‘Professionals who understand’: Expertise, public interest and societal risk governance

Description
This paper applies ideas from Beck, Power and Collins & Evans to investigate why crises
triggered by societal risks heighten tension between self-regulated experts and the state,
and why this increased tension threatens professional self-regulation. Using an Irish case
of the regulation of professional auditors, we find that Beck helps us to understand the
accounting bodies’ view of their own position as experts and their role in mitigating risk.
Beck’s idea of a closed organizational roof, Collins and Evans (2002) work on waves of risk
and expertise, and Power’s insights on the significance of public perception of risk are
deployed as a framework to explore why these bodies lost power to a non-expert state
which more clearly grasped the importance of lay power in a time of crisis. We propose
the idea of professional regulation as a form of societal risk governance; this provides a
frame to investigate why the state was able to harness a growing public disquiet to assert
more control in their relationship with the professional bodies, and underscores the prece-
dence of public interest over expertise in the self-regulatory debate

‘Professionals who understand’: Expertise, public interest
and societal risk governance
Philip O’Regan
?
, Sheila Killian
1
Kemmy Business School, University of Limerick, Ireland
a b s t r a c t
This paper applies ideas from Beck, Power and Collins & Evans to investigate why crises
triggered by societal risks heighten tension between self-regulated experts and the state,
and why this increased tension threatens professional self-regulation. Using an Irish case
of the regulation of professional auditors, we ?nd that Beck helps us to understand the
accounting bodies’ view of their own position as experts and their role in mitigating risk.
Beck’s idea of a closed organizational roof, Collins and Evans (2002) work on waves of risk
and expertise, and Power’s insights on the signi?cance of public perception of risk are
deployed as a framework to explore why these bodies lost power to a non-expert state
which more clearly grasped the importance of lay power in a time of crisis. We propose
the idea of professional regulation as a form of societal risk governance; this provides a
frame to investigate why the state was able to harness a growing public disquiet to assert
more control in their relationship with the professional bodies, and underscores the prece-
dence of public interest over expertise in the self-regulatory debate. An analysis of the per-
spectives of government, profession and civil society illustrates inherent vulnerabilities in
the authority of a self-regulated professional body excessively reliant on its own expertise.
Ó 2014 Elsevier Ltd. All rights reserved.
Introduction
The work of Ulrich Beck takes as a central theme the
role of scientists and other expert groups in both causing
and de?ning broad civilizational risks which permeate
society. Experts, he argues, are not best placed to respond
to or manage those risks precisely because of their own
role in creating them. Furthermore, Beck (1992:158)
observes that science ‘no longer merely scientizes nature,
people and society, but increasingly itself, its own
products, effects and mistakes.’ He argues that the body
of scienti?c experts is not only concerned with external
or pre-existing risks and dependencies, but ‘with the
de?nition and distribution of errors and risks which are
produced by itself’ (Beck, 1992:158). Their role in de?ning
risk creates a barrier to the non-expert who seeks to
understand or address the risk created by and mediated
by expert groups. This barrier in turn gives the closed,
self-referential groups of experts or professionals a sense
of security which can translate to an overcon?dence in
their traditional claims to self-regulation.
However, in the presence of what Robson, Willmott,
Cooper, and Puxty (1994:528) describe as ‘‘a series of scan-
dals that cast doubt on established claims to independence
and trustworthiness’’ the state can be enabled to overcome
this barrier between the expert as risk-de?ner/mediator
and the public at large. Collins and Evans (2002:236)
describe how, when risks and scandals arising from or
related to expertise become of ‘‘visible relevance to the
public,’’ this moves the issues into a domain in which
the political class is more comfortable and adroit. Thehttp://dx.doi.org/10.1016/j.aos.2014.07.004
0361-3682/Ó 2014 Elsevier Ltd. All rights reserved.
?
Corresponding author. Tel.: +353 61202397.
E-mail addresses: [email protected] (P. O’Regan), [email protected]
(S. Killian).
1
Tel.: +353 61202237.
Accounting, Organizations and Society 39 (2014) 615–631
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democratically-attuned state can then use its mandate to
exploit the public ‘pressure on the credibility of accoun-
tants’ (Robson et al., 1994:528) that results from these
scandals. In these circumstances a profession reliant on
inherited notions of its own professional invulnerability
may be unable to respond quickly or appropriately to this
newthreat. As Collins and Evans (2002:241) note, ‘‘the pace
of politics is faster than the pace of scienti?c consensus
formation,’’ in part because non-expert politicians make
decisions based on a simpli?ed version of expert knowledge,
free, in the case of accounting or auditing of what Michael
Power calls ‘the essential obscurity of auditing’, or
accounting ways of thinking (Power, 1997:27, 2007, 2009).
The closed nature of expert professions and their poten-
tial to generate and de?ne risk suggests that their effective
regulation should be a key element of societal risk gover-
nance on both a national and an international basis. This
raises the question of who should be best entrusted with
this regulation. To what extent, for example, can expert
professionals credibly and effectively regulate themselves
in the interests of society? Robson et al. (1994:531) argue
that professional self-regulation is a form of social contract
between the profession and society ‘agreed because the
‘‘profession’’ is judged to be an effective guardian of the
public good’. This suggests that the public interest legiti-
mation of a profession is a key underpinning of its ability
to self-regulate. In the period following a crisis of such
legitimacy, the state may seek to revoke the implicit con-
tract and recon?gure the regulatory relationship. The
capacity of a profession to respond to such a development
is dependent, in part, on its understanding of its own key
strengths; if it retains a clear focus on its purpose of serv-
ing the public interest it should foresee the threat and
understand how to respond. If, however, it retreats to a
perceived place of safety within the comfort of professional
tradition, prioritizing claims of expertise over public ser-
vice, it may become too blinkered to see the emerging
threat from a government responding to a very public risk
(Collins & Evans, 2002).
These issues are explored in this paper in the context of
a crisis in self-regulation within the Irish accountancy
profession which eventually led to the dilution of a self-
regulatory model that had survived virtually intact for over
a century. This crisis could be traced to a combination of
very public scandals in which the role of Irish accountants
was severely criticised while parallel international
auditing failures appeared to give credence to claims that
systemic failings were at play. Following investigations
that uncovered extensive fraud as well as some signi?cant
failures in the auditing process in Ireland, the government
established a Review Group on Auditing (RGA) in 2000.
RGA’s mandate was to determine whether or not self-
regulation was working effectively and whether, in the
light of such an assessment, newor revised structures were
required. This led to a very public contest on the appropri-
ateness of self-regulation as the most suitable regulatory
form for the accountancy profession in the twenty-?rst
century, leading ultimately to the establishment of the
Irish Auditing and Accounting Supervisory Authority
(IAASA), a regulator largely independent of the profession.
This represented a signi?cant breach with the self-
regulatory regime that had prevailed in Ireland for almost
a century. The struggle was characterized by the profes-
sional bodies’ blindness to the changing nature of their
relationship with the state, and the vulnerability of their
claims to expertise in a crisis in which the state was better
placed to rally public opinion, and to frame the debate in
terms of public interest.
Canning and O’Dwyer (2013:170) have already drawn
on the case of the formation of IAASA to study ‘‘how these
revised regulatory arrangements . . .. were re-negotiated
and re-shaped.’’ They utilise concepts of regulatory space
and Oliver’s (1991:188) responses typology to describe
the strategies of de?ance and resistance deployed by the
various actors, and highlight ‘the unrelenting nature of
the [professional bodies’] resistance’ to external regulation’
(Canning and O’Dwyer, 2013:188). This resistance, they
observe, was not expected, given the intensity of public
reaction to the scandals: ‘it was expected that they would
adopt compromise strategies . . .. It is as if the [professional
accounting bodies] were in denial about the ‘‘reality’’ of the
gradual accumulation of pressures over an extended period
which challenged their previously unquestioned status in
the Irish social and political context’ (Canning & O’Dwyer,
2013:189). Beck would suggest that this blindness of the
profession to the inherent weakness of its own position
in the face of public pressure derived from an inappropri-
ate prioritizing of its own technical expertise, essentially
a failure to grasp the public interest basis for the social
contract that underpins self-regulation (Robson et al.,
1994). This is consistent with Collins and Evans
(2008:125) who note that ‘in politics it is normal and
appropriate for public opinion to be important in reaching
conclusions; in science it is different’. Canning and
O’Dwyer (2013:191) conclude with ‘‘a call for an enhanced
appreciation of the in?uence of national political and social
contexts on the development and interpretation of
accounting regulation.’’ In contrast to Canning and
O’Dwyer (2013), we take the case of the formation of IAASA
in Ireland, and prioritise issues of risk and expertise, using
Beck’s frame as well as that of Collins and Evans (2002,
2008) to a different question to Canning and O’Dwyer
(2013). While they very thoroughly map the strategies
employed, we explore the extent to which it was the pro-
fession’s own self-perpetuated persona as an elite group of
experts veiled in a century of tradition that ultimately
blinded them to the impact of the crisis on the viability
of their own position. Our approach allows us to explore
the underlying factors that led to the profession’s misap-
prehension of changed power relations with bodies more
alert to the heightened signi?cance of legitimacy over
expertise in a period of perceived societal risk.
This paper’s contributions may be summarized as fol-
lows: In the ?rst place, Beck’s view of the profession as a
structure to generate and shield power, which he refers
to as a ‘closed organizational roof’ and the work of Collins
& Evans on successive chronological waves of science stud-
ies are used to illustrate why the profession’s unswerving
belief in the expert-based strength of their position blinded
them to three growing vulnerabilities. Firstly, they initially
saw no need to base their case for self-regulation on
issues of public interest, leaving this argument largely
616 P. O’Regan, S. Killian/ Accounting, Organizations and Society 39 (2014) 615–631
uncontested and available to be invoked by the state. Sec-
ondly, they focused their communications on like-minded
professionals and the business elite, a narrowing of scope
which did nothing to enhance the legitimacy of their posi-
tion. Thirdly, they framed their communications in a tech-
nical manner, prioritizing their own status as ‘professionals
who understand,’ rendering their arguments obscure and
compounding a growing public sense of alienation from,
and mistrust of, the profession.
We then draw on Power’s (2007) notion of the distinc-
tion between risk management and risk governance to put
forward the idea of professional regulation as a form of
societal risk governance which becomes urgent in the pres-
ence of widespread public perception of risk. This allows us
to explore how the state drew on a shifting democratic dis-
quiet to recalibrate the relationship with the profession in
a way that con?rms the contestable nature of the self-
regulatory form.
Furthermore, our analysis underscores the precedence
of public interest over expertise in the self-regulatory
debate, and examines how elements distinguishing the
profession from the population as a whole, previously a
source of strength and status, became weaknesses follow-
ing a societal crisis. Our work con?rms that the self-regu-
latory form is not immutable or inherited, but a
concession from society as proxied by the state to a profes-
sional group, and subject to continual review and
renegotiation.
Beck is useful in examining the impact of context inso-
far as it was a ?nancially-based societal risk which had
undermined the notion of audit and control. In this con-
text, those experts who are perceived by the public to have
contributed to the risk are not politically best placed to
address it. Beyond this, we also employ historical contex-
tualization in a manner that highlights how professions,
while founded on a basis of service to the public interest,
can slowly veer from this focus over time. Their belief in
the inherent worth of their professional values leads them
to con?ate self-interest and public interest. As Collins and
Evans (2002) shows, a crisis can quite suddenly expose
what has been a gradual erosion of purpose, leading to
an abrupt loss of perceived authority. They describe how
during the period they call the ?rst wave of science studies,
‘social analysts generally aimed at understanding, explain-
ing and effectively reinforcing the success of the sciences,
rather than questioning their basis’ with the result that
for all actors, including the public, ‘a good scienti?c train-
ing was seen to put a person in a position to speak with
authority and decisiveness in their own ?eld, and often
in other ?elds too’ (Collins & Evans, 2002:239). However,
in this case risks quickly crystalized with the onset of a
better-informed and more vocal public and a full-blown
Beckian societal crisis for which the auditing profession,
shielded from an awareness of change by its own closed
nature, was unprepared. Professional notions of service in
the public interest may evaporate quite gradually, but a
crisis has the effect of revealing the extent of the gulf very
abruptly. Our analysis highlights how such a misalignment
with the public interest contains latent threats not only for
society as a whole, but for the profession itself (Lee, 1995;
Robson et al., 1994).
We employ a methodology incorporating interviews
with key actors as well as analysis of written records to
address the issue of motivation and to enrich our under-
standing of the political and social context. Among other
things this highlights, consistent with Robson et al.
(1994:539), the alarm and surprise with which the profes-
sion greeted the prospect of external regulation. The appli-
cation of Beck’s notion of the closed roof helps us to see
that more than a belief in the primacy of expertise is at
play when professions seek to shield themselves. It is also
based on an overweening con?dence in professional tradi-
tion, and an assurance that what is best for the profession
will ultimately be best for society at large. This con?ating
of professional self-interest and public interest induced a
myopia and lack of self-awareness which obscured from
the profession the real weaknesses of its position in the
self-regulation debate.
This idea of the closed organizational roof comes from
Beck’s analysis of the medical profession. It builds on his
observation that doctors have a power in their own regula-
tion which comes from their ‘successful professionaliza-
tion’, that is to say their achievement in limiting external
access to their knowledge, protecting their own training
and transmission of professional norms while controlling
the ability to practice (Beck, 1992:210). These factors
together constitute a structure which shelters the profes-
sionals from the criticism of less-informed public voices.
We argue that the weight of one hundred years of tradition
also introduced a kind of ambiguous complacency within
the profession about its mandate of serving the public
interest. In the case of the Irish professional accounting
bodies, these factors combined to form a structure which
appeared to shelter them from external threat, but also
prevented them from seeing critical shortcomings in their
defence of their self-regulatory traditions. These shortcom-
ings related to a focus on issues other than the public inter-
est, a tendency to limit communication to the elites and a
framing of the issue which prioritized expertise over legit-
imacy. Accountants lost control of a debate which they
would have previously controlled by limiting it to the tech-
nical. In short, the profession was laboring under the mis-
taken belief that ‘as a professional power [it] has secured
and expanded for itself a fundamental advantage against
political and public attempts at consultation and interven-
tion’ (Beck, 1992:210). The profession found itself walled
in by rigid and outdated notions of the boundary between
it and society. Having created a distinction between the
expert and the lay person, it was easily ‘‘othered’’ in the
crisis, and its needs were seen as disconnected to societal
needs.
Both Beck and Power also help us to understand how,
despite the fact that technical failures triggered the crisis,
the discussion can become focused not on measures which
might improve the technical ef?cacy of audits, but rather
on the regulation of the profession. The government,
drawing on its public mandate, understood risk as
something to be governed rather than simply managed.
In this context, Power (2007) argues that an increased
public awareness of risk is not just an indicator of risk,
but also a source of risk in itself, requiring the government
to ?nd ‘a strategy to govern unruly perceptions and to
P. O’Regan, S. Killian/ Accounting, Organizations and Society 39 (2014) 615–631 617
maintain the production of legitimacy in the face of those
perceptions’ (Power, 2007:21). Its strategy mirrored the
public disquiet at the profession more generally, and
focused on issues of trust and control, moving the debate
away from the technical into an area closer to the govern-
ment’s own source of strength. This highlights the fact that
the trust granted to experts is ‘not as neutral nor objective
as Beck suggests’ but rather ?ows from the fact that those
in positions of authority have some control over those
experts (Hanlon, 2010:215). ‘The professionalization pro-
ject of accountants is continually being managed and
reproduced’ (Radcliffe, Cooper, & Robson, 1994:603).
As Power (2007:21) notes, while observing certain
shortcomings in his analysis of risk, ‘Beck’s ideas appeal
in contexts where there is increasing consciousness of
self-produced risks and also doubts about the capacity of a
?ourishing risk-regulation industry to cope with them.’ In
the context of growing public concern about the regulation
of the accounting profession, then, we can use Beck to
understand how the self-aggrandized assessment by the
profession of the signi?cance of its own expertise prevented
it from discerning the wider societal context and the
delegated nature of the power on which its self-regulation
was dependent. This contributed directly to the effective
diminution of its capacity to articulate a defence of its self-
regulatory regime in a manner that resonated with an
increasingly informed and sceptical public. The govern-
ment, facedwiththe needtorespondvery publiclytoa crisis
of con?dence, understoodthe origins of that crisis as lying in
the unfettered power of the professional expert, and so saw
addressing professional regulation as a key part of the
solution. Having devolved regulation of the profession to
the profession itself more or less since its foundation, they
grasped the urgency of reasserting control over this
relationship.
This case is important, therefore, in emphasising the
multi-faceted nature of society’s interaction with the self-
regulatory form. While self-regulation has constituted an
important element in the regulatory architecture of the
accountancy profession since the early days of profession-
alization (Walker, 2004a,b), the circumstances surround-
ing the imposition of IAASA suggest that the foundation
on which con?dence in the self-regulatory form is con-
structed may be more fragile than is immediately appar-
ent. This fragility has been obscured, in part, by a
historiography dominated by stories of organizational suc-
cess: the literature has yet to attend suf?ciently to the
insights that instances of ‘failure’ provide into the contest-
able nature of self-regulation as a discrete organizational
form per se (Cooper & Robson, 2006:418). This paper seeks
to redress this imbalance, using the study of a post-crisis
situation to highlight the fragility of a defense of self-regu-
lation based largely on notions of expertise.
This paper is structured as follows: the next section
explores the literature on self-regulated expert groups
and the state. We draw in part on a public policy literature
that acknowledges the essentially dynamic and contest-
able nature of self-regulation (Weber, 2000 [1894]; Black,
1996). The particular signi?cance of the regulation of audi-
tors is outlined, drawing on Michael Power’s work on audit
and risk (Power, 1997, 2007, 2009) the work of Beck (Beck
1992; Beck & Lau, 2005) and that of Collins and Evans
(2002, 2008).. We draw further on Canning and O’Dwyer
(2013) in outlining the details of the case. The paper con-
cludes with a discussion of the key issues.
Theoretical context
For auditors and accountants, self-regulation is ‘a de?n-
ing character of what it means to be professional’ (Robson
et al., 1994:527). However, a wide range of possible insti-
tutional con?gurations present themselves on the regula-
tory spectrum between public regulation and private
ordering (Ogus, 1995; Scott, 2002). Self-regulation, an
organizational form typically involving the regulation of
professional and trading activities by private agencies, is
one of these. It can be de?ned as:
‘a regulatory process whereby an industry-level . . .
organization sets rules and standards (codes of practice)
relating to the conduct of ?rms in the industry’
(Gunningham & Rees, 1997:365).
While no particular relationship with the state is
implied by the term ‘self-regulation’, for a variety of polit-
ical, historical, legal and economic reasons private sector
self-regulation is unlikely to exist in a form untouched by
public sector involvement (Black, 1996; Cane, 1987;
Scott, 2002). At the very least, self-regulatory entities will
typically owe any monopolistic advantages to the creation
of what Sikka and Willmott (1995:553) call a ‘state-carved
niche’ to be occupied exclusively by members of
professional self-regulated agencies (hereafter SRAs). Self-
regulation is therefore best understood as falling some-
where on the continuum between government regulation
at one end and private ordering at the other, with its
immediate form the result of a variety of socio-economic
and political factors mediated via the relative power posi-
tions of various public and private actors (Porter & Ronit,
2006; Scott, 2002; Stigler, 1971).
Explanations of the self-regulatory dynamic emphasize
the ef?ciency attractions of this regulatory form to govern-
ments and public rule-making bodies (Baldwin & Cave,
1999; Ogus, 1994; Ogus, 1995). Thus, the capacity of self-
regulated bodies to command greater levels of expertise
than the state can muster is presented as likely to result
in cost and operational ef?ciencies for both the state and
the public (Black, 1996; Ogus, 1995). While alert to the cor-
poratist tendencies of groups that are not accountable to
the body politic, this perspective identi?es many self-reg-
ulatory arrangements as a deliberate handing over by the
state of its law-making powers (Baldwin & Cave, 1999;
Ogus, 1995; Scott, 2002).
Since the standards and rules developed by the SRA will
be capable of incorporating a greater degree of informality
than those created under a public regime (which is typi-
cally subject to more transparent institutional and consti-
tutional procedures), the dynamics and processes of
industry regulation and disciplinary adjudication may
draw on more informal codes of common interest and
mutual dependence (Baldwin & Cave, 1999; Black, 1996;
Black, 2002; Braithwaite & Drahos, 1999). Inculcating in
618 P. O’Regan, S. Killian/ Accounting, Organizations and Society 39 (2014) 615–631
SRAs a culture that espouses trust-based reciprocity and
normative expressions of conduct may lead to further ef?-
ciencies. It will also allow public of?cials and legislators
both to reduce public expenditure (and, by extension,
taxes) and to de?ect criticisms onto designated SRAs
(Baldwin & Cave, 1999; Black, 2002; Ogus, 1995).
However, the bases for self-regulatory arrangements
transcend economic ef?ciency. Self-regulation is granted
to occupational groups on foot of a ‘social contract’
whereby professions agree ‘to regulate their members in
ways that serve the public interest’ in return for monopo-
listic advantages in the market for their services (Robson
et al., 1994:531). However, the self-regulatory form may
also confer on SRAs the means by which to bene?t mem-
bers in ways which are not consistent with the public
interest (Black, 1996; Black, 2001; Ogus, 1995). This is
more likely to develop when the SRAs are allowed to con-
struct a Beckian closed roof, by implementing strategies to
close off access to the profession. For instance, an SRA may
create rules controlling quali?cations and licenses to prac-
tice (Shaked & Sutton, 1981). Restrictive quality standards
relating to, for example, fee regulation (Van den Bergh &
Faure, 1991) and professional ethics (Gravelle, 1985) may
have a similar effect, restricting the capacity of clients to
identify the most ef?cient service provider, and, in the pro-
cess generating monopoly rents (Trebilcock, 1982). Such
closure strategies are part of ‘the ‘‘boundary work’’ of try-
ing to de?ne people in or out – that is, de?ning them as
legitimate or illegitimate commentators’ (Collins and
Evans (2002:242). These factors create a degree of mysti?-
cation or information asymmetry around the technical or
expert discipline controlled by the SRAs. In the case of
the accounting profession, information asymmetry derives
from what Power (1997:27) calls ‘the essential obscurity of
auditing’, referring to the way in which it is improperly
understood by outsiders, not only because of its inherent
dif?culty, but because ‘it may be argued that ?nancial
auditors have deliberately obfuscated the issue of what
audits really do’ (Power 1997:27). Because information
asymmetry allows the SRA to pursue its own goals
shielded from more direct regulation, it can be in the
self-interest of an SRA to maintain it. In this context actions
by the auditing profession which reinforce information
asymmetry, such as excluding non-experts and expressing
their work in technical terms, have the effect of drawing
more power to itself.
Baggott (1989) makes the case that a secondary bene?t
to professions of self-regulation as a privilege granted by
the state is the way in which it brings the SRA closer to
the government. Governments can be drawn into a form
of regulatory capture, when self-regulation begins to work,
not in the public interest, but in the interest of SRAs them-
selves. In the absence of a crisis, this can be a comfortable,
codependent relationship, and governments may be will-
ing to eschew long-term bene?ts to consumers in return
for short-termpolitical advantage and savings to the public
purse (Ogus, 1995; Trebilcock, 1982). In such stable times
they rely rather on the process of encouraging more goal
congruence based on shared ethical practices and Weberi-
an honor, an insight drawing on the work of Max Weber
who, in an extension of his work on class and status
groups, sought to broaden consideration of the self-regula-
tory form beyond mere rent-seeking and individual rights.
Thus, his comparison of the regulatory models underpin-
ning European and US stock exchanges recognized the
potential for self-regulated entities to promote normative
action amongst members (Weber, 2000 [1894]; Cooper &
Robson, 2006; Gunningham & Rees, 1997). Observing
how, ‘[d]espite . . . fundamental similarity in essential pur-
poses . . . the organization of the exchanges in different
lands exhibit very noticeable differences’, Weber sought
to understand the variety of regulatory models in a manner
that highlighted their socially and historically contingent
nature (Weber, 2000 [1894]:326).
To a greater extent than state controlled entities, there-
fore, self-regulation facilitates mediating institutions (such
as industry associations) in actively fostering shared nor-
mative and ethical practices in ways that recognized both
economic and social goals (Gunningham & Rees, 1997;
Weber, 2000 [1894]). A key consideration in assessing
the nature and role of the self-regulatory form must, there-
fore, be its capacity to affect the behavior of members of
the group or association ‘within a normative ordering that
is responsive to broader social values’ (Gunningham &
Rees, 1997:364). As Power (1997:5) notes: ‘different com-
munities will institutionalize different forms of account-
ability’. Complemented by the work of those such as
Durkheim, who viewed self-regulation as one means by
which ‘occupational activity can be ef?caciously regu-
lated,’ this framework has shaped a public policy literature
that examines self-regulatory bodies in the context of both
their contingent nature and their capacity to address soci-
etal problems (Black, 1996; Durkheim, 1933:5;
Gunningham & Rees, 1997; Ogus, 1994; Stigler, 1971).
Such norming has been central to self-regulation, in
part because the alternative, monitoring or close oversight,
carries with it certain costs and inef?ciencies. For example,
in imposing limits on the organizational form that
SRAs may adopt – by prohibiting the use of limited compa-
nies, for instance – the state may also in?ict additional
costs on clients by causing inef?ciencies, as well as dis-
couraging organizational diversity (Ostry, 1978; OECD,
1985, 1997, 2000). In a self-regulated system oversight is
essentially outsourced to the overseen. In the case of pro-
fessional auditors, the monitoring or audit function is
devolved precisely because of the very monitoring exper-
tise of the agent group, creating a form of meta-oversight.
In a time of crisis, however, this may be challenged by the
inability of the expert agents to deal with systematic disas-
ters which are ultimately seen by the general public as the
responsibility of the state. Beck (1992:59) argues that sci-
entists or experts are almost by de?nition incapable of
responding to these ‘civilizational risks’ – those pervasive
risks to humanity such as pollution, climate change or glo-
bal ?nancial crisis. This, he argues, is because expert
groups control not only the means of creating risks, but
also claim a monopoly on the language and professional
expertise necessary to understand or challenge them. As
an expert body moves from a concern with external or
pre-existing risks and dependencies, toward a focus on
‘the de?nition and distribution of errors and risks which
are produced by itself’ this creates what he calls ‘re?exive
P. O’Regan, S. Killian/ Accounting, Organizations and Society 39 (2014) 615–631 619
scientization’ which ultimately aims to exclude non-
experts from the management of expert-generated risk
(Beck, 1992:158).
As such, expert groups may come to be seen by govern-
ments as unsuitable to regulate their own work to the
extent that it relates to these pervasive risks that impact
on groups outside of their immediate domain. Beck argues
that even if they are not central to the creation of these
risks, they can be seen to act as ‘legitimating patrons’ of
the forces that created them. Utilizing this framework,
from the perspective of the state, a self-regulated
professional body may no longer be seen as key to the
management of risk. Rather, because of this ‘re?exive
scientization’, it may be perceived as contributing to
the obfuscation of its own contributory role (Beck,
1992:158). Therefore, external regulation of the profession
may be viewed by government as an essential element of
the governance of risk. In response, professional bodies
are expected to ‘assert the independence of their ‘‘techni-
cal’’ procedures from (socio-political) ‘‘interference’’ by
. . . state agencies’ (Robson et al., 1994:531).
Power (2009:854) notes that slavishly following the
dominant riskmetrics not onlyfails toaddress riskina holis-
tic way, but is dangerous because it distracts fromuncover-
ing those risks that arise due to the interconnectedness of
things. This interconnectedness is arguably at the heart of
the very professional norming referred to above – what
Power (2009:854) calls ‘an accounting style of knowing’,
again rendering the profession unsuitable for addressing
those risks. Governments, taking their cue from wider soci-
ety, may develop an inherent distrust of the impenetrable
club of professional experts who have apparently presided
over a crisis, believing themselves to be secure under the
closed roof of their expertise. This may lead the state to take
radical action to overhaul the model of self-regulation, and
to establish more control or at least transparency in the pro-
cess. What had formerly been seen as a question of knowl-
edge of technique becomes a political issue, and with the
interventionof politicians in the domainof the expert ‘mod-
ernization risks prepare the ?eld for a partial redistribution
of power –partially retainingthe oldformal responsibilities,
partially expressly altering them’ (Beck, 1992:78).
The speed with which the state can act in these circum-
stances may leave the profession lagging. Collins and Evans
(2002) note that political actors can reach consensus for
action far more quickly that groups of professional experts,
in part because they act on the basis of simpli?ed or con-
densed information, and are not distracted by detail or
ambiguity: ‘The consumers, as opposed to the producers,
of scienti?c knowledge have no use for small uncertainties’
(Collins & Evans, 2002:246). In the wake of a crisis, the
state responds to concerns from the public which may, in
turn, be even more simpli?ed, leading to a greater clarity
of purpose and speed of response. The expert group may
not foresee this move, being immersed in what Beck
(1992:60) describes as an ‘economic Cyclopia of techno-
scienti?c rationality’. This is a form of double-blindness:
?rst, as Beck argues, because the expert view is trained
exclusively on productivity, it cannot see or respond to
the risks this has created. This is particularly acute to the
extent that risk is created or exacerbated by the very
‘closed club’ nature of the profession. As a consequence,
the experts’ ability to act as an effective agent of the state
in addressing these risks is undermined. The unprepared-
ness of an expert group for this change in their relationship
with the state constitutes a second form of blindness: an
inability to see the risk posed to its own power by its per-
ceived inadequacy in responding to crises.
Hanlon (2010:217) argues that in order to succeed in
holding or expanding in?uence, experts ‘need public sup-
port, state legitimation, etc.’ The auditing profession in
the immediate aftermath of a societal crisis appeared not
to appreciate this need, apparently believing itself to be
still secure in an earlier, ‘golden age’ when ‘a good scien-
ti?c training was seen to put a person in a position to speak
with authority in their own ?eld’ (Collins & Evans,
2002:239) However, as Robson et al. (1994:528) observe,
‘ideology has a place and a time’. The profession’s dogmatic
notions of their right to self-regulate may have been based
on a sense of security deriving from their synergistic rela-
tionships not only with the state as outlined above, but
also with business leaders. Sikka and Willmott (1995) writ-
ing in a not-dissimilar UK context, note that many CEOs
and CFOs who contract for audit services are members of
the same professions as their auditors. This creates a com-
fortable relationship which predisposes the profession to
focus on this group as their major clientele under whose
patronage it enjoys both status and economic advantage.
Following a crisis of con?dence, however, the relationship
can be viewed by a skeptical public as collusive rather than
constructive, undermining the public interest purpose
which forms the basis of the devolved privilege of self-reg-
ulation. A continued focus by the profession on the busi-
ness elite, seen perhaps as a kindred group of like-
minded peers with whom they share a common outlook,
can exacerbate this perception and further encourage the
government to act. As the analysis in the next section
shows, these weaknesses were not immediately apparent
to the Irish profession, at least in the early stages of the cri-
sis, and that lack of understanding contributed signi?-
cantly to the challenge to self-regulation.
Frauds, scandals and the undermining of regulatory
credibility
In examining this case, we draw on extensive primary
material including minutes, submissions by relevant
bodies, media reports, parliamentary records and other
sources. We enrich this dataset with in-depth semi-struc-
tured interviews with key actors in the case. All intervie-
wees were offered anonymity, and all three declined.
Each session lasted approximately one hour and was digi-
tally recorded.
Up to the establishment of IAASA the accounting profes-
sion in Ireland operated under a self-regulatory regime
that had been in place since the incorporation of the Insti-
tute of Chartered Accountants in Ireland (ICAI) by royal
charter in 1888 (Annisette & O’Regan, 2007). Essentially,
for over a century the profession functioned in a self-regu-
latory capacity with limited, albeit increasing, supervision
by the relevant branch of government (Canning &
620 P. O’Regan, S. Killian/ Accounting, Organizations and Society 39 (2014) 615–631
O’Dwyer, 2001; O’Regan, 2008; O’Regan, 2010). This model
survived the creation of the Irish Free State in 1922 and
persisted, almost unadulterated, into the late 1980s with
the Department of Enterprise Trade and Employment
(DETE) acting as supervisor of the various approved
accountancy bodies.
2
Following a series of statutory consol-
idations, by the early 1990s the principal statutory instru-
ments
3
for the regulation of the profession required that
the Minister for DETE be satis?ed with the standards applied
by SRAs in relation to ethical values, independence, integrity
and disciplinary procedures and that standards of training,
quali?cation and repute be consistent with those speci?ed
in relevant EU Directives (CA90, s.191). To assist in forming
an opinion the minister was to be furnished with annual
reports by the approved accountancy bodies that covered
these and any other relevant areas. While the profession
was, therefore, subject to a form of external supervision,
the ICAI CEO was content to characterize the regulatory
regime pertaining at that time as ‘virtually wholly self-
regulation’ (Brian Walsh, Accounting Web, August 10, 2001).
Over the course of the 1990s, however, a series of scan-
dals and tribunals conjoined to create a crisis of con?dence
in the profession, triggering growing concern on the part of
DETE at the relative lack of transparency in the internal dis-
ciplinaryproceedings of recognizedbodies. There was wide-
spread concern about the evasion of Deposit Interest
RetentionTax [hereafter: DIRT]. Separately, aninvestigating
tribunal, chaired by Mr. Justice Brian McCracken, identi?ed
a number of individuals, including Charles Haughey,
ex-Taoiseach (Prime Minister) and former senior partner
in a prominent accountancy ?rm, who had bene?ted from
an elaborate tax evasion scheme involving an unlicensed
Cayman Islands bank (Canning & O’Dwyer, 2013; Keena,
2003; McCracken, 1997). Accounts at this bank (known as
‘Ansbacher Accounts’), which at one point contained over
IR£50million, facilitated tax evasion by enabling anony-
mous transfers of funds (Keena, 2003). Fintan O’Toole, an
in?uential media commentator suggested that this fraud
‘would not have been possible without the active collusion
of a wider group of bankers, solicitors and accountants’ (Irish
Times, September 25, 1999).
4
In response, ICAI set up its own
investigation chaired by a former High Court Judge, John Blay-
ney, and sought to conduct it in private as part of its normal
internal disciplinary process. Concerted political and media
criticism, however, led to the inquiry being eventually con-
ducted in public (Irish Times, passim; Canning & O’Dwyer,
2001; Canning & O’Dwyer, 2006; O’Regan, 2010:298-9).
The pressure on the profession to break from the pri-
vacy of an internal enquiry continued, as Mary Harney
who was then the Minister for DETE, Tánaiste (Deputy
Prime Minister) and leader of the junior partner in the coa-
lition government, introduced regulations that gradually
and incrementally imposed increased transparency
requirements relating to the internal disciplinary proce-
dures of the recognized bodies. From 1997 they were
required to grant unrestricted access to internal disciplin-
ary proceedings to an observer appointed by the minister,
and in 1998 the information that had to be disclosed in
annual reports to the minister was increased signi?cantly.
In response to changes introduced by the government,
ICAI, Ireland’s premier accounting body, approved the
introduction of a new, more open approach to disciplinary
hearings as well as the presence of a majority of non-
accountants on its Complaints and Disciplinary Commit-
tees (Canning & O’Dwyer, 2003; Canning & O’Dwyer,
2006). Despite the changes, concerns about the role of
the profession in matters of public interest continued to
feature in extensive media coverage throughout 1998
(Bougen, Young, & Cahill, 1999; Collins, 2007; Keena,
2003). Popular opinion was encapsulated by Peter Cassells,
the secretary general of the Irish Congress of Trade Unions,
who, in an address to the Leinster Society of Chartered
Accountants, promised that ‘If you do not rid your own
profession of the people who are tainting it, then it will
be done for you’ (Irish Times, January 13, 1999). Public dis-
quiet focused partly on the perceived weakness of the
?nancial audit as a means of oversight and also on the lack
of response by the profession, which was interpreted as
arrogance. In an opinion piece in the Irish Times, Dick
Walsh wrote of auditors ‘... it was as if ... because someone
had a necklace of letters to his name, his judgment was
regarded as beyond reproach or even question. A lot of
questions are asked here about institutions, practices and
assumptions which no one dared question’ (Irish Times,
December 18, 1999). These comments clearly demonstrate
public impatience with the idea that professional quali?ca-
tions might grant the expert some formof impunity, essen-
tially undermining the professional protection of the
institutional roof of expertise. This in turn put pressure
on the government to take action.
In September 1999 a sub-committee of the Public
Accounts Committee (PAC) began a nationally televised
investigation of the matter, questioning accountants, audi-
tors and representatives of all major banks. Their report,
issued in December, concluded that widespread DIRT eva-
sion was ‘an industry-wide phenomenon’ (Report of PAC,
1999; Irish Times, December 16, 1999). The committee
found that ‘there were a number of serious defects and
weaknesses in relation to the statutory external audit func-
tion, which contributed to the continuance of the bogus
non-resident problem’ (Report of PAC, 1999; Irish Times,
December 16, 1999). These defects, it concluded, ‘require
to be addressed urgently’ and should be the subject of a
separate investigation to be undertaken by a review group
created under the aegis of DETE (Dáil and Seanad Éireann
Minutes, 2003). The report identi?ed ten speci?c areas of
concern that deserved attention, mainly centered on issues
of con?ict of interest and auditor independence.
2
The following accountancy bodies were recognized by the relevant
minister for the purposes of registering auditors: The Institute of Chartered
Accountants in Ireland; The Institute of Certi?ed Public Accountants in
Ireland (ICPAI); The Association of Chartered Certi?ed Accountants (ACCA);
The Institute Of Chartered Accountants in England and Wales (ICAEW); The
Institute of Chartered Accountants of Scotland (ICAS); The Institute of
Incorporated Public Accountants (IIPA).
3
The Companies Act, 1990 (CA90) and the Companies (Auditors)
Regulations Act, 1992.
4
O’Toole was paraphrasing an Af?davit lodged in the High Court by Paul
Appleby, a DETE Of?cial, who had been appointed by Minister Harney to
undertake an investigation of the Ansbacher Scheme: see Appleby, P, (2002)
Report of the Inspectors Appointed to Enquire into the Affairs of Ansbacher
(Cayman) Limited, 2 vols, Stationery Of?ce, Dublin. For af?davit (2000) see
www.publicinquiry.eu/Reports/Ansbacher/Appendices.
P. O’Regan, S. Killian/ Accounting, Organizations and Society 39 (2014) 615–631 621
Given the ongoing revelations from various tribunals
and growing public disquiet at the apparent subordination
of the public interest to that of members of private agen-
cies, these recommendations found eager political and
media support. The minister in question, Mary Harney
was not only amenable to pursuing the speci?c recommen-
dations made by PAC, but saw the opportunity to seek a
more fundamental review. She established a Review Group
on Auditing [hereafter: RGA] requiring it, in addition to the
issues identi?ed by PAC, to consider: 1. Whether self-regu-
lation in the auditing profession is working effectively and
consistently, and 2. Whether any new or revised structures
and arrangements are necessary to improve public con?-
dence and, if so, what form they should take (DETE Press
Release, December 29, 1999). The leading nature of these
added terms of reference suggested that the government
was intent on a fundamental re-appraisal of the suitability
of self-regulation as an appropriate regulatory form for the
accountancy profession. The minister not only placed gov-
ernment at the heart of the debate, but also framed it in
terms of issues far more fundamental than the detail of
audit remuneration and terms of engagement. The RGA
mandate included the broader question of the continued
ef?cacy of self-regulation, as well as the speci?c aspects
of the auditing process identi?ed by the PAC sub-
committee taking their remit beyond the technical aspects
where the expertise of the profession would have been
particularly strong. As Beck (1992:77) put it, where the
professionals ‘had felt they were alone among their own
kind – in the technical, economic and legal details –
everyone suddenly wants to get a word in, and ultimately
not with comparable precepts, but from a totally different
system of reference’.
The government move met with widespread approval,
with one media commentator noting that the minister,
government agencies and regulators should be com-
mended ‘for lighting a ?re under the accountancy profes-
sion because of the slapdash, even improper, way some
of its members had audited the accounts of ?nancial insti-
tutions in the past . . .’ (Irish Times, February 26, 2000).
The membership of RGA as announced in February
2000
5
comprised seventeen representatives of the commer-
cial, academic and professional worlds (including members
of four of the six recognized accountancy bodies). It was
chaired by Joe O’Toole, a prominent independent senator,
who would prove a ‘formidable’ and ‘highly in?uential’
chairman, particularly in ensuring that members remained
focused on producing a report within six months.
6
In Sena-
tor O’Toole’s opinion, the various frauds and scandals were
a ‘huge . . . driver’ in determining both the context within
which the RGA’s work took place and the modi?ed power
relativities of private and public members.
7
Terence O’Rourke, the ICAI representative on RGA con-
curred. In his view the effect of these scandals was signif-
icant, and ‘would have informed’ the Institute’s view that
there were ‘things to be ?xed’ and that what was needed
was ‘to get the best regulation [in order for the] public to
have trust.
8
’
The Review Group noted that despite the professional-
ism of many auditors and accountants, for some the extant
system of regulation ‘had not operated as an effective
counterweight to the pressures of the marketplace.’ The
Group saw its role, inter alia, as helping to establish better
lines of accountability between the state and the profes-
sion, and between the profession and its members (Report
of RGA, 2000:15).
In all, RGA received thirty-nine submissions from a vari-
ety of sources
9
, not all of which addressed the issue of self-
regulation (O’Regan, 2010:304; Canning & O’Dwyer, 2013).
The individual submissions of the six recognized accoun-
tancy bodies were broadly in agreement that the current
system functioned well, albeit with some room for improve-
ment. ICAI, for example, argued forcefully that the existing
framework was ‘working well and has many strengths’ (ICAI
Submission to RGA, 2000:5). Signi?cantly, it sought to char-
acterize the current scheme as ‘effectively based on the reg-
ulation of audit by recognized professional bodies such as
ICAI’ (ICAI Submission to RGA, 2000:5), pointedly not
acknowledging the role already played by DETE. This unwill-
ingness to acknowledge the role of the non-expert betrayed
a continuing faith in a traditional understanding of the reg-
ulatory relationship, and a Beckian belief that ‘with the
increasing scientization of political decisions ... political
agencies only carry out what scienti?c expertise recom-
mends’ (Beck 1992:188). It was a myopia which foreshad-
owed its later inability to respond effectively to the power
the state would secure by transforming growing public dis-
quiet into a democratic mandate for change. The profession
at this point still saw the problem as a technical one, best
addressed from within the con?nes of self-regulation, ignor-
ing ‘the normatively valid expectation that the decisions
which change society should be concentrated in the institu-
tions of the political system’ (Beck 1992:188).
Demonstrating a limited understanding of the need to
reference public interest, ICAI argued that the ‘current sys-
tem of self-regulation has many positive bene?ts for the
public’. At its most basic level, the accounting profession
raised issues relating to experience and resources, ‘and
questioned the ability of an oversight body with limited
resources to regulate effectively’ (Canning & O’Dwyer,
2013:179). A key contention of the Institute was that both
the development and review of standards and regulations
was carried on by professionals who understand the work,
and are, as such, more likely to identify poor quality work.
‘Professionals who understand’ constituted a key element
in the self-regulatory architecture and the resulting
5
The Group was subdivided into two sub-committees: one dealing with
Self-Regulation, chaired by Ann Fitzgerald, Secretary General, Irish Associ-
ation of Investment Managers; the other with Auditor Independence,
chaired by Professor Niamh Brennan, University College Dublin. Con?rming
DETE’s key role in the process, Paul Appleby, the DETE of?cial who had been
appointed as a High Court Inspector to investigate the Ansbacher Accounts,
acted as Secretary to the Group.
6
Interview with Professor Niamh Brennan, May, 2009.
7
Interview with Senator O’Toole, December 2009.
8
Interview with Terence O’Rourke, February 2010.
9
Submissions were received from ten professional accountancy bodies,
(including all six recognized bodies); ?ve non-accounting professional
bodies; the ?ve largest auditing ?rms on the island; four academics; several
representative organizations, various government departments and enti-
ties, as well as a number of individuals.
622 P. O’Regan, S. Killian/ Accounting, Organizations and Society 39 (2014) 615–631
bene?ts enjoyed by the public at large. In particular, these
experts could be trusted to deal with the complex technical
issues that constituted their domain of knowledge. The
expertise of members was highlighted in a manner that
emphasized their ‘considerable technical study . . . exacting
examinations and . . . lengthy period of work experience’
(ICAI Submission to RGA, 2000:5) echoing the importance
of input costs highlighted in Hanlon (1994:6), together
with the national and international role of the Institute
in ‘the development of appropriate standards’ (p.6). In
stressing the complexity of the role of auditor, they were
taking refuge behind the ‘deep epistemological obscurity
of auditing’ which Power (1997:28) places at the heart of
the very expectations gap which gave rise to public mis-
trust in the ?rst place.
In response both to media and government calls for
reform and the recognition of most members of the ‘need
for further movement along that spectrum’ of regulatory
possibilities,
10
ICAI suggested two initiatives, both aimed
at engaging with the widespread public concern about the
profession, albeit without materially diluting the existing
regime. First, in order to see ‘public con?dence in self-regu-
lation . . . enhanced’ (ICAI Submission to RGA, 2000:13) it
proposed the establishment of a new Independent Oversight
Board,
11
underpinning the proposal with appeals to the pub-
lic interest. The oversight board was to ‘subject the regula-
tory regimes of the recognized bodies to an open, regular
and rigorous scrutiny’ (ICAI Submission to RGA, 2000:13).
However, the authority of such a body should be circum-
scribed: like its proposed UK equivalent, the Institute envis-
aged that this entity’s role would be limited to that of a
‘watchdog’ (p. 13; Canning &O’Dwyer, 2013:178–9). ‘In prac-
tical terms’, the ICAI submission concluded, such a body
would merely ‘assess and report on all the regulatory activi-
ties’ (p. 13) of the bodies within its ambit. Critically, and
anticipating what would become an area of major conten-
tion, this Oversight Board should not be allowed to intervene
in SRAs’ own internal disciplinary machinery. In spite of
recent instances of more proactive DETE involvement in such
cases (Canning & O’Dwyer, 2003; Canning & O’Dwyer, 2006),
the Institute was determined to ensure that, as far as possi-
ble, this function remained the responsibility of individual
SRAs. At a time when the profession was under considerable
external pressure, it was apparent that control of the disci-
plinary function constituted a key attribute of what it meant
to SRAs to be ‘self-regulated.’ In proposing this ‘open . . .
watchdog,’ the Institute was seeking to pre-empt alternative
proposals that threatened a regulatory body with far more
intrusive powers. A newoversight board might be acceptable
if its role was not intrusive and if it continued to rely on the
technical and disciplinary qualities that only accountants
could be expected to possess (O’Regan, 2010:303-4).
Secondly, ICAI sought government support for ‘statutory
backing for our investigation/disciplinary procedures’ in a
manner similar to that extended to peer groups such as
the Law Society and the Medical Council. This implicitly
claimed that self-regulation per se functioned well, and that
problems only arose because the accounting profession
was not granted the same level of support as others. In
proposing this course, the Institute represented self-
regulation in limited functional and regulatory terms
with little reference to broader socio-political contexts
(Gunningham & Rees, 1997; Porter & Ronit, 2006). In
framing the elements of self-regulation as technical details
best dealt with by professionals, the profession embodied
Beck’s re?exive scientization, taking refuge under the
closed roof of expertise.
Beck (1992:188) addresses the tension around interfer-
ence by the state inthe realmof the expert: on the one hand,
it is expected that what are essentially political decisions
whichwill impact onsocietywill be madeat apolitical level;
on the other, it is accepted that as more and more issues are
subject to ‘scientization’, then politicians will only enact
what is recommended by the experts. In terms of protecting
its own interests, the Institute clearly was of the view that
any response to the challenges it faced required emphasis
of this scientization and the primacy of the expert. This is
clear from their emphasis on the bene?ts of the existing
scheme of self-regulation on the basis of expertise and the
insights of ‘professionals who understand’.
The concerns and emphases of ICAI were echoed by
other recognized bodies and large accountancy ?rms.
ICAEW, for example, argued that the existing scheme ‘pro-
vides a mechanism that is responsive to changing circum-
stances and that it is operated by persons with a proper
understanding of the auditing profession and the issues
facing it’ (ICAEW Submission, 2000:3). It also supported
the introduction of a new oversight board along the lines
of that being introduced in the UK, noting that this would
have the advantage that it did not ‘politicise a process
which is essentially commercial’ while, at the same time,
‘maintaining (and being seen to maintain) the public inter-
est’ (ICAEW Submission, 2000:3). The profession continued
to represent self-regulation as essentially non-political,
demonstrating the degree to which the profession saw its
expertise as cut off from the wider social environment.
The active resistance to politicization of the process of reg-
ulation was an attempt to frame the issue as a question of
knowledge and technique, and thus retain control of it.
ICPAI also argued that only ‘professional accountants’ had
the knowledge and skills to make self-regulation work
(ICPAI Submission, 2000).
Re?ecting the leading role adopted by larger ?rms in
the self-regulated environment (Cooper & Robson, 2006),
all of the so-called ‘Big 5’ made substantial submissions.
These were, in the main, consistent with those of the rec-
ognized accountancy bodies and of the ICAI in particular.
In a submission which stressed the high professional and
ethical standards to which auditors complied, Deloitte
and Touche (D&T) argued that essential to any effective
system, was that the ‘accounting profession should con-
tinue to take a signi?cant role in regulation’ (Deloitte and
Touche Submission, 2000:5). Indeed, such was the ‘complex
and voluminous’ nature of the accounting and auditing
functions, it was imperative that ‘the person or persons
10
Interview with Terence O’Rourke, February 2010.
11
The fact that ICAI acted as an all-Ireland body, incorporating members
subject to both the Republic of Ireland’s and the UK’s regulatory regimes
meant that it was already familiar with the regulatory implications of the
new Oversight Board in the UK. This played an important role in informing
its position – interview with Terence O’Rourke, February 2010.
P. O’Regan, S. Killian/ Accounting, Organizations and Society 39 (2014) 615–631 623
involved in the regulatory process must have . . . the neces-
sary professional, technical and practical knowledge to be
in a position to assess and judge the issues before them’
(Deloitte and Touche Submission, 2000:25). Nevertheless,
recent dif?culties had to be acknowledged and ‘in order
to be credible’ it was necessary to ‘be seen to be indepen-
dent and to serve the public interest’.
The DETE submission insisted that RGA was ‘a direct
response to our unease with apparent de?ciencies in the
supervision of their members by certain of the recognized
bodies’ (DETE Submission, 2000:2). Echoing the view of
Minister Harney, DETE emphasized that it would not neces-
sarily be bound by RGA’s proposals. It saw itself as only
required to ‘take into consideration’ any recommendations
in ‘reaching its ?nal position’ (DETE Submission to RGA,
2000:4). It was a clear indication that the profession was
nowdealing with public actors who discerned the changing
power dynamics that had resulted from recent events
(Canning&O’Dwyer, 2013:179–182). DETEandthe Minister
clearly sawthemselves as the ?nal arbiters in any process of
institutional justi?cation, whatever about the political nice-
ties of parliamentary lines of reporting.
12
In that respect,
their understanding of the power of experts was closer to that
of Hanlon (2010) than of Beck: they saw self-regulation as
power devolved from the ‘lay’ state rather than a right of
the profession deriving fromits intrinsic expertise, a viewsit-
uated ?rmly in the second wave of science studies in which
‘science [is] reconceptualized as a social activity’ rather than
a purely technical one (Collins & Evans, 2002:239).
The submissions from public sector entities, and in par-
ticular that from DETE, were to prove ‘extraordinarily
in?uential’.
13
They not only provided a reminder of ‘the
public dimension’ of private rule making (Porter & Ronit,
2006:50), they drew on impulses and priorities distinctly
at variance with those underpinning the submissions of
the recognized bodies and professional ?rms. For a start,
there was no privileging of ‘professionals who understand’
or the prerogative of the ‘expert’ that had so informed the
submissions of the accountancy bodies. Instead, the starting
point was a diagnosis of recent events as having undermined
the norms traditionally summoned by SRAs in their institu-
tional justi?cation of the self-regulatory form. In particular,
they disputed long-standing presumptions regarding the
capacity of SRAs to act in the public interest.
14
As the DETE
submission so starkly put it, in the face of a long list of
wrongdoings that represented fundamental challenges to
broader socio-political interests, the ‘watchdogs appear to
[have been] mute’ (DETE Submission, 2000:1).
A profession previously viewed as having a long history
of initiating its own uncontested solutions to market crises
was now perceived to be subject to external factors outside
of its control. In the changed power alignments that had
resulted, SRAs had lost the initiative to public actors intent
on formulating a response in the context of macro-
government policy (Porter & Ronit, 2006). The crisis was
seen as so pervasive, and the response of the profession
as so inadequate that an intervention by politicians in
the domain of the expert was triggered, which would
‘prepare the ?eld for a partial redistribution of power –
partially retaining the old formal responsibilities, partially
expressly altering them.’ (Beck 1992:78)
RGA Recommendations
Re?ecting the political urgency surrounding their task,
RGA worked intensively to produce its report ahead of
schedule in July 2000 (RGA Minutes, February–June,
2000, passim). In RGA’s opinion, so fundamental were the
de?ciencies of the extant self-regulatory form, what was
required in order to secure the public interest was ‘a new
set of relationships . . . between the accountancy profession
as a whole and the State’ (Report of RGA, 2000:27; RGA
Minutes, March 22, 2000; Scott, 2002). These should have
at their core a new oversight architecture intended ‘to pro-
vide public assurance that appropriate standards of moni-
toring are consistently applied’ (Report of RGA, 2000:96).
Clearly prioritizing the needs of the public over those of
sectional groups and adopting the language of the DETE
submission, RGA identi?ed ‘the primary purpose of regula-
tion’ as being ‘to provide, for reasons of public interest, a
counterweight to free market forces and to counteract
market failure’ (Report of RGA, 2000:107). In a comment
consistent with Hanlon’s (2010) critique of the Beckian
view of expertise, they noted that a feature of modern reg-
ulatory regimes should be responsiveness to change. This
required that government and self-regulated bodies ‘keep
abreast of marketplace or societal developments’ in order
to ensure that their roles remain ‘relevant and proportion-
ate’ to the changing needs of society (Report of RGA,
2000:108, Canning & O’Dwyer, 2013). This was clearly an
allusion to the manner in which frauds and market failures
had triggered a power realignment between public and
private forces, with the government now intending to take
a more proactive role on the question of self-regulation
(Beck 1992:78; Porter & Ronit, 2006). It was also a clear
re-assertion of the role of the nation state in an increas-
ingly globalized world (Black, 2002; Picciotto, 2002).
In its ?nal Report, RGA proposed a change to a newregu-
latoryform, whichit characterizedas ‘Independent Supervi-
sion of Delegated Regulation’ (Canning & O’Dwyer,
2013:179). This would transfer the supervisory role from
the state to an independent entity supported by statute
and ‘controlled neither by the state nor the accountancy
profession’ (Report of RGA, 2000:112; RGA Minutes, March
7, 22, April 5, 2000). The ‘formal authority’ this wouldconfer
was seen as suf?cient to counter SRA arguments that the
‘limited wealth and organizational capabilities’ of such a
body would undermine its capacity to operate effectively
(Canning & O’Dwyer, 2013:179). In contrast to the SRAs’
emphasis on ‘professionals who understand,’ RGA high-
lighted issues relating to independence, transparency and
the public interest that went beyond SRAs traditional
concernwith business groups. For these reasons, it held that
any new oversight body should be independent of the
12
Interview with Senator O’Toole, who identi?ed a small ‘?efdom’ within
DETE – essentially comprised of some of those whose responsibility it was
to deal directly with the recognized bodies – who were opposed to any
changes to the existing structure.
13
Interview with Professor Brennan.
14
Interview with Senator O’Toole.
624 P. O’Regan, S. Killian/ Accounting, Organizations and Society 39 (2014) 615–631
auditing profession, transparent, and ‘responsive to the
needs of stakeholders in particular those who heretofore
have not been adequately catered for’ (Report of RGA,
2000:113; RGA Minutes, April 19, 2000).
These considerations, and especially the reference to
the needs of a broader set of stakeholders saw the question
of regulation reframed from one of technical oversight
(which strengthened the hand of experts) to a more
broadly de?ned ‘public interest’ which gave the upper
hand to the democratic institutions of the state. This in
turn moved the framing of the problem from one of exper-
tise to one of legitimacy (Collins & Evans, 2002).
Critically, RGA recommended that the oversight body
should have ‘authority to intervene in appropriate circum-
stances in the monitoring, investigation and disciplinary
areas and act on its own account’ (Report of RGA,
2000:111; RGA Minutes, March 22, April 19, 2000). While
this indicated that considerations of transparency and pro-
cedural fairness had outweighed the professions’ argu-
ments on disciplinary expertise and organizational
integrity, RGA was not oblivious to the issue of internal
expertise within the profession. Noting that ‘the substan-
tial market presence and specialist expertise of the Big Five
accountancy ?rms pose special challenges for any super-
vising body,’ the report emphasized that it did not ‘see
the Oversight Board supplanting the technical resources
which already exist in the accountancy bodies. On the con-
trary . . .. The Review Group believes that the technical
expertise developed within each of the individual bodies
will inform, support and strengthen the overall role in Irish
auditing standards which will be discharged by the Over-
sight Board’ (Report of the RGA, 2000:120).
For both public and private actors, their roles in the
internal disciplinary machinery of SRAs were being inter-
preted as a crucial barometer of what it meant to be self-
regulated. For SRAs the right to conduct their own internal
investigations was represented as a sine qua non of self-
regulation (Gunningham & Rees, 1997; ICAI Submission,
2000; Baldwin & Cave, 1999; Beck 1992; Porter & Ronit,
2006). For public actors, on the other hand, recent reviews
of the procedures employed by SRAs had reinforced a per-
ception that they functioned to protect member’s interests
at the expense of the wider public (Report of RGA,
2000:98). For the profession, control of disciplinary pro-
ceedings was central to maintaining the ‘closed roof’ of
expertise. For the more democratic public actors, disciplin-
ary procedures symbolized transparency and openness.
The issue gradually assumed a totemic quality.
Accentuating the priority now being given to indepen-
dence and mandate over the authority of the ‘professional
who understands’, RGA recommended that neither the
Chairman nor the Vice Chairman were to be members of
a recognized accountancy body, and that no more than a
quarter of the Oversight Board should be members of the
profession. These principles led to RGA’s most fundamental
recommendation:
Recommendation: The task of supervising the frame-
work for audit regulation operated by the accounting
bodies should be transferred from the Department of
Enterprise, Trade and Employment to a statutory Oversight
Board which would have enhanced powers to enable it to
deliver a more effective and equitable system of regulation
than applies under the current arrangements (Report of
RGA, 2000:112).
Media reports at the time indicate that ‘The accountants
could hardly have been more surprised by the contents of
the report’ (Irish Times editorial, July 14, 2000). The initial
response of the recognized bodies to the RGA Report sug-
gested that they were intent on resisting the politicization
of what they saw as their own internal affairs. As Canning
and O’Dwyer (2013:180) note, ICAI ‘persisted in claiming
that the oversight body’s proposed role in ‘operational’
issues was inconsistent with a supervisory function’ and
represented a fundamental challenge to what it meant to
be self-regulated. Thus, David Simpson, ICAI President,
found it necessary to reassure members that SRAs would
continue to exercise considerable leverage: ‘self-regulation
is not ending’, he insisted in the Institute’s own internal
journal. Indeed, in a veiled warning, he pointed out that
RGA should be careful not to press its proposals too far, lest
it lose the support of SRAs: ‘if the oversight board decides it
wants to intervene or second guess or undermine our
disciplinary committees,’ he noted, ‘then self-regulation
would, in effect, end’ (Accountancy Ireland, July 2000;
Irish Times, July 14, 2000). ‘If,’ he continued, focusing
speci?cally on the more intrusive role proposed for the
new oversight board in relation to disciplinary procedures,
‘the board simply reviews, monitors and assesses how
the recognized bodies carry out their regulatory func-
tion and then publishes an annual report that says we
have looked at the processes and are happy that they
work, then its presence will not have huge implications
for the profession. If, however, the board were to
intervene, as it can, and investigate speci?c cases then
obviously there is a situation there where individual
practices could be affected . . . If that happened, we
would have to say you can’t have your cake and eat it
and ask them to regulate. But you have to ask would
regulation be done any better? Would this oversight
board have the expertise to effectively regulate the
whole accountancy profession in Ireland?’ (Irish Times,
July 14, 2000).
Eamon Siggins, CEO of CPAI expressed similar concerns,
observing ‘that there was a real danger the proposed
Oversight Board would become more interventionalist in
nature than oversight’ (Irish Times, July 12, 2000). The
language of intervening and interfering reveals that the
profession saw this move as an intrusion by lay (and there-
fore uninformed) power in a domain that was rightfully
theirs, echoing Beck (1992:210), rather than as a logical
application of control by government.
In a breach from the position adopted by other profes-
sional bodies, and illustrating howa cohesive response from
SRAs cannot be assumed, ACCAclaimedthat the recommen-
dations ondisciplinaryandregulatoryprocedures were ‘clo-
sely aligned’ to its own. It applauded the fact that ‘at last,
there [was] a willingness to tackle serious issues and create
an appropriate platform for effective professional gover-
nance’ (Irish Times, July 13, 2000; ACCA Press Statement,
P. O’Regan, S. Killian/ Accounting, Organizations and Society 39 (2014) 615–631 625
May 3, 2001). Canning &O’Dwyer 2013:186) note that inthe
detail aroundthe arrangingof oral hearings, the ACCA, while
nominally supporting the proposals, ‘sought to restrict IAA-
SA’s mandate over the practical implementation of the leg-
islation.’’ It may also mirror the response described in
(Robsonet al. 1994) of the CharteredAssociationof Certi?ed
Accountants (ACCA) to an earlier, similar proposal in the UK.
Inthat case, they supportedthe establishment of a regulator
seeing it as ‘an attractive option for it offered a way for the
CACA to have stronger say in the regulation of accounting
as a whole, and . . . [an opportunity]. . . to enhance its status’
(Robson et al. 1994:539).
Senator O’Toole was taken aback at the profession’s
continued resistance, hinting at the possibility that RGA
proposals could have been even more dilutive of existing
arrangements: the proposed changes would, he hoped, go
a long way toward ‘thwarting the fraud and skullduggery’
that he believed had characterized the actions of many
professionals over recent years (Irish Times, July 12,
2000). His sentiments were echoed in more measured
tones by Minister Harney. Echoing Baggott (1989) she
pointed out that ‘accountants were given the enormous
privilege of self-regulation, something which is not given
to every group in this country, but this clearly was not
working’ (Irish Times, July 12, 2000).
15
Meanwhile, newspa-
per commentary on the RGA Report characterized its
recommendations as ‘sweeping’ and hugely signi?cant for
the accounting profession, effectively ‘ending its long history
of self-regulation’ (Irish Times, July 12, 2000).
Implementation
The aim of Minister Harney was to reform regulation of
‘‘not just one strong interest group, but several’’ including
taxis, pharmacies, hospital consultants as well as the
accounting profession (Irish Times, April 27, 2001). In spite
of pressure from ICAI and ICPAI for further consultation on
the RGA Report, in early 2001 she decided to establish the
Irish Auditing and Accounting Supervisory Authority
(IAASA) on an interim basis, pending legislation (DETE
Press Release, January 23, 2001; Irish Times, April, 27,
2001). The only impact of the accountancy bodies’ lobby-
ing was an increase in the membership of the board from
eight to twelve, with the profession’s representation
remaining at one-quarter.
16
Senator O’Toole, a nominee
from each of the Central Bank, DETE and Revenue Commis-
sioners, together with various industry representatives,
would take the remaining places.
The profession continued, however, to voice its opposi-
tion, couching it in terms of resistance to ‘intervention’ in
what it viewed as properly the internal matter of discipline.
While some reference was made at this stage to public
interest, ICAI continued to characterize the government
proposals as a crude, non-expert response to a problembest
dealt with by professionals. As reported in the Irish Inde-
pendent, ICAI argued that ‘many of the recommendations
of the RGA should be implemented through the adoption
of codes of conduct and best practice guidelines, rather than
trying to deal with complex issues in primary legislation’
(Aughney, 2000), implicitly prioritizing professional nor-
ming and Weberian honor as the best way of dealing with
matters too complex for the non-expert state.
Heads of a draft Companies (Audit and Accountancy)
(Amendment) Bill published in February 2002 provided
for the almost complete implementation of RGA’s recom-
mendations. SRA opposition increasingly coalesced around
the provisions granting IAASA the right to ‘intervene’ in the
disciplinary processes of the regulated bodies. For most
members this was seen to represent a challenge to the very
essence of what it meant to be self-regulated. It also
re?ected a broader ‘suspicion’ amongst members as to the
‘ef?cacy’ of government being involved in ‘putting in regu-
lation’.
17
Going on the offensive, Adrian Burke, ICAI Presi-
dent, while continuing to champion the expertise and
ef?ciency bene?ts of the self-regulatory model, signaled a
subtle shift in SRA tactics in choosing to advertise public
agencies’ own de?ciencies:
"Those who criticize self-regulation seldom, if ever, sug-
gest a viable alternative. State regulation is not neces-
sarily the answer. There have been many serious state
regulatory failures in recent years; from planning to
health to tax collection. There are signi?cant bene?ts
to the public from having self-regulation. The regula-
tory work is done by professionals who understand
the work involved, the standards necessary, and are in
a better position to identify poor work" (ICAI Press
Release, May 17, 2002).
Apart from the unsupported claims of ‘signi?cant bene-
?ts’ accruing to the public interest under self-regulation,
the continued reference to ‘professionals who understand’
betrayed a failure on the part of SRAs to appreciate the
extent to which traditional arguments in favor of self-reg-
ulation had been overtaken by broader concerns about
transparency and accountability. Their position echoes that
described by Beck (1992) when he notes that ‘according to
their position, the public sphere and politics are always
and necessarily ‘uninformed’, lagging hopelessly behind
the developments, and thinking in terms of moral and
social consequences.’ (Beck 1992:208)
The Minister refused to countenance any change in the
proposed legislation (Irish Times, February 26, 2002; DETE
Press Release, February 25, 2002), and over the course of
2002 made it clear that the draft legislation to establish
IAASA would conform closely to the recommendations of
RGA. She was bolstered in this by the publication of the
Report of the Inspectors into the Ansbacher Accounts (2002),
which she characterized as raising issues that went to
the heart of the role of professionals in the democratic
process:
15
In Senator O’Toole’s opinion the RGA Recommendations were broadly
in line with the Tánaiste’s own views, and those of the DETE. In his view,
the minister ‘was not for turning’ and ‘her support made it happen’ –
interview with Senator O’Toole.
16
This was amended to a total board membership of fourteen plus the
Chief Executive. The number of members nominated by the accountancy
bodies was limited to three. Up to ?ve directors, including the Chief
Executive, could be members of prescribed accountancy bodies.
17
Interview with Terence O’Rourke, February 2010.
626 P. O’Regan, S. Killian/ Accounting, Organizations and Society 39 (2014) 615–631
"The systematic, planned denial of taxes to the state
was a denial of the sovereignty of the state. It was sub-
version, one could say, of the vote of each citizen, of
their equality before the law, of their right to live in a
fair society . . . It undermined the ability of the state to
provide vital services; it cost us all" (Irish Times, July
12, 2002).
The various auditing and accounting scandals were not,
she continued, ‘the result of chance and random forces’
(Irish Times, July 12, 2002). The coincidence of the
con?rmation of these national auditing failures and the
high-pro?le collapses of Enron and WorldCom merely
highlighted the extent to which the accountancy profession
appeared no longer capable of managing its environment.
For a profession that had a long history of initiating its
own solutions to self-regulatory problems, this perception
further undermined its authority, allowing government,
public and media to characterize the profession as
vulnerable to external forces outside of its control.
In these circumstances government had clearly decided
that the matters at issue were not simply discrete failures
of regulation, but were akin to the kind of civilizational
risks described by Beck (1992). The implication was that
if the function of protecting against these risks were to
continue to be delegated to the professions which had, in
part, been responsible for their spread, then additional
monitoring would be needed. The consequence, the minis-
ter promised, would be ‘fundamental reform’ of the
accountancy profession in a manner that increased trans-
parency and accountability (Irish Times, July 12, 2002). To
this end, the Minister circulated second stage drafts of
the Companies (Auditing and Accounting) Bill (2003),
which incorporated all of the signi?cant recommendations
made by RGA (DETE Press Release, February 14, 2003).
Conscious of continued disquiet on the part of SRAs, how-
ever, she did allow for a short period during which she
would accept further submissions from interested parties.
At this point the response of the professions became
more nuanced. ICAI indicated that it ‘fully supports the
principal recommendations of the RGA,’ and presented its
case as one intended to secure, not self-regulation per se,
but the interests of Irish business, the public and the wider
economy as a whole (Institute of Chartered Accountants in
Ireland, 2003:3; Canning & O’Dwyer, 2013:181). The sub-
mission represented a ?nal and incremental intervention
by the principal recognized body on the island, one that
contained political as well as professional risks. ICAI was
explicitly supported in this process by a number of the
Big 5 ?rms (Canning & O’Dwyer, 2013:182).
While addressing some other issues, ICAI concentrated
on the proposed changes to the disciplinary procedures of
regulated bodies and the composition of the new supervi-
sory authority.
18
In its view, while the new oversight body
‘should have the responsibility for de?ning high level stan-
dards and identifying objectives,’ it should not involve itself
in the operational procedures of the recognized bodies.
Developing detailed standards, regulations and guidance
on these matters should be the responsibility, primarily,
of SRAs. ICAI’s stance on this point highlights, to a degree
that will not typically become apparent when private-rule
making is in the ascendant, that SRAs view their autonomy
in this area as an indispensable facet of what it means to
be ‘self-regulated.’ The professional bodies view the closed
nature of the profession as fundamental to its strength,
echoing both the ‘closed roof’ of Beck, and the power that
information asymmetry confers. They clearly saw their
expertise as conferring upon them the right to control the
disciplinary function, and were unsettled by the govern-
ment’s demands for a role in this area. They failed to see
that their power as expert groups was derived in large part
from the lay power of the state, and that in order to main-
tain and expand it they ‘need public support, state legiti-
mation etc.’ (Hanlon 2010:217). Essentially, their thinking
was locked in the ‘golden age’ of Collins and Evans
(2002), unaware that they had been outpaced by a govern-
ment more conscious of the importance of legitimacy in
the ‘second age’.
Re?ecting its continued determination to press the
case for the ‘expert’, the submission also protested at
the relatively low number of accountants to be
appointed to the board of IAASA. Benchmarking from
international equivalents, they argued for a minimum
of 40% of members from the accountancy profession to
guarantee the required ‘technical and ?nancial expertise’
on the board (ICAI Submission on Companies Bill,
2003:16). Consistent with previous submissions that
had emphasized the importance of technical expertise,
ICAI was blunt in its assertion that without an increased
representation of accountants, the board would be
‘unable to ful?ll’ its obligations (ICAI Submission on
Companies Bill, 2003:6). Consequently, it would never
be in a position in which it ‘commands public con?-
dence’ (ICAI Submission on Companies Bill, 2003: 16;
Canning & O’Dwyer, 2013:183). It saw public con?dence
as coming from the expert nature of the board, rather
than from its transparency, re?ecting a continued belief
in the primacy of expertise.
The profession’s lobbying had little effect. Indeed, the
comments of Senator O’Toole in the Seanad (Upper House
of Parliament) con?rmed that SRAs, although formidable in
their advocacy, had failed to appreciate the real political
signi?cance of recent events:
"All we have heard from the accountancy bodies is neg-
ativity, but that is not the way to play the game at present.
The Bill comes from a time when the public was appalled
by and aghast at what emerged from the DIRT inquiry
and other tribunals concerning the involvement of accoun-
tants and auditors in all sorts of nefarious activities that
created vicious dif?culties" (Dáil and Seanad Éireann
minutes, 2003).
The characterization of the SRAs interventions as
‘negative’ was itself re?ective of changed power relativ-
ities and the way in which a series of failures had
diminished the standing of the profession (Bougen
18
Other items addressed included audit committees, the requirement
that company directors include ‘compliance statements’ relating to partic-
ular aspects of corporate activity, and a proposed new Irish equivalent of
the UK’s Financial Reporting Review Panel (ICAI Submission on Companies
Bill, 2003).
P. O’Regan, S. Killian/ Accounting, Organizations and Society 39 (2014) 615–631 627
et al., 1999).
19
Weakened by ongoing revelations about
fraud and scandals, SRAs were forced into essentially
defensive stances that saw them unable to represent
themselves as capable of resisting external pressures. In
late 2003 a broadly unchanged Bill passed the ?nal stages
and was enacted. IAASA was duly constituted and con-
ferred with the majority of its statutory functions and
powers. Once the Bill passed both houses of parliament
the process effectively concluded.
Discussion and conclusions
This paper examines the limitations of professional per-
spectives when dealing with those risks which impact on
society as a whole, and the consequent recon?guration of
relationships between experts and society following a cri-
sis. Against the background of events that ultimately led to
the dilution of self-regulatory arrangements, we use Beck,
Power and the ideas of Collins & Evans to explore the pres-
sures on self-regulation in a less-frequently investigated
context – that of crisis and attenuation. By extension, the
insights gleaned reveal the extent to which our under-
standing of self-regulation as an organizational form has
been unduly in?uenced by instances of success (Cooper &
Robson, 2006). During such a period of economic success
and growth, a profession may become absorbed by its
own central role, and over-con?dent about the strength
of its position in relation to the state and the business
elites. The public interest basis for the privilege of self-reg-
ulation may no longer be suf?ciently appreciated by SRAs,
a development that weakens their claims to continued
enjoyment of this regulatory form in three speci?c ways.
The ?rst becomes apparent when questions are raised
about the democratic legitimacy of a profession whose
actions are represented as favoring private actors. In the
face of such criticisms, and in spite of protestations of sup-
port for greater transparency, the profession may not be
alert to the need to base its case, at least in part, on matters
relating to public interest, accountability and procedural
fairness. Signi?cantly, these are typically the very issues
on which public agencies pursue demands for change.
Indeed, where the socio-political context is informed by
market failures that are perceived to have compromised
the mandate and legitimacy claims of self-regulated agen-
cies, the profession actively seeks to move debate away
from these issues, closer to the perceived safety of issues
of expertise. Mirroring Beck’s observations on the medical
profession’s ‘closed roof’, the profession may believe that
‘as a professional power [it] has secured and expanded
for itself a fundamental advantage against political and
public attempts at consultation and intervention’ (Beck,
1992:210). In this, they seem to situate themselves in what
Collins and Evans (2002) call the ‘golden age’ of the ?rst
wave of science studies, ‘before ‘‘the expertise problem’’
raised its head’ (Collins & Evans, 2002:239).
Secondly the profession, having taken that position, is
particularly challenged when power relativities evolve in
ways that see the debate about regulation extend beyond
business and social elites. While willing to engage in
debate and to present arguments that acknowledge exter-
nal concerns, the profession displays an institutional cau-
tion in its dealings with the media and the broader
public. Instead, re?ecting the reciprocal trust relations
and the relatively informal nature of communication net-
works that characterize the self-regulatory form, SRAs con-
centrate on cultivating support from both members and
peers for those issues on which they do choose to take pub-
lic stances. To this end SRAs initiate extensive consultation
with members (although any subsequent debates may take
place within rather narrow circles and be dominated by
larger ?rms). When communicating with external inter-
ests, the profession favors addressing only certain business
and political groups and frames its public pronouncements
with these groups in mind. This self-imposed restriction on
the profession’s communications strategy does little to
alleviate what Collins and Evans (2002:269) call ‘the Prob-
lem of Legitimacy,’ which they identify as the key issue in
the second wave of science studies, ‘the need to legitimate
technical decisions’. As an approach it is outdated, and
demonstrates a dangerous complacency on the part of
the profession. Again, this re?ects Beck’s characterization
of professions: ‘According to their position, the public
sphere and politics are always and necessarily ‘unin-
formed’, lagging hopelessly behind the developments,
and thinking in terms of moral and social consequences.’
(Beck 1992:208).
Thirdly, when confronted with broader public interest
challenges to its claims, particularly where these chal-
lenges are intertwined with wider economic and political
agendas, the profession grows circumspect. An element
of wariness is shown by an institutional reluctance to pres-
ent the case for self-regulation in a non-technical manner,
a manner more in tune with the information demands of
the public stage. This allows the profession to ignore what
Power (2007:20) describes as ‘pressures for greater democ-
racy in risk analysis.’ For SRAs already weakened by crisis,
this institutional insecurity can lead to heightened risk,
particularly when confronted by public actors more
attuned to the possibilities presented by changing power
dynamics. In circumstances where SRAs believe they have
been damaged by the actions of members they may con-
clude that it is in their own interests to minimize exposure
to public scrutiny. In doing so, they inadvertently reveal
the extent of their drift from a clear public interest man-
date. This may, in turn, reinforce public perceptions of lack
of transparency. The failure of the profession to address
public concerns in a clear, non-cryptic manner can contrib-
ute to a form of legitimacy gap into which others with a
public mandate are prepared to step.
The government by contrast is far more likely to grasp
that it needs to respond to such a crisis of public con?-
dence. Speci?cally, it understands the heightened aware-
ness of risk among the general public as a key factor in
shaping its response. Power (2007:21) sees risk gover-
nance as essentially about the management of public
expectations and the production of legitimacy. In this
19
In interview Senator O’Toole clari?ed that the reference to ‘negativity’
referred not only to resistance to RGA proposals in relation to self-
regulation, but also to SRAs ongoing opposition to RGA proposals from the
sub-committee dealing with auditor independence relating to increased
responsibilities for company directors.
628 P. O’Regan, S. Killian/ Accounting, Organizations and Society 39 (2014) 615–631
context, increased public awareness of risk is ‘not simply a
new factor in more intelligent risk analysis,’ but also a
source of risk in itself. This wide societal form of risk can
only be addressed by restoring public con?dence in the
ef?cacy of regulation. In the case examined, the govern-
ment addressed the problem not by providing reassur-
ances on the detail of how audits are conducted, but by
seeking to strengthen the oversight of professional experts.
This illustrates a tendency to locate the ensuing struggle in
a political rather than a technical arena, taking advantage
of an opportunity created by crisis to very visibly impose
political control on a profession. In doing so, the state
can distance itself from a body which has become synony-
mous in the eyes of the public with the problem itself, in
the process resasserting its own power in the relationship.
Such political opportunism is congruent with Beck’s obser-
vation that ‘modernization risks prepare the ?eld for a par-
tial redistribution of power – partially retaining the old
formal responsibilities, partially expressly altering them.’
(Beck 1992:78)
Crisis effectively undermines the interdependent rela-
tionship between the SRAs and the state. A comfortable
reliance by government on the professional norms of
accountancy bodies is suddenly insuf?cient in the face of
Beck’s ‘civilizational risk’ in the form of fraud or tax evasion
and a consequent lack of public trust in the profession.
Institutional justi?cations based on expertise and ef?-
ciency are at odds with the public perception of the role
of professionals in both perpetrating, and subsequently
failing to adequately address, such critical issues. A profes-
sion preoccupied by notions of inherited authority may
lose sight of the fact that this authority is delegated by
the state, rather than inherent in their expertise. This
enables public actors to press home their advantage: ‘pro-
fessionals who understand’ are no longer perceived to be
the most trustworthy champions of the public interest in
a Beckian, expertise-based crisis.
In this case, SRAs initially sought to pre-empt RGA pro-
posals for ‘a new set of relationships’ between the state
and the accountancy profession (Report of RGA, 2000:27),
responding by specifying the problem as one to be
addressed by minor modi?cations to technical standards
and existing behavioral norms, as well as some additional
legislative support. This re?ects a comfort on the part of
SRAs with the expression of normative practices and stan-
dards, as well as an ‘exceptionally strong tendency to cast
even the most severe and unexpected problems as amena-
ble to be solved by an incremental modi?cation of existing
best practices’ (Porter & Ronit, 2006:51). The costs to the
profession of submitting to a form of oversight are clearly
understood. The bene?ts of a supportive government and
public are less clear to a profession af?icted by Beck’s ‘eco-
nomic Cyclopia of techno-scienti?c rationality’ (Beck
1992:60).
For public actors, the process of speci?cation is
informed not only by the intrinsic technical characteristics
of the problem, but also by an appreciation of changing
power dynamics, particularly those induced by public
interest considerations. This case shows how public actors
pursue their cause, not by directly countering the expertise
claims of SRAs, but by harnessing issues relating to
mandate, accountability and procedural fairness, matters
on which widespread public disquiet had already been
established (Bougen et al., 1999). Essentially, this allows
them to reassert their power in the relationship, and to
employ more controlling measures to reduce the informa-
tion asymmetry between the government and the SRA.
Thus, while SRAs seek to emphasize the importance of
professional expertise, the state focuses on issues of wider
public interest, such as a lack of accountability in the
disciplinary procedures of the recognized bodies. In that
context, this case is interesting in illustrating the extent
to which the internal disciplinary process of self-regulated
professions can become a central focus of debate between
the state and the SRA, assuming talismanic signi?cance for
both regulator and regulatee. This may be because the
issue lies at the intersection of risk to society, as pursued
by government, and risk to the profession, as defended
by the recognized bodies. Echoing Power (2009), the
emphasis in a time of crisis is on regulation as a form of
control, rather than on improving regulation as a
way of improving compliance. What Power (2009:854)
identi?es as the ‘logic of auditability’ comes to pervade
the process.
Exploiting both changed power dynamics deriving from
a belief that SRAs no longer retain the public interest and
the perception of a profession in crisis, therefore, public
actors are able to press their case in political rather than
technical terms, terms more readily appreciated by the
public (Collins & Evans, 2002). Displaying a Beckian belief
that ‘the public sphere and politics are always and neces-
sarily ‘uninformed’, lagging hopelessly behind’ (Beck
1992:208), SRAs tend to target their messages at the busi-
ness and political elite. In crisis, this penchant for express-
ing their case in a language and manner more amenable to
elite groups reinforces public suspicions about the nature
of those relationships.
To a degree, the internal data gathering and consensus
building that support the informal power networks and
peer interaction of self-regulated entities can, in these cir-
cumstances, work against SRAs who need to respond
promptly. Key elements of the professional architecture
of SRAs – their structures, closed nature and elitism –
become weaknesses in negotiating with a government
keen to address ‘civilizational risks’ by framing them in
the public mind as deriving from poor performance by
the profession. This grows more pronounced when, having
lost the initiative due to what is perceived to be member-
in?icted damage, the profession seeks to minimize public-
ity, media attention and public action. In periods of crisis,
this case suggests that long-established expert groups
can quickly succumb to political and economic events that
weaken self-regulatory claims to authority. This can enable
public actors to exploit changed power dynamics in a man-
ner intended to reassert public in?uence (Beck 1992:76;
Power 2007:21).
Our analysis of this case, informed by Beck, Power and
Collins & Evans, reveals the hazards of an expertise-based
defence of the self-regulatory form. Societal risks man-
date the state to implement risk governance measures
which threaten professional self-regulation and place
the public interest at the heart of the debate in a manner
P. O’Regan, S. Killian/ Accounting, Organizations and Society 39 (2014) 615–631 629
which may not be immediately apparent to a profession
grown complacent over a prolonged period of success
and stability. For the state, a clear tactical advantage in
wresting regulatory control from a profession will be con-
ferred when such risks trigger a crisis that is ‘of visible
relevance to the public’ (Collins and Evans 2002:236),
moving the frame of the debate on self-regulation from
the ?rst to the second wave, away from expertise and
toward legitimacy. Given the seeming pervasiveness of
such crises, professions need to remain close to the idea
articulated in Robson et al. (1994:531) that professional
self-regulation is a concession ‘agreed because the ‘‘pro-
fession’’ is judged to be an effective guardian of the public
good’ rather than a right based on expert knowledge or
tradition. The public interest underpins professional priv-
ilege. An SRA which has drifted from this key tenet of
what it means to be a professional body may ?nd that
professional structures carefully built on a foundation of
technical knowledge and expertise will fail to shelter it
in a time of crisis.
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