accounting, professions and regulation-locating the sites of professionalization

So

rDavid J. Cooper a,, Keith Robson b

a School of Business, University of Alberta, Edmonton, Alta., Canada T6G 2R6b CardiV Business School, CardiV University, CardiV, CF10 3EU Wales, UK

Abstract

This review paper argues that the institutions and sites of professionalization projects and regulatory processes mat-ter. The institutions and locations where regulation takes place aVect both the outcome of the regulatory process and thelegitimacy of the rules and practices produced. Changes in regulatory processes aVect opportunities for democratic con-trol and legitimacy. A common position in the accounting literature is to examine both the process of professionaliza-tion and accounting and audit regulation within and around professional associations and related organizations, such asstandard setting bodies and regulatory agencies. We argue that professional Wrms are increasingly important in profes-sionalization and regulatory processes and have not received the attention that they warrant: an examination of themulti-national professional service Wrms (currently known as the Big 4) can enhance an understanding of professionali-zation and professional regulation. We suggest that these are important sites where accounting practices are themselvesstandardized and regulated, where accounting rules and standards are translated into practice, where professional iden-tities are mediated, formed and transformed, and where important conceptions of personal, professional and corporategovernance and management are transmitted. 2006 Elsevier Ltd. All rights reserved.

Introduction

Accounting rules and accepted practice aVectnot just how resources are produced and distrib-uted in an economy, but they aVect what is deemed

and what is deemed to be irrelevant to an organiza-tional account. The inXuences on these rules(including how they are produced, which practicesare recognized and what is seen to matter) and theprocesses by which these rules are seen as legiti-Accounting, Organizations and

Accounting, professions and of professio0361-3682/$ - see front matter 2006 Elsevier Ltd. All rights reservedoi:10.1016/j.aos.2006.03.003

organizationally and socially rational and valuable,

* Corresponding author. Fax: +1 780 492 3325.E-mail addresses: [email protected] (D.J. Cooper),

[email protected] (K. Robson).ciety 31 (2006) 415444

www.elsevier.com/locate/aos

egulation: Locating the sitesnalizationd.

mate, have been important areas of accountingresearch. A signiWcant emphasis has been on therole of accountants themselves in producing rulesand determining the practices of calculation andaccountability. Research on accountants and their

a416 D.J. Cooper, K. Robson / Accounting, Org

professional associations addresses how and whyaccounting and accountants have become a power-ful social and economic force in society, and howand why they have been imbued with such inXu-ence and status. In short, research on the account-ing profession and its regulatory practices isimportant for understanding modern society.

The sites of professionalization projects and reg-ulatory processes also matter (Martinez Lucio &MacKenzie, 2004). The agencies where regulationtakes place aVect both the outcome of the regula-tory process and the legitimacy of the rules andpractices produced. Changes in regulatory organiza-tions (e.g., from professional committees controlledby accountants to standard setting bodies con-trolled by quangos or government agencies to transnational agencies controlled by large corporations,including private accounting Wrms) aVect opportu-nities for democratic control and legitimacy. Sincethe 1980, we have seen a shift in institutional justiW-cations such that accounting regulatory institutionsappear to have greater legitimacy if they facilitateand support capital markets (Engelen, 2002) ratherthan state agencies, who may be interested in sup-porting other social groups and institutions.

Professionalization processes are also inXu-enced by their institutional alignment. How practi-tioners come to see themselves, their identity asindividual, public sector, or corporate accountantsand auditors, and what this means in terms of theirallegiances and concerns, inter-relate with regula-tory processes and impacts how rules are opera-tionalized. Accountants working in industry have adiVerent sense of their responsibilities than thoseworking in large Wrms, who again have diVerentvalues than those who work in smaller publicoYces or those in the public, voluntary or commu-nity sectors (Hastings & Hinings, 1970). How pro-fessional organizations make claims to speciWcactivities and expertise, and the nature of theclaims they make, are also inXuenced by their his-tories, allegiances and struggles with other occupa-tions and economic institutions. If auditors seetheir role as being to serve their managerial clients(rather than, for example, the public or investors),then this aVects what they regard as legitimate anduseful knowledge, and what the appropriate

actions should be if they discover fraud or corrup-nizations and Society 31 (2006) 415444

tion; if accountants oVer tax avoidance schemes,then they are likely to favour and promote tax pol-icies which favour their clients.

In the Wrst two sections of this paper, prior workon professionalization and on accounting regula-tion is reviewed, with an emphasis on what we seeas useful lines of future enquiry in an era ofincreasingly dispersed processes of professionaliza-tion and modes of regulation. In accordance withour view that there are other important sites andinstitutions for the regulation of accounting prac-tice, and the construction and legitimation of theaccounting professional, in the third section of thispaper we argue for increased examination ofaccounting Wrms, and how this can enhance anunderstanding of professionalization and profes-sional regulation. We focus on one crucial site: themulti-national business (professional) serviceWrms (currently known as the Big 4).1 These areimportant sites where accounting practices emerge,become standardized and regulated, whereaccounting rules and standards are translated intopractice, and where professional identities aremediated, formed and transformed. A focus onWrms also means that we can work with theassumption that these Wrms are motivated by proWtand capital accumulation, and we can avoid whatare often distracting debates about whetheraccountants and professional organizations areconcerned with the public interest (MacIntosh &Shearer, 2000). While questions of how publicinterest and professional vision are deWned andunderstood by accountants are indeed important(Fogarty, RadcliVe, & Campbell, 2006; Willmott,Cooper, & Puxty, 1993), recognition of the proWtmotive in Wrms enables an analysis that is not pre-occupied with issues of professional legitimacy andself-understandings.

Before proceeding, there are a few issues to clar-ify. First, this paper oVers no new empirical mate-rial on the evolution of the accounting professionor changes in the regulation of practices and

1 There are other sites that are signiWcant too, such as localaccounting Wrms, accounting and controller units in large cor-porations, and accounting and audit units in governments andinternational organizations, and these should be further exam-

ined in the future.

aD.J. Cooper, K. Robson / Accounting, Org

accountants. In the last thirty years there has beenan almost continual process of change wherebyprofessional institutions and regulations are pro-posed, established, modiWed and implemented.This process forms an important context for thispaper, but part of our argument is that researchershave focussed on the empirical detail of the morevisible professional and regulatory institutions inthis process. So, for example, we do not discussrecent changes in the regulation of auditors or dis-cussions about the governance of standard settingagencies. We are more concerned to suggest newand illuminating ways to understand such changes.However, as Calhoun argues (1993), abstract theo-rizing rarely tells us much about the operation ofthe world, or how it might be transformed, and wethus set this review within existing empirical workon professions and regulation.

Second, the paper does not aspire to oVer a spe-ciWc theoretical perspective to organize the diver-sity of research in the area. Nevertheless, whilethere is no single correct method, there are distin-guishable methodological strategies appropriate toparticular questions and subject matters, depend-ing on the nature of the object of inquiry (Mor-row, 1994, p. 79, emphasis in original). Much ofour focus can be characterized as an interest in thepower of accounting, accountants and the account-ing profession, although power can be conceived ofin diVerent ways (Clegg, 1989; Robson & Cooper,1989). Issues of regulation and professionalizationcan be studied through a variety of methods andthere is much to learn from many social theories,ranging from the classical theories of Marx andWeber, to the recent explorations of Bourdieu,Foucault and Latour. We hope this eclecticismdoes not result in more incoherence than is war-ranted by the state of our knowledge.

This paper has a decidedly Anglo-American ori-entation, which reXects much of the research litera-ture,2 but begs the question whether the concept of

2 But see the special issue of Accounting, Auditing andAccountability Journal (1999) on Organizing the accountingprofession in Asia, the series of country reviews in EuropeanAccounting Review, and recent papers such as deBeelde (2002),Uche (2002) and Sian (2006) that provide accounts of the devel-opment of the accounting and audit professional bodies outside

Anglo-Saxon countries.nizations and Society 31 (2006) 415444 417

a profession is understood in the same way outsidethe Anglo-American world (Friedson, 1986, p. 34;Rueschemeyer, 1989). This omission relates also toour own lack of knowledge about accounting out-side Britain and North America and clearly limitsthe nature of this review. Finally, we use terms likeprofession in a theoretically liberal way. Clearlythe claims of accountants to be professional can becontested, as can their understandings of self-regu-lation. While it is important to explore both theirclaims for legitimacy and their understandings ofregulation, we do not here focus on the deWnitionsof terms such as professional, profession or regula-tion: one weakness of this stance is that it risksprofessional ideologies and understandings domi-nating those of the researcher. On the other handwe consider theories of profession that treat pro-fession and professional as speciWc constructionsof practice and discourse and there are grounds forviewing accountants as implicated in the process ofconstruction and presentation of the professionalself.

The paper is organized in three main sections.The next section reviews the research on theaccounting profession since the 1970s, focussing onthe contribution of historical and comparativeanalyzes. Section three then examines the literatureon accounting regulation, both the regulation ofaccounting rules (GAAP and standards) andaccountants (state and self-regulation of the posi-tion of the accountant). While regulation and pro-fessional issues are treated as distinct areas ofenquiry, they are no doubt strongly connected.Indeed in the fourth and Wnal main section, we col-lapse this distinction. SpeciWcally, by stressing theroles of accounting Wrms and issues of professionalgovernance, it is argued that accounting Wrmsshould be seen as an obligatory node in the net-work of institutions through which regulatory andprofessional processes operate. Of course, account-ing Wrms, and the multi-national auditing Wrms inparticular, have not been entirely immune fromstudy (Habgood, 1994), but research on profes-sions, professionalization and regulation has toooften occluded the Wrms as signiWcant agents in theprocess. We conclude by oVering some commentson the enduring political and cultural value of

studying the accounting profession and regulation.


The accounting profession and the professionalization project

Robson and Cooper (1990) present a review ofthe sociological literature on the accounting profes-sion in the context of the UK profession. Weargued that most research up to that point hadtaken for granted accountants claims to be profes-sional, and focussed rather too much on profes-sional elites. Despite, for example, the evidence ofall manner of political activity by professional asso-ciations (Dwyer & Roberts, 2004; Walker, 2000),too many early studies were prepared to accept theprofessions articulation of a public interest pur-pose as an explanatory account of the professional-ization process. Just as Sacks (1983) had done forthe literature on the sociology of professions moregenerally, our review emphasized the atheoretical orfunctionalist nature of much research on theaccounting profession. Since then there have been anumber of studies that have attempted to workwithin interesting and useful approaches to under-standing the professional project (Larson, 1977;Macdonald, 1995; Leicht & Fennell, 2001) and thecontinuing evolution of professional bodies. Manysuch studies have concentrated on the establish-ment of the professional bodies (Greenwood, Sud-daby, & Hinings, 2002), their relation with the state,and their eVorts in the process of professionaliza-tion, that is occupations becoming accepted as pro-fessional (Richardson, 1987).

Yet research on the formation of professionalassociations in a number of countries (e.g., Chua &Poullaos, 1993, 2002; Walker, 1995, 2004) has notbeen neglected. The focus has been on the strategiesof early accountants to diVerentiate their craft fromthat of other occupations (notably lawyers), to cre-ate barriers to entry, and to restrict the market fortheir services. Many have taken on a neo-Weberianframework related to the quest for occupationalclosure (Walker & Shackleton, 1995, 1998). What ismost striking has been the shift away from the tra-ditional, often very carefully executed, studies ofthe accounting profession which examine singleprofessional institutions with little social and eco-nomic contextualization (Carey, 1969, 1970; Jones,1981; Kedslie, 1990; Lee, 1997; Stacey, 1954)

towards more comparative analysis, illustratingnizations and Society 31 (2006) 415444

speciWc theoretical themes, and often drawing ontraditional archival work (Macdonald, 1984; Will-mott, 1986) or extending it (Poullaos, 1994; Walker,1988, 1995, 2004). The more recent historicalresearch on professions has reacted to Burrages(1990) caustic remark that:

historians focussed on the creation, and thedomestic aVairs, of the corporate aVairs of particu-lar professions and therefore tended to concentrateon the elite of the profession and the issues thatcame to the attention of their governing bodies.They rarely sought to study the working practiceof the rank and Wle members of the profession,rarely referred to other professions, rarely soughtto relate changes in the profession to changes inthe wider society and rarely therefore found anyreason to criticize the profession. Their main taskwas to recount the success story of responsibleleaders coping with the problems that faced theprofession (pp. 56).

While there has been some attention byaccounting historians to failures as well as suc-cesses, and some social contextualization, Bur-rages comment sometimes still seems a reasonablesummary of too much of the historical work on theformation of the accounting profession. Further,the implications of this scholarly work are notalways clear: what is often unstated are the waysthe formation attempts of British and Americanprofessional bodies in the late nineteenth and earlytwentieth century continue to have resonance forunderstanding the continuing evolution of theseinstitutions in the 21st century, or the likely strate-gies available to accountants in other parts of theworld who are attempting to create a professionalbody, or others trying to resist such attempts.

It is encouraging that historical analysis andscholarship is now being applied to study speciWcthemes in professionalization. We identify fourthemes that seem to have reinvigorated research onthe accounting profession: the role of the profes-sion in imperialism and colonization, comparativeanalysis of the systems of professions, focussing oninter-professional and occupational rivalry, theexamination of the inter-play between commercial-ization and professionalization, and the emergence

of an interest in the marginalized in the story of the


development of the accounting profession. Eachprovides interesting theoretical and empiricalobservations, and that may indeed be suYcientgrounds for continued work in this area. Thesedevelopments have continuing promise for under-standing future professional developments in anera of neo-liberalism and globalization since theymove away from a focus on professional bodiesand instead focus on the discursive and materialpractices of accountants and locate accounting asan industry and as a contested terrain within themodern economy.

Imperialism and professions

Following the seminal work of Johnson (John-son, 1972, 1973, 1977; Johnson & Caygill, 1971),there has been a rising interest in the role of theaccounting profession in imperialism. Much of thework is historical, examining the role of the Britishstate and the British profession in setting upaccounting associations in its former colonies.Chua and Poullaos (1998, 2002), MacDonald andRichardson (2004) and Carnegie and Edwards(2001) have looked at the formation of accountingassociations in settler colonies (such as Australia,Canada and South Africa) and Annisette (2000)and Bakre (2005, 2006) has examined non-settlercolonies (Trinidad and Tobago and Jamaica,respectively). Caramanis (1999, 2002) studies con-temporary imperialism, examining the role of theUS and the OECD in frustrating the eVorts ofGreek accountants to retain and regain theirmonopoly of statutory auditing. Studies of theaccounting profession in imperialism seem ofenduring value, since they trace the role ofaccounting profession in helping to constitute spe-ciWc views of nationhood (Dyball, Poullaos, &Chua, forthcoming), facilitating the spread ofinternational capital and communicating forms ofaccounting and management knowledge. More-over, the historical studies illustrate the role of set-tlers and indigenous elites in the creation of anaccounting profession. For example, Caramanis(2005) demonstrates how the Greek professionemerged out of contests between modernising andtraditional local elites. These studies also indicate

how fears of contamination of social standing innizations and Society 31 (2006) 415444 419

the home country discouraged elite Britishaccounting associations from converting theirsocial capital into economic capital, in terms ofgrowth of membership overseas. Elite UK associa-tions did not want to support the development ofindigenous accountants, but would help their ownexpatriate members to obtain practise rights (Chua& Poullaos, 2002).

A related issue, explored by both Annisette(1999) and Briston and Kedslie (1997), is the role ofeducation and examining bodies in the spread ofaccounting knowledge, particularly that based uponBritish accountinga more subtle, although proba-bly no less coercive inXuence than the direct formsof colonial inXuence on embryonic professionalbodies. These studies help us understand currentdevelopments in the global spread of accountingknowledge, and the inter-connection between edu-cation and the pursuit of practice rights as mecha-nisms for expanding the global market power ofaccountants from Anglo-American countries.3

In addition, the relation between the UK pro-fession and the embryonic US profession has beenexamined by Previts and Merino (1998) and Mir-anti (1990). US accounting seems to have been cru-cially aVected by the spread of British capitalinvestment, particularly in terms of the spread tothe US of UK Wrms and the spread of a view ofaccounting rules based on laissez faire, the market,self-regulation and individual rights (e.g., Allen &McDermott, 1993). However, the professionalbodies themselves, and professional education andcodes of conduct, arose out of a complex inter-playof British expatriates and locals, with many of thelatter being seen by the former as ungentlemanly,and consequently likely to bring the embryonic USprofession into disrepute (Preston, Cooper, Scarb-rough, & Chilton, 1995). Here we see the role ofethnicity and class in the development of US pro-fessional bodies, issues that have been a centralfeature of the development of accounting bodies inmany countries (Annisette, 2003; Dezaley, 1995;Walker, 2002). For example, Richardson (1987)examines the historical, inter-professional rivalryin a Canadian context, where Scottish accountants

3 We are grateful to Anne Loft and Caroline Aggestam for

drawing our attention to these issues.


saw themselves as more competent, of higher socialstanding, and more trustworthy than accountantsfrom other ethnic backgrounds.

These inter-connections between competence,ethnicity and social class continue to be played outin many jurisdictions in disputes over the monop-oly of the audit function. It would be very valuableif these issues could be explored across jurisdic-tions. For example, how is professional work, andindeed competence and skill, constructed andreproduced across countries. It would be valuableto learn more about the development of accoun-tancy in Japan, India and China. Similarly, itwould be useful to examine developments betweenimperial powers where accounting does not seemto be as central a part of economic management(Germany, Italy and Spain) and their former colo-nies (such as Mexico, North Africa and easternEurope). Johnson (1982) begins to explore thepeculiarities of the British system of professions,but much more can be done about the potentiallyvariable roles that accounting plays in speciWc ver-sions of capitalism. We return to this issue when weconsider accounting regulation, especially in termsof national styles or systems of regulation.

Inter-professional relations

Research on the issue of inter-professionalrivalry and disputes about the control of work(especially monopoly rights to speciWc markets)has been invigorated, and extended, by inXuentialwork on systems of professions (Abbott, 1988).Abbotts analysis centres on the development ofprofessions in terms of inter-occupational competi-tion about their expertise and struggles for controlof markets. It encourages another form of compar-ative research: not just how accounting has devel-oped in comparison to developments in otherprofessions (see Johnson, 1972), but how it devel-oped in relation to other occupations.

On the former issuehow the professionaliza-tion of accounting diVers from that of lawyers, engi-neers, actuaries and so onthere is still clearlymuch valuable work to be done. An instructive illus-tration about how accountants drew on the experi-ence and reputation of lawyers in the eVorts to

obtain a Royal Charter can be found in Abel-Smithnizations and Society 31 (2006) 415444

and Stevens (1967) and Fielding and Portwood(1980). Less evident are studies of how accountingdevelops in relation to other occupations. Here wehave in mind both the competition and cooperationbetween professional bodies in accounting and law(Sugarman, 1995; Walker, 2004), actuaries, consult-ing (especially information systems), and personalWnancial advisors (RadcliVe, Cooper, & Robson,1994). The Big Four business advisory Wrms havenow incorporated many of these occupations withineach of their organizations, but that does not endquestions among professional bodies about multi-disciplinary practices, the ethics of professionalpractice and claims to competence (Dezalay &Garth, 2004; Suddaby & Greenwood, 2001). Thus,there are disputes between lawyers and accountantsabout who has competence in speciWc areas of taxa-tion planning. Which occupational group is domi-nant varies from country to country, and betweendiVerent forms of tax advise (for example, comparetransfer pricing advise and advise on the legal struc-ture of subsidiaries and joint ventures). And, asKurunmaki (2004) has shown for medical profes-sionals, the outcome of such struggles can result notsimply in one occupation winning at the expense ofanother, but the possibility of hybridized profes-sions and new occupations.

Professional bodies are often heavily involved inturf wars between occupations, and this can befought not just in terms of rights to practice in spe-ciWc domains (notably over taxation and insol-vency) but also in terms of educational credentialsand requirements. For example, professional bod-ies and accounting Wrms have been required to setup quasi-autonomous regulatory mechanisms toensure that accountants have the expertise andlegal authority to provide clients with investmentadvise (RadcliVe et al., 1994). These requirementshave also altered the nature of the professionalbodies themselves, and their relations with accoun-tants and accounting Wrms. That is, professionalbodies take on more a role as monitor and regula-tor of their member non-accounting services. Thiscan put them in a seemingly paradoxical situationof controlling and disciplining members in order topresent themselves as acting in the public interest,yet also trying to promote the profession in com-

petition with other occupations.


In general, what is at stake here is not only thesocial construction of expertise (Gendron, Cooper,& Townley, 2006) and inter-professional (andoccupational) rivalry, but also how markets arediVerentially constructed, who is seen to be a legiti-mate supplier, what the form of service might be,which occupational groups beneWt, and who is seento be the client (Dezalay & Garth, 1996, 2004;Dezaley & Sugarman, 1995). For example, Floodand Skordaki (1993) show that the way in whichcorporate insolvencies are managed depends notjust on which professional groups are involved andin control, but also in which jurisdictions theseactors learned their craft. Thus, the story is notabout a zero sum battle between professions, butabout the interactions between occupations (Deza-ley, 1995; Dezalay & Garth, 2004; Sugarman,1995). People who think of themselves as eitherlawyers, accountants, management consultants,actuaries, or engineers, typically deWne their workand expertise in relation to one another. That iswhy multi-disciplinary Wrms (Covaleski, Dirsmith,& Rittenberg, 2003; McVea, 2002; Suddaby, 2000;Suddaby, Cooper, & Greenwood, 2005), oVer afruitful site for examining how inter-occupationalrivalries and the division of labour between groupsgets played out in practice. Further, the sort ofadvice oVered, the services provided, and the waymarkets are structured, are aVected by who areseen to be legitimate actors in the system.

The marginalized and marginalization in the professionalization project

There has been an increasing focus on groupsof accountants who have not been included inmost studies of accounting professionals, workerswhose presence in the professionalization ofaccounting has been largely ignored in conven-tional historical studies of the profession. Peoplesuch as clerks, women and black people areimportant in an analysis of professional formationas they indicate how the boundaries of theaccounting profession are constructed and re-con-structedwhich groups are excluded and whichallowed to participate as legitimate accountants.Studies of the marginalized are also important

because they recognize excluded groups. Theynizations and Society 31 (2006) 415444 421

indicate how boundary work (processes of exclu-sion and inclusion), class, gender and race impor-tant elements in constructing systems of prestige,closure and distinction (Bourdieu, 1984). Thus arelevant line of research is to examine processes ofexclusion and marginalization, and thereby obtainan understanding of not only the development ofa profession, but also how it gains privilege andstatus, and why its services (such as audit or man-agement consulting) are accorded social and eco-nomic value.

Loft (1988, 1990, 1994) and Kirkham and Loft(1993) explicitly focus on non-elite accountants,notably bookkeeping and cost clerks, in profes-sional formation. Instead of examining great menand prestigious Wrms and institutions, theseresearchers explore how low-status workers wereable to form their own professional body, forexample by allying themselves with elite accoun-tants and auditors. In one sense, Lofts work canbe seen as an extension to traditional histories con-cerned with the formation of professional bodies,but its achievement, subsequently echoed by oth-ers, is also to provide a voice to marginalizedgroups (Hammond, 1997, 2002).

Witz (1992) introduced the idea of discursivestrategies to explain the link between ideology andthe closure practices of professions. She discussesthe exclusionary strategies of professional men,identifying those who are ineligible or alleged notto possess the appropriate qualities, as well as thestrategies excluded groups adopt to form their ownoccupational groupings, such as accounting techni-cians or bookkeepers. In this context, Lehman(1992) examined the role of women in accounting:her research in Russia showed how accountingclerks, who were predominantly women, used todo much of the accounting work in the formerSoviet Union, but with the introduction of theWestern accounting model, and the multi-nationalaccounting Wrms, senior positions in accountingcame to be held by men. Similarly, Hammond(1997, 2002) and Hammond and Streeter (1994)explored the struggles of AfricanAmericans inNorth American accounting,4 providing not just

4 A parallel study of the experience of Maori women is found

in McNicholas, Humphries, and Gallhofer (2004).


the stories of exclusion and perseverance in theface of extreme prejudice, but also an analysis ofthe way in which the experience of black pioneersin accounting reproduces a view in the black com-munity that accounting is not for them: the occu-pation not being regarded as a sensible path ofupward mobility and movement for African-Americans. One implication worth exploring iswhether the marginalization of accounting as anoccupation for African Americans is associatedwith a marginalization of Wnancial calculation andaccounting techniques in organizations created byblack entrepreneurs.

Cooper and Taylor (2000) bring women andworking class people together in their study of thework practices of accounting clerks, and show howBravermans (1974) analysis of the labour process,and his emphasis on de-skilling, remain applicableto the analysis of contemporary accounting work.They criticize conventional studies of the account-ing profession precisely because such studies seede-skilling as inappropriate for understanding thework of professionals, where the intangible orjudgmental components of their work is empha-sized. In contrast, Cooper and Taylor show the rel-evance of labour process analysis to understandthe devaluation of their skills, their loss of abilityto use their skills and the loss of autonomy formiddle and junior accountants. They clearly showthe importance of studying marginalized groups ininterpreting the development of accounting andthe accounting profession, and the value of exam-ining the professional project of accountants inrelation to class, gender and race.

Commercialization and professionalization

Hanlons work on the role of accountants in thelabour process of modern capitalism has the con-siderable virtue of raising often neglected ques-tions about the profession as a business thatpursues proWt, and one that shifts its activitiesdepending on the speciWc form that capital accu-mulation takes in diVerent places and times (Han-lon, 1994, 1996, 1997). He discusses the labourprocess of accountants and accounting Wrms inmajor metropolitan (and Wnancial) centres, nota-

bly London and New York. Hanlon contrasts thenizations and Society 31 (2006) 415444

life chances and allegiances of accountants in theoYces of the major accounting Wrms in these cen-tres with the experiences, aspirations and types ofwork conducted by accountants in these sameWrms in Ireland, which he deWnes as semi-periphe-ral in relation to these centres. He argues that theBig 4 accounting Wrms are dominated by the oYceslocated in the metropolitan centres of Wnance, thatthis domination results in a strong commercialethic within these Wrms, and those accountants inperipheral oYces who wish to get on in theirWrm must adopt the values of commercialization.We will discuss his examination of the Wrms them-selves later, but here it is worth stressing someother important themes which he raises.5

Hanlon (1994) resurrects an important elementin the sociology of professions, namely a concernwith the implications of professionalization for ananalysis of power and the division of labour insociety. He suggests that many accountants arepart of the service class and are often in marginal-ized activities which are threatened by automationand low wage competition. He argues that theaccounting profession is segmented such that thereis a small elite of accountants who act as the agentsof capital, and who obtain very great rewards fortheir eVorts, and the mass, comprising junioraccountants, bookkeepers and others at theperiphery (often women or new immigrants) whocan be seen as working class. The mass of accoun-tants have poor working conditions, for examplelow pay, oppressive control systems, threats ofautomation and increasing part time work (Tinker& Koutsaumadi, 1997). Hanlon suggests that theinternal dynamic of multi-national accountingWrms explains how the feudal values of accoun-tants (gentlemanly attitudes and aristocratic andpaternalistic values) are transformed into the com-mercial values of the large corporation, in which

5 Hanlon (1994), has been criticized for the gaps between histheory and empirical evidence (Sikka & Willmott, 1997) and ac-cused of paying insuYcient attention to the speciWc practicesand strategies of commercialization (Dezaley, 1997; Suddaby &Greenwood, 2001). While these criticisms have merit, our viewis that they indicate avenues for future research rather than alack of validity for his arguments. His book oVers an importantform of analysis, to which his empirical evidence unfortunately

cannot do justice.


proWtability and contribution to the growth ofcapital are dominant. In eVect, he oVers a mecha-nism to explain how professions move from atrustee logic to a commercial one (Brint, 1994).Professional virtues (or a trustee logic) including aconcern with the public interest, have been seen asa curious carry over of feudal practices into thecapitalist era (MacIntosh & Shearer, 2000; Perkin,1989).

There has always been segmentation and strati-Wcation (Jacobs, 2003; Walker, 2002) in the occu-pation of accountants in all manner of ways, notjust hierarchically in large Wrms (i.e., between part-ners and junior staV), but also between those whowork within and outside metropolitan centres ofcapital, and those who work in the public or pri-vate sectors (Robson & Cooper, 1990). These seg-mentations have been overlaid by gender, ethnicand other divisions. Johnson (1977) also discussesaccountants as a segmented occupation, but placestheir activities in relation to the sorts of knowledgeand skills deployed (technical, modiWable knowl-edge of junior and peripheral accountants andbookkeepers in contrast to the indeterminate, non-programmable knowledge of the elite).

While Hanlons work usefully recognizes therole of Wrms in commercialization, much of the lit-erature on the accounting profession and commer-cialization has emphasized the role of professionalbodies. Robson, Willmott, Cooper, and Puxty(1994) is an extensive exploration of the ways inwhich British professional bodies articulated anincreasingly commercial role for their members(notably in relation to selling Wnancial services andexpanding or protecting the practice and regulatoryrights of British accountants), and how this inter-acted with their claims to be professional and act-ing in the public interest. RadcliVe et al. (1994)takes the analysis further by pointing out that theUK professional bodies worked hard to constructthemselves, at least discursively, as enterprisingorganizations. Finally, Hanlon (1998) has extendedthe argument about commercialization, by pointingout that the attempt to be enterprising can resultin serious cleavages in the service class. Pursuit ofcommercialism and a view of professional organi-zations as enterprising enables Hanlon to return to

his argument about the proletarianisation, and per-nizations and Society 31 (2006) 415444 423

haps even the political radicalization, of largegroups of marginalized accountants who yearn fora return to what they may see as the golden age ofprofessionalism (BriloV, 1990), although it is seenby others as a fantasy of nostalgia (MacIntosh &Shearer, 2000; Tinker, 2005).

Debates about the commercialization ofaccounting have been intensiWed since the series ofaccounting scandals and the demise of ArthurAndersen. Mitchell and Sikka (2004), ZeV (2003a,2003b) and Wyatt (2004) claim that the commer-cialization of the Big Four went too far, and thatregulatory structures need to be set in place to curbpast excesses. Such debates emphasize the impor-tance of further examining the practices of accoun-tants and auditors, and not relying on thediscursive claims of professional associations andleaders of the industry that they are indeed profes-sional (Simmons & Neu, 1997). We suspect thatresearchers would be well advised to go beyond thedualistic debates about commercialization andprofessionalism and examine what it means for thepractices of accountants to talk in terms of com-mercialization, being businesslike, enterprising andmodern. For example, it would be useful to exam-ine whether claims to gentlemanly and profes-sional values might be a strategy to be commercial.Appeals to such forms of social and cultural capi-tal can be an eVective strategy for professionals indeveloping their business and being proWtable(Cooper, Hinings, Greenwood, & Brown, 1996).Rather than reproducing a conception that com-mercialization may be antithetical to professionali-zation, studies of accounting and audit practiceswill beneWt from examining the work practices andclient relations of professional organizations (Wrmsand associations), a theme to which we return insection three, and in particular how claims to becommercial and professional are selectively used insuch organizations (Alvesson & Krreman, 2004).

This section has highlighted a number of veryvaluable lines of research on accounting as a pro-fession and on accountants as professionals. Wewish to emphasize that broadening the researchagenda involves locating the accounting professionin its context. While current research often focuseson historical analyzes, we believe there is also

important work to be done in analyzing current


developments, relating to the roles of the account-ing profession in imperialism, colonialism, exclu-sions and commercialization. Such research mightalso examine how these roles feed back on devel-opments in the profession, as well as the practicesof powerful sites in accounting labour, notablymulti-national accounting Wrms. Before moving tofurther discussion of accountants as professionals,we explore another theme highlighted by recentdebates about the commercialization of account-ing. To observers like ZeV, Sikka, BriloV andWyatt, an important solution to many of the scan-dals that have undermined accountants claims tobeing professional, is to regulate accountants andaccounting practices; reliance on the market andself-regulation is no longer seen as adequate toprotect the public or investors. Section threeaddresses some of the more important debates andresearch about accounting and regulation.

Accounting and regulation

The literature on accounting regulation is vast,using a number of diVerent theoretical approachesand focussing on a variety of diVerent dimensionsof regulation. Much of the conventional literaturetreats accounting regulation as an exercise inapplied economics and applies public choice the-ory to accounting public policy (Benston, 1973;Stigler, 1971; Watts & Zimmerman, 1978). Whilethis is well covered in journals like Journal ofAccounting and Public Policy and Journal ofAccounting and Economics, it is intriguing thatpublic choice theory has not been extensivelyadopted by specialists in political science. We sharethe view that public choice economics is toorestricted in its conceptions of politics, too orientedto an individualistic conception of society and pol-itics, too neglectful of the power of large organiza-tions and groups, and too partisan in its approachto deregulation (Alford & Friedland, 1985; March& Olsen, 1989; Strange, 1996). Tinker (1984) andOkcabol and Tinker (1993) highlight some of theproblems of applying public choice theory toaccounting regulation.

In this section we examine two streams of

research about accounting regulation. The Wrst isnizations and Society 31 (2006) 415444

on accounting standard settingthe process bywhich accounting rules are developed andchangedwhich has been very extensively studied,but which recently seems to have passed a little outof fashion. The second stream concerns the regula-tion of accounting more broadlywhat aVects thechanging position and role of accounting in soci-ety. Our lens for examining this second streamrelies heavily on work with our colleagues, TonyLowe, the late Tony Puxty, and Hugh Willmott(e.g., Puxty, Willmott, Cooper, & Lowe, 1987), butwith important clariWcations, and adopting a moreconstructivist approach.

The politics of standard setting

Since Gerboth (1973), ZeV (1972), Lowe andTinker (1977), Burchell, Clubb, Hopwood, Hughes,and Nahapiet (1980), Burchell, Clubb, and Hop-wood (1985), there has been an increasing interestin locating accounting in relation to politics andthe state, and to see accounting as an importantpolitical institution. These studies reXected, andhelped to make sense of, signiWcant social develop-ments. Amongst the most notable developments,the 1970s saw the rise of new regulatory structuresof accounting practice, and increased concern by avariety of states in accounting rules and rule mak-ing (Robson, 1991, 1992; ZeV, 1978). The mergermovement and the consolidation of capital in theUS and UK highlighted the Xexibility of account-ing statements, and was one reason for the statesinterest in the regulation of accounting rules(BriloV, 1972; Robson, 1991; Stamp & Marley,1970). The proWt crisis of the 1970s and the prob-lem of capital maintenance in a period of rapidlyrising prices, increased the interest of both the stateand business in accounting rules for proWt determi-nation, and the link between accounting calcula-tions, deindustrialization and large scale capitalXows (Bryer & Brignall, 1986). As Miller (1991)shows, the welfare state was keen to intervene inindustry through accounting measures and tech-niques in order to improve the eYciency of busi-ness. Similarly, concerns about oil company proWtsand possible price gouging in the US lead to Con-gressional examinations of the possibilities of uni-

form, or at least standardized, Wnancial reporting


(US Congress House, 1976). The state took anincreased interest in accounting standards, seeingthem as an important element of industrial andWnancial policy.

Two points are worth making in this regard.First, historical studies as diverse as ZeV (1972),Loft (1994), Miranti (1986) and Previts and Merino(1998) show that, the state in Anglo-Americancountries has had a longstanding involvement withthe development of accounting rules, practices andwhat constitutes a profession. State agencies helpedto create a demand for general Wnancial manage-ment services, particularly within regulated Wrms(Jones, 1981). They also provided a legal monopolyover audit and bankruptcy for members of speciWcoccupations. However, state involvement intensi-Wed in the 1960s and 1970s as Anglo-American eco-nomic performance declined. Secondly, while thestate has had a long standing involvement in creat-ing and sustaining the monopoly for audit workand in specifying who is a competent auditor, it isonly recently that state interest has extended to thedetail of audit procedures, which have typicallybeen constructed as more technical than account-ing rules (Moonitz, 1974), and been left to theaccounting profession, especially the larger Wrms.Challenges to the new audit technologies used bythe large Wrms (Cullinan & Sutton, 2002) haveescalated more recently since the demise of ArthurAndersen. Regulatory agencies such as the ECand SEC have taken an interest in how audit prac-tices are used to produce assurance. Concurrently,there are increasing concerns about the spread ofaccounting and auditing logic in ever wider spheresof life (Power, 1997; Power, Laughlin, & Cooper,2003; Strathern, 2000).

As the state became involved more explicitly instandard setting, so the research community, echo-ing practitioners enrolled in the process, started tosee the process as political (Horngren, 1973;Stamp, 1985; ZeV, 1978), some even arguing thatthe states involvement amounted to interference(Solomons, 1978). The speciWcs of who is involvedin accounting regulation, and who is viewed asinterfering, varies over time and between jurisdic-tions. In the UK and USA, the complaints werealso concerned about the involvement of industry,

and this complaint has become more intense innizations and Society 31 (2006) 415444 425

recent years, articulated both by standard setters,state agents and academics (Hendriksen, 1998). Theaccounting profession is also seen as acting asspokespersons for powerful clients (Levitt, 2001).Standard setting is now recognized by practitionersand academics as involving power, where power isconceived as involving explicit conXict: one partyor group getting another group to do somethingthat they would not otherwise want to do.

The research into the politics of standard set-ting reXected not just these social and economicdevelopments, but also this view of power asinvolving overt conXict. Studies by Hope and Gray(1982), Hussein and Ketz (1980), Newman (1981),Lowe, Puxty, and Laughlin (1983), Sutton (1984),Watts and Zimmerman (1978), McKee, Williams,and Frasier (1991) and McKee, Bell, and Boats-man (1984) examined who was involved in thedevelopment of a particular accounting rule or reg-ulation, who appears to have inXuenced the out-come, or how veto power may occur. Booth andCocks (1990) and Walker and Robinson (1993)reviewed much of this literature, pointing out thelimited insight oVered when research shares thepopular, practitioner conception of power, asinvolving conXict over interests. Robson and Coo-per (1989) take the argument further by question-ing the implication of such studiesthat power issocially diVuse, depending on which groups gettheir way in speciWc circumstances:

Studies of the accounting standards setting pro-cess have recognized that it is a political processand have concentrated on studies of key deci-sions, namely speciWc standards. Because no singleindividual or group seems to explicitly dominateacross a range of standards (Haring, 1979), eventhough it may be possible to identify powerfulindividuals and groups for a speciWc standard, itis implied that the standard setting process is plu-ralist. The focus on explicit decisions and anindividualistic approach (there is no coherentapproach to what constitutes a group) means thatmany possibilities for power (e.g., the control of theagenda and shared perceptions) cannot be identi-Wed (1989, p. 86).

No such pluralist conclusion is warranted since

a multiplicity of interest groups competing over


diverse interests cannot be extrapolated to an argu-ment that the groups arent connected by a similar-ity of outlook, for example about the legitimatepurposes of Wrms and the existing distribution ofproperty rights (Tinker, 1984).

Yet while there are good reasons to point out thelimitations of studies that rely on common senseand practitioner conceptions of inXuence andpower, perhaps we have gone too far in neglectingto study the overt use of power in standard setting,both relating to accounting and audit rules. Itseems that, with some exceptions (Hogler, Hunt, &Wilson, 1996; Robson, 1991, 1992; Young, 1994,1996) studies of the politics and process of account-ing standard setting have declined, even thoughthere seems much to be learned about mechanismsof inXuence and the reasons for speciWc regulatoryoutcomes (Young, 2003). It would be foolish toneglect what Lukes (1974) referred to as the Wrstdimension of power, that is overt conXicts of inter-ests in determining the nature of speciWc account-ing standards, just because there are moresophisticated conceptions of power. There havebeen a series of revelations by standard setters thatpoint to the signiWcance of multi-national compa-nies, industry lobby groups and employer organiza-tions, such as the Business Roundtable in the US, ininXuencing accounting and audit rules. The lobby-ing over the treatment of employee stock options isan obvious recent example of overt conXict in stan-dard setting (Hendriksen, 1998).

While Robson (1992) is right to point out thatthe concept of interests can be over-used in ana-lyzing the development of rules, the crucial pointhe makes is that researchers should carefully tracethe link between interests and outcomes. He dem-onstrates how this might be done in his study ofthe development of an R&D study in the UK.Extending his observation, Susela (1999), in astudy of a goodwill standard in Malaysia, suggeststhat interests be understood as a discursiveresource, which draws on social, historical and eco-nomic understandings that actors have about theirposition in society, and which determines theirview of what are appropriate problems and solu-tions. Another way of understanding this point isto suggest that there is much of value in going

beyond the simple, economic self-interest assump-nizations and Society 31 (2006) 415444

tions adopted by the agency approach to standardsetting (Watts & Zimmerman, 1978), and studyingstandard setting as a complex process (Loweet al., 1983). Research is needed into how actorsmake sense of, and operationalize, what theybelieve to be their interests.

Studies of overt conXict in standard setting arerelatively straightforward to conduct, providedthat relevant documentation is accessible toresearchers. Many of the formal standard settingbodies now have rules providing for disclosure ofmeetings and submissions. Of course, the availabil-ity of empirical materials can lead to over conW-dence in their signiWcance; much of the importantwork of standard setters takes place informally, isunwritten, and likely involves only a few people(Stamp, 1985). Further, focussing on standard set-ting and the negotiations and politics associatedwith speciWc accounting rules can lead to a seriousneglect of more systematic, institutional similari-ties in the structure, form and assumed purposes ofaccounting and audit rules. That is why studiesapplying what Lukes refers to as the Wrst dimen-sion of power ought to be augmented with ana-lyzes which attend to other power dimensions:agenda building and the systemic and pervasiveforms of structural and ideological power.

What is much harder to establish is how theagenda for accounting rules get determined, andwhat are seen to be appropriate or feasible rules.One interesting attempt by Young (1994) used thenotion of a regulatory space to explain the choiceof agenda items on the FASB: the choice ofagenda items is conceived as a result of a garbagecan of organizational decision making. Her workhas been extended by MacDonald and Richard-son (2004). A related study also conceived theFASBs Emerging Issues Task Force as a garbagecan and showed how its decisions are made by acombination of decision processes (Mezias &Scarseletta, 1994). By emphasizing the decisionprocesses in standard setting bodies, an intriguingapproach to accounting rule making is opened up(March & Olsen, 1989; Mouritsen, 1994). Thestandard setting agenda, both internationally andfor most of the developed economies, has increas-ingly been articulated in terms of the user

(Young, forthcoming), and this understanding has


become institutionalized. Further, the concernwith the user has increasingly been narrowed toinclude only one type of user, the investor andaccounting regulation has mutated into a concernwith her decision making and protection. Thisnaturalization suggests the dominance of a pro-capital orientation for those who are involved inaccounting rule making. As Cooper and Sherer(1984) demonstrate, the general economic welfarefor a society as a whole is unlikely to be achievedby the single minded pursuit of shareholder inter-ests. Yet there is now little discussion of therequirements of other groups in society, such asemployees or consumer groups, for reliable Wnan-cial information for their purposes, or how idealssuch as organizational and corporate accountabil-ity might be usefully conceived and implemented(Gray, 2002).

The marginalization of the interests and con-cerns of other corporate stakeholders has consider-ably narrowed the scope of research on accountingstandard setting and rule making. Engelen (2002)examines the functional and moral basis of whathe refers to as shareholderism, an idealized Amer-ican model of shareholder rights and action that isspreading in many countries. Together with othercommentators, such as Lazonick and OSullivan(2000), Engelen demonstrates that shareholderismis not as irresistible as its proponents might wish,and is not necessarily superior to other varieties ofcapitalism. It would be valuable for research onaccounting standard setting to explore possibilitiesfor alternative rationales for accounting rules, suchas enhancing organizational democracy, worker orconsumer welfare, or environmental sustainability.

The ideology of shareholderism seems to pervademany modern states, even though it might bethought that they have some concern for groupsother than shareholders and issues of investor pro-tection. Arnold and Oakes (1998) examined theimpact of the passage of Statement of FinancialAccounting Standard No. 106 on retiree health ben-eWts in relation to the reduction in employee wealth.Although it was possible to view these reductions aseconomic costs that businesses were attempting toavoid and to conceive of accounting standards asdesigned to protect employee rights, the standard

was legitimated as necessary to recognize unex-nizations and Society 31 (2006) 415444 427

pected liabilities. These liabilities were conceived asthreatening the survival of corporations, rather than,for example, as damaging the wealth of sharehold-ers. Tinker and Ghicas (1993) point out a similar dis-interestedness when corporations appropriated theiremployees pension funds after corporate lobbying tochange accounting rules. These studies highlightthe importance of expert ideologies, taken-for-granted thinking and metaphors in understandingaccounting institutions, regulation and the impactsof standard setting. Complaints about the pre-occu-pation of accounting regulators with investors aremet with views that naturalize the involvement ofthe accounting profession in rule making, whilst de-naturalizing the involvement of non-investor stake-holders (Hogler et al., 1996; Young, 1996, 2001,2003).

When we turn to examine some of the assump-tions of literature on the politics of standard set-ting, several potentially value lines of researchopen up. Most of the literature on accounting reg-ulation, and particularly that which examines thepolitics of standard setting, is based on a heroicassumption: that rules constrain the reportingpractices of organizations, that rules fundamen-tally aVect how GAAP and auditing is practiced.Yet managers and auditors have a great deal ofdiscretion as to how rules are enacted. First, thevoluminous earnings management literature (e.g.,Fields, Lys, & Vincent, 2001; Schipper, 1989) sug-gests that corporate managers can manipulatetheir companys reported Wnancial results throughdiscretionary accruals management, and may do soin order, for example, to maximize their own sala-ries, stock options, bonuses or other contracts.While the focus has often been on the manipula-tion of accruals (Healy & Whalen, 1999), recentcontroversies in the high-tech and e-business sec-tors have shown that earnings management alsoinvolves issues of revenue recognition.

The literature on intra-method accountingchoice also suggests that managers and auditorshave considerable discretion in applying rules. Forexample, Lilien and Pastena conclude, based ontheir examination of diVerences in application ofthe rules for recognizing research and developmentexpenditures in the oil and gas industry, that our

results show that the choice of speciWc procedures


within an accounting method [rules] can have amaterial eVect on net income, retained earnings andasset balances (1981, p. 701). Similarly, research onwhether Wrms actually comply with accountingstandards and rules (Shah, 1996; Styles, 1999), sug-gests that many rules are treated as if they are dis-cretionary. And it would seem that this applies alsoto regulatory bodies. Bedard (2001) indicates thatthe disciplinary procedures of accounting associa-tions may be subject to considerable discretion andinterpretation. Fogarty, Zucca, Meonske, andKirch (1997) shows that at least one state regula-tory body seems to ignore many of the require-ments for practice review.

Taken together, these observations suggest theimportance of studying the interpretation andimplementation of rules. Conventionally under-stood in terms of negotiation, research into theinterpretation and implementation of accountingrules would beneWt from an expansion of the con-ceptualization of negotiation and greater contextu-alization of inter-organizational inter-action. Thisis an avenue of research that has good potential forunderstanding regulation and involves, inter alia,examining decision processes and negotiation pos-tures within accounting Wrms around the meaningand implications of speciWc accounting and auditrules (Barrett, Cooper, & Jamal, 2005).

We would thus wish to encourage research onhow, and to what extent, managers and auditorsuse rules to produce the results they want, or con-versely, how far speciWc rules actually limit discre-tion. Broadening the research agenda involvesexamining not only the development of accountingrules, but also how they are interpreted, imple-mented and audited and the impact of the locationof the interpreter. It is time to go beyond simpleexplanations for accounting choices, which typi-cally focus on the impact on managers bonuses,and examine the role of corporate and industry his-tory, the structures of markets, spatial and tempo-ral location, the incentive structures of auditors, thesocial and cultural capital of the Weld, as well aseconomic interests, in aVecting how accountingrules and standards are used. The concept of regu-lation within accounting research has typicallyequated regulation with standard setting, but

there are many other issues at stake. For example,nizations and Society 31 (2006) 415444

these might involve inter-organizational negotia-tion between large organizations (corporations andaudit Wrms), perhaps involving lawyers, accoun-tants, and managers. Gibbins, Richardson, andWaterhouse (1990) provide a useful start in study-ing corporate disclosure decisions, and althoughthis work has now been extended to inter-organiza-tional relations (Gibbins, Salterio, & Webb, 2001),their approach relies on individualistic conceptionsof negotiation. More detailed and contextualizedWeld or case studies of processes of interpretation,negotiation and bargaining would be helpful inunderstanding the way regulations are used (Beat-tie, Fearnley, & Brandt, 2001).

Accounting regulation in its organizational and social context

Our colleagues, Tony Lowe, Tony Puxty, andHugh Willmott, and ourselves originally studiedaccounting regulation because we were interestedin the relationship between accounting and capital-ist states concerned with implementing various ver-sions of neo-liberalism, re-assessing the role ofprofessionals in rule formation, and experimentingwith varieties of regulation. Many researchers wereaware of the increasing links between the UK stateand the British accounting profession, and theinter-relation between the two (e.g., Burchell et al.,1985, 1980; Sikka & Willmott, 1995). Their studiesraised questions as to how the professions claimsto expertise and self-regulation could be linked todemocracy, in the sense that non-state regulatoryorganizations could undermine public accountabil-ity (at least through legislative authorities). Study-ing accounting regulation in a comparative manner(Puxty et al., 1987) oVered the opportunity to con-trast regulatory systems in advanced capitalist soci-eties. Our expectation was that such comparisonswould help not just to highlight diVerences thatwere the result of varying national histories andcultures,6 but would also help to identify common-alities across capitalist countries. We were attentiveto the location of regulatory activities (e.g., in vari-

6 A tendency to celebrate variation had been a characteristicof much traditional international accounting to that point (for

example, Gray, 1988; Nair & Frank, 1980; Nobes, 1987).


ous state agencies, capital market bodies, profes-sional associations, or some hybrid) and how thespeciWc location might aVect regulatory outcomesand the possibilities for the democratic control andaccountability of the rules produced. Discussing theaccounting profession, we stated:

It is only when the formation and development ofinstitutions and practices of accounting regulationare theorized as an outcome as well as a medium ofadvanced capitalist structures of economic andpolitical relationships that it becomes evident thatthe very presence of an organized professiondepends upon the presence of other organisingprinciples (Puxty et al., 1987, p. 279).

The framework focuses on the principlesthrough which social order is achieved, and hasproven to be fairly inXuential (e.g., Hao, 1999).Although the principles of dispersed competition,hierarchical control and spontaneous solidarityhave been widely discussed in political science (seeAlford & Friedland, 1985; Polanyi, 1944) asinforming how regulation is achieved in modernsocieties, they had not been discussed in relation tohow accounting is regulated. While research onaccounting regulation has been inXuenced byagency and transaction cost economics, whichargues that social order is achieved through theapplication of either the principle of hierarchicalcontrol or the principle of dispersed competition,we drew on a third principlethat of spontaneoussolidarityto recognize the crucial role of trust,sense of community and belongingas a crucialdimension of social order.7

While the framework has sometimes beenreferred to as corporatist, in retrospect this label

7 Indeed, Halliday and Carruthers (1996), in their study of theintroduction of an insolvency act in England, reinforce a pointmade earlier by Merino and Neimark (1982) and Merino andMayper (2001) in the slightly diVerent context of the creation ofthe SEC and the US system of accounting regulation, that suchregulations are often about trying to achieve trust and conW-dence in markets. Recent regulatory reforms in North Americaand Europe likewise stress the importance of restoring trust inaccounting and markets. Restoring trust often involves identify-ing scapegoats for past wrongdoing and this may help to ex-plain what some commentators have referred to as the lynching

of Arthur Andersen and Co. (Morrison, 2004).nizations and Society 31 (2006) 415444 429

is somewhat confusing since our purpose wasalways more than analyzing corporatism (Cooper,Puxty, Lowe, & Willmott, 1989). It is referring toprinciples of order, that is the logics of action thatinform people and regulatory systems, and thedynamic inter-play between them. Thus, speciWcinstitutions operate with a mix of these principles.That is, markets rely on trust and laws to operate,and bureaucracies require allegiance and commit-ment when the rules dont seem to work, or Wt aspeciWc circumstance. Further, we stressed not justthe inter-dependence of these principles, but alsotheir internal contradictions, suggesting that con-tradictions within as well as between the three log-ics explains the dynamics of constant change intheir respective roles in accounting regulation. Theargument in Willmott, Puxty, Robson, Cooper,and Lowe (1992) attempted to be more consistent,hoping thereby to dispel any implication that, forexample, professions operate, even predominantly,on the principle of spontaneous solidarity andtrust, or that markets operate only on the principleof competition. The initial confusion lead to somecriticisms of Puxty et al. (1987), which are dissi-pated when the focus is on principles, not speciWcorganizations (such as the state, the profession andstock exchanges). Thus Richardson (1989) suggeststhat Gramscis (1971) theory of hegemonyimproves our analysis of the dynamics of profes-sional regulation, and we now turn to elaboratingaccounting regulation in the context of the mate-rial and hegemonic foundations of capital accumu-lation.

While there is much talk of the context ofaccounting, rarely is this context explicitly theo-rized. The Puxty et al. (1987) framework insistedthat the three principles of order operate in capital-ist societies, where the underlying logic is capitalaccumulation and the logic of accumulationexplains the basic similarity of all systems ofaccounting regulation in advanced capitalist coun-tries. In insisting on the crucial role of capital accu-mulation, we were implicitly following at least partof the regulation approach of Aglietta, Lipietzand colleagues (Aglietta, 1979; Jessop, 1990; Lipi-etz, 1986). A regulation approach stresses thatany system of regulationincluding audit rules,

qualiWcation of auditors, accounting standards, or


practice rights- operates within the context of asystem of accumulation.

There are several ways of thinking about sys-tems of capital accumulation, beyond the tradi-tional Marxist conception, which focuses ongeneral features of capital accumulation. Forexample, Jessop (2002) distinguishes between Key-nesian welfare and Schumpeterian competitionstates and Whitley (2000) discusses diVerent busi-ness systems based on geographic regions. Thevarieties of capitalism approach (Hall & Soskice,2001) has considerable potential to make sense ofchanges in the role of accounting in the regulationof diVerent capitalist economies. Alongside acontinuing concern with accounting rules, GAAPand organizational governance, accounting proce-dures and accountants themselves have becomeincreasingly involved in the rationalization andformalization of many areas of life and auditinghas become a signiWcant mentality in social andeconomic management (Power et al., 2003). DiVer-ent contexts are thus associated with diVerent con-ceptions of what it means to be regulated, andvarying accounting practices are important in theregulation of diVerent varieties of capitalism.

The regulation approach and an emphasis oncapital accumulation should not, however, blind usto the potential fragmentation and perhaps evendisorganization (Lash & Urry, 1987) not only ofthe state, but also many regulatory systems (Coo-per, Puxty, Robson, & Willmott, 1996). Manystates have shifted towards a series of co-ordinatedsemi-autonomous agencies and alliances with stateand non-state organizations. Rose and Miller(1992) point out how the capitalist liberal stateoperates in diVuse ways, across multiple institu-tions. Similarly, Miller (1990) emphasizes account-ing as an assemblage of calculating activities andthereby reminds us that the deWnitions and bound-aries of accounting itself shift with changes in thestate and other regulatory activities. Foucaultsconcerns with governmentality (1991) oVers a pro-ductive way to understand the fragmentation ofthe three systems of regulation we have been dis-cussing. Studies of accounting regulation from agovernmentality perspective not only illuminatethe way that accounting constrains and enables

such changes in capital accumulation but alsonizations and Society 31 (2006) 415444

sensitises us to how the boundaries of what isaccounting itself shift.

Regulation and the international accounting arena

The prominence of international regimes ofaccounting regulation is partly the result of theincreasing Wnancialization and inter-connectionof the advanced economies, and the crucial role ofWnancial Xows, which dominate, by several ordersof magnitude, Xows of goods and services. Thisexpansion in Wnancial Xows both assists and ispredicated upon consistent regimes of accountingdisclosure. Thus international organizations suchas the IASB, WTO and IFAC have become moresalient, and are worthy of further serious and sus-tained study. Wallace (1990) is a useful Wrstattempt to examine the IASB, written by aninsider who returned to academic life, but therehave been signiWcant changes to that organizationsince then (Kwok & Sharp, 2005). There have alsobeen proposals to create an internationalaccounting qualiWcation, to enable professionalsto operate without practise restrictions aroundthe world. Covaleski et al. (2003) examine the riseand fall of the XYZ designation and what its pro-posals would have meant for the regulation ofpractice rights and jurisdictional conXicts betweenprofessional bodies and Wrms. In addition, thedominant economic power, the USA, has thoughIOSCO, taken more interest in the internationali-zation of capital markets, seeking to become thedominant world player both for companies seek-ing to raise capital, and those governments seek-ing to privatise state enterprises. The consequencehas been that international regimes of regulation,in accounting as well as in other domains, aredominated by US interests and values (Rahman,1998).

In stressing the increasing role of global andinternational systems of regulation, it is importantto avoid adopting the myth (Hirst & Thompson,1996) that national systems of regulation, or thenation state, are obsoleteHegarty (1997) comesclose to this conclusion in his insiders account ofinternational accounting regulation. However, asKapstein (1994) and others have argued, nation

states, particularly those with large economies and


the power to opt out of international agreements(Kaldor, 2004), remain signiWcant, if not moreimportant, agents of regulation as the internationaleconomy grows. This is particularly the case if anational state wishes to pursue its own, indepen-dent, path of development, such as Malaysia hastried to do since the 1997 Asian meltdown. More-over, state inXuence has been extended by theemergence of international non-governmentalorganizations (NGOs) as well as by the growth ofinternational governmental organizations, IGOs(Boli & Thomas, 1990; Drori, 2006). These regula-tory bodies serve as carriers for global culturalmodels of governance, performance and account-ability via accounting and auditing practices (Tri-antaWllou, 2004). Issues of regulation are as muchabout will as about authority and capacity to regu-late (Meiksins Woods, 1997). Arnold and Sikka(2001) is particularly instructive in making thispoint. Their study of the relative willingness ofnational regulators to discipline the failed bank,BCCI, is an excellent model of how future work onaccounting regulation might proceed.

While global governance might seem remote,the proliferation of both non-Governmental Orga-nizations (such as the IASB and WTO) and Gov-ernment networks (such as IOSCO), have hadprofound eVects upon the co-ordination ofaccounting (and other) policies and regulations. Assuch, it now scarcely possible to discuss seriously,for example, the work of the IASB, IFAC, ASB,FASB, IOSCO or the EU in the Weld of accountingregulations without considering the complex ofalliances, agreements and accords that now existsbetween these agencies on various accounting andauditing matters, and how these agreements andalliances aVect implementation in speciWc jurisdic-tions (Robson, Humphrey, & Loft, 2005). Whilstthe importance of accounting regulations in theinternationalization of policy regimes (Jessop,1997) is now almost a clich, many studies at theinternational level tend to focus upon one particu-lar international institution or standard: muchless attention is give the polycentric, network orco-ordinated character of regulation work andthe complex of relations between national agencies(Caramanis, 1999, 2002). Further, as Graham and

Neu (2003) argue, insuYcient research been con-nizations and Society 31 (2006) 415444 431

ducted on the work of non-accounting institu-tions such as the OECD, WTO, World Bank andIMF in the cultural normalization and transmis-sion of Wnancial accounting practices. Neu,Ocampo Gomez, Graham, and Heincke (forth-coming) show how accounting is central in WorldBank attempts to reform educational practices andsystems in Central America. Arnold (2005) is alsoan excellent example of the research that can bedone, although her study of the WTO and negotia-tions over regulations about the practice rights ofaccountants focuses on just one NGO. Little atten-tion yet been given the work of the Big Four Wrmsin the establishment of policy, the staYng of theseagencies or the enactment and enforcement ofinternational regulations, nor has much researchexamined whether the relationships of the BigFirms to NGOs and government networks con-tinue to be mediated through the national profes-sional associations, or whether these bodies arenow eVectively by-passed by the Big Four (Sud-daby et al., 2005).

Observers like Cox (1993) and Strange (1996)argue that globalization has restructured relationsbetween the state and capital, so that nationalstates become coordination vehicles for transmit-ting global market discipline into domestic econo-mies. Parallel arguments can be made aboutaccounting regulationthat national systems ofaccounting standard setting become one mecha-nism by which states attempt to restructure theireconomies, and discipline their labour. Indeed,Rahmans study (1998) of how the United Nationshas shifted from a concern with policing multi-nationals, to facilitating their expansion and help-ing them discipline workers, is a useful examina-tion of the way international agencies restructurethe international economy. Further, as Catchpowleand Cooper (1998) show for South Africa, even socalled progressive states use multi-nationalaccounting Wrms to help privatise their economiesand re-structure their government administration.So, the Big Four Wrms are increasing playing a roleas an advisor to states and NGOs. They oVer ideasand techniques to regulate the economywhichbrings us to our Wnal theme: the (neglected) role ofprofessional Wrms in understanding processes of

professionalization and regulation.


Accounting Wrms as key actors in professionalization and regulation

Accounting Wrms (even if the Big Four nolonger call themselves such) are everywhere(Catchpowle & Cooper, 1998; Catchpowle, Coo-per, & Wright, 2004). Our interest in broadeningthe research agenda includes recognizing the roleof accounting Wrms in shifting elements of regula-tion. We are less interested in the pervasiveness orscale of these Wrms, however great that may be,but are concerned to stress their centrality in pro-cesses of professionalization, regulation and thedivision of labour in society (Hanlon, 1994).Expanding the agenda involves research on theprocesses of regulation and a re-conceptualizationof what regulation means. For example, we wouldencourage further work on the regulation of theself and actor subjectivity, (rather than the con-ventional focus upon professional self-regula-tion), and the role of the audit Wrms in dispersingand promoting dominant notions of management,organization, performance and agency (Meyer &Jepperson, 2000; TriantaWllou, 2004). To this end,in this section we review contemporary researchinto the Wrm context and appeal for a greater linkbetween studies of accounting professionalizationand regulation, and the activities of the profes-sional Wrms.

The professional Wrms and the construction of professionalization

In discussing areas of research on the account-ing profession, we have thus far omitted an emerg-ing area of current studyhow accounting Wrmsare central to processes of professionalization. Inthis section we emphasize the links betweenaccounting Wrms and the production of profes-sional identity and regulation. The production ofprofessional identity and regulation includes whatconstitutes good advice and who is the client foraccounting services. As such, it extends to the waypeople are constructed by accounting and accoun-tants as calculating, competitive and accountableobjects (Miller & OLeary, 1987, 1994) as well asthe belief in the objectivity and value of quantiWca-

tion and hierarchy (Porter, 1994; Power, 1997;nizations and Society 31 (2006) 415444

Power et al., 2003). Accounting Wrms play a centralrole in these constructions.

There have, of course, been a series of Wrm histo-ries, perhaps the most notable of which are Jones(1981) and Allen and McDermott (1993). Thesehave oVered Wrm chronologies, focussing on greatleaders and key events. They do not oVer muchinsight into the role of Wrms in professionalization,although they often point to the role senior partnershave played in professional organizations (e.g., Mat-thews, Anderson, & Edwards, 1998). However, morerecently, detailed studies, typically based on longterm, ethnographic research, explore the construc-tion of the professional within accounting Wrms(CoVey, 1993, 1994; Covaleski, Dirsmith, Heian, &Samuel, 1998; Dirsmith, Heian, & Covaleski, 1997;Grey, 1994, 1998; Hanlon, 1994, 1996, 1999). Build-ing on more general studies of socialization in Wrms(Fogarty, 1992), they show that professionalization,and what it means to self-identify as a professional,is largely constructed within accounting Wrms(Anderson-Gough, Grey, & Robson, 1998). We nowknow a great deal more about how accountants livetheir daily lives and enact professionalism, at leastin large multi-national accounting Wrms.

From these studies we appreciate how themeaning of being a professional is seen primarilyas a way of behaving: accountants view the idea ofprofessional as referring to ways of acting, partic-ularly in front of clients. Attention is given to mat-ters of appearance, dress sense, and personalgrooming (CoVey, 1993). Relatedly, appearance interms of ways of talking and writing are important.Time management, eagerness and other forms ofovert commitment also mark the aspirant profes-sional (Anderson-Gough, Grey, & Robson, 2001;CoVey, 1994).

Thus far much of this work has focussed onpartners or on junior accountants; there is some-thing of a gap in our knowledge of middle manag-ers in accounting Wrms and those working outsideprofessional oYces. And, to follow up earlier com-ments about marginalized groups, we know all tolittle about how the identity of workers such asaccounting clerks and technicians is produced inrelation to both professional and non-profes-sional staV. Anderson-Gough, Grey, and Robson

(2005) consider how processes of socialization and


identity construction connect to issues of genderbalance and the gendering of large Wrms. Dirsmithet al. (1997) and Dirsmith and Covaleski (1985)have focussed on partners and aspiring seniormanagers in large accounting Wrms, exploring therelative roles of informal systems such as mentor-ing, and the more formal systems such as MBO, inproducing conceptions of what a professional isand does. Perhaps unsurprisingly, interacting withthe client in a business like manner seems to be theprimary characteristic of the accountants theystudied: Anderson-Gough, Grey, and Robson(2000) demonstrate how the focus on the client isproduced in trainee accountants, and Hanlon(1994) has linked this to the growing commerciali-zation of professional service Wrms.

The emerging focus upon subjectivity and iden-tity within professional service Wrms often draws-upon the work of Foucault. As Grey (1994, 1998)and Covaleski et al. (1998) show, the mechanismsof individuation within audit Wrms operate in partthrough appraisal and performance evaluationprocesses. Anderson-Gough et al. (2000) indicatehow the processes of organizational discourse,such as the use of clich and appropriate lan-guage, construct disciplinary conceptions of theindividual auditor who is deemed to be the rightstuV.

At the organizational level, Cooper, Green-wood, Hinings, and Brown (1998) discuss how pro-fessionalization interacts with nationalism in largeaccounting Wrms. While the focus was on invest-ment decisions within the Wrm, it is apparent thatthe identity of senior partners is tied closelywith the prestige and power of their own countryand the professional bodies within them. Further,Cooper et al. (1996) show how professionalism isunderstood in corporate law Wrms, where returningclient calls, looking busy, and being well organizedare seen as important traits. Our observation isthat similar, if more commercialized and bureau-cratized understandings, pervade major account-ing Wrms. In literally hundreds of interviews in the1990s, in many countries and large accountingWrms, we never heard an accountant refer to thepublic interest, and when issues of client manage-ment are discussed, the concern expressed in

accounting Wrms is usually in terms of providingnizations and Society 31 (2006) 415444 433

client service and Wnding opportunities for cross-selling. At least in law Wrms, client managementsystems seem to be focussed on avoiding conXictsof interest! Studying accounting Wrms is likely toprovide considerable insight into how the profes-sion operates, and how both its own understand-ings, and those of its clients, are changing.

Finally, building upon their earlier work onprofessional identity, Anderson-Gough, Grey, andRobson (2002) examine the UK accounting profes-sion in terms of the fragmentation of its profes-sional bodies and the diversiWcation of its marketsand link this to their Wndings about the profes-sional socialization of accounting trainees in theUK. Arguing that the practices, norms and beliefsof accounting professionals are both a mediumand outcome of their institutional conWguration(2002, p. 23), they link conduct and context byelaborating the linkages that exist between themanner in which accounting trainees are socializedand acculturated in their Wrms, and how the insti-tutions of the accountancy profession in the UKare thereby produced and re-produced.

The professional Wrms and accounting regulation

Multi-national accounting Wrms are centrallyinvolved in regulation. This extends from theirinvolvement in the standard setting process, whereeven if partners have to give up their partnerships(as required by the FASB), their attitudes andbusiness connections assure that these Wrms haveconsiderable inXuence, both nationally and inter-nationally, to participation in professional com-mittees and groups, to their involvement in howparticular versions of globalization are spreadaround the world (Caramanis, 2002). Greenwood,Rose, Brown, Cooper, and Hinings (1999) discusshow particular conceptions of what is good man-agement are spread around the world by the BigFour, and how these Wrms are linked to interna-tional systems of regulation, promoting privatisa-tion, Xexible manufacturing, and trade liberalisationmore generally (see also Neu, Ocampo Gomez,Garca Ponce de Len, & Flores Zepeda, 2002).Neu and his colleagues are beginning to showhow the advise of accounting Wrms aVects educa-

tional reform in many countries as well as how


governments deal with indigenous peoples (Neu &Heincke, 2003; Neu & Therrien, 2003). And there issome evidence that these linkages include theactive involvement of the Big Four in internationallending agencies, such as the World Bank (Arnold& Cooper, 1999), who then recommend the ser-vices of these Wrms to audit and advise on develop-ment projects.

Accountant or auditor subjectivity also raiseswider questions concerning the role of Wrms in theemergence and dissemination of notions of agency.As noted above, concepts of regulation and gover-nance are highly interdependent, if not identical, inliberal democracies, and regulation now embracesa multiplicity of sites, agencies and practices, manyof which contribute to a regulation of the selfthrough their eVects upon subjectivity and identity.In a case study of the development of an account-ing standard for R&D, Robson et al. (1994) explic-itly linked the development of the revision to thestandard to broader programmes of the regulation/governance of science and technology in the UK.Changes to the UK standard were intended tostimulate activity among British managers andWrms towards research and innovation.

The power-eVects of Wnancial and manage-ment accounting practices have increasinglyreceived study not only within audit Wrms, but alsoin corporations, public sector organizations and inthe home (Llewellyn & Walker, 2000; Walker,1998). There is much further work to be done toexamine the part that the Big Four professionalservice Wrms play in diVusing concepts of eYcientorganization and rational behaviour, not simply interms of the promotion of audit technologies(Power, 2003) or accounting (and management)fads and fashions (Armstrong, 2002; Jones & Dug-dale, 2002), but in terms of naturalizing particularconceptions of management in multiple sectorsand economies (Gendron et al., 2006; RadcliVe,1998). This takes us beyond the work of the Wrmsas auditors or account preparers, towards anexamination of the array of management servicesthat Big Four Wrms provide.

Discussions of corporate and public sector gov-ernance and regulation now inhabit a discourse inwhich terms such as transparency, account-

ability, performance and responsibility arenizations and Society 31 (2006) 415444

increasingly deWned through accounting conceptsand practices. Transparency is linked to Wnancialdisclosure and, to the extent that corporations candemonstrate Wnancial transparency in accordancewith accounting standards and regulations, thenthey are accorded legitimacy. As Everett and Neu(2000) have detailed, accountability for the envi-ronment is now translated into the terms and cate-gories of an environmental accounting. Theysuggest that the intersection of ecological andsocial realms is ignored and issues of social justiceare eVectively erased (2000, p. 5). Research isbeginning to highlight the processes throughwhich accounting helps deWne areas of politicaland social concern not previously viewed inaccountants terms. This translation of multipleissues to accounting issues (Power et al., 2003)now gives enormous inXuence to accounting Wrmsin many areas of the regulation of economic andpolitical life. Many of these regulatory practicesand institutions have been removed from arenasfor political or democratic legitima

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