soviet audit re-branding and re-presentation are putation of taxes right, the enterprise would choose 1250
1192 analysed. another auditor the next time. (Audit Manager of 1251
EC
1193 First, changing representations of relations between another large Russian audit rm) 1252
1194 subject and object of auditing, between auditor and audi-
1195 tee, are investigated. It is shown how notions of auditing In the early 1990s auditing had been introduced and put on 1253
1196 as instrument of verication and market-control came to a market footing, but potential audit clients were not nec- 1254
1197 be shifted and remoulded by auditors and audit rms seek- essarily convinced that auditing constituted a valuable, 1255
RR
1198 ing to reinvent themselves as doctors who heal in order worthy activity. Professional standards were largely absent 1256
1199 to leave stigmas of socialist inspection behind, distinguish or, if present, rarely enforced. Markets, including the 1257
1200 themselves from sham professionals, legitimate entrepre- emerging market for audit services, came to be experi- 1258
1201 neurial inventiveness and re-emphasise customer orienta- enced by many as being out of control, as wild and unciv- 1259
1202 tion. Second, it is shown how imageries of auditors as ilized spaces where anything goes. Furthermore, stigmas 1260
1203 doctors who heal are not only utilised to reinforce differ- of Soviet inspection continued to live on and were often at- 1261
CO
1204 ences between the present and the past; they are also used tached to auditing, too. As was pointed out earlier, during 1262
1205 to restage old aspirations of organisational efciency and, Soviet times neither bookkeeping nor inspection enjoyed 1263
1206 to some extend, defend continuity in audit methodology. a high status or good reputation. In order to expand their 1264
1207 Third, we turn to the embedding and re-articulation of businesses, enhance public credibility and trustworthiness, 1265
1208 market-oriented audit ideals in inter-organisational con- the new auditors needed to counteract the old stereotypes 1266
and imageries. In so doing, they did not only need to devel-
UN
1209 structions of market credibility, and analyse the relevance 1267

1210 of audit rm rankings in newspapers and popular business op new technical skills and a new knowledge base, they 1268
1211 magazines for the construction and legitimation of new also needed to nd ways and instruments allowing for 1269
1212 claims to expertise. We observe the re-invoking of market their public re-staging, proactive impression management 1270
1213 ideals in terms of inter-organisational competition and and communication of their worth. 1271
1214 demonstrations of corporate powerfulness. But we also In doing so, individual auditors and their rms, inter 1272
1215 see that this does not necessarily imply that former Soviet alia, began to emphasise the metaphorical similarity be- 1273
1216 calculative practices and inspection technologies are en- tween auditing and other respected, established occupa- 1274
1217 tirely changed or replaced; rst of all, they rather are re- tions. As with the US-American management consulting 1275
1218 wrapped and restaged with the help of Western ideas profession in the 1930s (McKenna, 2006, p. 201), Russian 1276
auditors too began to describe their activities in terms of 1277
ARTICLE IN PRESS
1278 medical analogies. Auditors and audit rms, seeking to dis- they later relabelled themselves as audit-consulting rms 1326
1279 tinguish themselves from past inspectors and sham profes- [auditorsko-konsultatsionnye rmy], and auditors referred 1327
1280 sionals, promoted themselves as doctors who heal, and to themselves as auditorconsultants [auditory-konsultan- 1328
1281 commercial auditing as medicine for the ailing economy. ty] (see e.g. Pyatenko, 1998). Russsian audit rms, which 1329
1282 In various journal articles, books, advertisements and pub- in 2005 for example belonged to Russias ve largest na- 1330
1283 lic speeches auditors presented themselves as doctors of tional audit rms, started under names such as Unicon (Uni- 1331
1284 the economy [doktory ot ekonomiki], as physicians for versal Consulting)27, or FBK (Finansovye i bukhgalterskie 1332
1285 the bookkeeper [vrachi dlya bukhgaltera] (Baklan, 1988; konsultatsii Financial and bookkeeping advice), which they 1333
1286 Pyatenko, 1998, 2001). Notions of control [kontrol] and continued to carry. Consulting images were invoked not only 1334
1287 inspection [reviziya] came to be reworked and intertwined to reinforce distance from old inspection imageries, but also 1335
1288 with notions of guidance, help [pomosh] and competent to legitimate the prot orientation of the new audit rms 1336
1289 advice [gramotny sovet] (Pyatenko, 1998). Whereas former and communicate, akin to Western audit rms in the 1337
F
1290 Soviet inspectors continued to be portrayed as watchdogs, 1980s and 1990s (Hinings et al., 1999; Jeppesen, 1998; Rob- 1338
1291 as policemen who want to expose mistakes, punish and son et al., 2007), the added value of their services to poten- 1339
OO
1292 collect nes, auditors sought to re-brand themselves as tial clients. 1340
1293 consultants, helpers, and accounting advisors (Pyatenko, The presence of the Big Six (later Big Five and then Big 1341
1294 1998, 2001; Suyts et al., 2001; Terekhov, 2001). In the Four) accounting rms in Russia from the late 1980s on- 1342
1295 accounting journal Bukhgalterskii uchet we read: wards had a major impact on such developments. The big 1343
rms were seen as role models who had successfully em- 1344
1296 Auditors are no longer the state inspectors [revizory]
braced a competitive market orientation. Their multifac- 1345
PR
1297 from yesterday, whose task it was to nd errors and
eted business engagements reconrmed beliefs that 1346
1298 breaches. The auditor of today is an adviser [sovietchik]
auditing should combine the function of control with con- 1347
1299 to the owner, entrepreneur and bookkeeper. Qualied
sulting and legal advice (Bukhgalterskii uchet, 1993, No. 2, 1348
1300 consulting services are often more needed than the
p. 10). The entrepreneurial success of the big rms, their 1349
1301 audit itself. (Bukhgalterskii uchet, 1998, No. 8, p. 8)
client orientation and general management expertise, 1350
1302 A shift is articulated from socialist inspection to Western- came to be seen as important preconditions for profes- 1351
1303
1304
1305
oriented business consulting (see also Baklan, 1988; Pyaten-
ko, 1998, 2001). Medical metaphors came to be blended
with Western consulting ideals. They were not so much used
D
sional audit development (see e.g. Pyatenko, 1998, and
Bukhgalterskii uchet, 1992, No. 4, pp. 8).
Supported were such views by articles from owners of
1352
1353
1354
TE
1306 to root auditing in ideals of science, but to articulate charac- smaller Western accounting rms, which began to be pub- 1355
1307 teristics of (Western) management consulting, emphasise lished by Bukhgalterskii uchet regularly from the early 1356
1308 the importance of client/patient care, discretion/doctorpa- 1990s onwards. In 1992 for example, the journal published 1357
1309 tient condentiality and state independence: an article by Thomas Telling, an American accounting rm 1358
1310 owner, entitled Accounting rms in the market economy. 1359
EC
Telling wrote: 1360

1311 It is important that [audit] organisations [. . .] empha-
1312 sise in their regulations and contracts the consulting Accounting rms offer clients all complex accounting 1361
1313 and condential character of their offered services, services, which the client himself cannot carry out. 1362
1314 avoiding the words inspection and control [reviziya i [. . .] Accounting rms help business people. [. . .] They 1363
1315 control]. In the opinion of the leaders of the organisa- can help prepare budgets, offer valuation services, pre- 1364
RR
1316 tions, their client will only be interested in their ser- pare accounts for tax authorities and provide other ser- 1365
1317 vices, if he is convinced that the results of the vices. (Bukhgalterskii uchet, 1992, No. 12, pp. 21) 1366
1318 accomplished work will only be communicated to
According to a survey, published in the journal Bukhgalter- 1367
1319 him, and the objective of the work does not consist in
skii uchet in 1995, the majority of Russian audit rms of- 1368
1320 an attempt to wash ones dirty linen in public. (Bukhgal-
fered consulting services to their clients. They sought to 1369
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1321 terskii uchet, 1988, No. 11, p. 11)

protect their clients from the grip of tax authorities, pre- 1370
1322 Before statutory audits were widely introduced, many pared business and nancial plans for them, provided ad- 1371
1323 audit rms worked as accounting consulting organisations vice on accounting policies, and helped clients adapt to 1372
1324 [khozraschetnye konsultativnye organizatsii].26 Modelling the fast changing regulatory environment (Podolsky, Savin, 1373
1325 themselves on Western accounting and consulting rms,
UN
27
Andrei Dubinsky, founder and director of Unicon comments on the
26
See for example the article in the journal Bukhgalterskii uchet by Baklan company name on the audit rms website: [. . .] the name should include
(1988), a representative of the inspection apparatus of the Soviet Ministry the word consulting or a part of it to reect the universal nature of our
of Finance, describing the foundation of Soviet accounting consulting rms services. Furthermore, it should show that we are going to become part of
in the late 1980s. Amongst other things, he describes the activities of the global system in the future, that our professional roots are interna-
Finansy, a consulting rm in Tbilisi founded in 1987 to offer services in tional. At the same time I wanted a good-sounding name. That is how the
the areas of nancial economic analysis, management consulting and legal name Unicon was born its rst part uni stands for universal; its
compliance work; Took, an Estonian rm offering legal advisory services second part con is for consulting. If we look at it in a different way,
and consulting in nance; and Ekspert, a Moscow rm providing unic sounds similar to unique. The ultimate meaning would be unique
consulting services to newly founded cooperatives in accounting and consulting, and I believe it is true. See http://www.bdo.ru/eng/about/
bookkeeping. history/index.wbp (accessed in August 2008).
ARTICLE IN PRESS
1374 & Sotnikova, 1995). Bare audits, in this context, were often own PR, marketing and strategic business development 1416
1375 regarded as being of secondary importance. By many departments with the aim stop auditing from being poorly 1417
1376 (including auditors and auditees) they came to be seen as understood and re-emphasise its usefulness for the devel- 1418
1377 necessary formality, not yet a really effective element opment of the market (Voronaev, 1994).30 Audit rms and 1419
1378 in the market economy, not an instrument of societal their founders began to portray themselves as active audit 1420
1379 control over the commercial activities of enterprises and market organisers actively forming themselves, audit 1421
1380 organisations (see e.g. Stukov, 1996, p. 38). As Stukov expectations, and their competitive environment (Pyatenko, 1422
1381 (1996, p. 39) put it: In the best case audits are tolerated, 1997, 1998). 1423
1382 but they are not liked. Consequently, audits as such en- Market success came to be promoted as a sign of profes- 1424
1383 joyed limited credibility. Even in 2002 we can read in a sionalism, and organisational competence of audit rms as 1425
1384 widely disseminated Russian audit textbook (see Danilev- the main vehicle through which high levels of audit profes- 1426
1385 sky et al., 2002, p. 98): When granting loans, banks often sionalism could be realised. Displays of entrepreneurial 1427
F
1386 employ non-ofcial information about the real situation of success, shown in newspaper articles, business journals 1428
1387 the potential client rather than trust his nancial state- and audit rm advertisements, came not only to be utilised 1429
OO
1388 ments, although they have been approved by a licensed for the attraction of new clients, but, as the following sec- 1430
1389 auditor. tions will show, also for the general enhancement of public 1431
1390 Against the background of such articulations of distrust, recognition and respect. Similar to the case of the US- 1432
1391 marketing and skilful public impression management be- American management consulting eld (McKenna, 2006, 1433
1392 came important topics for the newly established rms, p. 203), and the case of the large international accounting 1434
1393 especially for those with bigger business aspirations (e.g. rms (Cooper & Robson, 2006; Greenwood et al., 2006), 1435
PR
1394 FBK, Unicon, Rufaudit). Western-oriented marketing strat- professionalism came to be seen as a characteristic of indi- 1436
1395 egies, combined with ideas of strategic management, be- vidual rms and their capacities for efcient organisation 1437
1396 gan to be adopted to underline professionalism, client and business development, rather than as the property of 1438
1397 orientation and entrepreneurial ability (Pyatenko, 1998, individuals. Attributes of organisational prociency and 1439
1398 2001; Vedeneev, 1999). Key account management, SWOT corporate powerfulness, the next section shows, came to 1440
1399 analyses (analyses of strengths, weaknesses, opportunities be utilised to articulate professionalism. In this context, 1441
1400
1401
1402
and threats), and PR work began to enter in particular lar-
ger rms (see e.g. Pyatenko, 2001; Verkhov & Kozlova,
Q5 1998).28
D
special attention was devoted once more to the large Wes-
tern accounting rms and their ways of organising exper-
tise. At the same time, however, practices aimed at
1442
1443
1444
TE
1403 Further, rms like FBK, Rufaudit and Unicon founded increasing organisational rigour and discipline provided 1445
1404 their own publishing houses. They issued journals for also old inspection ideals with new relevance. 1446
1405 accounting and audit practitioners, were involved in the
1406 setting up of audit business associations29, published Civilizing markets: organisational prociency and 1447
1407 translations of Western accounting and audit textbooks, accounting hygiene 1448
EC
1408 and issued their own books and articles. These carried titles, 1449
1409 such as Choosing an auditor and consultant (Pyatenko, Between 1989 and 1995 audit-consulting, like any 1450
1410 1998), The auditor comes to the bookkeeper to help other Russian business, developed basically on a combi- 1451
1411 (Antipin & Badalin, 1994), The foundation and development nation of indomitable spirit and entrepreneurial energy. 1452
1412 perspectives of a market for audit-consulting services in [. . .] Independently, a well developed and ourishing 1453
RR
1413 Russia (Pyatenko, 1997), or The marketing of audit ser- new branch of the economy came to be formed. More 1454
1414 vices (Vedeneev, 1999). They sent their employees to give importantly, auditors and consultants, ahead of almost 1455
1415 public speeches (e.g. at conference), and founded their everyone, paved the way for a life in accordance with 1456
the laws of the market economy and competition. The 1457
sphere of professional [audit and consulting] services 1458
CO
28
Pyatenko, for example, extensively refers to the English and American already itself constitutes a clear example of the possibil- 1459
consulting and marketing literature and quotes Maister (1993), Managing ity to form and develop normal, independent, market 1460
the Professional Service Firm, New York: Free Press; the Handbook of laws abiding organisations. (Pyatenko, 2001, pp. 119, 1461
Management Consulting Services by Barcus and Wilkinson (1995), New York:
329) 1462
McGraw-Hill; and Peoples (1993), Selling to the Top, New York: John Wiley.
29
The two founders of Rufaudit, Alexey and Alexander Ruf, founded in Auditing came to be regarded as a sphere of business 1463
1992 the Russian Collegium of Auditors. In 1996, under the leadership of
where market relations were realised. Auditors and audit 1464
UN
the audit rm Unicon, the Union of Professional Audit Organisations (SPAO,

which became later renamed into IPAR, Institute of Professional Audit rms sought to actively embrace market ideas. They pro- 1465
Firms in Russia) was founded. Temporarily, the number of audit associa- moted themselves as entrepreneurs, as motors of the 1466
tions amounted to more than 100. Following the introduction of the Federal
Audit Law in 2002, and the requirement for governmental accreditation of
30
such associations, this number was eventually cut down to ve ofcially In 1996, the Russian business magazine Ekspert published a survey
recognised organisations (see http://www1.minn.ru/common/img/ where the then 20 largest Russian audit rms (in terms of revenues) were
uploaded/library/2009/02/peresh_apao.pdf, accessed in June 2009). With asked to list the main factors that contributed to their economic success
the exemption of the RCA, all associations accept audit rms as their and continuing competitiveness on the audit market. Amongst the most
members. The associations are primarily seen as a platform for auditors and important factors mentioned were: good relations with national enter-
audit rms to defend their business interests. Membership in them has prises (potential clients), professionalism of employees and compre-
never been compulsory and audit certicates were, and still are, not issued hension of the clients psychology. See Ekspert, 1996, No. 35, p. 32;
by them, but the Ministry of Finance. reprinted in Terekhov (2001, pp. 196197).
ARTICLE IN PRESS
1467 audit machinery, oriented towards the future (Pyatenko, as possible, because thats how they make money. They 1521
1468 1998, p. 37). Pyatenko, deputy director and partner of FBK, have to let the students pass to secure their existence. 1522
1469 distinguishing between audit specialists and audit entre-
A senior expert involved in the management of audits at 1523
1470 preneurs for example wrote:
the same rm even decided not to enrol for the national 1524
1471
examinations: 1525
1472 Experience and knowledge of the [audit] specialist does 1526
1473 not mean much without the work of the manager and
I decided not to get the certicate out of principle. I can 1527
1474 [audit] entrepreneur. [. . .] The entrepreneur is the
openly say to you that our audit certicate is a complete 1528
1475 motor of the machine, oriented towards the future. He
profanation. The point is, well, usually all people who 1529
1476 is a creator, a strategist, a founder and developer of
decide to take the exam will also pass, and I dont 1530
1477 new markets and the methods of their mastering. (Pya-
believe in exams where 100 per cent pass. [. . .] I just 1531
F
1478 tenko, 1998, pp. 3739)
dont have any respect for this exam; some people even 1532
1479 Images of audit entrepreneurialism came to be utilised to just buy the certicate.32 1533
OO
1480 underline the market orientation of the audit sector, stress
Due to the lacking credibility of the state audit certicates, 1534
1481 its progressiveness and, thereby, reinforce distinctions be-
and supported by reform programmes aimed at marketisa- 1535
1482 tween the past and the present between old worlds of
tion and privatisation, ambitious audit rms began to pro- 1536
1483 passive, rule-abiding bureaucratic inspection and book-
mote themselves as sites of professionalisation (Cooper 1537
1484 keeping and new worlds of Western-oriented accounting
& Robson, 2006). Seeking to establish themselves as 1538
1485 and auditing. In accordance with market ideals, the eco-
PR
pioneers and elite (Pyatenko, 1997, 1998; Terekhov, 1539
1486 nomic success of an audit rm came to be promoted as a
2001) of Russian audit development, they began to play a 1540
1487 sign of organisational efciency, competent management
major role in the shaping of new professional identities 1541
1488 and professionalism (Guttseit & Ostrovsky, 1998; Pyaten-
and creation of intra-occupational status hierarchies. They 1542
1489 ko, 1997; Pyatenko, 1998; Verkhov & Kozlova, 1998). Mar-
began to run their own training programmes (see e.g. Uni- 1543
1490 ket competition came to be advanced as crucial for the
con and FBK), adopted international auditing standards, 1544
1491 enhancement of service quality and client satisfaction. In
rationalised audit procedures, formalised their audit meth- 1545
1492
1493
1494
the absence of strong and long-established conventional
forms of professional accreditation and organisation, the
particular business history of an audit rm, its positioning
D
odologies and established differentiated command struc-
tures to establish clear divisions of audit labour (see e.g.
Danilevsky et al., 2002; Pyatenko, 2001; Sheremet & Suyts,
1546
1547
1548
TE
1495 in the market and client portfolio, came to play an impor-
2001 [1995]). In attempts to demonstrate a more civilised 1549
1496 tant role in the production of status differentials and gen-
stage of [audit] development (Pyatenko, 2001, p. 119) ide- 1550
1497 eration of public recognition and authority (Pyatenko,
als of professionalism came to be intertwined with dis- 1551
1498 1998; Verkhov & Kozlova, 1998).
plays of organisational efciency and economy (see also 1552
1499 Drawing on organisational patterns of the West, the
Guttseit & Ostrovsky, 1998; Sheremet & Suyts, 2001
EC
1553
1500 government had introduced licensing procedures for audit
[1995]). Pyatenko, for example, wrote: 1554
1501 rms and professional examinations for individual audi-
1555
1502 tors in 1994 (see e.g. Bychkova, 1996; Enthoven et al.,
1503 1998; Sucher & Bychkova, 2001).31 Yet, within these struc- For auditors and consultants a deciding factor for their 1556
1504 tures, work and jurisdiction of the Russian auditing profes- survival and development in the tough market environ- 1557
RR
1505 sion remained largely undened. The formal entry barriers ment consists in the professionalisation of the organisa- 1558
1506 to the profession remained low, and were not strongly con- tion of their business. [. . .] The fundament of a 1559
1507 trolled (Danilevsky et al., 2002; Terekhov, 2001). In the view professional culture in an audit-consulting rm is the 1560
1508 of many auditors, professional examinations represented a presence of well mastered management procedures at 1561
1509 necessary condition for the carrying out of audit work, but all levels [. . .], and the ability to quickly and accurately 1562
1510 they did not constitute a very effective mechanism for the utilise standard working algorithms within day-to-day 1563
CO
1511 production of closure and credentialising of expertise. This practices. (Pyatenko, 2001, pp. 79) 1564
1512 was conrmed by many interviewees occupying differing
The establishment of standard operating procedures, the 1565
1513 positions ranging from audit trainee, audit partner to rm
formalisation and industrialisation (Pyatenko, 2001) of 1566
1514 director. The Deputy Director of one of Russias biggest audit
audit activities, came to be regarded as a sign of normal- 1567
1515 rms remarked in this respect:
isation and civilised-ness (Guttseit, 2000; Guttseit & 1568
UN
1516 The qualication that is required to do audit work is rel- Ostrovsky, 1998; Pyatenko, 1998, 2001; Terekhov, 2001). 1569
1517 atively easy to get. The requirements are very low. You Once more, reference was made to the Big Six accounting 1570
1518 just need to study for two nights; you read a little bit rms (see e.g. Danilevsky, 1990, 1991; Pyatenko, 1997, 1571
1519 that is all very easy. [. . .] The centres that conduct the 1998). Their bureaucratic professionalism [burokratich- 1572
1520 exams are interested in letting as many students pass eskiy professionalizm] and rationalised ways of organising 1573
paper-work [bumago-tvorchestvo] came to be seen as 1574
important attributes of audit professionalism (Pyatenko, 1575
31
See Regulation No. 482 on the issuing of audit certicates and audit
32
licenses (Danilevsky, 1994). The regulation was adopted by the government On the lacking quality of auditor certications comment also Danilev-
on 6 May 1994. sky et al. (2002) and Terekhov (2001).
ARTICLE IN PRESS
1576 1998, pp. 1418). Ideals of marketisation were reworked work (see e.g. Bailey, 1995; Campbell, 1963; McGee & 1625
1577 and, taking the then Big Six accounting rms as an exam- Preobragenskaya, 2005; Shama & McMahan, 1990). 1626
1578 ple, auditing came to be linked up with Weberian-like ide- Most of the Russian audit rms that the author had vis- 1627
1579 als of formal-rational organisation33: ited in Moscow between 2001 and 2002 (8 out of 9) used 1628
1580 audit manuals, documentation indices, working paper 1629
blueprints and quality control procedures that had been 1630
1581 Western companies have great experience with meth-
imported from the big international accounting rms by 1631
1582 ods of industrialisation and the very process of provid-
employees who, at some point, had been working for these 1632
1583 ing professional services. They have methods [. . .] and
rms. These materials were used to increase procedural 1633
1584 standard operating procedures. [. . .] The Big Six teach
orderliness, ensure accurate documentation and enhance 1634
1585 their people how to work on a conveyer belt. [. . .] [Their
organisational efciency. Yet, these new technologies did 1635
1586 methods of] standardisation and industrialisation make
not entirely replace old inspection practices. Audits con- 1636
F
1587 it easier to train personnel and deal with turnover. This
ducted on Russian nancial statements, largely continued 1637
1588 is their corporate culture. (Pyatenko, 1998, p. 15)
to consist mainly of detailed, highly standardised transac- 1638
OO
1589 Organisational rigour and discipline came to be promoted tion tests, aimed at checking documentary accuracy and 1639
1590 as characteristics supporting the establishment of nor- compliance with national tax and accounting regulations. 1640
1591 mally functioning market relations and the formation of Less emphasis was placed on checks of the control systems 1641
1592 a civilised competitive market (Pyatenko, 1998, 2001). of an organisation, asset valuation and overall economic 1642
1593 Oddly enough, old ideals of efcient administration, accu- representation. As the Deputy Director of one large Russian 1643
1594 racy, and accounting hygiene, in this context, came to be audit rm remarks: 1644
PR
1595 provided with new relevance. To some extent, in the name
In a Russian audit, you would nd less condence in the 1645
1596 of the market, bureaucratic traditions were reinvented (see
internal control systems. And therefore youd have a 1646
1597 e.g. Avdyunin, 1996). Looking at how the big international
much higher amount of substantive testing than in 1647
1598 accounting rms organised their work, well designed and
other countries. 1648
1599 articulated internal organisational structures, standardised
1600 audit manuals, well managed archives with working pa- A senior auditor who worked for another large Russian 1649
1601
1602
1603
pers and audit les, and formalised audit quality control
procedures, came to be seen as characteristics distinguish-
ing proper audit rms from foul players, often labelled as
D
audit rm commented:
The problem is not that auditors dont understand the

1650
1651
1652
TE
1604 black auditors [chornye auditory]. The term black audi-
operations [of the audited entity]. The problem is that 1653
1605 tors was widely used amongst regulators and profession-
auditors have quite a formal approach to their work. 1654
1606 als for describing auditors who were formally qualied but
Back in the Soviet times, there existed the principle: if 1655
1607 pursued audit activities in an unethical manner, for exam-
there is a document, there is also a transaction, and 1656
1608 ple, by providing clean audit reports without backing these
vice versa if there is no document, no entry into the
EC
1657
1609 up with detailed checks and documentations (Danilevsky
books has to be made. Often, this principle is still alive 1658
1610 et al., 2002; Guttseit, 2000).
today. 1659
1611 Against the background of widespread distrust in audit-
1612 ing (and accounting), and in view of the absence of credible A Russian partner of one of the large international audit 1660
1613 professional certicates, bureaucratic professionalism rms conrmed this view: 1661
RR
1614 was advanced as important element in the achievement 1662

1615 of audit quality, civilized competition, market recogni-
Whereas the task of the audit process is to throw light 1663
1616 tion and economic success (Guttseit & Ostrovsky, 1998;
on the reliability [dostovernost] of the nancial state- 1664
1617 Pyatenko, 1998). The xation of Western audit rms on
ments as a whole, the objective of an inspection [revi- 1665
1618 procedural correctness, proper documentation, and formal
ziya] is to check on concrete kinds of business activity, 1666
1619 auditability, as Power (1996), Power (1997) would put it
CO
on concrete operations. [. . .] Somehow. . . well, because 1667

1620 (but see also Barrett, Cooper, & Jamal, 2005; Radcliffe,
the Russian public is more used to inspections [revi- 1668
1621 1999; Van Maanen & Pentland, 1994), to some extent,
ziya], Russian audit companies often hang on to the ide- 1669
1622 could be invoked to re-legitimise old Soviet bookkeeping
ology of inspection [reviziya]. [. . .] A certain part of the 1670
1623 and inspection practices concentrating on issues of formal
Russian community of auditors is interested in inating 1671
1624 accuracy, lawfulness [zakonnost] and legal compliance
these differences under the label of Russian specicity. 1672
UN
Many Russian [audit] rms use this in their competition 1673

with the Big Four. They say: What can they [the Big 1674
33
To paraphrase Meyer and Rowan (1977, p. 340) the audit rms Four] give you? They control only in general, but we 1675
incorporated practices and procedures dened by prevailing rationalized control every transaction. 1676
concepts of organizational work. They adopted these bureaucratic struc-
tures and rules not so much because of their immediate efcacy, but to To become redened as market-oriented, actual account- 1677
enhance their legitimacy, resources and stability. Being both widely ing and audit practices did not necessarily need to be rad- 1678
accepted amongst Western accounting rms and rooted in past ideals of ically changed. What changed, rst of all, were the ways in 1679
Soviet bureaucratic organisation and planning, these rules, structures and
procedures already enjoyed widespread legitimacy and, thereby, could
which such practices were restaged, represented, mar- 1680
function as powerful symbols signalling orderliness, rationality and keted and commoditised. In attempts to make post-Soviet 1681
normality. auditing marketable, audit and accounting technologies 1682
ARTICLE IN PRESS
1683 were not automatically radically reworked, but they came fee income, service lines, and staff numbers. Other indicators 1735
1684 to be intertwined with Western marketing technologies, published were earnings per employee (audit specialist), 1736
1685 Western ideas of strategic organisational management economic growth of each rm and the audit market as a 1737
1686 and the hierarchical structuring of large international pro- whole, and comparative international audit rm rankings. 1738
1687 fessional services rms. In this process, ideas of auditing FBK published its rst ranking in 1996 in its in-house journal 1739
1688 themselves came to be redened. Attention came to be Finansovye i bukhgalterskie konsultatsii [Financial and book- 1740
1689 shifted away from auditing as mechanism of certication keeping advice] (No. 3, pp. 58-63).35 The ranking consisted 1741
1690 enabling market exchange and accountability, to auditing of 20 Russian audit rms, which voluntarily participated. 1742
1691 as platform for entrepreneurial development, self-realisa- In 1997, the group of audit rms wanting to be ranked ac- 1743
1692 tion and economic wealth creation. Auditing itself was crued to 41. By 1998, the ranking included already 100 rms 1744
1693 reinvented as a marketplace, with audit rms as central (amongst them PricewaterhouseCoopers, see Table 2 below) 1745
1694 audit market designers. Despite the general public mistrust and had come to be an established feature in the Russian 1746
F
1695 in accounting and audit reports, auditing could ourish, business press (e.g. journals, such as Ekspert and Prol or 1747
1696 because of the marketing skills of a selective group of newspapers, such as Finansovaya gazeta and Kommersant 1748
OO
1697 new audit entrepreneurs, the added consulting services daily) (for an example of a more recent ranking see Table 3 1749
1698 they were promising to deliver, and the economic success- below).36 1750
1699 fulness they emanated. Careful client management, audit Despite criticisms and articulations of mistrust (see e.g. 1751
1700 rm branding and instruments of efcient organisational Chaya, 2007; Danilevsky, 1992; Finansovaya Gazeta, No. 1752
1701 management directed attention away from the actual con- 23, 04.06.1996; Izvestiya, No. 103, 05.06.1996), over the 1753
1702 tent of audits. Questions about auditing came to be re- years the rankings gained more and more attention and 1754
PR
1703 placed with concerns about procedural rigour, corporate inuence.37 The audit rm rankings began to gain popular- 1755
1704 powerfulness and skilful impression management. ity at a time when ratings and rankings generally had ac- 1756
1705 In the following last part of the analysis, the paper turns quired vogue in Russias business world, not just in 1757
1706 to one particular instrument that came to be of increasing auditing and consulting, but also in other sectors of activity. 1758
1707 importance for audit rms in attempts to create markets Rankings and ratings, at rst, had been conducted on emerg- 1759
1708 for their services, enhance their standing and general cred- ing Russian banks and newly issued securities.38 Later the 1760
1709
1710
1711
ibility. Attention is drawn to the production and circulation
of audit rm rankings. As will be shown, through the intro-
duction and circulation of audit rm rankings, in particular
D
insurance and audit-consulting industries followed, and
soon after that universities and other organisational elds.39
In the insurance sector, rankings and ratings had been put
1761
1762
1763
TE
1712 large Russian audit rms sought to reinforce their impor- forward as second testimony [vtoroe svidetelstvo], as sec- 1764
1713 tance and central standing. Market ideals were translated ond assurance mechanism, particularly needed in the ab- 1765
1714 into displays of inter-organisational competition, audit sence of trustworthy audits and government structures 1766
1715 rm hierarchies, and organisational status differentiations. (Finansovaya gazeta, No. 18, 1994). They were advanced as 1767
1716 Connections came to be drawn between audit expertise insurers of market principles, as promoters of conditions 1768
EC
1717 and audit rm size; ideas on professional authority came of open competition (ibid.). Also in the auditing eld, audit 1769
1718 to be intertwined with measures of corporate success. rm rankings came to be regarded as a means of competi- 1770
tion [sposob konkurentnoy borby] (Ekonomika i Zhizn, No. 1771
1719 Competition, rankings and status congurations 29, 17.07.1997]. They were promoted as lists of the largest 1772
RR
1720 One of the rst Russian audit rm rankings was pub-

1721 lished in February 1992 by the business journal Kommer-
1722 sant (Danilevsky, 1992). The ranking was produced by
1723 the Russian tax authorities and consisted of a list of audit
35
1724 rms whom they trust (Danilevsky, 1992, p. 6). A couple See also article The largest rms on the Russian and world market for
audit-consulting services (Finansovaya razeta, No. 33, 12.08.1996).
1725 of years later, audit-consulting rm rankings began to be
CO
36
See e.g. issues No. 35 (16.09.1996), No. 12 (31.03.1997), No. 14
1726 produced by the editorial team of the Kommersant-Daily (14.04.1997) of the journal Ekspert, issue No. 56 (04.04.1996) of the
1727 (No. 139, 27.07.1995; No. 56, 04.04.1996) and the audit newspaper Kommersant-Daily , issues No. 33 (12.08.1996) and No. 16
1728 rm FBK. FBKs rankings were (and still are) conducted (18.04.1997) of the newspaper Finansovaya gazeta , or issue No. 32
(08.09.1997) of the journal Prol.
1729 on a voluntary basis. They came to be of wide popularity 37
In an article of the Finansovaya gazeta (No. 23, 04.06.1996), the vice-
1730 and, from early on, were regularly published in leading president of the Russian Audit Chamber (Auditorskaya Palata Rossii)
UN
1731 Russian business journals (e.g. the journal Ekspert). Draw- Sheremet, for example, criticised the methodology of the rankings and
1732 ing on Western audit rm rankings, in particular those stated that such ratings misleadingly implied the foundation of a civilised
1733 published by the International Accounting Bulletin (IAB)34, market for audit services. Yet, such criticisms did not stop their later rise
and spread.
1734 FBK ranked Russian audit rms by total earnings [vyruchka], 38
See e.g. the securities rating published in the business journal
Kommersant, No. 104, 27.01.1991, the article Rating of the leaders in
exchange market structures, Kommersant, No. 38, 23.9.1991, or the article
34
The International Accounting Bulletin (IAB) is an international newsletter How to use the rating of banks, Izvestiya-Ekspertiza, No. 52, 22.03.1995.
39
reporting on the activities, performance and strategies of the worlds On the importance of insurance rm ratings see the article by Kolomin,
accounting rms. The IAB is subscribed by many large international Finansovaya gazeta, No. 18, 1994. Regarding university rankings, see Kariera
accounting rms and banks, such as PwC, Ernst and Young, Deloitte, KPMG, (No. 2, 01.05.1998). The reputation of the 100 largest Russian corporations
Barclays, and Credit Suisse. See www.researchandmarkets.com/report- (nancial and industrial sector) and Russian regions are rated in the journal
info.asp?report_id=220224&t=d&cat_id (accessed September 2008). Ekspert (see e.g. issues No. 12, 31.03.1997 and No. 17, 12.05.1997).
Table 2

AOS 682
Extract of Russian audit rm ranking published in journal Ekspert in 1998 showing 10 largest audit rms out of 100 rms included in the ranking.
Rank Name of Central Aggregate revenues Average number Revenue per Aggregate revenues Increase Average number Revenue per Increase in
auditing-and- ofces for 1997 (million of specialists in specialist in 1997 for 1996 (million in of specialists in specialist in 1996 revenue per
consulting group location roubles)a 1997 (million roubles) roubles) revenue 1996 (million roubles) specialist (%)
(%)
1 Price waterhouse Moscow 438,000 815 537.4 228,000 92.1 570 400.0 34.4
2 Unicon Moscow 94,098 414 227.3 78,057 20.6 346 225.6 0.7
UN
3 Rosexpertiza Moscow 44,763 241 185.7 35,026 27.8 173 202.5 8.3
4 Top-audit Moscow 34,645 80 433.1 32,603 6.3 73 446.6 3.0
5 FBK Moscow 32,561 139 234.2 25,711 26.6 126 204.1 14.8
6 MKPZN Moscow 32,500 231 140.7 26,200 24.0 239 109.6 28.3
7 Business-audit Moscow 26,097 130 200.7 24,574 6.2 132 186.2 7.8
8 BDO rufaudit Moscow
CO 25,339 76 333.4 21,870 15.9 81 270.0 23.5
A. Mennicken / Accounting, Organizations and Society xxx (2009) xxxxxx

9 Gorislavtsev & Co Moscow 23,011 76 302.8 10,855 112.0 61 177.9 70.1
10 Rusaudit Moscow 17,547 78 225.0 11,845 48.1 77 153.8 46.2
marillion
RR
Source: Journal Ekspert No. 12, 30.03.1998, English translation provided by author.
Revenues are construed as total revenues from auditing and consulting operations for the entire afliated group; in subsequent years revenues from auditing and consulting are disclosed separately (e.g.
ARTICLE IN PRESS
Ekspert No. 14, 14.04.2003 and Table 2 below).
EC
TE
D
Table 3
Extract of Russian audit rm ranking published in journal Ekspert in 2009 showing 10 largest audit rms out of 100 rms included in the ranking.
Rank Rank Name of auditing- Central Aggregate revenues for Proportionate Increase in Number of Increase in number of Revenue per specialist Number of branch
2008
1
2007
1
and-consulting
Group
Price waterhouse
coopers
ofces
location
Moscow
2008 (thousand
roubles)a
8,480,797
revenue from
auditing (%)
50.0
revenue 2007
2008 (%)
27.9 PR
specialists/
certied auditors
1966/1172
specialists 20072008
(%)
17.7
in 2008 (thousand
roubles)
4314
ofces and
subsidiaries
N.A.
2
3
4
2
3
6
BDO unicon
Intercom-audit
Razvitie biznes-
Moscow
Moscow
Moscow
4,112,926
2,849,900
2,604,010
41.8
44.0
28.2
34.6
22.2
33.8
1807/431
1683/773
774/98
17.7
20.3
64.0
OO 2276
1693
3364
24
330
11
No. of Pages 26, Model 3G

sistem (RBS)
5 5 FinExpertiza Moscow 2,585,969 41.1 32.5 690/295 3748 28
F
1.7
6 4 FBK (PKF) Moscow 2,322,778 43.9 13.2 858/167 15.8 2707 12
7 9 Energy consulting Moscow 2,127,511 20.1 53.7 537/64 30.7 3962 11
8 8 Rosexpertiza Moscow 2,112,552 61.5 15.0 641/197 0.5 3296 22
9 7 RSM top-audit Moscow 2,027,368 35.2 4.6 1324/482 43.4 1531 103
10 11 SV-audit Moscow 1,870,757 61.8 47.2 400/220 24.2 4677 8
Source: Journal Ekspert No. 11, 23.03.2009, English translation provided by author.
a
Revenues are construed as total revenues from auditing and consulting operations for the entire afliated group.
19
ARTICLE IN PRESS
1773 [krupnyshikh] and the leading [vedushiy], as a who is Table 4

1774 who [kto est kto] to aid auditor choice.40 Total revenues of registered and licensed audit rms in Russia, 20042007,
as estimated by the Russian Ministry of Finance.
1775 Press articles with audit rm rankings carried titles,
1776 such as The rst ten audit rms in 1995 [Pervaya desyatka 2004 2005 2006 2007
1777 auditorskikh rm po rezultatam 1995 goda] (Kommersant- Total revenues (million 20,545.7 28,857.0 34,392.5 41,731.3
1778 Daily, No. 56, 04.04.1996); Auditors exist, auditing not, the roubles)
1779 market is developing [Auditory est, audita net, rynok raz- Source: Predvaritelnye pokazateli rynka auditorskikh uslug v Rossiyskoy
1780 vivaetsya] (Kommersant-Daily, No. 56, 04.04.1996); In Rus- Federatsii za 2007g. [Preliminary indicators of the market of audit ser-
1781 sia a civilised market for auditing and consulting services is vices in the Russian Federation, 2007], issued by the Russian Ministry of
1782 emerging [V Rossii poyavlyaetsya tsivilizovannyi rynok Finance in 2008. Cf. http://www1.minn.ru/common/img/uploaded/
library/2008/07/pokaz_030708.pdf (accessed in March 2009).
1783 auditorskikh i konsultativnykh uslug] (Finansovye Izves-
1784 tiya, No. 64, 20.06.1996); Who is who on the audit market
F
1785 [Kto est kto na pynke auditorov] (Finansovye Izvestiya, No. Table 5
1786 72, 23.07.1996); The largest rms on the Russian and world Total revenues of 50 largest audit rms retrieved from the audit rm
OO
1787 market for audit-consulting services [Krupneyshie rmy na rankings conducted by the rating agency Expert-RA, 20042007.
1788 rossiyskom i mirovom rynke auditorsko-konsultats- 2004 2005 2006 2007
1789 ionnykh uslug] (Finansovaya gazeta, No. 33, 12.08.1996);
Total revenues 17,946.9 21,808.0 29,335.8 39,417.6
1790 Market, competition, ranking [Rynok, konkurentsiya, rey- (million roubles)
1791 ting] (Ekonomika i Zhizn, No. 29, 17.07.1997); Auditing
1792 the auditors [Audit auditorov] (Dengi, No. 42, 13.11.1997). Source: Audit rm rankings published in the journal Ekspert, issues No. 12,
PR
28.03.2005; No. 12, 27.03.2006; No. 12, 26.03.2007; No. 12, 24.03.2008.
1793 Large audit rms, like FBK, Unicon or Rosexpertiza
1794 sought to utilise the rankings to demonstrate the civilised
1795 nature of the audit market, show their competitive ability, sion in the ranking came to be listed. In this respect, the 1830
1796 and introduce (at least rhetorically) quality differentials rankings were of a very specic form, in which differentia- 1831
1797 between large and small rms (see e.g. Finansovaya gazeta, tion within the rankings mattered less than the difference 1832
1798 No. 64, 20.06.1996; Ekspert, No. 35, 16.09.1996). The rank- between who came to be included and who was not. Firms 1833
who managed to be included gained more visibility, and 1834
1799
1800
1801
ings should inform potential clients and the larger public
about the leading gures in the Russian audit and con-
sulting market (Kommersant-Daily, No. 56, 04.04.1996).
D
audit rm leadership came to be equated with a rms
inclusion in the rankings. The rankings were controver-
1835
1836
TE
1802 They should demonstrate their inuence and melt down sially discussed, and did not only receive afrmative atten- 1837
1803 myths about the indispensability of Western [audit] tion. Yet, in particular for the larger rms, the rankings 1838
1804 rms (Finansovaya gazeta, No. 64, 20.06.1996). In 1996, came to constitute an important vehicle of representation 1839
1805 more than 3000 audit rms operated in Russia (Kommer- and market differentiation. They corroborated their lead- 1840
1806 sant-Daily, No. 56, 04.04.1996). By 2007, this number had ing role and signicance by shifting attention away from 1841
EC
1807 increased to more than 7000 (see Table 1 above). Between questions of audit quality to measures of corporate suc- 1842
1808 2004 and 2007, the total revenues of registered audit rms cessfulness. Audit rm size came to be put forward as a 1843
1809 had also doubled from 20.5 to 41.7 billion Roubles (see Ta- surrogate for audit quality, driving professional distinction 1844
1810 ble 4 below). During these years, the 50 largest audit rms and status differentiation.41 1845
1811 listed in the audit rm rankings, conducted by the rating As Espeland and Saunder (2007), Sauder and Espeland 1846
RR
1812 agency Expert-RA, picked up about 80% of these revenues (2009)) have pointed out for rankings more generally, 1847
1813 (see Table 5 below). rankings shape what we pay attention to. They create 1848
1814 The rankings came to be regarded as an important and obscure relations amon g entities, and they change 1849
1815 instrument that could help make a small subset of qual- the form and locus of attention. Also in the context of this 1850
1816 ity Russian audit rms more widely known, exhibit their study, audit rm rankings contributed to a simplication 1851
1817 prosperity and professionalism, and oust non-profession- and de-contextualisation (Espeland & Saunder, 2007) of 1852
CO
1818 als from the market [vytesnenie neprofessionalov c rynka] knowledge. The audit rm rankings could be circulated 1853
1819 (ibid.). The rankings should prove that the rms were able widely in popular Russian business journals, such as Eks- 1854
1820 to seriously compete with the international audit rms pert or Prol. No specialist knowledge appeared to be 1855
1821 the then Big Six in particular (Kommersant-Daily, No. 216, needed for their interpretation. In the rankings, audit suc- 1856
1822 17.12.1996). Attempts were made to establish a Russian cessfulness came to be redened in terms of market suc- 1857
cessfulness, and questions seeking to address issues of 1858
UN
1823 alternative, a Russian Big Nine (or Big Ten), to the Wes-
1824 tern Big Six (Finansovaya Izvestiya, No. 72, 23.07.1996), audit quality came to be displaced. Audit rm size was 1859
1825 and contribute to the formation of an audit elite (Ekspert, put forward as a surrogate for audit quality, driving profes- 1860
1826 No. 35, 20.09.1999). sional distinction and status differentiation. As national 1861
1827 The rankings were not representative of the whole audit licensing and audit certication mechanisms did not have 1862
1828 market. Participation in them was (and still is) voluntary. much credentialising and differentiating power, rankings 1863
1829 Only the largest 100150 rms of those applying for inclu- focusing on audit rm size came to be regarded as one pos- 1864
40 41
See e.g. audit rm rankings published in Dengi (No. 42, 13.11.1997), It is interesting to note that audit rm size is also commonly used as a
Ekspert (No. 35, 16.09.1996, No. 12, 30.03.1998), Finansovye Izvestiya (No. proxy for quality in audit research (see e.g.DeAngelo, 1981; Palmrose,
72, 23.07.1996). 1988).
ARTICLE IN PRESS
1865 sible alternative mechanism of distinction and status dif- 1998; Hinings et al., 1999; Ramirez, 2009; Robson et al., 1925
1866 ferentiation. Albeit not uncritically, Guttseit and Ostrovsky, 1994; Suddaby et al., 2007). In the case studied, audit rm 1926
1867 who at government level were involved in matters of audit rankings and other marketing devices reinforced the cen- 1927
1868 and accounting reform and research, for example wrote: tral standing of audit rms. Through the rankings and 1928
other branding activities, audit rms (and not professional 1929
1869 Audit rm rankings will, as a rule, pick out and rank
associations) were promoted as the main entities involved 1930
1870 only the best ones [. . .]. The striving of audit rms for
in the organisation and transformation of audit expertise. 1931
1871 a high place in solid rankings can strongly support the
Attention was thus directed away from the individual pro- 1932
1872 enhancement of the quality of audit services. (Guttseit
fessional to the audit organisation. Projects aimed at 1933
1873 & Ostrovsky, 1998, p. 87)
increasing professional status and external recognition 1934
1874 Whether or not the rankings actually corresponded with came to be carried forward at the level of audit rms and 1935
1875 different levels of audit quality did not matter much. In their positioning in the emerging audit market. 1936
F
1876 any case, large rms were provided with an important plat- In so doing, the relationship between auditing, audit 1937
1877 form for their marketing and brand creation. The rankings professionalism and markets came to be reworked. The 1938
OO
1878 could be used as rhetorical vehicle to gain public visibility, new audit entrepreneurs did not want to escape from 1939
1879 and advance rm size and corporate powerfulness as indica- market evaluations (Burrage, 2006), but sought to actively 1940
1880 tors of audit quality and professional leadership. With the embrace and shape them (e.g. through the audit rm rank- 1941
1881 help of the rankings, at least rhetorically, boundaries could ings). In contrast to the 18th century lawyers in England 1942
1882 be erected between different groups of audit market partic- and France that Burrage (2006) studied, the Russian audi- 1943
1883 ipants. Boundaries could be erected between those who tors did not seek to construct private enclaves in which 1944
PR
1884 were included and those who were excluded from the rank- market rules could be modied or suspended and de- 1945
1885 ing, between small and large audit rms. Following the clined (Burrage, 2006, p. 20). The market was not per- 1946
1886 rankings, also textbooks and other media began to divide ceived as a threat to professionalism, but as a platform 1947
1887 and classify audit market participants by size. Four groups allowing for professional development and the enhance- 1948
1888 of audit rms came to be identied: the then Big Six (now ment of public recognition. Looking at the West and large 1949
1889 Big Four); second-tier international audit networks; large multinational accounting rms, the market was appealed 1950
1890
1891
1892
and medium-sized Russian audit rms; and small rms
and partnerships (Danilevsky et al., 2002; Pyatenko, 1997,
1998; Terekhov, 2001). Taking the big accounting rms as
D
to as a mechanism for the promotion of audit develop-
ment. The market came to be seen as a space in which
audit quality differentials and mechanisms of professional
1951
1952
1953
TE
1893 a benchmark, generally larger rms came to be portrayed distinction could be worked out and demonstrated. On the 1954
1894 as the rms of higher quality, with better trained personnel, other hand, one could argue that a market as such a mar- 1955
1895 more resources, more efcient structures and rigour. Later ket as envisaged in textbooks never came to be realised. 1956
1896 in 2001, when the new Federal Audit Law was adopted, very Neither audit rms, nor their marketing instruments (e.g. 1957
1897 small partnerships were no longer allowed. Licenses were audit rm rankings) came to function as neutral, objective 1958
EC
1898 only given to audit organisations consisting of ve or more information intermediaries. Auditing was turned into a 1959
1899 certied audit professionals (Danilevsky et al., 2002). All market-oriented activity, but status and reputation of the 1960
1900 this contributed to a further corporatisation of the emerging audit rms did not come to be determined by an abstract 1961
1901 Russian audit profession. Professional prestige accrued not market mechanism. They were actively created, crafted 1962
1902 to individual accountants/auditors or professional associa- and shaped, by the audit rms themselves and their repre- 1963
RR
1903 tions, but to particular prestigious rms portraying them- sentational instruments. 1964
1904 selves as enforcing high standards.
1905 Audit rm branding and marketing became decisive for
1906 the erection of intra-occupational boundaries, status group Discussion and conclusion 1965
1907 formations and internal differentiation. In contrast, tradi-
1908 tional mechanisms of professional organisation and clo- This paper has examined the roles that images and 1966
CO
1909 sure, such as state licensing, state-accredited professional ideas of market creation played in the re-articulation of 1967
1910 examinations and professional associations, did not have relations between government, audit expertise and profes- 1968
1911 much differentiating and organising power. Such struc- sional organisation in post-Soviet Russia. A linked ecolo- 1969
1912 tures were developed, but they did not contribute much gies approach, together with concepts drawn from the 1970
1913 to the enhancement of professional status, prestige and governmentality literature and social studies of science 1971
UN
1914 credibility. Instead, notions of professionalism came to be and technology, has been used to trace how audit and mar- 1972
1915 intertwined with activities of organisational marketing, ket ideals mutually shape and condition one another. It is 1973
1916 demonstrations of corporate inuence and the establish- suggested that the notion of linked ecologies helps in 1974
1917 ment of administrative efciency. This nding is consistent developing a more nuanced and dynamic account of the 1975
1918 with Cooper and Robsons (2006) reminder that profes- multiple relations that came to be formed between audit, 1976
1919 sional rms, particularly large international rms, are and ideas and instruments of post-Soviet market creation. 1977
1920 increasingly important in accounting professionalisation This allows us to examine not only the roles of governmen- 1978
1921 and regulatory processes (see also Anderson-Gough, Grey, tal reform programmes in transforming the ethos of gov- 1979
1922 & Robson, 1998; Caramanis, 1999, 2002; Cooper et al., ernment (Rose, 1999) from one of bureaucracy to one of 1980
1923 1998; Dezalay & Sugarman, 1995; Empson, 2004; Green- business. It also allows us to investigate how such pro- 1981
1924 wood & Suddaby, 2006; Greenwood et al., 2006; Hanlon, grammes came to be reworked through new entrepreneur- 1982
ARTICLE IN PRESS
1983 ial selves and their newly founded audit rms, which had the audit knowledge base, and issues concerning profes- 2044
1984 emerged as a result of the reform programmes. sional qualication. Put differently, audit rm rankings 2045
1985 In post-Soviet Russia, many factors contributed to the and other marketing instruments contributed to deect- 2046
1986 rise and spread of audit expertise that went beyond the ing attention (Espeland & Saunder, 2007) away from audit 2047
1987 immediate control demands from shareholders, investors content and related questions of accountability, gover- 2048
1988 and other nancial market participants. Auditing emerged nance and audit quality control. In the process, market ide- 2049
1989 at a time when shareholders and nancial markets did not als were redened too. Ideals close to classic and neoclassic 2050
1990 yet exist, and it was appealed to as a mechanism to bring notions, which viewed the market as an abstract mecha- 2051
1991 such markets into being. On the other hand, auditing itself nism for the coordination of economic exchange, were re- 2052
1992 came to be redened as a site of market creation. Audit worked. Markets came to be envisaged as consisting of 2053
1993 expertise itself was marketised, and ideas and images of competing powerful corporate entities, and as a space in 2054
1994 audit and market creation came to co-constitute and rede- need of being actively ordered and organised. 2055
F
1995 ne each other. Looking at audit and markets as linked What do these developments imply with respect to the 2056
1996 ecologies, this paper paid attention on the one hand to broader roles of audit in the construction of markets? The 2057
OO
1997 the different relationships and the dynamics evolving be- paper showed how new Russian audit entrepreneurs, to- 2058
1998 tween abstract globalised ideas and models of audit and gether with their audit rms, actively created the markets 2059
1999 market development, and, on the other hand, the more they sought to rule. They perceived the role of an auditor 2060
2000 specic and localised programmes and technologies of as that of a creator, a strategist, a founder and developer 2061
2001 audit and audit market creation. In the case studied, new of new markets and the methods of their mastering (Pya- 2062
2002 Russian audit entrepreneurs and their rms came to be ac- tenko, 1998, p. 39). In the case studied, auditing did not full 2063
PR
2003 tively engaged in making audit marketable. They actively the function of spurring capital market development. Be- 2064
2004 sought to create an audience for auditing and, in this pro- tween 1991 and 1999, Russian capital markets remained 2065
2005 cess, the meaning of markets and the roles of auditing in relatively underdeveloped (OECD, 2005; World Bank Ofce 2066
2006 them came to be redened. Moscow, 2004), and audits for local IPOs and internationally 2067
2007 Auditing came to be shifted away from Western text- listed Russian companies were mainly conducted by the big 2068
2008 book ideals, which had depicted it largely as a mechanism international accounting rms. Yet, Russian audit rms con- 2069
2009
2010
2011
to reduce information asymmetry and enhance market
accountability. Instead, auditing came to be viewed as a
platform for corporate development and entrepreneurial
D
tributed to the construction of markets in other ways.
From early on, Russian audit rms sought to offer both
control and consulting services. In adopting and spreading
2070
2071
2072
TE
2012 self-realisation. Auditors sought to reinvent themselves Western technologies of marketing, strategic management, 2073
2013 as business consultants, and construed themselves as enterprise resource planning and IT management, they 2074
2014 business doctors who heal. Audit success was redened provided new Russian enterprises with valuable business 2075
2015 in terms of corporate success, and projects aimed at advice. They helped them set up market-oriented business 2076
2016 increasing professional status and external recognition infrastructures. They introduced notions of client manage- 2077
EC
2017 were carried forward at the level of audit rms and their ment, highlighted the relevance of PR, and provided con- 2078
2018 positioning in the emerging audit market. Notions of good sulting services in the areas of procurement and supply 2079
2019 or bad, professional or unprofessional auditing came to be chain management (see e.g. Pyatenko, 1998, 2001). Fur- 2080
2020 linked to audit rm size and corporate inuence. In the ther, they helped their clients to get the accounting books 2081
2021 market-oriented corporatisation of audit activities, the in order, deal with tax inspectorates and adapt to the rap- 2082
RR
2022 then Big Six accounting rms played a major role as role idly changing legal environment. The audit rms contrib- 2083
2023 models. Their international standing and local presence uted to the reduction of legal risk, and protected clients 2084
2024 reinforced beliefs that the foundation of commercial, mar- from the taxation authorities. Finally, the audit rms 2085
2025 ket-oriented audit rms constituted the right response to themselves came to be seen as successful market actors 2086
2026 inspection reform demands. The big rms came to be seen and functioned as role models for other rms, for example, 2087
2027 as entities that had successfully embraced market ideals, with respect to their expertise in reputation management, 2088
CO
2028 and that exhibited high standards of professionalism. They client management and personnel training (Danilevsky, 2089
2029 had a trade mark that particularly larger Russian audit 1995a, 1995b; Pyatenko, 1998, 2001). 2090
2030 rms aspired to (Pyatenko, 2001, p. 36). The big rms were It would be useful to carry out further investigations 2091
2031 further important in the spreading and local transfer of into how auditing interacts with different forms of mar- 2092
2032 Western marketing and branding instruments. ket-oriented business management. More generally, it 2093
UN
2033 Local Russian audit rms adopted these instruments, would be useful to gain deeper insight into the dynamics 2094
2034 along with audit rm rankings similar to those published of clientauditor relationships, and to analyse how these 2095
2035 in the International Accounting Bulletin, to enhance their contribute to shifts in strategies of market building and 2096
2036 reputation and local standing. Yet, as this paper has audit practice. This study showed how the market rele- 2097
2037 showed, the audit rm rankings, together with other mar- vance of auditing is something that needs to be actively 2098
2038 keting instruments, helped shift attention away from built. Yet, former Soviet calculative practices and inspec- 2099
2039 auditing itself, and toward mechanisms of its representation technologies were not entirely changed or replaced, 2100
2040 tion and marketability. Activities and instruments aimed and we need to be careful not to overstate the transforma- 2101
2041 at making auditing widely presentable and communica- tive power of auditing. What auditing and governing 2102
2042 ble came to the fore, eclipsing from public scrutiny ques- through markets means is something that needs to be 2103
2043 tions concerning the characteristics of audit methodology, worked out, over and over again. In this process, the mean- 2104
ARTICLE IN PRESS
2105 ing of auditing and markets is neither clear-cut, nor can it thank David Cooper, Liisa Kurunmki, Yuval Millo, Michael 2164
2106 be presumed. In utilising a linked ecologies approach, this Power, Keith Robson, Rita Samiolo, Mitchell Stein, Kristina 2165
2107 paper sought to make more room for the complexities and Tamm Hallstrm, Ute Tellmann, audiences from the 2166
2108 paradoxes that derive from attempts to spread and utilise Accounting and Finance Sections of Cardiff Business School, 2167
2109 somewhat ambiguous and ill-dened Western concepts Strathclyde, Innsbruck, the University of Alberta, the 2168
2110 of market-oriented auditing. Department of Sociology at Bielefeld University, the Stock- 2169
2111 In the case studied, the rise and spread of auditing was holm Centre for Organisational Research (Score) and the 2170
2112 not automatically accompanied by an intensication of pro- two anonymous reviewers for helpful comments on earlier 2171
2113 cesses of neoliberalisation, enhanced levels of market drafts of this paper. The nancial support provided by the 2172
2114 accountability and organisational or individual scrutiny. ESRC Centre for Analysis of Risk and Regulation (based at 2173
2115 Nor did it lead to the spread and uniform application of a the London School of Economics and Political Science), 2174
2116 set of new and distinct audit technologies. At least to some and the Economic and Social Research Council (ESRC Award 2175
F
2117 extent, auditing was built onto the very same bookkeeping No. R42200034280) is also gratefully acknowledged. 2176
2118 and inspection practices that it was asked to reform. Distinc-
OO
2119 tions between socialist inspection and market-oriented References 2177
2120 auditing therefore were not so much worked out on the
Abbott, A. (1999). Department and discipline. Chicago, London: Chicago 2178
2121 grounds of changes in accounting frameworks, economic
University Press. 2179
2122 calculation and checking styles. Similar to the former state Abbott, A. (2005b). Linked ecologies: States and universities as 2180
2123 inspections, auditing or at least the core activity of audit- environments for professions. Sociological Theory, 23(3), 245274. 2181
Abbott, A. 2005a. Ecologies and elds (unpublished manuscript). Chicago: 2182
2124 ing, the checking of nancial statements continued to be
PR
University of Chicago. <http://home.uchicago.edu/aabbott/Papers/ 2183
2125 regarded by many as a somewhat ritualistic compliance BOURD.pdf>. Accessed in May 2009. 2184
2126 exercise. Yet, because of the audit rms corporate success, Aganbegyan, A. (1988). The economic challenge of perestroika. 2185
2127 their marketing activities, their careful client management, Bloomington: Indiana University Press. 2186
Aganbegyan, A. (1989). Inside perestroika: The future of the soviet economy. 2187
2128 and their attempts to expand notions of auditing to include New York: Harper and Row. 2188
2129 consulting and other advisory services, the audit industry Akera, A. (2007). Constructing a representation for an ecology of 2189
2130 could sustain itself and further expand. Auditing became a knowledge: Methodological advances in the integration of 2190
knowledge and its various contexts. Social Studies of Science, 37(3), 2191
2131
2132
2133
label for a mix of different activities ranging from transaction
checking to strategic consulting. This does not mean that old
inspection practices no longer had a place. Rather, new ser-
D
413441.
Aldridge, A. (2005). The market. Cambridge: Polity Press.
Anderson-Gough, F., Grey, C., & Robson, K. (1998). Making up accountants:
2192
2193
2194
TE
The organizational and professional socialization of trainee chartered 2195
2134 vices (e.g. valuation services, IFRS reconciliations) and audit 2196
accountants. Aldershot, Hants: Ashgate Publishing.
2135 methodologies (e.g. Western audit risk models and sampling Annisette, M. (2000). Imperialism and the professions: The education and 2197
2136 techniques) were added on. In the long run, these new ser- certication of accountants in Trinidad and Tobago accounting. 2198
Organizations and Society, 25(7), 631659. 2199
2137 vices and technologies may change the way in which audits
Antipin, B. S., & Badalin, V. V. (1994). The auditor comes to the bookkeeper 2200
2138 are carried out. This change, however, is likely to be much to help. Bukhgalterskii uchet, 58(1), 2930. 2201
EC
2139 more incremental than the process of audit commercialisa- Antonov, A. A. (1989). Inaudit: Novy delovoy partner [Inaudit: A new 2202
business partner]. Bukhgalterskii uchet, 53(2), 5153. 2203
2140 tion and privatisation that this paper has studied.
Arbatov, G. (2001). Origins and consequences of Shock Therapy. In L. R. 2204
2141 To conclude, audit is not something that represents an Klein, & M. Pomer (Eds.), The New Russia: Transition gone awry (pp. 2205
2142 unproblematic, stable logic. Nor is it linked necessarily to 171178). Stanford: Stanford University Press. 2206
2143 readily dened rationalities of neoliberalism or audit pro- slund, A. (1991). Gorbachevs struggle for economic reform. Ithaca: Cornell 2207
RR
2144 fessionalism. Linkages between audit and markets, and be- slund, A. (1995). How Russia became a market economy. Washington, DC: 2209
2145 tween politics and expertise, are open to conict, Brookings. 2210
2146 contradiction and instability. Auditing, similar to the neo- slund, A., Boone, P., Johnson, S., Fischer, S., & Ickes, B. W. (1996). How to 2211
stabilize: Lessons from post-communist countries. Brookings Papers 2212
2147 liberal project of marketisation itself, can embrace a multi- 2213
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2148 plicity of different voices, views and practices (see also the Avdyunin, G. F. (1996). Effektivny kontrol Eto prezhde vsego vysokaya 2214
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AOS 682 No.

of Pages 26, Model 3G

Contents lists available at ScienceDirect

Accounting, Organizations and Society

From inspection to auditing: Audit and markets as linked ecologies

0361-3682/$ - see front matter 2009 Published by Elsevier Ltd.

405 with information relating to the operations of the enter-

Problematising Soviet command and control

cles in the journal Bukhgalterskii uchet carrying titles such 673

viewed as an indispensable element of its effectiveness. 781

In April 1991, Boris Yeltsin, in his function as Chairman 790

20); through which reliable [dostoverny] nancial infor- 879

838 between enterprises and investors. As a mechanism of

1996 1997 1999 2000 2001 2007 2008

1125 tions and requirements of economic entities and the

200,000 minimum monthly salaries (ca. 3 Million USD) (Enthoven et al.,

1209 structions of market credibility, and analyse the relevance 1267

Telling wrote: 1360

1321 terskii uchet, 1988, No. 11, p. 11)

the audit rm Unicon, the Union of Professional Audit Organisations (SPAO,

The problem is not that auditors dont understand the

1614 was advanced as important element in the achievement 1662

on concrete operations. [. . .] Somehow. . . well, because 1667

Many Russian [audit] rms use this in their competition 1673

1720 One of the rst Russian audit rm rankings was pub-

28 July 2009 Disk Used

CO 25,339 76 333.4 21,870 15.9 81 270.0 23.5

A. Mennicken / Accounting, Organizations and Society xxx (2009) xxxxxx

No. of Pages 26, Model 3G

1773 [krupnyshikh] and the leading [vedushiy], as a who is Table 4

being well organised]. Nalogovyi vestnik (8). 2216

of change in large accounting rms. In D. M. Brock, M. J. Powell, & C.

Sauder, M., & Espeland, W. N. (2009). The discipline of rankings: Tight

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