The Continuity of the Board of Statutory Auditors Across Social, Economic and Political Institutional Changes

Abstract

This study examines how and why the board of statutory auditors, an important accounting institution, has continued to operate from its establishment in 1882 until today, with little change in its nature and role. This is despite the fundamental changes that have occurred in the Italian social, economic and political environment. This study reveals that even though Italy’s societal institutions have substantially changed, the board of statutory auditors has continued to exist, with no material change in its nature, across different historical blocs, such as monarchy, fascism, post-war socio-democratic republic, neoliberal republic, and major changes in Italian politics and economy. This long-lived accounting institution has also faced a series of potentially significant sources of change, which appeared dramatic at first sight, but had no significant far-reaching historical impact, as hegemony was unaffected. In Italian society, the board of statutory auditors has provided a reassurance role, in principle this is to monitor company directors, a role which is perceived to benefit all society. However, in practice, this institution has provided a legitimating, rather than a substantive monitoring mechanism. It helped to exercise the ruling class’ hegemonic control, whose power was diffused across society through civil institutions during various historical blocs.

Keywords:

• Accounting history
• Board of statutory auditors
• Hegemony
• Italy

Acknowledgements

The authors are grateful for the constructive comments received from Carlos Larrinaga, two anonymous reviewers, Chris Chapman, Stefano Coronella, Gary Previts, Alan Sangster, the participants at the 2015 Financial Reporting and Business Communication conference at the University of Bristol, the 2016 European Accounting Annual conference at the University of Maastricht and the 2017 South Eastern regional meeting of the American Accounting Association at the Florida International University in Miami. The authors gratefully acknowledge the financial support from Fondazione di Sardegna. The normal caveats on author’s responsibility apply.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 This paper relies primarily on the ‘Quaderni del carcere’ which Gramsci wrote originally in Italian. However, for the convenience of the international reader, we have cited the English translation: ‘Selections from the Prison Notebooks of Antonio Gramsci,’ translated by Hoare and Nowell-Smith (Gramsci, 1971). This edition is the most widely used one in social science discussions of Gramsci.

2 At the board meeting, executive and non-executive directors make operational and strategic decisions and vote, whereas the statutory auditors attend as silent non-voting observers. Their main task is to monitor that company directors act within the law, the corporate bylaws and the principles of business administration (Melis, 2004).

3 Gramsci (1971, p. 322) used the term ‘common sense’ with a negative tone, distinguishing it from ‘good sense.’ While the former leads to acritical consent of the ideology of the ruling class, the latter contributes to a critical understanding of the dominant ideology.

4 To find these companies we searched through the oldest and the most important Italian companies in the Italian Chamber of commerce’s national database.

5 Those for 1911, 1913, 1914, 1921, 1925, 1928, 1930, 1934, 1936, 1937, 1949, 1952, 1953, and 1960 survived.

6 Specifically, we conducted a systematic search through Rivista Italiana di Ragioneria ed Economia aziendale (from 1901 onwards), Rivista del Diritto Commerciale (from 1903 onwards), Bancaria (from 1921 onwards), Rivista di Diritto Civile (from 1930 onwards), Rivista dei Dottori Commercialisti (from 1949 onwards), and Le Società (from 1956 onwards).

7 We have checked thirty BOSA’s annual reports out of the largest companies listed at the Milan stock exchange in 1976 and 1977. In all the cases analysed the BOSA’s annual report to shareholders clearly stated that BOSA had audited the company’s financial statements.

Additional information

Funding

This work was supported by Fondazione di Sardegna.