Auditing in Action

in association with the University of Manchester|

February 2004

The ESRC workshop Auditing in Action, organised by Michael Power and Christopher Humphrey (University of Manchester), brought academics and practitioners together to discuss a range of issues about the audit process, particularly pertinent in the wake of the apparent failure to detect a large fraud at Parmalat. 

The papers presented were all field studies of auditing, and two contributions dealt specifically with the business risk audit (BRA) model. Christopher Humphrey (with Rihab Khalifa (LSE) and Keith Robson (UMIST) argued that BRA was much more than a technical innovation and was part of a repositioning of the professional identity of auditors as advisers and consultants; a process which was undermined by the collapse of Enron. Robert Knechel (University of Florida) traced the history of risk-based auditing, arguing that it was born in a climate of cost pressures on auditors. 

There was a lively panel session discussing the future of auditing, led by Jonathan Hayward (Independent Audit), Martyn Jones (Deloitte), and David York (ACCA). Auditing is an essential resource for regulatory systems and in the wake of Enron and Parmalat pressures for the reform of auditing have been great. However, the technical dimension of auditing has always been relatively immune from these pressures, changing slowly, and often regarded as a 'black box' by regulators. It was argued that this was set to change with the development of new standards by the International Federation of Accountants. Some practitioners expressed concern that new regulatory arrangements could change the incentives to audit, leading to an undersupply of good auditing; but this market failure scenario was doubted by others. 

This discussion was followed by two detailed studies of the audit decision process in Scandinavia (Stig Westerdahl, Mid Sweden University; Peter Ohman and colleagues from Mid Sweden University, Lulea University of Technology and the University of Oslo). Finally, Jean Bedard (Laval University) presented empirical work on how audit committees construct themselves as effective and credible bodies in organisations.

Please follow the links for the programme and papers| for this event.