Accounting, Organizations and Society 32 (2007) 409–438

www.elsevier.com/locate/aos

Transforming audit technologies: Business risk audit

methodologies and the audit Weld
a,¤
Keith Robson , Christopher Humphrey b, Rihab Khalifa c, Julian Jones b

a
CardiV University, Aberconway Building, Colum Drive, CardiV CF103EU, United Kingdom
b
University of Manchester
c
Warwick University

Abstract

Business Risk Audit (BRA) methodologies have been promoted by a number of the large audit Wrms in response, they
claim, to the challenges of the information age and corporate clients’ needs for assurance. This paper subjects their claim
to critical scrutiny, drawing on the perspectives of neo-institutional theories of legitimacy, the sociology of professional
knowledge and the sociology of science and technology. To bring into play new Business Risk Audit methodologies a
number of the larger Wrms have sought, through their auditing practice, to renegotiate the bases of their professional
identity and status within audit Wrms and to widen their jurisdictional claims over other areas of expertise. These moves
have been accompanied by the legitimation and embedding of Business Risk Audit in revised constructions of the mar-
ket for audit, in abstract academic knowledges, reforms of professional education, and professional regulations. In pro-
viding a constructivist account of Business Risk Audit technologies, we argue for a theory of audit change that
recognises (i) the centrality of legitimation processes and (ii) the co-construction of audit technology and the audit Weld.
© 2006 Elsevier Ltd. All rights reserved.

This paper addresses the issue of audit change;
more speciWcally, technological change in audit
practices and the embedding of audit technologies
in professional and institutional structures. Our
speciWc focus is the collection of audit technologies
*
Corresponding author.
E-mail addresses: RobsonK@cardiV.ac.uk (K. Robson),
Chris.Humphrey@mbs.ac.uk (C. Humphrey), Rihab.Khalifa@
wbs.ac.uk (R. Khalifa), julian.jones@man.ac.uk (J. Jones).
and methods that have as a deWning characteristic
the incorporation of client-Wrm strategy and busi-
ness risk into the assessment and planning of audit
risk. While there may be diVerences between the
speciWc technologies, and their labels, used by audit
Wrms, there are suYcient commonalities to group
them as Business Risk Audit (BRA) methodologies
(see Bagshaw, 1999; Curtis, 2003; Curtis & Turley,
2005; Eilifsen, Knechel, & Wallage, 2001; Knechel,
2004; Lemon, Tatum, & Turley, 2000; Winograd,
Gerson, & Berlin, 2000).

0361-3682/$ - see front matter © 2006 Elsevier Ltd. All rights reserved.
doi:10.1016/j.aos.2006.09.002
410 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
To understand audit change the paper argues
that it is necessary to understand the ‘organiza-
tional Weld’ of relations in which audit Wrms oper-
ate (Scott, 2001, pp. 136–44). DiMaggio and Powell
(1991, p. 148) deWne the organizational Weld as
those competitors, regulators, suppliers, and con-
sumers that collectively “constitute a recognized
area of organizational life” and is institutionally
deWned.1 Hence, the ‘audit Weld’ of the title refers to
the audit Wrms, clients, investors, professional asso-
ciations, regulators (professional, state, supra-
national) and, a source of normative legitimacy,
educational institutions. In our account we note the
interactions between members of the audit Weld. In
this paper, the emergence of Business Risk Audit
(henceforth BRA) methodologies are examined as
institutional events (Burchell, Clubb, & Hopwood,
1985; Hopwood & Miller, 1994) through which to
analyse and comment upon the audit industry and
the profession. We argue for a theory that views
technologies of audit as co-constructed with their
economic, social and cultural environments
(Latour, 1993). In eVect we seek the development of
a theory of technological change in audit that sees
the technologies and ‘contexts’ as co-produced and
co-dependent. Our title: transforming audit technol-
ogies signals both the transformations of audit
technology and the wider transformative relations,
adaptations and eVects within the audit Weld.
In pursuing our theoretical agenda we draw on
the perspectives of neo-institutional theories of
organizations, the sociology of professional knowl-
edge and the sociology of science and technology.
Accordingly, we argue that in order to distribute
and embed BRA methodologies, audit Wrms have
had to seek legitimacy for them and enrol allies in
the institutional environment (Latour, 1987). In
related processes of co-construction, actors in the
audit Weld attempt both to establish new technolo-
gies and build the supportive environments in
which those technologies are mobile, through such
1
Scott (1995) deWnes an organizational Weld with the follow-
ing: “the notion of Weld connotes the existence of a community
of organizations that partakes of a common meaning system
and whose participants interact more frequently and fatefully
with one another than those actors outside of the Weld (Scott,
1995, pp. 207–209)”.
processes as regulation, standardization and edu-
cation. This in turn involves deWning, redeWning or
embedding a claim or claims to knowledge (upon
which the profession stakes its professional status
and jurisdiction) within a complex of professional,
regulatory and cultural, including academic, envi-
ronments (Abbott, 1988; Lounsbury, 2004; Strang
& Macy, 2001; Strang & Meyer, 1993; Suchman,
1995). The production and the legitimacy of new
technologies are co-terminous and overlapping
processes in practice, but for the purposes of ana-
lytical clarity we have tried to consider them sepa-
rately in the two main sections of the paper.
With such ends in mind, our paper illuminates
what is at stake in the development of a new audit
methodologies and the conditions of possibility for
their emergence. We consider the network of eco-
nomic and cultural relationships that established
BRA and how such technologies come to be
embedded (insofar as this has been achieved). Of
particular relevance is how new claims to audit
knowledge are articulated, to which constituencies
new knowledge claims are addressed, and how and
from whom legitimacy is sought. In the concluding
discussion we consider whether, after Enron, there
are challenges that constrain the ascendance of
Business Risk Audit. We argue that the BRA pro-
ject is not simply indicative but productively
revealing of the changing character of the profes-
sion, the status of auditing and, in particular, the
professional identities of auditors – in the ‘Big’
Wrms, of course, but also in terms of the contrast to
the professional self-image of accountants, and the
norms and beliefs of auditors working in small and
medium sized Wrms.
The Wrst main part of the paper presents a brief
review of recent audit methodological develop-
ments and identiWes the scope for developing theo-
retical conceptualisations of the ways in which
auditing technologies are transformed. This is fol-
lowed by a short outline of our methodology. The
second main section of the paper commences with
our empirical analysis of the development of BRA,
considering the particular signiWcance of the
nature of the market for professional services and
the potential appeal oVered by BRA in terms of
extending the professional jurisdictional bound-
aries of an auditing profession experiencing threats
 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
to its status. The third part considers the ways by
which the profession, or key players within it, have
sought to legitimise BRA and facilitate the diVu-
sion of such technologies. SpeciWc consideration is
given here to attempts to provide a knowledge base
for BRA, whether through professional Wrm publi-
cations, education and training developments, or
the development of auditing standards and regula-
tions. The paper concludes by highlighting its
contribution in terms of enhancing conceptual
understanding of the (complex) nature of change
processes in audit technologies and the continuing
value and signiWcance of subjecting the practical
operation and achievements of such technologies
to critical scrutiny.
Business risk audit techniques and audit research
The rise of business risk audit methodologies
Since the publication of The Audit Explosion
(Power, 1994), a number of social science and
political commentators have noted the extension
of old and the rise of new audit technologies in the
emergent evaluative and accountability processes
of economic, social and political organizations
(Power, 1997; Strathern, 2000). We are, for exam-
ple, accustomed to hearing of medical audit,
eYciency audit, eVectiveness audit, performance
audit, value-for-money audit and environmental
audit (Pentland, 2000). One of the contradictions
of this apparent audit explosion has, however, been
the loss of prestige and legitimacy that has accrued
to traditional Wnancial audit (Wyatt, 2003; ZeV,
2003a, 2003b). There has been in traditional audit
an ‘implosion’ through which continued question-
ing of audit’s signiWcance and contribution has led
to a critical re-evaluation of audit practices. New
models of Wnancial audit have been developed and
promoted in the name of client service (Power,
2000). During the 1990s many of the large audit
Wrms announced the development of new BRA
methodologies. These have been heralded as
the ‘audit of tomorrow’ and a complete transfor-
mation in ‘assurance’ practices is said to be
accompanying changes in the management and
organization of modern corporations (for example,
411
see Elliott, 1997, 1998; Elliott, Rasmussen, Rucker,
Strange, & Williamson, 1999; Stewart, 1998, 1999a,
1999b). Lemon et al. (2000, p. 1) have observed
that:
“during the 1990s several of the major inter-
national accounting Wrms developed their
methodologies on the basis of business risk
analysis”.
Bagshaw also argued:
“over the last two years, the Big 5 have all
rolled out major changes to the way they per-
form audits, in the form of new audit meth-
odologies that are said to be powerful tools
designed to pinpoint the critical elements of
business risk and audit risk”, (1999, p. 96).
Following a study of audit methodologies
encompassing all the Big Five (as was) and two or
three of the largest ‘second tier’ Wrms in three
countries, Lemon et al. (2000) concluded that,
while some diVerences of approach existed:
“(t)here is good reason to view the business
risk approaches as a signiWcant innovation to
the existing model” (Lemon et al., 2000, p. 10).
The script for BRA methodologies runs as fol-
lows: BRA innovation focuses upon the modelling
of business risk processes of the clients company,
and using this knowledge as the basis for establish-
ing Wnancial statement risk and, accordingly, the
main focus of subsequent audit testing. Analysis of
business risk forms the precursor to an analysis of
the likely sources of audit risk (see Fig. 1). As part
of the ‘new’ audit the client company’s strategy is
examined and tied to its business process. Out of
this emerges an assessment of key business risks
that in turn informs the essential areas of potential
audit risk for the auditor.
In addition to the fulWlment of the statutory
audit task, BRA methodologies are claimed to pro-
vide valuable feedback to the client. Client com-
pany strategy is analyzed by the auditor and a
report on the key areas of business risk is fed back
to the client, serving as a knowledge ‘spillover’
from the audit. BRA provides, it is said, a better
focussed, more streamlined audit plus assurance
for the client that their business strategy is sound.
412 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
Fig. 1. The business risk link to audit risk.
Bell, Marrs, Solomon, and Thomas (1997, p. 50)
draw upon this script (see Fig. 2) to summarize
the key diVerences between traditional audit and
BRA “Audit Plus” (ToZer & Reingold, 2003,
p. 132).
In summary, this new process of Wnancial state-
ment attestation claims to incorporate both more
eVective auditing and greater ‘added-value’ client
service by allowing the auditor to comment and
advise the client, both upon business risks and the
accounting implications of those risks. While tradi-
tional audit is said to be oriented towards ‘compli-
ance’, the BRA approach is said to create value;
whereas the traditional approach is ‘transactions
based’, the evolving audit is risk based. An accom-
panying rhetoric also suggests that BRA oVers
audit Wrms economies of professional audit labour
(see Curtis, 2003), and, as we note below, audit cost
reduction has been regarded as a critical factor
explaining the design of the methodological
programme of BRA. Moreover, Lemon et al.
(2000) go somewhat further in their summary, sug-
gesting that this ‘top down’ approach to auditing,
starting with the business processes and moving
down to the Wnancial statements, potentially oVers
greater audit eVectiveness, eYciency, client service,
better corporate governance and consistency at an
international level. The emphasis on (potentially)
enhanced audit eVectiveness is signiWcant as earlier
attempts to enhance the value oVered by auditors
to their clients rested upon providing ‘add-on’
(often classiWed as ‘free’), extra services such as
treasury or risk management advice, rather than
building such work directly into the audit investi-
gation (see Humphrey & Moizer, 1990).
To date, there has been relatively little explora-
tion, empirical or theoretical, of the processes
through which audit techniques change (Carpenter
& Dirsmith, 1993). Indeed, although it is now
widely accepted, almost to the point of cliché, that
there is much to be gained from attempting to
understand accounting in its social context (see, for
example, Burchell, Clubb, Hopwood, Hughes, &
Nahapiet, 1980, 1985; Cooper & Sherer, 1984;
Hopwood & Miller, 1994), auditing research has
remained relatively immune from the inXuence of
this type of theorizing, particularly in terms of the-
oretical and empirical analysis of contemporary
audit practice. There have been relatively few stud-
ies exploring the ways in which the rise, implemen-
tation and application of new audit technologies
are shaped by the formal and informal schemata,
beliefs and norms that make up the organizational
culture of an audit Wrm and its environment (Car-
penter & Dirsmith, 1993; Power, 2003). As Hop-
wood (1996) and Jeppesen (1998) have argued,
much of audit and its associated technologies
remain a ‘black box’ (cf., Humphrey & Moizer,
1990).
The emergence of BRA oVers an opportunity
to enhance theoretical understanding of processes
of technological change in auditing and to
explore how changes in audit technologies can be
conceptualized as socially constituted, rather
than simply operative within economic and social
environments (Mizruchi & Fein, 1999, p. 654). In
doing so we draw upon three bodies of social the-
ory that are perhaps more usually considered
separately: neo-institutional theories of organiza-
tional legitimacy (DiMaggio & Powell, 1991;
Suchman, 1995), the sociology of professions
(Abbott, 1988; Freidson, 1986), and the sociology
of translation (Latour, 1987). In the next section
we outline in more detail our theoretical con-
structs.
 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438 413

Source: KPMG: http://www.kpmg.co.cr/english/assurance.htm

Fig. 2. Comparison of traditional and new business risk paradigms.

Theorising change in audit technologies
Many analyses of audit change have been
expressed in the terms that the audit Wrms them-
selves oVer to explain their activities: practitioner
views of new audit developments follow a com-
mon script. For example, in 1999, as part of the
merchandising process that has accompanied
BRA, KPMG’s US Assurance and Advisory Ser-
vices Center published a booklet, The Financial
Statement Audit, with the subtitle ‘Why a New
Age requires an Evolving Methodology’ (Elliott
et al., 1999). The booklet proWles, publicizes and,
of course, accounts for the ‘evolving’ audit meth-
odology, with audit mutating to a “risk based,
strategic systems, methodology” Wt for “the
economy of the 21st Century” (1999, p. 4). The
opening page cites the chair of the American Insti-
tute of CertiWed Public Accountants (AICPA), O.
Kirtley:
“People want to know more about what is
going to happen tomorrow. The rules of
business and the economy are changing.”
(Elliott et al., 1999, p. 1).
Explanations oVered for the evolving BRA rely
heavily upon a language of transformation: the
keyword is change; many environmental processes
are “developing”, “evolving”, usually at more
rapid pace or with greater frequency. With change,
as “the 20th Century draws to a close”, has come
increased economic competition, heightened and
more frequent “demands”, “new and increasingly
complex organizations” which in turn “fuel the
414 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
need” for new responses in the “information age”
(Elliott et al., 1999; Lindsey, 2001).
The growth of business risk based audit tech-
niques has been more or less contemporaneous in
Arthur Andersen (Business Audit), Ernst and
Young (Audit Innovation), KPMG (Business Mea-
surement Process) and PricewaterhouseCoopers
(PwC Audit Approach) (Bagshaw, 1999; Eilifsen
et al., 2001; Knechel, 2004; Lemon et al., 2000;
Winograd et al., 2000), though Deloitte and Tou-
che seem, thus far, to have withstood the trend. In
a professional service industry where technological
innovations are viewed as commercial weapons,
there is little reason to deduce that these large and
medium audit Wrms worked collaboratively in the
establishment of BRA methodologies. Rather, this
degree of simultaneity in developments in BRA is,
we suggest, indicative of wider processes of social
and cultural rationalization.
Of course, the KPMG document is a self-
reported account (see also Elliot, 1994, 1997), not a
report of research Wndings. In contrast academics
such as Jeppesen (1998) view the BRA phenomena
as linked to the dissolving by audit Wrms of the
boundaries between management advisory services
and audit. Similarly, Fischer (1996) suggests that
the substitution of procedures by new audit tech-
nologies has as a common theme the attempt by
audit Wrms to reduce procedures and costs. Kne-
chel (2004) refers to “a cauldron” of “globaliza-
tion” in the market for audit requiring that audit
costs and proWtability improve. While Knechel
(2004) considers BRA to be perhaps, more a reXec-
tion of determinism by economic market environ-
ments, in contrast to Fischer (1996) and Jeppesen
(1998) who both emphasise the agency of auditors,
all three authors’ views are linked by conceptions
of audit change that focus upon the economics of
audit: audit markets are driving change and audi-
tors are demanding cost reductions. In this way
audit techniques appear as mere servants or tools
to economic processes.
Although the costs and prices of audit plainly
have a role in audit changes, such aspects tell us
little about the form or structure of the new audit
techniques that emerge. Many possible changes to
audit methods may result in a lower cost proWle,
but how do these changes account for the concur-
rent rise of business risk audit methodologies?
This paper seeks to illuminate how the ‘inside’ of
these new audit techniques embodies broader cul-
tural assumptions and constructions linked to the
‘outside’ audit Weld; in other words how the ‘out-
side’, being market, Wrm and knowledge construc-
tions, help to construct audit technology. To
conceptualize these relationships, we suggest that
the development of audit technologies are best
considered as processes in social construction, as
indicated by the three moments in the social ori-
gins of institutionalization that Berger and Luck-
mann outlined (1966; cf. Carpenter & Dirsmith,
1993, pp. 44–53), namely: externalization (the pro-
cess through which the products of human activity
appear external to the individual); objectivation
(the process through which the products of human
activity attain the character of objectivity); and
internalization (the process through which the
objectivated social world acts back upon the pro-
ducer through socialization). For Berger and
Luckmann (1966, pp. 70–79) the construction of
the institutionalized world is simultaneously an
‘external’ and an ‘internal’ process. To this end we
develop neo-institutional theories of legitimacy to
frame our analysis.
Drawing upon the work of Berger and Luck-
mann (1966), Meyer and Rowan (1977) developed
a theory of institutionalization that suggested
organizations act to produce (and consume) legiti-
macy for their activities. One example of this is
how they build representations about themselves
and their actions in order to achieve legitimacy
from their environment. Such accounts may often
be loosely coupled with what the organizations
actually ‘do’, but their key role is to serve as sym-
bolic accounts of their activities that tie in with
what inXuential environments consider organiza-
tions ‘should do’. Building upon Meyer and
Rowan (1977), DiMaggio and Powell (1991), in a
seminal article Wrst published in 1983, drew atten-
tion to the way that organizations show many
structural similarities in modern societies. These
similarities, they argued, were a consequence of
organizational responses to institutional impera-
tives from the environment. DiMaggio and Powell
described the pressures for homogenization as
‘isomorphism’ and analyzed three mechanisms
 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
through which institutional isomorphism might
occur: coercive, mimetic and normative processes.2
As Mizruchi and Fein (1999, p. 653) argue,
DiMaggio and Powell’s contribution to the devel-
opment of neo-institutional theory is now a social
construction itself, in the sense that their contribu-
tion to knowledge is the outcome of selective
interpretation and operationalization in neo-
institutional research. Following on from Mizruchi
and Fein’s argument, in our view, one problemati-
cal aspect of the exploitation of neo-institutional
theory has been an overly mechanical selection and
interpretation of the process of institutional iso-
morphism: in particular, relying on a model of
institutionalization that sees changes internal to
organizations simply as responses to external ‘iso-
morphic pressures’ (DiMaggio & Powell, 1991).
In ways that recall GarWnkel’s criticism (1967, p.
71) of social theories that suggest actors as ‘cul-
tural dopes’ (actors who can do only what cultural
roles provide), Bowring (2000) and others (Barley
& Tolbert, 1997; Hirsch, 1997; Hirsch & Louns-
bury, 1997; Lounsbury & Ventresca, 2002) have
argued that this model of environment and organi-
zation set up by selective applications of the con-
cept of institutional isomorphism has had the eVect
of occluding the role that organizational actors in
their Welds play in interacting with the environ-
ment and interpreting the meanings of their
contexts to construct and re-construct their envi-
ronment.3 Moreover, such interpretations of neo-
institutional theory also appear to have little to say
about how organizations are themselves powerful
agents in the construction of social, economic and
2
Coercive isomorphism refers to pressures upon organiza-
tions to conform that might arise, for example, from state regu-
lation or the requirements of the organization to gain resources
from signiWcant environmental actors, such as funding agencies.
Mimetic isomorphism is the result of a pressure to conform that
emerges from uncertainty. In uncertain environments, organiza-
tions often choose to mimic their peers. Normative isomor-
phism refers to homogenization arising from the inXuences of
professions on the norms, structures and practices of organiza-
tions.
3
Bowring, in particular, has questioned the relationship to
concepts of ‘social construction’ (and the work of Berger and
Luckmann) that many ‘applications’ of neo-institutional theory
seem to present (2000).
415
cultural ‘environments’ (Perrow, 1985, 1986; Stern
& Barley, 1996).
Pursuing such concepts, any attempt to theorise
the BRA phenomenon should in our view treat
technologies simultaneously as a product or con-
struction of the audit Weld, and yet also capable of
impressing a re-construction of this Weld as technol-
ogies are promoted and enacted by auditors and
audit Wrms. This process we term the co-construc-
tion of technologies and audit Welds. Although it is
clear that auditors perceive institutional and com-
petitive pressures as both ‘objective’ and ‘external’,
how they interpret and act, perhaps by such inno-
vations as new organizational forms, adapting tech-
nologies or product innovations, are themselves
both a outcome of their internalization of an exter-
nalized social reality, and a medium through which
to re-construct that social reality in accordance
with their professional identity. While the social
world does not have the ontological status of objec-
tivity, experience of it as externalized and objecti-
Wed is dependent upon a socialized internalization
(Berger & Luckmann, 1966, p. 70; Giddens, 1984).
What this paper is moving towards, therefore, is
a theory that does not simply observe and recite the
environmental pressures that ‘act’ upon organiza-
tions, but one that has something to say about how
those pressures are constructed, perceived and
drawn upon in action by auditors inside their Wrms
in ways that also change audit Welds. Hence our
focus upon co-construction: technologies that audi-
tors develop are both a construction of the audit
Weld and an intervention that construct the audit
Weld in new ways. While acknowledging that the
economic conditions facing audit Wrms bear a
prominent role in the transformation of organiza-
tional products, structures and technologies, we
want to emphasise the signiWcance of the co-con-
struction and co-presence of internal technologies
and external environments in the production of
audit change. Building upon concepts of co-con-
struction connected to the work of Latour and his
associates in the sociology of translation (Latour,
1987; Shapin & SchaeVer, 1986), our account will
highlight the central role of organizing knowledge
and legitimation processes in audit change (Abbott,
1988, pp. 53–54). In detailing the processes through
which BRA has assumed the form of an abstract
416 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
and legitimate knowledge, we note the work of the
three central agents in the formal institutionaliza-
tion of professional knowledge, namely, practitio-
ners (technicians), administrators (technocrats) and
academics (intellectuals; cf. Freidson, 1986, pp.
209–230). From an ensemble of technical practices,
regulations and academic knowledges, the con-
struction and legitimation of BRA knowledge
claims in the audit Weld are then traced. Following
the methodology section, we develop these argu-
ments with respect to the rise of Business Risk
Audit methodologies, starting with the audit Wrm’s
problematization of the market for audit services.
Methodology
To address the emergence of BRA in the con-
text of the transformation of audit, we adopted a
pre-dominantly qualitative approach. The research
presented here builds on an analysis of discourses
within a range of archival evidence, and is based
upon an examination of the major Wrms’ publica-
tions, brochures and websites (including archive
sites dating back to 1996), as well as documentary
material emanating from the professional accoun-
tancy institutes (in particular relating to matters of
audit regulation, practice, training and education).
The analysis has also been informed by material
obtained through a series of interviews that we
have conducted with audit partners and senior
managers from a range of ‘Big’, mid-tier and small
Wrms with UK oYces in Manchester and London,
and with a limited number of former auditors, now
working in business consulting and private equity.
The interviews, most of which were conducted
post-Enron, explored recent changes in modern
audit technologies. The combination (or ‘triangu-
lation’) of several research sources was important
in improving the reach and robustness of the theo-
retical claims made in this paper and overcoming
the perspectival problems normally associated
with using a single data source/method.
We used our data sources in diVerent processes
of textual interpretation, the overall purpose of
which being to extract the systems of meanings
that surrounded the emergence of BRA. Above
and beyond the close attention to the data that we
collected for this research project, we relied sub-
stantially on our familiarity with the Weld of audit-
ing. Prolonged engagement with audit Wrms in
various studies conducted by each of the research-
ers was valuable in interpreting patterns observed
in our data. Interview transcripts and archival
evidence cast each other in a particular light and
both were interpreted in the context of the
researchers’ wider understandings of the audit
Weld and the accounting profession. Spending time
in the Weld, or “hanging around” (Strauss & Cor-
bin, 1998) “provides the researcher with a special
perspective on the material collected during the
research, as well as a special understanding of the
participants and how these individuals interpret
their social worlds” (Berg, 2004, p. 266). “Hanging
around” denotes an ongoing engagement with the
Weld that can yield insights that cannot be directly
extracted from individual textual, visual or verbal
clues, an approach that has often been linked to
social anthropological styles of research (Bernard,
1998).
Our interpretive approach is characterized by a
focus upon the discursive construction of BRA as
a technology (Potter, 1996, p. 35). Our usage of the
term ‘discourse’ refers to a contextual “form of
language use” (van Dijk, 1997) with a focus on the
symbolic order and communicative elements of
such discourses, such as how, why, when and by
whom is language used to describe changes, the
‘facts’ of those changes, in audit methodologies. By
focusing upon the constructive eVects of discourse,
we indicate how the ‘descriptions’ of BRA and the
claimed ‘needs’ for audit change are constructed
through discourse in relation to the social identity
of auditors, their relationships to ‘clients’, ‘aca-
demics’ and professional administrators and regu-
lators, as well as existing knowledge practices in
the audit Weld (Fairclough, 1992, p. 64; 1989). Dis-
course refers to the context of an ‘interpretive com-
munity’ which is the frame of its existence. In this
paper the interpretive community is understood as
the institutional Weld of audit.
Our analysis relies in part on content analysis as
a way of understanding meanings emerging from
discourses in the audit Weld. Accordingly we ana-
lysed discourses related to BRA at two levels. At a
manifest level (Berg, 2004, p. 269) we describe cer-
 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438 417

tain verbal characteristics of texts noting for The co-construction of audit technique and the audit
example, as support for our interpretations, how Weld: bringing the outside inside
many times key phrases or words (e.g., ‘risk’, ‘inde-
pendence’, ‘theory’) appeared. The second, more ‘Markets’ and the market for audit services
signiWcant level seeks to extend the manifest char-
acteristics of textual discourses to some of their As many audit commentators have noted, eco-
latent meanings. Here we investigate what was nomic assessments of the market for audit services
inferred or implied by the text. The latent level of have suggested that, by the turn of the century, the
analysis, requires an interpretative approach that is proWtability of audit had declined (Boyd, 1999;
grounded in our observations from the audit Weld Knechel, 2004). Data that justiWes this claim is
to interpret behavioural patterns that emerged at diYcult to access, but it is clear that the growth in
the manifest analysis level (Silverman, p. 76–77; total Big Audit Firm revenues has not come from
Krippendorf, 1980). Again, here our familiarity audit (see Tables 1–3). Rather it is claimed that the
with the audit Weld helped in giving as comprehen- contraction in audit proWtability is linked to
sive an interpretation as possible to the properties the expansion of non-audit services (see Squires,
of the discourse being studied. Smith, McDougall, & Yeack, 2003). For the past
One key example of our analysis was a mono- thirty years development in audit Wrm revenues has
graph published by KPMG, entitled Auditing been driven by the expansion of non-audit services,
through a Strategic-Systems Lens: the KPMG Busi-
ness Measurement Process (1997). The monograph Table 1
not only represents a formal expression of the FTSE top 100 companies: ratios of audit to non-audit fees
main contours of one inXuential BRA philosophy earned by the Big (6/5/4/) Audit Firms 1992–2001
of auditing, but is also an important contribution Ratio of non-audit
to an academic discourse about audit and its value. fees:audit fees
Several elements in the book were analysed; key 1992 0.2:1
technical terms (such as risk, strategy, indepen- 1993 0.6:1
dence), actors (manager, senior management, audi- 1994 0.6:1
tor, decision maker), themes (such as globalization, 1995 0.6:1
1996 0.9:1
information, technology, adding value, future), and 1997 1.3:1
ideas concepts (such as theory, knowledge and 1998 1.5:1
expertise).4 The aim was to reXect on word clusters 1999 2.3:1
around the key words, concepts and terms (Berg, 2000 2.9:1
2004, p. 274) such as risk, in an attempt to shed 2001 3.7:1
light on the discursive strategies and associations
deployed by Wrms, such as KPMG, to embed BRA Table 2
as a technology.5 FTSE 100 companies and total audit fees and non-audit fees
earned by accounting Wrms (1992–2001)
% of Audit fees % of non-audit fees Total fees
4 81 19 100
Although we do not report in detail our content analysis,
63 37 100
the method helped to conWrm and challenge the validity of our
62 38 100
interpretations.
5
Although our focus on the qualitative aspect of content 62 38 100
analysis was a way to avoid emphasis on the “procedure of 51 49 100
44 56 100
analysis” (Selltiz, Jahoda, Deutsch, & Cook, 1967, cited in Berg
et al., 2004, p. 268) and give more room to those discursive ac- 39 61 100
counts that could not be represented numerically by counting 30 70 100
26 74 100
words or phrases, hence the emphasis on how those words were
discussed in relation to other words, we found that simple word 21 79 100
counts a useful back-up to our interpretations. (Source: Fisher, 2004).
418 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
Table 3
Proportional US Revenue Sources for Big Eight (Five) Firms:
1975, 1990 and 1999
Year
1975 (%) 1990 (%) 1999 (%)
Audit 71 49 30
Tax 17 25 21
Consulting 12 26 49
(Source: Suddaby et al., 2004).
particularly in the area of management consulting,
with the 1990s being a quite intense period in terms
of the relative rise in consulting revenues and the
pressures on audit fees (Suddaby, Cooper, &
Greenwood, 2004).
The provision of non-audit services by the self-
styled large ‘Professional Service Firms’ (who tend
not to classify themselves as just ‘audit’ Wrms)
appears to have been particularly lucrative. More-
over, pressing the advantage of the global scale
and reach of the large audit Wrms still further, the
1980s and 1990s have seen the contraction of the
Big Eight auditing Wrms to Big Six, Five and now
Four. This process has been conducted in conjunc-
tion with an ever-increasing diversiWcation in the
services oVered by such Wrms (Dezalay, 1991,
p. 793).
Other constructions of the ‘problem’ of audit
point to pricing: commentators have argued that
since the late 1980s audit clients have become
much more prepared to shop around for their
audit (Greenwood & Lachman, 1996; Boyd, 1999).
While this contest for audit clients has probably
contained audit fee levels, the contraction in the
percentage revenue split between audit and non-
audit sources of revenue, however, is not simply a
reXection of ‘pressures’ upon audit fees by clients.
The stratiWcation of the market for audit and the
concentration of large audit Wrms indicate a mar-
ket for audit services at the large corporation level
that is far from the neo-classical model of perfect
competition (Fligstein & Freeland, 1995). While
methodological problems with the measures
remain, there is ample justiWcation for aYrming
that the supply side of the market for audit ser-
vices market is highly concentrated (Moizer &
Turley, 1989; Pong, 1999; Tonge & Wootton,
1991).
The market for audit services is constructed by
statutory obligation and highly regulated. More-
over, it is based upon a complex social as well as
economic network of individual auditor and client
relationships (Dezalay & Sugarman, 1995; Ander-
son-Gough, Grey, & Robson, 2004) in which ex-
employees of the large audit Wrms often become
audit clients (Squires et al., 2003, chap. 5). A mar-
ket in which there have been, during the 1990s,
only Wve or six main providers is connotative of
one in which the supplier of services is not a sim-
ple price-taker. As such, it is widely acknowledged
that audit Wrms appear to have been keen to ‘low-
ball’ (Boyd, 1999; Chapin, 1992, p. 18; Jacob,
1991; Knechel, 2004; Sikka & Willmott, 1995) the
bid for audit, in the expectation that the provision
of non-audit services to the captured client will be
a suYciently lucrative and oVsetting source of
proWtability (Abdel-Khalik, 1990; Beck, Frecka, &
Solomon, 1988; David, Ricchiute, & Trompeter,
1993).
Additionally, it has been claimed that audit
costs have tended to increase following hikes in
auditor training costs and insurance premium
charges (Eilifsen et al., 2001, p. 193), particularly in
the wake of increased litigation (O’Malley, 1993).
Moreover, as others have noted (Boyd, 1999; Man-
son, 1997; Matthews, 2002; Power, 2000) one of the
expected consequences for BRA practice is that the
requirement for substantive testing of transactions
is diminished – one of the more sensitive ‘beneWts’
of BRA (Hatherley, 1998) – and that the level of
audit costs is reduced. Yet the ‘market’ position of
audit and large audit Wrms is not determined sim-
ply by a cost proWle of audit, but reXects the con-
scious pricing strategies of audit Wrms in the
market for audit services and divergent price strat-
egies in the market for non-audit services
(D’Angelo, 1981; Ezzamel, Gwilliam, & Holland,
1996; Palmrose, 1986; Simon & Francis, 1988;
Simunic, 1984). In short, partners of large audit
Wrms are signiWcant actors in the construction and
functioning of these markets (Granovetter, 1985;
Dezalay & Sugarman, 1995), and not passive recip-
ients of ‘market forces’. Nevertheless, discourses of
the “depressed market of audit”, in Berger and
Luckmann’s (1966) terms, externalize concepts of
the market that Wrms through their audit practices
 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
have helped to construct. At the same time the
market position of audit is treated as objective by
audit Wrm actors. In so doing, ‘audit market’ dis-
course partially constructs the problem that BRA
is claimed to address.
As we argued above, however, acknowledging
the declining proWtability of audit tells us little
about the form and nature of the organizational or
technological responses that emerge. As Louns-
bury and Rao (2004) have explained, the disci-
plines of ‘market demand’ do not dictate the
speciWc changes in organizations that reconstitute
products or technologies. The functionalist eco-
nomic demand-led, change explanations neglect
how outcomes such as BRA methodologies are
negotiated by members of the organizational Weld.
There is now an extensive literature that examines
how the political (such as the presence of dominant
producers) and cultural (such as dominant tastes
and preferences) characteristics of an organiza-
tional Weld structure the emergence and redeWni-
tion of products in speciWc markets (Hirsch, 1972;
Fligstein, 2001).6 BRA methodologies appear to
combine the characteristics of ‘products’ the large
audit Wrms already supply – audit and business
advice – and in so doing have established a degree
of product ambiguity where none previously
existed. The externalized market reality of audit is
interpreted and reproduced by the Wrms them-
selves, and as such the response of auditors is con-
structed by their internalization of the objectivated
market. To understand these aspects of the pro-
duction of BRA methodologies is to incorporate
the political and cultural relations in the audit Weld
that re-structure and re-constitute the audit ‘prod-
uct’.
In these terms, the declining proWtability of
audit has implications that extend beyond the eco-
nomic and into the status and legitimacy of audit,
its position in the organizational hierarchy of prac-
tices, products and services within the large diver-
siWed audit Wrms and identities that audit profes-
sionals bring to their work.
6
The lobbying of elites, for example, structured the categori-
zation and associated pricing of wines in France rather than soil
conditions or climate (Ulin, 1996; Lounsbury & Rao, 2004).
419
‘Professional service Wrms’ and the legitimacy
of audit
The legitimacy of audit resides substantially in
the statutory frame in which audit requirements
are embedded and by those claims that legitimate
the profession as a whole, that is, the attachment of
auditor expertise to dominant cultural codes and
values such as eYciency, rationality and science
(Abbott, 1988; Dirsmith, Fogarty, & Gupta, 2002).
However, the status of audit and the professional
identity of auditors is also connected to the cul-
tural and socialization processes within the large
audit Wrms. The loss of proWtability or, indeed,
‘decline’ of audit (Boyd, 1999) stands in close rela-
tion to the loss of prestige of the audit function
inside the large audit Wrms themselves.
While the evidence that validates this loss of sta-
tus is less immediate than fee data, the spectacle of
the split between Andersen Consulting and Arthur
Andersen in 1999, the most diversiWed of the Big
Six Wrms, was indicative of the tensions and rival-
ries between the value adding activities of the self-
styled professional service Wrms’ non-audit services
and the ‘statutory’, seemingly unproWtable, prac-
tice of audit attestation (Squires et al., 2003). Fur-
ther clues to the position of audit practice in large
Wrms are found in examinations of the training and
socialization of auditors which relate closely to the
redeWnition of audit inherent in BRA methodolo-
gies (Saks & Ashforth, 1997).
US and UK studies of audit socialization and
professional identity in the large audit Wrms share
many of the same judgments as to the constitution
of the accounting professional and the main
features of professional identity amongst auditors
and trainees, and clearly point to a substantial
decline in the prestige of audit within the large
diversiWed ‘professional service’ Wrms.7 Although
7
Whereas ten years ago there were less than a handful of
qualitative and ethnographic studies of accountants (Dirsmith
& Covaleski, 1985a; Harper, 1988, 1989), the present decade has
seen something of a proliferation of such work (for a review, see
Anderson-Gough et al., 1998a, 1998b, 2000; CoVey, 1993, 1994;
Dirsmith & Covaleski, 1985b; Grey, 1994, 1998; Hanlon, 1994).
We now know a great deal more about how accountants live
their daily lives and enact professionalism, at least in the large
public accounting Wrms.
420 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438

the provision of statutory audit to a corporation longer held to be a lucrative, challenging or

has usually been a conduit to the provision of enticing career within the Wrms by the major-
‘value creating’ non-audit services (tax, manage- ity of those who either leave or remain with
ment consulting), the studies that exist of audit the Wrms in the hope of future partnership.”
Wrm culture (Anderson-Gough, Grey, & Robson,
Recent research focusing on the intra-profes-
1998a, 1998b, 2000; Dirsmith, Heian, & Covaleski,
sional rankings amongst specialisms in UK
1997; Grey, 1994, 1998; Khalifa, 2004) have
accounting Wrms found that accounting profes-
aYrmed that audit is accorded low status in the
sionals placed auditing the lowest:
hierarchy and division of labour within the Big 5
professional service Wrm activities (Abbott, 1988, “Indicators of the specialisms’ professional
pp. 125–129; Wyatt, 2003; ZeV, 2003a, 2003b). status include references to salaries, the age
Personnel management systems of the large of members, the nature of their knowledge
Wrms have reinforced through appraisal mecha- base, the potential mobility after qualiWca-
nisms, a notion of ‘professional’ that has a range of tion, the number and social composition of
speciWc organizational and cultural meanings. members and their commercial value to
Dominant conceptions of ‘being professional’ con- Wrms” (Khalifa, 2004, p. 156).
structed through professional training stress con-
The falling cachet of audit was conWrmed by an
duct and appearance. These meanings typically
accompanying survey of ICAEW members in
refer to trainees’ personal aspects and conduct,
which auditing and personal taxation were ranked
especially in front of the client. As the ‘client ser-
by respondents as least prestigious and auditing as
vice’ ethic is closely connected to the selling skill
least Wnancially rewarding (Khalifa, 2004). More-
and commercial awareness aspects of performance
over, Gwilliam and Brierley (2001) found that
appraisal (including seizing the opportunities to
auditing personnel were regarded as most easily
expand the Wrm’s non-audit services), it is unsur-
replaceable by human resource managers in
prising that although many auditors and trainees
accounting Wrms, while ICAEW members work-
consider the possibility of a career within the large
ing in industry were recently found to rank the
audit Wrms, the audit task is commonly perceived
contribution of the statutory Wnancial audit
as one of the lower prestige points in the Wrm hier-
within their organisation quite lowly – placing it
archy of ‘accounting’ careers. Auditors develop lit-
behind internal, health & safety and quality audits
tle professional identiWcation with audit through
(see Humphrey, Bowerman, Owen, & Stride, 2002,
their training and socialization.8 Prestige points
p. 11).
within the Wrm lie in the divisional functions
Other indicators of audit’s status conWrm these
judged ‘creative’ and ‘value adding’, such as man-
assessments: for example, the report by the Panel
agement consulting and corporate recovery. As
on Audit EVectiveness (2000) set up by the Public
Anderson-Gough et al. (2000, p. 1166) have
Oversight Board in the US, at the request of the
argued:
SEC, remarked critically on the apparent com-
“Notwithstanding the claims of practicality modiWcation of audit and the questionable “tone
and general business training that trainees at the top” set by large audit Wrms:
attach to their work in audit Wrms, one curi-
“Focus group participants often indicated
ous element of this is the low esteem in which
that not only clients, but also engagement
audit is held, once qualiWed. Audit is no
partners and Wrm leaders, treat the audit
negatively – as a commodity. Some respon-
8
This does not mean that auditors lack concern with formal dents to the Panel’s survey and some engage-
accreditation as professionals – indeed, the contrary. The way in
ment teams interviewed..expressed a similar
which accreditation is conceptualised, however, appears some
way removed from the traditional picture of the profession as a
view, in some cases implying, by the more
repository of technical knowledge or as exemplifying a public positive comments made about the Wrms’
service ethic. other service lines and their perceived higher
 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
levels of growth and proWtability, that the
audit was viewed as a commodity. The
emphasis on providing proWt-enhancing
ideas to the client’s management, so the
audit would appear to have value beyond
meeting statutory requirements, also con-
tributed to the perception that audit itself
had little value.” (Panel on Audit EVective-
ness, 2000, pp. 99–100).
The erosion of status has been linked to audit’s
declining proWtability despite the unmistakable
strategies of the large Wrms to treat audit as the
gateway to the supply of the more diverse and
Wnancially rewarding non-audit services to the cli-
ent. While audit partners could justify the eco-
nomic role of the audit function to the Wrm as a
subsidized or loss leading activity, the emphasis
within the Wrms upon ‘managing’ and evaluating
partners through measures of fee income, realiza-
tion rates and proWtability suggests that in prac-
tice they are just as subject to the same sort of
Wnancial targets as their senior managers and
partners in the other ‘commercial’ divisions of the
Wrms (Covaleski, Dirsmith, Heian, & Samuel,
1998; Squires et al., 2003, pp. 95–102; Stevens,
1991, pp. 174–175). This in turn suggests that the
cultural status attached to individualized mea-
sures of fee income and proWtability, ‘sales cul-
ture’ (Squires et al., 2003, chap. 6), has worked in
practice to the disadvantage of audit divisions
within the Wrms.
Viewing the development of BRA from such a
perspective adds a diVerent dimension to explana-
tions of external economic market pressures driv-
ing technological change. The accent on business
advice (‘adding value’) embodied within BRA
methodologies potentially oVered higher prestige
and a new identity for auditors more consonant
with the other functional identities of the large
professional service Wrms, such as management
consultancy or corporate recovery. The transfor-
mation of auditor to an added value business
advisor promised an enhanced status for audit
and the possibility of new markets, as well as
addressing the economic problems of audit in
ways that are considered to be in the interests of
the client.
421
Extending professional jurisdiction: business risk
audit, assurance and internal control markets
Abbott has argued that the ability of a profes-
sion to sustain jurisdiction resides in part on the
“power and prestige of its academic knowledge”
(1988, pp. 53–54). Professional knowledge relies
upon a process of abstraction and as such the main
function of academic knowledge for the profes-
sions is often symbolic rather than practical (1988,
p. 54; Bourdieu, 1986). To this end the role of aca-
demics in the system of professions is signiWcant –
though not necessarily at the level of technical
development. The research evidence that follows
supports Abbott’s claim, suggesting that the devel-
opment of BRA has been legitimated by its associ-
ation with an abstract, academic theory of business
strategy.
The development of BRA is tied to the wider
cultural emergence of strategic, risk and assurance
technologies in the management of corporations.
Through the 1980s “diVerentiation”, “cost leader-
ship” and “focus” became key mantras as corpo-
rate managers and business schools absorbed and
reproduced an abstract strategic analysis of com-
petitive position (Porter, 1980, 1985). The late
twentieth century witnessed an explosion in busi-
ness texts outlining the importance to corporations
of managing their risk in seemingly ‘scientiWc’ ways
(Bernstein, 1996). This rise of academic and expert
knowledge forms emphasizing corporate strategy,
competitor assessment and business risk manage-
ment over operational eVectiveness, has contrib-
uted signiWcantly to the intellectual antecedents of
BRA technologies. The risk models underlying
BRA methodologies developed by the professional
audit Wrms borrowed heavily from the industry
analysis/industry structure model of competitive
position and, in turn, the academic discourse of
strategy helped to legitimate them (Bell et al., 1997).
BRA methodologies have given auditors access
to a new discourse and market rationale for audit –
that of assurance for the client. In the aftermath of
the Treadway Commission Report on Internal
Control (COSO, 1990) in the US the large audit
Wrms were, throughout the 1990s, at the forefront
of the dissemination of the ‘Corporate Risk Man-
agement’, ‘Business Risk’ programme throughout
422 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
the 1990s (e.g., Coopers & Lybrand, 1996; DeLo-
ach, 2000; Economist Intelligence Unit, 1995,
1998). As Eilifsen et al. (2001) have noted, with
BRA, the task of the auditor commences with a
focus on business issues and processes, both
generic to the clients’ industries or market (‘bench-
marking’) and speciWc to an analysis of the Wrm’s
risk exposure, leading to an expectation that:
“the audit team ..provide valuable additional
assurance to the client as part of the basic
audit engagement. As auditors obtain evi-
dence from controls and performance indica-
tors, we expect high-value assurance tasks to
replace low-value substantive testing” (Eilif-
sen et al., 2001, p. 196, emphasis added).
By gaining knowledge of client strategy, com-
petitive advantage and business risk as the prelude
to the assessment of audit risk, BRA methodolo-
gies are said to generate “knowledge spillovers” for
the auditor that provide the basis for an assurance
report to the client. The new Wnancial statement
attestation incorporates greater “added value cli-
ent service” by allowing the auditor to comment
both upon business risks and the accounting impli-
cations of those risks (Eilifsen et al., 2001). The
implementation of BRA necessitates the auditor
securing new knowledges on “core processes” and
“information risk management” from the client
(Eilifsen et al., 2001). By relating this information
to industry models the auditor is then able to
assess corporate strategic risks, opportunities, haz-
ards, controls and performance. To this end, BRA
has required investment in industry level databases
and developed knowledge management systems
through which to measure and benchmark client
related information.
The discourse of “value added” may be the
most distinctive element of BRA methodologies as
compared to previous developments in audit (Mat-
thews, 2002), and goes some way to accounting for
the way that this new audit technology has been
promoted so visibly as a vital component of the
audit’s merchandising instrument (Power, 2000;
ToZer & Reingold, 2003). Value added is of course
a term with many referents in business knowledges
of the 1980s and 1990s (EVA, Just-in-Time, ABC,
etc.), suggesting a mimetic component to the BRA
knowledge base. And in redeWning audit rationales
in this way the new audit function allows the large
audit Wrms, as Covaleski, Dirsmith, and Rittenberg
(2003, p. 338) have suggested, citing the AICPA,
“to migrate up the economic value chain” and lay
claim to wider areas of professional expertise in the
markets for other assurance and consulting ser-
vices (AICPA, 1997).
One example of this laying claim is the US
debate on outsourcing of internal audit. The exten-
sion of markets for non-audit services into the ter-
ritory of professional internal auditors has pitched
the large Wrms into debates and conXicts that have
encompassed the AICPA, the SEC and the Insti-
tute of Internal Auditors (IIA) over the role of
auditing professionals and the economic relation-
ships between audit Wrms and their clients (Coval-
eski et al., 2003). As we noted above, the self-image
of the large audit Wrms is now as ‘professional ser-
vice’, not simply ‘audit’ Wrms. To this end the
added value claimed by BRA’s proponents assists
the integration of audit services within the large
Wrms as another component of their assumed role
as “global knowledge experts” (Covaleski et al.,
2003).
In one account from a former Arthur Ander-
sen’s partner in the US, the slow take-up of Busi-
ness Risk (the Andersen variety of BRA) was
countered with a memo to all AA partners spelling
out the signiWcance of the new methodology to its
marketing strategy. The memo read:
“BA [Business Audit] is the key to imple-
menting other planks in [Assurance and
Business Advisory’s] strategic pyramid, par-
ticularly our need to grow risk consulting ser-
vices and integrate other service categories,
i.e. cross-sell other AA services” (ToZer &
Reingold, 2003, p. 137).
While audit has traditionally served as an entrée
to the supply of non-audit services, BRA method-
ologies enable the extension of professional juris-
dictions into forms of corporate governance and
risk management not normally associated with the
large audit Wrms (Abbott, 1988, p. 125). Covaleski
et al. (2003) show how the movement towards the
outsourcing of internal control functions, in asso-
ciation with the risk management approach to cor-
 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
porate control, has oVered the large Wrms the
opportunity to legitimate the extension of their
jurisdictional domain into the market for profes-
sional internal auditors. As ToZer has argued,
within Arthur Andersen the rationale for promot-
ing Business Risk was explicitly related to the pro-
vision of internal control services:
“The idea seemed to be that in the rapidly
changing, highly complex world that all com-
panies were facing, risk was the enemy. What
better way to manage your risk than to make
sure that your internal and external auditors
saw life from the same perspective?” (ToZer
& Reingold, 2003, p. 143).
The rhetoric of audit as business advice con-
nected to the AICPA’s attempts to promote the
profession as global knowledge experts accredited
with XYZ, the Global Credential (AICPA, 2001).
The American Institute of CPAs special committee
on assurance services report also highlighted a
potentially lucrative future for the profession in
adopting an “assurance perspective” on audit
(AICPA, 2001). Headed by Robert K. Elliott, a
partner of KPMG Peat Marwick LLP, in New
York, the committee reported that the introduc-
tion of new assurance services “could double or
even triple” the CPA profession’s $7bn. accounting
and auditing income. The AICPA web site
reported that the Elliott committee:
“found clear evidence that Wnancial state-
ment audits are a mature product. Account-
ing and auditing revenue, adjusted for
inXation, has remained Xat for the last seven
years. The traditional audit of Wnancial state-
ments adds value to both users and clients, is
widely appreciated for its eVect on the integ-
rity of the capital markets, contributes to the
CPA’s reputation for objectivity and integ-
rity and will continue to be in demand in the
future. But the greatest opportunity for
growth lies in assurance services. A close
look at potential customers and the trends
changing the practice environment shows
why. The need for information services is
exploding and in those needs lie opportuni-
ties for the CPA profession. The core beneWt
423
of the audit-attest tradition – information
improvement – provides a foundation for
new value-added services”. (www.aicpa.org/
pubs/jofa/jun97/assur.htm).9
From this standpoint, an apparently academi-
cally justiWable process of BRA not only con-
structs a ‘value-added’ audit market but helps
realize new markets in corporate risk management
and the outsourcing or co-sourcing of internal con-
trol.
To summarize, if the vocabulary of justiWcation
for BRA methodologies has the ‘creation of
added-value’ for the client as a central theme, then
this is all of a piece with the construction of the
fee-pressured, concentrated market for audit cli-
ents. By transforming the rationale of audit to
encompass business knowledge and advice and
hence facilitate the extension of inXuence in new
markets for internal control, BRA oVered auditing
the potential of an enhanced standing as a com-
mercial practice within the large professional audit
Wrms. In the next section we move away from the
relative prestige of audit and the construction of
new markets to examine other key facets of the
development of BRA methodologies in the audit
Weld. We focus upon the institutional construction
of regulatory and normative frameworks that have
sought to legitimate BRA methodologies in the
audit Weld.
The co-construction of technologies and
legitimation: embedding business risk audit
A signiWcant literature now exists on the role of
audit in the production of legitimacy in organiza-
tions and society (Humphrey & Owen, 2000; Pent-
land, 2000; Power, 1997, 2003; Strathern, 2000),
but much less has been written about the process
of acquiring and developing the legitimacy of audit
technologies themselves. In this section we take up
the second major theme of the paper: securing
legitimacy and enabling the mobility of new audit
9
This report was published exclusively on the AICPA web-
site: http://www.aicpa.org/assurance/scas/index.htm, but seem-
ingly is no longer there.
424 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
technologies. While the concept of legitimacy is of
course a familiar construct in neo-institutional
sociology (DiMaggio & Powell, 1991; Meyer &
Rowan, 1977; Suchman, 1995), our emphasis here
is to contribute to an understanding of audit
change by highlighting the co-construction of
audit technologies and legitimacy. Accordingly, we
outline a number of the processes through which
BRA methodologies have gained legitimation in
the audit Weld, and how developments within the
audit Weld in turn further enhanced such legiti-
macy.
In this section we highlight the role of formal
knowledge and regulation in the establishment of
new audit techniques. Freidson (1986, pp. 9–13)
argued that professional powers rest, in part, on
the development of formal knowledge but that the
production of formal knowledge is necessarily
mediated by a profession’s linkages to the agents
of formal knowledge – such as academics and uni-
versities. As we noted above, the role of abstract
knowledge for a profession is more symbolic than
practical (Abbott, 1988, pp. 53–55). Similarly a
profession’s technocrats or administrators service
the profession’s educational or credentializing pro-
cess wherein professions are generally recognized
as professionals. By developing and enforcing
practice standards, such activities seek to legiti-
mate (or protect) the profession’s claim to conduct
its work in a professional manner, demonstrate its
ability to regulate itself and also serve to mediate a
range of political, economic and cultural forces in
the profession’s environment (Power, 1995). Such
processes have variously involved the engagement
of professional associations and their administra-
tors, regulatory bodies, clients and academics.
Normative sources of legitimacy: business risk
auditing methodologies as knowledge claims
As noted above, the set of methodologies that
we group as Business Risk Audit reXect in part the-
ories of corporate strategy that originated in aca-
deme in the 1980s. As such the production of BRA
rested in part on its absorption of, and association
with, academic knowledge claims. However, the
promotion of BRA has also depended signiWcantly
on a range of other processes oVering normative
sources of legitimacy, including speciWc links with
universities, the writing and dissemination of texts,
the production of case studies for teaching, the
funding of research and the promotion/sponsor-
ship of academic conferences.
A relevant example here is the 1997 publication
of Auditing through a Strategic-Systems Lens: the
KPMG Business Measurement Process (Bell et al.,
1997). While the text deals speciWcally with
KPMG’s chosen form of BRA, the impact of Bell
et al. (1997) has been such that it is seen to repre-
sent a ‘theoretical’ case for BRA. Bell et al. is often
held out as an important formal expression of the
main contours of a BRA science of auditing (e.g.,
see Knechel, 2004; Power, 2000).
The text bears careful scrutiny. Many of the
same claims to the ‘value creating’ or value-adding
role of BRA are found in the Bell et al. monograph,
as they are also evident in KPMG’s The Financial
Statement Audit (Elliott et al., 1999). While some
sections of Auditing through a Strategic-Systems
Lens appear to have been driven by a marketing
orientation, much of the text gestures towards
established ‘scientiWc’ knowledge bases that accord
with the normative types of legitimacy that profes-
sionals traditionally recognize and aYrm. The
appeal to science in these sections is strikingly simi-
lar to those that accompanied early textbooks on
statistical sampling for auditors (Carpenter & Dir-
smith, 1993, pp. 48–50; Power, 1992).
The monograph opens with the following quo-
tation:
“In our time, the conWdence, maturity and
promise of a science should be measured not
by its power to reduce the complex to the sim-
ple . . . but instead by its willingness to study
complexity with advanced methods under
descriptions that respect the reality of what is
being studied. (David J. Depew and Bruce H.
Weber, Evolution, Ethics, and the Complexity
Revolution in Bell et al. (1997, p. 1).
The quotation highlights a relationship that is
frequently overlooked in many accounts of the
authority of accounting and auditing – namely the
links to a culturally legitimate view of accounting
and audit as an objective science. In no small way
Auditing through a Strategic-Systems Lens articu-
 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
lates and embraces the status of scientiWc knowl-
edge. The Wrst page continues:
“Accounting plays a central role in the
eYcient allocation of resources in market-
based economies. By adding credibility to
accounting measurements and disclosures,
auditing has for centuries made it possible for
accounting to play such a key role. Today’s
global economy and the business organiza-
tions operating within it, however, have
become so complex and interdependent that
new approaches to auditing must be devel-
oped. With these new approaches, the auditor
would embrace and master, rather than sim-
plify, the complexity inherent in the economic
web of interrelationships of which the client
organization is a part” (Bell et al., 1997, p. 1).
While most academics and researchers (and per-
haps practitioners) would deny a scientiWc basis to
the practices of accountants and auditors, the legit-
imacy of the profession rests in part upon an
acceptance that individuals and organizations are
rational and knowable. This in turn rests upon the
wider cultural dominance of science and belief in
its authority, if not as a direct source of instrumen-
tal knowledge in accounting or auditing practice
but as a cosmology that underlies the accounting
profession, and other bearers of modern rationali-
zation (Drori, Meyer, Ramirez, & Schofer, 2003).
Following the initial suggestion of a scientiWc
foundation for the new auditing approach, the Bell
et al. monograph establishes academic justiWca-
tions for BRA and organizational complexity in
the global economy. Its authors’ academic prestige
clearly plays a part here, with two of them, Ira
Solomon and Howard Thomas being respectively
KPMG LLP Distinguished Professor of Accoun-
tancy at the University of Illinois at Urbana-
Champaign and James F. Towey Professor of
Strategic Management also at the University of
Illinois at Urbana-Champaign.10 Moreover, while
the Wrst named author (Timothy O. Bell) is Direc-
tor of Assurance Services at KPMG LLP, he was
previously a member of the accounting faculty at
10
Thomas is now Dean of Warwick Business School.
425
the University of Texas at Austin. The monograph
has a preface by Professor William Kinney, one of
the most senior Wgures in American auditing
research over the past three decades (Kinney,
1986), a consultant to the profession on many
auditing policy issues who has also served on vari-
ous AICPA committees including the Auditing
Standards Board (1981–1984) and the aforemen-
tioned Special Committee on Assurance Services,
the Elliott Committee (1994–97).
The text runs through the methodological
underpinnings of BRA, the relationships between
strategic systems, business concepts of risk and
audit, and gestures towards other, quite diverse,
knowledge claims to justify the new audit. As well
as economic reasoning, cybernetic systems metho-
dologies are drawn upon to portray the organiza-
tion as a “complex, living” system (Bell et al., 1997,
p. 15). Decision sciences modelled upon cybernet-
ics are explained in order to outline the organiza-
tion as a risk-bearing, quasi-organic body. New
Age physicist/philosophers, such as Fritjof Capra,
are cited in support of the ‘holistic’, ‘systems’
approach exempliWed by BRA (Bell et al., 1997, p.
14). Whilst the words theory and science are also
clustered with new age terms, most science/theory
words relate to strategy (for example, Porter’s con-
cept of value-chain analysis (Bell et al., 1997, p. 27,
31, 33–4; Porter, 1980, 1985), complexity (Bell
et al., 1997, p. 1, 5–6, 10; Depew & Weber, 1995;
KauVman, 1995) and systems theory (Beer, 1966;
Bell et al., 1997, p. 16–7, 33; Richardson, 1991)).
Although Bell et al. (1997) refers to the ‘inde-
pendent’ auditor, there is no discussion of the
concept of independence – indeed the term inde-
pendence does not crop up. On the other had, con-
cepts of service and assurance to the ‘business’,
‘client’ or ‘management’ are very prevalent –
indeed client- or management-words far outnum-
ber references to either auditor or shareholder. The
ongoing assumption of the text is that by servicing
the management/client through the KPMG busi-
ness risk methodology, owners are also served.
Moreover, the strategic systems audit is commonly
associated with vocabularies of ‘change’, ‘global’,
the ‘new’ and the ‘future’ to contrast it with the
‘traditional’ audit of the ‘past’. Bell et al. connect
the new audit to an analysis of organizational
426 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
‘value-creating’ processes (1997, p. 43) so as to dis-
tinguish it from traditional work of audit (Bell
et al., 1997, p. 2, 19–22).
Auditing through a Strategic-Systems Lens is an
eclectic mix. The key point, however, is that Bell
et al. legitimate the process of reconstituting the
knowledge base of audit from compliance and sub-
stantive testing towards the auditor as business
risk assessor. Although the monograph is short on
speciWcs as to the audit procedures and practices
introduced or modiWed by BRA methodology, it
delineates how ‘external’ audit can be remodelled
and re-crafted to address matters of risk manage-
ment, internal audit and assurance. The signiW-
cance of Auditing through a Strategic-Systems Lens
lies in the connections it makes to legitimate,
abstract academic bodies of knowledge that are
claimed to underpin BRA. In an industry in which
client conWdentiality is used to justify the limited
access granted to researchers and secrecy of meth-
odology is justiWed as a competitive weapon, the
Bell et al. (1997) document stands out as an open,
public expression of the new auditing, albeit to a
diVerent, if overlapping, constituency: knowledge-
able professionals, regulators and academics, per-
haps best presented by Freidson as the “knowledge
class” (1986, p. 82–83).
This approach is further illustrated in the fol-
low-up text, Cases in Strategic-Systems Auditing
(Bell, Peecher, & Solomon, 2002), which reports
the results of the Wrst eight of twenty three cases
funded under a related element of KPMG’s Busi-
ness Measurement Case Development and Research
Program that had funded the Bell et al. (1997)
monograph.
“Following dissemination of the monograph,
the case development and research program
was established to engage scholars in the
development of classroom materials relevant
to a 21st century audit environment, fol-
lowed by scholarly research to advance
knowledge and enable further improvements
in audit methods and techniques. ƒOur goal
was to produce some of the most realistic
and intellectually nurturing teaching materi-
als available for business and assurance edu-
cation” (Bell et al., 2002, pp. viii–ix).
The cases represent a Wrst attempt at addressing
the pedagogy of BRA. The introductory chapter in
Bell et al. (2002) – by Timothy Bell, Mark Peecher
and Ira Solomon – seeks to clarify and extend the
ideas presented in the Bell et al. (1997) monograph –
“Our overarching goal is to help the reader under-
stand the fundamental antecedents and rationale of
Strategic Systems Auditing” (Elliott et al., 1999, p.
7). It starts with the familiar premise that auditing
methodologies have become “increasingly ineY-
cient and eVective as innovations in information
technology altered the business landscape. New
methodologies were needed to help auditors obtain
the in-depth business knowledge required to assess
the economic implications of complex business rela-
tionships and activities and to guide the search for
instances in which managers may have exploited
ambiguous and complex accounting rules” (Elliott
et al., 1999, pp. 7–8). The chapter stresses the signiW-
cance of the auditor’s mental mode and his/her stra-
tegic-systems thinking skills. In particular, it
emphasizes the importance of holistic strategic anal-
ysis, calling for the use of “forest thinking” rather
than “tree-by-tree” thinking on the part of strategic-
systems’ auditors (Elliott et al., 1999, p. 19).
The Bell et al. monograph (1997), The Financial
Statement Audit (Elliott et al., 1999) and the Bell
et al. (2002) case studies text denote the value add-
ing ideals of BRA as a major source of justiWcation
and merit. Further links between the KPMG Busi-
ness Measurement Process and academia have been
forged by sponsorship of research intent on
Advancing the State of the Art in Business Measure-
ment (KPMG, 2002). Academic researchers have
been encouraged to submit proposals related to
extending knowledge of business measurement,
“including risk measurement and control, business
process performance, internal and external busi-
ness reporting and transparency, assurance, corpo-
rate governance, and enabling technologies”.11
KPMG has also hosted conferences in San Diego
and Copenhagen at which academics and practi-
tioners were invited to discuss the latest thinking in
the KPMG Business Measurement Process.
11
The Program Advisory Board includes Timothy Bell and Ira
Solomon.
 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
An important consequence of these processes is
that BRA is now recognized as a legitimate arena
for research. Academics have now studied the
impact of BRA on audit costs (Curtis, 2003), have
undertaken Weld studies of BRA in new market
economies (Eilifsen et al., 2001; Ballou & Knechel,
2002), compared Big Firm methodologies (Lemon
et al., 2000; Winograd et al., 2000), posited relation-
ships between business risks and audit fees (Bell,
Landsman, & Shackelford, 2001), tested assump-
tions about the connections between business risk
and audit risk (Kotchetova, Kozloski, & Messier,
2005; Salterio, Steven Knechel, & Natalia, 2005;
Wu, Roebuck, & Summers, 2002), modelled the
impact of BRA and support software on auditor
judgments (Ballou, Earley, & Rich, 2004; O’Don-
nell & Schultz, 2004a, 2004b, 2005) and written
textbooks on the audit and assurance methodology
(Knechel, 2001). In these ways, and in contrast to
the conventional ‘gap’ view of accounting research
and its relationship to accounting practices, such
large Wrm sponsorship of academics and academic
functions have served to promote BRA and its
associated knowledge claims and set in motion a
programme of research that now seeks to ‘explain’,
legitimate and extend the reach of BRA techno-
logies (Abbott, 1988, p. 54).
Regulation and coercive legitimacy: circulating
business risk audit
As Latour (1988) and others have noted (Sha-
pin & SchaeVer, 1986; Shapin, 1995), the develop-
ment of standards for education or ‘best practice’
enables knowledges and technologies to circulate –
by creating standardized contexts for applying
such knowledges and techniques. In this section we
focus upon the actions of professional technocrats
and their eVorts to bolster the legitimacy of BRA
technologies by bringing them within recognisably
legitimate, though rarely restrictive, professional
regulations (Freidson, 1986, p. 228). Rather than
viewing professional regulation as a process that
constrains the practices and methodologies of
audit Wrms, we argue that a network of regulatory
action (DiMaggio & Powell, 1991) can be seen to
have facilitated the promotion and legitimation of
427
BRA methodologies (Strang & Meyer, 1993). Reg-
ulatory processes now grant to BRA a signiWcant
mode of legitimacy by recognizing its import
within the audit Weld. In this section we note how
standards, regulations and professional guidelines
in education and standard-setting have all been re-
conWgured to license and empower the develop-
ment of BRA methodologies, and in so doing these
adaptions have enhanced the legitimacy and diVu-
sion of BRA. Even though BRA has almost exclu-
sively been associated with the largest audit Wrms,
professional associations in the UK and, interna-
tionally, have enabled a wider dissemination and
approval of such methodological approaches.
The embedding of BRA in the audit Weld has
been a signiWcant political project (Covaleski et al.,
2003) for the audit Wrms within their respective
national associations. As Lemon et al. (2000) sug-
gested, the introduction of BRA subsumes several
assumptions about the expertise and competencies
of auditors:
“A business risk approach emphasises judge-
ment, and broad skills to be able to assess the
position of a business in its environment,
matters of strategy, operations and Wnance.
This has implications for the nature of the
formal qualiWcations recognised as appropri-
ate for auditors, for the structure of educa-
tional courses accredited in the process of
qualiWcation and the recruitment and train-
ing of audit staV by the public accounting
Wrms. There is a heavy emphasis on strategic
management embodied in the business risk
approach and, as a consequence, auditors
conducting audits under that approach will
have to be strongly conversant with the stra-
tegic management literature” (p. 22).
Revising the content of professional training
helps to aYrm that the auditor has the established
competence or expertise to conduct a re-invented,
‘added-value’ audit function. Demonstrating com-
mand over, and the appropriate credentials for
developing (Reed, 1996), an abstract body of
knowledge is a fundamental element of profes-
sional jurisdictional control (Abbott, 1988). With-
out a credible background of expertise and training
the claims of BRA could be held in question by
428 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
occupations with competing or overlapping con-
cerns with business risk- such as, for example, the
professional associations of internal auditors.
Indeed, some years prior to the publication of the
Lemon et al. study (2000), the English Institute
(ICAEW) had initiated a review of the professional
training process. The resulting internal inquiry into
the future of the profession and the skill set of the
accountant of the future published Added Value
Professionals: Chartered Accountants in 2005 in
which the scenario of a possible oversupply of
chartered accountants and loss of audit work
would be compensated by a transformation of the
audit sector towards assurance reporting to third
parties on matters such as pensions, internal con-
trol, public sector services as well as the traditional
audit client (ICAEW, 1996, pp. 20–21). By setting
out the agenda for the UK profession in these
terms the 2005 report set in train a series of facilita-
tive reforms to professional accreditation and edu-
cational requirements that would construct the
future in these terms.
While the ‘added value business professional’
construct reXected the potency of the large Wrms, in
practice this leverage operated through engage-
ment with issues by their appointees to the relevant
ICAEW internal committees. For example, Peter
Wyman, the then chair of the key ICAEW commit-
tee responsible for educational matters, the Edu-
cation and Training Committee (E&T), was a
senior tax partner in what later became Pricewater-
houseCoopers. Wyman had begun a review of the
structure and curriculum of the examinations con-
stituting the professional qualiWcation process. The
ICAEW’s E&T Committee subsequently issued a
‘Green Paper’ in 1998 entitled Creating the Added
Value Business Advisor, which reinforced the valid-
ity of key tenets within BRA.
The Green Paper recommended the adoption
of specialist pathways within the training process.
Whilst certain technical skills remained core to the
credential, the Green Paper proposed elective
routes within the examinations process to broaden
the potential education of prospective ‘entrepre-
neurial’ accountants. At public meetings held to
explain the proposals to Local District Societies
and in the Wnancial press, representatives from the
smaller accounting Wrms regularly voiced concerns
over the diluting of ‘core’ accounting competen-
cies, in favour of a more general business or, per-
haps, even MBA-style education. The changes
suggested by Creating the Added Value Business
Advisor (1998), however, were consistent with the
skills changes that subsequent BRA methodolo-
gies have claimed as necessary if ‘traditional’
accountants were going to be capable of becoming
business risk assessors. According to Williams
(2001), by the turn of the century, 25% of the
revised ICAEW training syllabus had become
weighted to matters of business risk and internal
control.
The content of annual Wnancial reports was also
a target for regulatory initiatives that have been
underpinned by a greater focus on issues of busi-
ness risk. In 1998 the ICAEW issued a discussion
document proposing that publicly traded compa-
nies should issue a Statement of Business Risk in
their annual reports (ICAEW, 1998). Whilst mind-
ful of the probability that corporations would not
wish to disclose commercially sensitive material in
such a report, the ICAEW Steering Group, headed
by Robert Hodgkinson (then Chair of the Finan-
cial Reporting Committee and an Arthur Ander-
sen partner) maintained that such a report would
assist Wrms to reduce their cost of capital and
encourage better risk management, as well as
improving accountability to investors (ICAEW,
1997, p. 1). The report drew explicitly upon the
Arthur Andersen Business Audit methodology to
outline various concepts of risk and the diVerent
methods available for assessing risk. SigniWcantly,
the report recommended that as:
“[i]nvestors ascribe more value to company
reporting when it is audited. We believe that,
in principle, the proposed contents of a state-
ment of business risk are veriWable and capa-
ble of being audited.” (ICAEW, 1997, p. 49).
The methodology underlying the new business
risk audit was further reinforced by the report’s
proposal that companies should compile reports of
their business risk for auditors to audit. One conse-
quence of a Statement of Business Risk, however,
is that some of the endeavour of the new audit
would be taken over by the corporation (providing
the business risk information for auditors to then
 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
audit, rather than auditors providing it them-
selves).
A follow-up report in 2000 (No Surprises,
ICAEW, 1999) conveyed the results of a study of
quoted companies on the London Stock Exchange,
claiming that companies already disclosed exten-
sive information about diVerent kinds of risk. No
Surprises re-iterated the call for “better risk report-
ing” by quoted companies, under an overall policy
of the need for there to be ‘no surprises’ for inves-
tors in published Wnancial accounts. The case for
auditors to involve themselves in the call for a new
statement of business risk was re-aYrmed – with
the warning that markets for audit assurance ser-
vices are not closed to outside interests:
“It should be a matter of some concern to
auditors that alternative sources of credibil-
ity might be tapped in future by preparers
and users of annual reports. Auditors do not
have the natural monopoly of the risk assur-
ance business that they might presume.”
(ICAEW, 1999, p. 30).12
Auditing standards are another arena in which
the new audit methodology has been assimilated.
On both national and supra-national auditing reg-
ulatory stages, BRA stimulated the development of
new auditing standards orientated towards the new
methodologies, and which in turn add validity to
BRA as a professional audit practice. For example,
the Audit Risk Project of the International Audit-
ing and Assurance Standards Board (IAASB of
the International Federation of Accountants) was
set up explicitly to integrate the regulation of audit
risk assessments with the design of audit proce-
dures. In October 2002 the IAASB issued four
replacements for previous ISAs that dealt with
Internal Control and Computer Information Sys-
tems (see IAASB, 2002). Whereas previously risk
assessment standards were largely considered a
separate niche issue for regulations and auditing
standards, new standards regulating the quality of
risk and risk assessments are now central compo-
12
However, the report also concludes that auditors are more
likely to ‘come on board’ for the Wnancials reporting of risk if
released from unlimited liability by government regulators
(ICAEW, 2000, p. 50).
429
nents to the objectives and principles governing
Wnancial statement audits, with potentially signiW-
cant implications for audit approaches, skills and
training needs:
“The IAASB believes the proposed ISAs will
increase audit quality as a result of better risk
assessments and improved design and perfor-
mance of audit procedures to respond to the
risks. The improved linkage of audit proce-
dures and assessed risks is expected to result
in a greater concentration of eVort on areas
where there is greater risk of misstatement. In
some cases, this may result in a change to the
audit approach, including the audit proce-
dures performed. In many cases, implementa-
tion of the proposed ISAs will result in an
overall increased work eVort by the audit
team, particularly for new engagements or
when Wrst implemented on continuing
engagements. It is also likely that to imple-
ment the new requirements will require new
skills and competencies, and may increase the
need for specialist assistance on audits. Audi-
tors and their professional bodies will need to
consider the training needs that will result
from the new requirements.” (IAASB, 2002,
p. 3).
The new standards were formally approved and
issued in October 2003 (see IAASB, 2003a, 2003b,
2003c, 2003d). The Explanatory Memorandum to
the audit risk exposure drafts (2002a) stated that
the proposed standards had been inXuenced sig-
niWcantly both by the Wndings and recommenda-
tions of the Joint Working Group5 – which
resulted in the Lemon et al. (2000) publication on
developments in the audit methodologies of large
accounting Wrms – and also those of the US. Public
Oversight Board’s Panel on Audit EVectiveness
(2000). The memorandum also emphasized that
the standards require the auditor to obtain an
enhanced understanding of the entity’s business
and its risks (to the extent that the latter are rele-
vant to the Wnancial statements of the business).
The memorandum, however, did not address
explicitly a new business risk-based auditing model
and reXected, post-Enron, an emerging cautious-
ness towards BRA. Rather, it saw the essentials of
430 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
the audit risk model as remaining the same,
with the proposed standards putting forward sig-
niWcant new requirements and expanded guidance
designed to enhance the auditors’ implementation
of the audit risk model and to improve auditing
performance. In eVect, the standards encourage
and allow (and hence legitimate) the business risk
based approach to auditing but in a framework
which places considerable emphasis on the rigour
of risk assessment at all levels of audit inquiry (and
not just with high-level controls) and requires the
auditor to demonstrate a clear linkage between risk
assessments and audit procedures (see Curtis &
Turley, 2005).
In summary, BRA oVered to the audit industry
and the profession a new form of rationality and
legitimacy for the audit task. It occluded the dis-
tinction between audit and business (or value-add-
ing) services in a seeming harmony of interest
between auditor and corporate management. The
Wxing of BRA into the educational training of
auditors has advanced and regulators have
adopted a form of BRA as the deWning methodol-
ogy of audit for standard setting. Proposals to
incorporate Business Risk as a form of Financial
Reporting are also in train.
However, while BRA methodologies have
become legitimate objects of regulatory action, the
embedding of BRA is not Wnished. In the conclud-
ing discussion we summarise our case for a theory
of the construction of audit techniques and their
co-construction of the audit Welds. We also exam-
ine the tensions that have emerged from the re-
invention of audit, in particular the relationships
of accounting professionals to their institute and to
each other, and we consider some of the ‘objectors’
to BRA and the relationship of the BRA to others
sections of the profession in the post-Enron envi-
ronment.
Concluding discussion: business risk audit and the
post enron audit Weld
“Two former PricewaterhouseCoopers part-
ners have formed a ’new concept’ audit Wrm,
which will focus on helping companies meet
the requirements of the Higgs’ report and
promises to be completely independent of the
company it audits.
According to its founders, Jonathan Hayward and
Richard Sheath, Independent Audit Limited has
been set up ‘in response to the Enron and World-
Com scandals and will provide Wnancial and cor-
porate governance analysis – reporting solely to
[company] boards and audit committees. As its
name suggests, the Wrm says it will ensure that
‘total independence from management is main-
tained’.” (Larry Schlesinger, Accountancy Age,
17th February 2003, emphases added).
Our primary motivation for this paper was the
conviction that the emergence and dissemination
of new audit techniques and methodologies have
not received the attention in academic research
that their signiWcance merits. In particular, it can
be argued that attempts to establish new claims to
knowledge provide valuable opportunities to
study the economic, cultural and social processes
through which such claims emerge and the extent
to which they are linked with attempts to expand
the ‘legitimate’ Weld of professional jurisdiction.
In so doing, the dynamics and tensions that
underlie the markets and institutions of a profes-
sion can become exposed and made readily sub-
ject to analysis. In providing a constructivist
account of BRA technologies, we have argued for
a theory of audit change that recognises (i) the cen-
trality of legitimation processes and (ii) the co-
construction of audit technologies and the audit
Weld.
Auditing activity is the outcome of a complex
conjunction of externalized and internalized prac-
tices and associated constituents, including images
of the Wrm, its traditions and systems, ‘client’ and
‘market’ constructs, the status and rank of audit
within the Wrm, prior training processes and expe-
riences, the incorporation of abstract business
knowledges, the processes through which auditor
performance is assessed, and the regulatory institu-
tions of the profession. It is this constellation of
connected elements that justiWes, in our view, a
Weld level approach to the analysis of audit change.
As we have made clear, audit change is not a sim-
ple, one-sided response to economic factors but is
 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
actively implicated in interventions to construct
(and reconstruct) economic, social and political
relations in the audit Weld into new alignments.
Hence our emphasis upon the co-construction of
technologies and the Weld of their practice. Simi-
larly, we have challenged the view that aspects of
the regulatory process in auditing and accounting
serve as mere constraints on professional practices
and called for recognition to be given to their capa-
bilities to facilitate the mobility of professional
practices by standardizing and legitimizing (new)
technologies.
Although a number of the larger Wrms have
tended to seek to establish the argument that the
shift towards more risk based approaches is a
response to ‘demand’ (e.g., Elliott et al., 1999), our
perspective argues that the process of audit genera-
tion is more appropriately viewed as a process of
co-construction of technologies and environments.
From such a perspective, new business risk audit
techniques, and their associated discourses and
rationales, can be seen as being intertwined with
the status accountants and auditors perceive of
themselves and their craft, and with their identity
as auditors or, rather, as ‘business advisers’. A
number of the larger Wrms have sought to bring
into play these new methodologies through their
auditing practice, to renegotiate the terms of their
professional status and widen their jurisdictional
claims over other areas of expertise. The impera-
tives for BRA are in our view reXective and consti-
tutive of the organizational tensions in play within
the larger Wrms. The promotion of BRA is not a
market driven, transformation in the identity of
the Big Six/Five/Four, as they seek to move from
being regarded as professional service (and not
just, audit) Wrms (Greenwood, Rose, Cooper, Hin-
ings, & Brown, 2002). Rather, their strategy to pro-
mote a professional identity of accountants as one
closely aligned to the notion of a ‘business adviser’
has undermined the status of audit divisions – to
the extent that the business risk ‘re-invention’ of
audit in part oVered a welcome source of internal
legitimacy (and potentially enhanced proWtability
margins) to those providing audit services in such
Wrms. Further, in serving to occlude the distinction
between audit and business (or value adding) ser-
vices in an apparent harmony of interests between
431
auditor and corporate management, BRA has not
so much marginalized audit independence (Jeppe-
sen, 1998; Power, 2000) as recast the audit as a pro-
cess of mutual interest between the business
director and the auditor (Power, 2000). Such pro-
cesses are supported by: the incorporation of BRA
in the educational training of auditors; proposals
to incorporate more business risk reporting in cor-
porate Wnancial reports; and by international regu-
lators accommodating in their auditing standards
the essential spirit of BRA as the deWning method-
ology of audit.
However, while BRA methodologies have
become legitimate objects of regulatory action,
post-Enron, the story of BRA looks less stabilized –
with the claims and anticipation that developments
in risk-based audit methodologies represented
enhancements in the knowledge base and opera-
tional eVectiveness of auditing having taken
more of a back-seat. The accounting profession,
rather than setting new audit agendas, has had to
defend itself from numerous allegations made by
business, media, academics, regulators and even
some auditing practitioners that the ‘independent’
external audit (and the associated regulatory
regime) is Xawed (Dettmer, 2002; Wyatt, 2003;
Levitt, 2002, 2004; Hayward, 2003; ZeV, 2003a,
2003b).
The accountancy bodies in the UK attempted to
deWne notable corporate failures, such as Enron
and WorldCom, as peculiar to the US environment
and a so-called ‘cook-book’ approach of US
GAAP. Yet the swift response of the US Congress
in passing the Democrat-inspired Sarbanes-Oxley
Act in July 2002 has not left the UK profession,
and its self-styled principles-based approaches to
regulation, immune from debates proposing the
banning of consulting services, the need for com-
pulsory auditor rotation, more detailed audit
reporting and other regulatory amendments
designed to address perceived Xaws and failings in
auditor independence. The 2002 Sarbanes-Oxley
Act in the USA is also having a constraining eVect
on what is possible and permissible in terms of
BRA approaches. The Sarbanes-Oxley Act prohi-
bits a registered public accounting Wrm from per-
forming certain non-audit services for a public
company client for whom it performs Wnancial
432 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
statement audits. Such prohibited non-audit ser-
vices include internal audit outsourcing services
and Wnancial information system design and
implementation. From November 2004, Section
404 of the Sarbanes-Oxley Act has required US
companies covered by the Act to assess the eVec-
tiveness of their internal controls over Wnancial
reporting and state in their annual reports whether
the controls are operating eVectively. The com-
pany’s external auditor must also evaluate the in-
house assessment and render an independent
report on it. Alongside more wide-ranging examin-
ations of corporate governance and the role of
non-executive directors (Higgs, 2003), the UK
audit industry clearly remains under the scrutiny
of government, corporate directors, investors and
the press (DTI, 2003).
Such developments have had an impact on the
promotion of BRA – particularly in the sense that
the required emphasis on internal control systems
and the need to monitor degrees of compliance
suggests some clear similarities with the type of
audit approaches predominant in the late 1970s
and early 1980s. While it is still quite common for
larger Wrms to project themselves as business
advisors and to reject the label auditor as a
descriptor for their work, it is clear from our inter-
views that support for BRA, post-Enron, is no
longer unanimous (even across the larger Wrms in
the UK). Abbott has claimed that “internal stratiW-
cation in professions both generates system distur-
bances and absorbs them” (1998, p. 120). In this
respect, techniques such as BRA have the potential
for creating and revealing some of the tensions that
reside in the internal diVerentiation and stratiWca-
tion of the profession. Despite recent regulatory
developments in the arena of international audit-
ing standard setting that have accommodated
BRA approaches, and evident assessments that
they represent a major audit methodological inno-
vation (see Eilifsen et al., 2001; Lemon et al., 2000),
the future of BRA methodologies in the UK
appears uncertain post.
The future of BRA is likely to rest signiWcantly
on how the concept of audit is both promoted by,
and reconciled across, the profession. In our
account of the rise of BRA, the contribution of
smaller accounting Wrms is notable by its absence;
BRA is essentially a large Wrm phenomenon with
the most visible evidence of any diVerence of opin-
ion across the small and larger Wrm audit arena
being over attempts to re-structure the process of
educating prospective accountants and auditors.
From the research we have undertaken to date, an
additional source of tension rests in competing
‘concepts’ of audit and responsibilities of auditors
held by the small and medium Wrm practitioners
and those evident amongst auditors in a number of
the larger audit Wrms (Khalifa, Humphrey, Robson,
& Sharma, 2006). Small Wrm practitioners claim
their approach to work and the type of services
provided to clients are more integrated and cohe-
sive. Small practitioners assert that the BRA philo-
sophy (creating Wrm value) reXects a working
model that they had eVectively been utilizing on
their audits of owner-managed businesses – the old
adage of “knowing the business” – where their
audit was usually coupled with accounts prepara-
tion and tax advice. Yet they considered that ques-
tions confronted the new audit approach and
underlying business risk model being applied on
the audits of larger, multinational corporations.
Where there exists a fundamental distinction
between owners and managers and clear issues of
public responsibility and accountability, in their
opinion, the role of the auditor should not be based
so centrally on satisfying the business demands of
managers. Indeed, evidence of the concern with the
suitability of contemporary audit approaches has
seen some former external auditors demanding that
auditors “re-connect with shareholders” (see
Acher, 2002) and, as the quotation opening this
conclusion attests, some audit Wrms essentially pro-
claiming as a ‘new audit concept’ the commitment
and vision of an audit Wrm concerned primarily
with auditor independence and making the case for
a need class of public interest auditors or evalua-
tors (for more details, see Hayward, 2003).
Post-Enron, there is also evidence that re-estab-
lishing the credibility of audit is seeing a reversal in
low-balling strategies, with the charging of higher
audit fees and the re-emergence of a discourse of
audit quality and client risk (Fisher, 2004). It is also
noticeable for example that the second follow up
report to the ICAEW’s Financial Reporting of Risk:
Proposals for a Statement of Business Risk (1998),
 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
No Surprises: Working for Better Risk Reporting
(ICAEW, 2002), has no mention of audit and the
role of auditors in assessing the proposed State-
ment of Business Risk. This might indicate a draw-
ing back. A similar conclusion could be drawn, as
we have noted earlier, with respect to the IAASB’s
audit risk standards, in the sense that they encour-
aged rather than mandated the business risk based
approach to auditing and lent continuing support
to the more traditional, audit risk models. The
increasing emphasis upon mechanisms of corporate
governance and the role of non-executive directors
might also paradoxically oVer a challenge to audit,
signalling a lack of conWdence in the ability of audi-
tors to deliver whatever it is audit is meant to
deliver – an issue that, as we have seen with the
audit expectations gap debate, remains contested
(see Humphrey, Moizer, & Turley, 1992; Hum-
phrey, 1997; Porter & Gowthorpe, 2004).
Our exploration of the BRA technique is, of
course, partial – we have not, as yet, studied BRA
in action and whether the impacts of the methodol-
ogy match the rhetoric. With respect, for example,
to the now defunct Arthur Andersen, ToZer
argued that Andersen’s form of BRA, Business
Risk, “didn’t really catch on” (ToZer & Reingold,
2003, p. 133) and that enthusiasm for the new
methodology was much less apparent in European
partnerships than in the US. Although BRA meth-
odologies have dominated audit discourses over
recent years, there is much scope for further
research to explore competing practitioner views
of, and experiences with, BRA and to consider the
resulting implications for the status and identity of
the auditing profession. This has become most evi-
dent, with one of the Wrst detailed case studies of
BRA methodologies in action clearly questioning
the extent to which such methodologies have
proved capable of generating additional audit and/
or non-audit fees and succeeded in getting audit
teams to drop ‘tried and trusted’ auditing practices
for more ‘modern’ variants (Curtis, 2003; Curtis &
Turley, 2005). It would also be helpful to under-
stand more of the role of key academics, such as,
perhaps, Solomon and Knechel, as ‘carriers’
(Strang & Meyer, 1993) of strategic analysis and
business risk concepts, and new notions of audit
between the professional service Wrms.
433
Overall, the examination of audit practices in
context – the study of auditing in action – is lack-
ing (see Power, 2003; Beattie, Brandt, & Fearnley,
2001) and far less developed in comparison to such
studies of practice in professions such as law and
medicine (Abbott, 1988; Becker, Gerr, Hughes, &
Strauss, 1961; Freidson, 1974, 1986, 1994). With
regard to BRA it remains too early to judge
whether it will pass as a temporary ‘fashion’ or
whether further reWnements to audit methodology
may signal a tactical distance from the ‘value
added’ rhetoric (Abrahamson & Fairchild, 1999;
cf. Bell, Peecher, & Solomon, 2005). Indeed, with
the various attempts to shift from audit to business
advice, it may be that the success or failure of the
BRA methodology will prove critical both to the
future strength/viability of the market for auditing
services and the social signiWcance of the auditing
function. It could be argued that the auditing pro-
fession is at a crossroads – but it is not the typical
one portrayed in the media, centred on the need for
auditors to become more active in detecting fraud,
closing expectations gaps and preventing corpo-
rate collapses. We believe it is likely to be more
socially productive to develop understanding of
the practical implementations of today’s audit
methods (see Curtis, 2003; Eilifsen et al., 2001), of
the ways in which auditors construct themselves
within the Wrms, and the extent to which perfor-
mance measurement systems and cultural percep-
tions as to the status of auditing impact on audit
practices.
Acknowledgements
An earlier draft of this paper was presented at
the Annual Congress of the EAA, Sevilla, May
2003, the Centre for the Analysis of Risk and Reg-
ulation (CARR), Centre on Regulation and Com-
petition (CRC) and Aston Business School Joint
Workshop on Risk Regulation, Accountability and
Development Workshop, June 2003, the Workshop
on Auditing in Action, LSE, February 2004 and
seminars at the University of CardiV, October 2003
and HEC, Paris, May 2006. The authors would
like to thank participants at those events and,
also, David Cooper, Mahmoud Ezzamel, Nicolas
434 K. Robson et al. / Accounting, Organizations and Society 32 (2007) 409–438
Mangin and Michael Power for their constructive
comments. The Wnancial support of the Federal
School of Business and Management, University
of Manchester/UMIST and the ESRC (23-0977)
facilitated the preparation of this paper, and is
gratefully acknowledged.
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