Conflict, Compromise and Conquest in Setting Auditing Standards: The Case of the Small Company Qualification

The consideration of environmental matters in the audit of financial reports

“…Chandler (1997) stated that audit standards do impact auditing practice, and the experiment conducted by Frazer and Lin (2004) confirmed the statement. However, much of the critical literature argued that audit standards have been ineffective, and that they are mere articulations of existing auditing practice, driven by professional self-interest (Humphrey & Moizer, 1990;Humphrey et al, 1993a).…”

“…The structure for audit standard-setting and its enforcement differ significantly from that of accounting standard-setting. Across countries, external independent bodies regulate the accounting standard setters (Brown, 2001), but auditing standard-setting is selfregulated by the accountancy professional bodies themselves (Baker, 1993;Chandler, 1997;Willmott, Cooper, & Puxty, 1993). When audit standards were first promulgated, the objective was to improve the quality of audits by disseminating information about audit best practices (McEnroe & Nikolai, 1983).…”

“…Chandler (1997) explained that a legitimation crises occurs when the accountancy profession is perceived to have broken the (unwritten) code of conduct in protecting the public interest. At such times, the accountancy profession must respond to public concerns or risk losing its own legitimacy in the form of its authority to act for the public interest (Pasewark et al, 1995).…”

“…Byington and Sutton (1991, p. 318) added that the mere issuance of published standards could "provide the perception of significant change to external parties", even though audit practice did not change (Baker, 1993). This led Chandler (1997) to believe that the practice of auditors as a profession might not be the same as that deduced by others who read and relied upon the audit standards; and also led Byington and Sutton (1991, p. 319) to suggest that individual auditors might claim to carry out audits in accordance with audit standards whilst actually performing a below-par service". Hence, these constituted examples of 'ceremonial conformity', enactments that give the appearance of action without the substance (Ashforth & Gibbs, 1990).…”

“…Empirical studies presented in the preceding sections raised many questions about audit standards and audit guidance statements: whether the promulgation of audit standards is a significant legitimation strategy (Nue, 1991); whether they are perceived as reflecting ideas that inform audit methodologies and a body of knowledge to justify the claims of professional expertise and audit practices (Curtis & Turley, 2007); whether they are regarded as symbols creating illusions which guide cognition and legitimize acceptance through the business community (Mills & Bettner, 1992;Pentland, 1993); whether their mere issuance "provides the perception of significant change to external parties" even though audit practice did not change (Baker, 1993); whether the practice of auditors is the same as that deduced by those who read and rely upon the audit standards or guidance statements (Chandler, 1997); whether "they are merely codifications of established practices rather than the active pursuit of high professional standards and the protection of the public interest" (Humphrey et al, 1992, p. 148); whether the written content of audit standards and guidance statements "is sufficiently vague and ambiguous to prevent detailed scrutiny" (Lee, 1994, p. 32). These questions may be asked similarly in this research, as they are also relevant to the current research topic.…”