Behind Closed Doors: What Company Audit is Really About

Abstract

England, 2001 (ISBN 0333747844, 309 C xxii pp. £45) With the auditing profession under the political microscope as never before, this book could not have been published at a more appropriate time. The book presents evidence of many unseen aspects of the auditor-client relationship, with two main themes emerging, 'earnings quality' and auditor independence. The work's original contribution takes the form of (lightly) edited transcripts of interviews with the Finance Directors and audit engagement partners of six UK public-listed companies and insightful analyses of the contexts, characters and issues involved. The interviewees had been selected because they had admitted to experiencing auditor-client interactions over significant accounting issues. The sort of evidence produced in the concluding part of the book is badly needed as it provides some balance to the highly charged debate following the Enron collapse. In such an environment, there is a real high risk that politicians, institutes and even accounting firms will favour knee-jerk reactions that will prove not only expensive but also ineffective in the long term. This book, which is introduced by Sir David Tweedie and which has been written by three academics respected for their appreciation of practical issues, deserves a place on the shelves of every auditing trainer/lecturer.The first part of the book contains three chapters setting the scene. The first outlines the regulatory environment, the second identifies a number of factors in the auditor-client relationship and the third describes the questionnaire used by the authors to obtain the views of directors and auditors on the frequency with which 46 audit and audit-related issues are the subject of inter-party contention.The second part of the book contains the case study material from the interviews themselves. The section begins with an introduction to the nature of inter-party negotiation before describing how the sample companies were selected, and then going on to present a brief overview of the cases and matters of contention. Each case study is awarded a separate chapter.It is difficult to summarise the nearly 200 pages of transcripts and discussion since such a wide range of issues, contexts, characters and outcomes is covered. For example, on the 'buyer type', that is, Finance Director, side of the business equation, four categories are identified, ranging from the 'grudger' who sees little value in the audit to the 'resource-seeker' who wants to get the most out of the audit. On the seller, that is, audit partner, side, the range goes from 'crusader' (perhaps an unfortunate choice of label in the context of current cultural sensitivities) with a high degree of professionalism to the 'truster' who is not sufficiently skeptical.However, the third section of the book attempts not just to summarise but to theorise about the auditor-client interaction by analysing the outcome of negotiations as a function of the quality of the auditor-auditee relationship and of the ease of obtaining agreement...

Rethinking bank business models: the role of intangibles

“…Moreover, the clearly specified operational procedures of grounded theory data analysis can enhance construct validity of a qualitative study (Pandit, 1996). Based on previous work by, among others, Beattie et al (2001), Locke (2001), Parker and Roffey (1997) and Strauss and Corbin (1998), the interview data was analysed through five stages: familiarisation, reflection, open coding, axial coding and selective coding. All the case data was manually analysed due to the consideration that grounded theory is an "interpretive process" (Suddaby, 2006: 638) between the researcher and the data, and the researchers' theoretical sensitivity tended to be very important in all stages.…”

Auditor–Client Interactions in the Changed UK Regulatory Environment – A Revised Grounded Theory Model

“…The outcome of high-level auditor-auditee discussion and negotiation issues (auditorclient interactions) is central to this debate. Beattie et al (2001) developed a grounded theory model of these interactions in the 1997 UK setting. This paper reports on a field study of 45 interactions in nine case companies in the radically changed post-SOX regulatory environment.…”

The consideration of environmental matters in the audit of financial reports

“…However, Power (2003) and Beattie, Brandt and Fearnley (2001) observed that overall, the study of auditing in action is lacking. Additionally, Humphrey (2008) agreed with Power's (2003) assertion that auditing in practical settings and its role in producing legitimacy were under-documented and under-researched.…”

“…They demonstrated that many authors (Beattie et al, 2001;Humphrey, 2008;Power, 2003) have strongly criticised the current approach to audit research, which is predominantly quantitative and focused on testing the validity of hypotheses which, as Gendron (2006) pointed out, are often removed from the realities of auditors' practice. Commentators have criticised current audit research as having accomplished little in bridging the knowledge gap in 'audit technologies' (Hopwood, 1996;Humphrey & Moizer, 1990;Jeppesen, 1998), and critiqued the ways in which professional audit work, competence and skill are constructed and reproduced across countries (Cooper & Robson, 2006).…”

“…Other authors have observed a serious gap between the study of auditing in action and in practical settings (Beattie et al, 2001;Humphrey, 2008;Power, 2003), and the role of auditing in producing legitimacy (Power, 2003). Hence, Humphrey (2008) strongly encouraged research that might lead to a better understanding of the realities of audit practice in its broader social, organisational and regulatory contexts.…”