Institutional logics and sustainability of selected small and medium-sized audit firms

Abstract

Although an abundance of research exists concerning larger audit firms, studies on small-scale audit firms are scarce. This study investigates how small and medium-sized audit firms deal with professional and commercial logic for sense-making and legitimisation of their strategies and practices to remain sustainable, particularly as audit practices, in a changing environment. The study focuses on a specific change event, namely a change in legislation that resulted in mandatory audit relief for certain small and medium-sized enterprises. Following a multiple-case study design, a qualitative research approach was used to show that small and medium-sized audit firms responded to a threat to their sustainability in an environment transformed by new legislation, by broadening the service offerings which coincided with selective adoption of practices related to commercial logic. Those retaining a more focused professional orientation had a positive outlook on the sustainability of their audit practices.

Keywords:

• small and medium-sized audit firms
• mandatory audit relief
• institutional logics
• sustainability
• professional logic
• commercial logic

Notes

1 For purpose of this study the Big 4 audit firms are Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY) and KPMG.

2 These comments should be seen against the study’s delimitation. Although participants commented on the impact of section 90(2)(b) on their firm’s sustainability, the change event considered in this study is limited to the change to the Companies Act which resulted in mandatory audit relief.