FAR Literature review: How is auditor commercialism related to audit quality and efficiency?

Professional service firms, such as public accounting firms, face a unique challenge relative to other types of for-profit enterprises. While auditors are charged with serving an important societal function, they are also engaged in for-profit enterprises. This raises an important question: does engaging in commercial activity compromise auditors’ professionalism? 

Occupations which achieve professional status are expected to abide by a social contract wherein they serve as safeguards for the public good (Robson et al. 1994). However, auditors and other professionals are often under considerable commercial pressure to increase sales and cater to their clients (Bamber and Iyer 2002). In brief, theory suggests that commercialism and professionalism are fundamentally opposed, and that emphasizing one will necessarily lead to a reduction in the other (Suddaby and Greenwood 2005).

In contrast to the claims of critics of the audit profession, other stakeholders including academics posit that commercialism and professionalism need not be mutually exclusive and could instead be complementary (Gendron 2002).  This alternative perspective suggests that audit firms operate successfully by developing cultures and systems in which each perspective serves to constrain the excesses of the other. Commercialism ensures that the firm receives adequate compensation for its professional activities to remain viable in a competitive economy, while professionalism ensures that profit-seeking does not undermine the activities that maintain the public trust.  

What is missing from much of the research that discusses the trade-off between commercialism and professionalism is a careful discussion and empirical examination of quality control within audit firms. Audit firms are unique professional service organizations with a clear mission to serve the welfare of society. Unlike many other professions, such as the legal or medical profession, 

where the first-order consideration is the individual directly receiving the service, auditors must be mindful of a myriad of other stakeholders that will rely upon their work. Quality control mechanisms could effectively allow the audit professional to serve both commercial and professional ends. 

In Section II of this research synthesis, we will present the arguments from both sides. After reviewing the relevant literature discussing the trade-off theory, we will proceed in Section III by discussing how organizational control within public accounting firms has evolved over time. Lastly, in Section IV we will bridge these two streams of literature together and discuss their joint implications for audit practice.