The Audit Society: Rituals of Verification

by Michael Power

Since the early 1980s there has been an explosion of auditing activity in the United Kingdom and North America. In addition to financial audits there are now medical audits, technology audits, value for money audits, environmental audits, quality audits, teaching audits, and many others. Why has this happened? What does it mean when a society invests so heavily in an industry of checking and when more and more individuals find themselves subject to formal scrutiny?The Audit Society argues that the rise of auditing has its roots in political demands for accountability and control. At the heart of a new administrative style internal control systems have begun to play an important public role and individual and organizational performance has been increasingly formalized and made auditable. Michael Power argues that the new demands and expectations of audits live uneasily with their operational capabilities. Not only is the manner in which theyproduce assurance and accountability open to question but also, by imposing their own values, audits often have unintended and dysfunctional consequences for the audited organization.

Genres: Sociology, Nonfiction, Anthropology

202 pages, Kindle Edition

First published January 1, 1997

Reviews

[Frank Calberg · Rating 5 out of 5]

Takeaways from reading the book:

What is the purpose of auditing / checking / controlling?
- Page 3: In the 1980s and early 1990s, checking grew strongly in several fields.
- Page 5: Audit is a risk reduction exercise.
- Page 21: The provision of an opinion on a financial statement is the purpose of an audit.
- Page 38: Audits are supposed to be planned and performed on the basis of accuracy and thoroughness, not the accounting firm's profit goals.
-Page 44: It has been argued that taxpayers have rights to know that their money is being spent economically, efficiently and effectively - the three Es - and that citizens as consumers of public services are entitled monitor and demand certain minimum standards of performance.
When and how did auditing / controlling / checking people's work develop?
- Page 73: Early accounting and auditing policy in the USA were permeated by a scientific optimism which was open to statistical ideas.
- Page 127: Corporate financial audits are formally intended to serve the goal of shareholder control.
- Page 127: Academic audits have as one of their goals the empowerment of a hitherto powerless student body.
- Page 127: Medical audits are conducted in the name of patients.

What are some problems related to auditing / controlling / checking?
- Page 2: Societies, which have tried to institutionalize checking on a grand scale, have slowly crumbled. Why? Because it was too costly and exhausting for people who check and were checked.
- Pages 27 and 29: There is no robust conception of what good auditing is. Auditing lacks clear output based criteria of performance.
- Page 45: Expert professionals and public accountability often express competing values.
- Page 95: The audit process can be said to fail because its side-effects may undermine performance.
- Page 95: One type of auditing failure is that the audit process becomes a world in itself, self-referentially creating auditable images of performance. The audit process is decoupled or compartmentalized in such a way that it is remote from the very organizational processes which give its point.
- Page 95: Another type of auditing failure is that regardless of intended changes to the audited organization, the audit world spills over and provides a dominant reference point for organizational activity. Organizations are colonized by an audit process which disseminates and implants the values which underly and support its information demands.
- Page 108: Medical audit serves accountability programmes imperfectly because much information remains private.
- Page 123: There are tendencies to create ever more formal auditable structure, regardless if demonstrable effectiveness, in order to produce comfort.
- Page 127-128: Auditing quality labels do not invite public dialogue. Paradoxically, the audit society threatens to become an increasingly closed society, albeit one whose declared programmatic foundation is openness and accountability.

How can we solve problems related to excessive auditing / controlling / checking:
- Page 1: Trust releases us from the need for checking.
- Page 123: Auditing is a practice which must be trusted and which is also itself, of necessity, trusting.

[Ronald J. · Rating 2 out of 5]

How can auditing be such a robust policy tool when it so often fails. Are we becoming an audit society—the pathologically of excessive checking? This book attempts to provide an answer. It makes many interesting points, such as: auditing is an important constraint on the development of any performance measures, especially non-financial ones, or ones that cannot be audited; audits produce comfort and reassurance rather than critique; with respect to financial auditing, more accurate to speak of an “audit implosion” rather than an “audit explosion”; in the end, checking itself requires trust; have auditors earned that trust? While most people think that auditing is to detect fraud, that’s not what financial auditors do. This is the “expectations gap,” and the profession has done a lousy job with messaging and marketing the real function of an audit. This obfuscation is a feature, not a bug, and it’s why I believe the CPA profession doesn’t deserve a monopoly in this service. Monopolies don’t innovate, and nowhere is that more evident than in auditing. Open it up to competition and all sorts of new offerings would enter the market: financial statement insurance, other providers of audit, etc. Also, the author doesn’t really address how an audit firm can be independent if they are paid by the company they are auditing? This is a problem the profession simply doesn’t want to address, instead crafting all sorts of picayune rules that make it look like they are concerned with independence in fact and appearance. I think the stock market exchanges should hire and pay the auditing firm, as they are in the best position to capitalize on the audit. But the author doesn’t really address this issue at all. The book is very wonkish, somewhat turgid, and not a light read. It’s also outdated, and is mostly UK examples. I still thought there were some good points, I just wished he expanded the analysis of what innovation could do to reform auditing. Blockchain is an obvious partial answer.

[Pete · Rating 3 out of 5]

The audit might form a kind of legitimizing ritual for the technicalized, ‘anti-political’ aspects of government. Power’s insights about the ways that the audit reworks existing professional practices to make them amenable to audit oversight is useful. The tension between ‘decoupling’ and ‘colonizing’ aspects of the audit is an interesting starting point for thinking about how technical processes are legitimized. Also useful is the concept of orders of systems of control - audit being a ‘second order’ system for the control of regulatory systems.

[Saaya · Rating 3 out of 5]

I read a super interesting review of this book and was excited to read it. The preface was good and digestible, but as soon as I got into the first chapter……I was completely lost. Im not even sure where the difficulty comes from. But still, I’m sure I’ll comeback to better understand the author’s fascinating argument that I could pick up so far.

[Cold · Rating 4 out of 5]

Dense and critical with many interesting ideas.

[Sam Grace · Rating 3 out of 5]

This book is accessible and makes important points. Just not ones with obvious connections to my interests ...