Sarbanes-Oxley: An endangered specie?

Whistle-blowing by external auditors: Seeking legitimacy for the South African Audit Profession?

“…Accordingly, the efforts of the profession alone to respond to various corporate failures, and more recently the global financial crises, are not enough (Carcello et al, 2011;Bayou et al, 2011;Cagnin et al, 2011;Odendaal and De Jager, 2008;Riotto, 2008;Unerman and O'Dwyer, 2004).. Delegitimized structures are, therefore, 'quarantined' and monitors put in place by independent regulators to prevent subsequent failures (Suchman, 1995). The promulgation of SOX, with mandatory audit quality provisions (Riotto, 2008;Sy and Tinker, 2008;Bronson et al, 2011;Cullinan et al, 2012); formation of the PCAOB (Mosso, 2003;Kaplan and Williams, 2012), revocation of Author Anderson's license (Unerman and O'Dwyer, 2004); and calls for separation of non-assurance practice from existing audit firms (Wines, 2012;Bazerman and Moore, 2011;European Commission, 2010) serve as examples. In summary, in the USA, UK, France, Italy, Austria, Canada, Germany, Australia and New Zealand, governments and regulatory bodies are responding to a perceived crisis of legitimacy in the audit profession by moving away from a system of self-regulation to one where audit practice is increasingly subject to exogenous control (Bronson et al, 2011;European Commission, 2010;Canada et al, 2008;Laughlin, 2007;Nel, 2001;Konar et al, 2003;Kaplan and Williams, 2012).…”

“…As discussed in Section 2, corporate scandals have shaken the confidence vested in the audit profession and its self-regulatory systems. Compliance with the RI provisions by audit firms may be part of the process of conforming to societal ideals or norms which, increasingly, appear to favour external regulation over the traditional self-regulatory approach (see, for example, Konar et al, 2003;Nel, 2001;Bazerman and Moore, 2011;Sy and Tinker, 2008). For example, Expert 3, discussing the use of more arms-length regulation for the audit profession, felt that:…”

“…As summarised by Konar et al (2003, p. 28), when it comes to the legitimacy of the South African capital market system, including the audit process, 'it is important that South Africa be seen to be in step with international developments regarding corporate governance' (Konar et al, 2003, p. 28). Through achieving a sense of parity with developments in other jurisdictions, s45 of the APA appears to conjure up confidence rooted in the fact that South Africa has not simply maintained a self-regulatory status quo while, internationally, external regulation is championed (for examples see: Bazerman and Moore, 2011;Gavious, 2007;Sy and Tinker, 2008;Konar et al, 2003). As a result, almost all users pointed to the fact that formalising the duty to blow the whistle when MIs were replaced with RIs; broadening the reporting duties; clarifying that the RI provisions are under official control of an independent regulator; and reminding constituents of the existence of this legal duty capitalises on a sense of mimetic isomorphism that fortifies the sense of comprehensibility and generally accepted 'correctness' of the auditor's duties (U7).…”

South African Auditors Blowing the Whistle without Protection: A Challenge for Trust and Legitimacy

“…Prior scholarly works have argued that legislation may play a meaningful role in enhancing the legitimacy of the external audit process (Kaplan & Ruland, 1991; Suchman, 1995; Power, 2003; Sy & Tinker, 2008). What the existing literature has largely ignored is the converse.…”

To report or not to report

“…This is of particular concern given the assertions of Sy and Tinker (2008), Gavious (2007), Pesqueux (2005), O'Dwyer (2004), andMcMillan (2004) that the regulation of the profession ought to aim at addressing the risk of self-interested practitioners ignoring their civic duties.…”