A Study of auditing professionalization, standards and oversight in Egypt: Closure, Capture and Spectacle

Abstract

This research aims to examine the influence of transnational and national organizations on auditing in a developing economy (Egypt) by considering three main pillars of audit practice- audit professionalization, standards and oversight. This thesis draws upon the burgeoning literature analysing the increasing influence of transnational regulatory arrangements and the promotion of Anglo-American audit reforms on a global scale. Such reforms are notionally intended to enhance audit quality by aligning these three audit practices (APPs) with 'best' international practice. These three APPs are interrelated, whereby the 'product' of the professionalization project (i.e. the auditor) is tasked with implementing audit techniques and procedures (i.e. auditing standards), with a consequence that his/her professional judgement is reviewed by the national Public Oversight Board (POB). These audit practices emerged and developed locally at different times, starting with a contemporary history of the local professionalization project, followed by the switch from national standards to international Standards on Auditing (ISA) and, lately, the rise of Public Oversight Boards (POBs) as a new powerful regulator, namely the Auditor's Oversight Unit (AOU). This work contributes to the previous literature which has in the main examined the two latest key audit practices, ISA adoption and POBs, by focusing on developed countries. Furthermore, whilst the auditing literature has addressed the emergence of the accounting and audit profession in developing countries, it is, however, argued that there has been an insufficient examination of the interaction between the global profession and the local profession.

Informed by the above, this thesis consists of three papers that examine the link between audit practices and the global context. The first paper examines the developments of the Egyptian professionalization project since 1946, focusing on the dynamics of the State-profession axis in regulating who can be a registered auditor. The second paper addresses the regulatory space of the ISA adoption process in developing countries by examining the interplay between National Standards Setters (NSS) and other local actors, with an emphasis on the role of local Big Four affiliates in adapting ISAs as national auditing standards. The third paper is concerned with the establishment of POBs as the latest transnational regulatory arrangement and portrayed as an essential component in enhancing audit practice. Drawing on Debord's (1967,1988) concept of Standards Setters (NSS) and other local actors, with an emphasis on the role of local Big Four affiliates in adapting ISAs as national auditing standards. The third paper is concerned with the establishment of POBs as the latest transnational regulatory arrangement and portrayed as an
essential component in enhancing audit practice. Drawing on Debord's (1967,1988) concept of the "spectacle", the third paper examines how the formation and operation of POBs are shaped by, and integrated into, the global audit arena. Guided by an interpretive paradigm, the three papers have adopted a qualitative approach, using semi-structured interviews with 32 auditors and stakeholders representing regulators, professional associations, and local and international audit firms within the Egyptian audit arena. Overall, the study reveals that the change in APPs is a result of the different dynamics of institutional interplay between the transnational forces and local representatives of the Anglo-American profession with the State, regulators, and the local profession. These dynamics include: 1) Professional closure strategies between the State and the profession conditioned by the politico-economic context; 2) Regulatory space dynamics governed by the technical and financial resources of local actors (e.g. NSS & Big Four); 3) Replicated regulatory oversight mechanisms applied by local POB amid institutional weaknesses, with little understanding about their effect on practical changes in audit practice. Overall, this thesis offers contextually-informed empirical and theoretical contributions to the external auditing literature, by providing a multi-faceted understanding of the effect of global, as well as national forces on the change in three APPs in a developing country (i.e. Egypt).

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ORCID for Oliver Marnet: orcid.org/0000-0001-9450-2332

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