Investigating the Regulation of Audit Quality in Canada: Complexity, Emotions, and Expertise
Couchoux, Oriane
I investigate the impact of regulation around audit quality in Canada on the work and perceptions of the stakeholders directly affected by these rules. More specifically, I examine auditors’ and audit committee (AC) members’ respective experience with: 1) National Instrument 52-108, which created the Canadian Public Accountability Board (CPAB) responsible for independently overseeing and inspecting auditors of Canadian reporting issuers; and 2) National Instrument 52-110, which notably sets requirements for the responsibilities of ACs as well as for the level of requisite expertise of AC members.
Based on 48 interviews conducted with audit managers, audit partners, and AC members of Canadian reporting issuers, my analysis reveals the empirical depth of the Canadian audit regulation by shedding light on the actors, the processes, and the tensions embedded in the changes made to the environment of public companies. In my first study, I build on institutional theory to examine both the pressure brought by independent inspections and the changes implemented by audit firms in response to this added pressure. In my second study, I draw on Bourdieu’s scholarship to assess the effects of regulation and inspections on auditors’ experience of partnership and career trajectories. In my third study, I use a social constructivist approach to knowledge to analyze the way AC members perceive and enact their expert role in practice.
My findings show that regulation has brought its share of complexity at the institutional, organizational, and individual levels. The new regulations have shaken the field by modifying the distribution of expert authority and status in the financial reporting system, which triggers a wide variety of emotional reactions. In this major overhaul, CPAB regulators have gained influence while audit partners have experienced a significant disjunction because of both regulators’ scrutiny and the renewed focus on the technical aspects of auditing. For their part, AC members have gained in expert status but struggle with uniformly embodying their expert role. Hence, AC members adopt different styles of oversight that do not require the same effort, knowledge, and focus, resulting in heterogeneous governance practices on ACs.
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