Dynamics and Limits of Regulatory Privatization: Reorganizing audit oversight in Russia

Abstract

Accounting and auditing are often cited as key sites where business regulation has been privatized, globalized and neoliberalized. Yet, these sites have also undergone a legitimacy crisis in recent years, marked by a shift from self-regulation to increased public oversight. This paper investigates these developments by reference to the evolution of a public/private audit oversight regime (audit of the auditors) in Russia. We show how, in the early stages of post-Soviet reforms, old state-administered forms of financial oversight were replaced with market-oriented arrangements (peer reviews) offered by newly founded private professional accountancy associations as a service to their members. Fifteen years later, the process of regulatory privatization culminated in a reinvigoration of public authority. Our longitudinal analysis highlights the pivotal role of the state in the liberalization of governance by showing how audit oversight privatization was not only enabled by, but also provided a condition for, the strengthening of government actors. We introduce the term ‘legislative layering’ to denote the mechanism that enabled public actors to redeploy themselves in the face of the rising market logic to ensure continuity in their regulatory objectives.

New Roles of Government in the Governance of Business Conduct: Implications for Management and Organizational Research

“…In terms of theoretical grounding, the contributions are equally diverse, ranging for instance from Foucauldian governmentality in the context of the Chilean mining industry (Maher et al, 2019), to transnational institutionalism and regulation theory (Boghossian & Marques, 2019), and an in-depth conceptual analysis of political science theories (Eberlein, 2019). Methodologically, two conceptual studies (Eberlein, 2019;Schneider & Scherer, 2019) are complemented by four qualitative studies, some of the latter drawing on a longitudinal research design to explore how government-business dynamics evolve over time (Alon et al, 2019;Hamann, 2019).…”

“…In the context of privatization, globalization and liberalization in the wake of the collapse of the USSR, and the associated questioning of the power of government, Alon, Mennicken, & Samsonova-Taddei (2019) investigate the evolution of Russia’s audit oversight regime (the “audit of the auditors”). On the basis of their longitudinal study using a variety of qualitative data they conclude that there has been a shift from self-regulation (mainly through member peer reviews offered by new private accountancy associations) to increased public oversight.…”

Protectionism through legislative layering: Implications for auditors and investors

“…As of 2016, these, in declining order of total revenues (audit and consulting), were BDO-Unicon, Grant Thornton-FBK, Nexia-Nexia CIS, FinExpertiza, Crowe Horwath-Rosekspertiza, and RSM-RSM Rus (RA Expert Statistics, 2016). In contrast to the Big 4, which opened and developed their branches in Russia during the late 1980s and early 1990s (Alon et al, 2019), these firms are the product of partnerships between foreign and local auditing groups and were not the target of import substitution efforts.…”

Filling the Gap in White-Collar Crime Detection Between Government and Governance: The Role of Investigative Journalists and Fraud Examiners

“…Actors in auditing and compliance functions in business and public enterprises seem to have a preference toward formal rules and guidelines in the form of window dressing rather than detection of potential offenders (Desai, 2016). Alon et al (2019) argue that accounting and auditing functions have undergone a legitimacy crisis in recent years. At least part of the answer why there is a preference for formal rules and guidelines is the task of confirming rather than questioning figures in financial statements, and conflicts of interest between auditing and the provision of accounting and management consultation.…”