Reining in auditors: On the dynamics of power surrounding an “innovation” in the regulatory space

In the aftermath of Enron and the collapse of Arthur Andersen, new “independent” institutions were created to oversee financial auditing. Based on a modified version of Lukes’ multidimensional model of power, we first investigate how the creation of the Canadian Public Accountability Board (CPAB) has affected the dynamics of power among the main players enlisted in Canada’s regulation of public accounting. Our findings strengthen the view that a “form of allegiance” was, at the time of data collection, developing between CPAB and the largest Canadian accounting firms. Through a second analytical movement, we extend the boundaries of our argument, showing that patterns of resistance against the logic of arm’s length regulation operate in a variety of audit regulatory sites. Our conclusion points, in particular, to the spatial gap – and incidentally the limitations – of any attempt to control and supervise a globalized industry from a national or regional perspective.

► Studies the creation of independent audit regulatory offices.
► Examines how dynamics of power is impacted by the change.
► Shows resistance to logic of arm’s length regulation within offices.
► Resistance to arm’s length regulation operates transnationally.
► Private circuit of power aims to preserve tradition of self-regulation.