Revealing Oz: Institutional Work Shaping Auditors' National Office Consultations*

Abstract

National office consultations (NOCs) are a mechanism intended to enhance audit quality, consistent with the logic of professionalism inherent in the audit profession. Yet research indicates that the competing logic of commercialism has become institutionalized in audit firms. We examine how the coexisting and conflicting logics of professionalism and commercialism manifest themselves in the current NOC dynamic. Specifically, we interview 22 highly experienced Big 4 audit firm partners to investigate how key actors engage in institutional work that creates, maintains, and disrupts the influence of professionalism and commercialism in NOC practices. We observe a swing of the pendulum: in the wake of SOX, audit firms adopted professionalism‐based practices which involved creating a more authoritative, “Oz”‐like national office identity, while in recent years key actors' institutional work reconfigured NOC practices and placed a renewed focus on commercialism. Our findings bring to light a number of implications that offer opportunities for future research. Although the new client‐inclusive culture aims to improve audit outcomes by encouraging consultations and fostering open dialogue with clients, it also exposes the national office to relationship‐management pressures and client‐service demands. Thus, practices developed to uphold professionalism also created a channel for commercialism‐focused practices, leading to unintended second‐order effects.

The ICFR process: Perspectives of accounting executives at large public companies

“…Asking this allowed us to better understand what ICFR guidance is available to management and influences its efforts. Executives' responses provide support to the untested notions suggested by prior research that auditors' own policies (Christensen et al, 2015;Epps & Messier Jr., 2007), consultations with the national office (Aghazadeh et al, 2021), and presence of a material misstatement (Asare et al, 2013) comprise the primary justifications of auditors' conclusions on an ICFR deficiency. With respect to authoritative guidance, executives' responses reveal that auditors use past PCAOB inspection findings more than the SEC's guidance or the PCAOB's practice alerts and that they are least likely to refer to the COSO framework itself.…”

Auditors' Professional Identities: Review and Future Directions*

“…Their technical expertise is valued both in ensuring appropriate decisions are made by engagement partners and in defending such decisions from external inspectors. Similarly, Aghazadeh et al (2021) note the increasing importance of National Office Consultants in helping engagement teams address complex audit and accounting issues, allowing them to both increase audit quality and meet the regulatory burden of PCAOB inspections. Such a re‐focus on technical expertise may well have led to a change in fortune for technical‐focused professionals, allowing them to rise to the partner level more easily than suggested by some prior studies.…”

The Big 4 Under Pressure: Scanning Work in Transnational Fields*

“…By emphasizing these broader struggles in the transnational field, we complement existing insights on the kinds of internal knowledge and institutional structures defining and reshaping global accounting firms' professional practices (Aghazadeh et al 2020;Greenwood and Suddaby 2006;Spence et al 2015). Specifically, we focus on the conflicts over tax transparency that have emerged between global accounting firms, MNCs, politicians, and transnational regulators, as well as from expert activists.…”

“…At its simplest, corporate tax transparency is the practice of corporations providing available information about their tax affairs to stakeholders and authorities (cf. Aghazadeh et al 2020). Transparency also gives rise to corporate risk, both financial and reputational, as exposure empowers outsiders to pursue effective challenges to multinational tax practices (Joshi et al 2020;Overesch and Wolff 2021).…”

“…Today, the range of professional actors involved in transnational contexts is more heterogeneous and ephemeral (Henriksen and Seabrooke 2016). Activists and critical politicians, in particular, have been able to introduce new lines of action (Free et al 2020), contributing to field‐level change from a peripheral starting point by forcing core professional groups to assess their positions (Aghazadeh et al 2020; Becker et al 2020).…”