Jurnal 1

ABACUS, Vol. 49, No. 4, 2013 doi: 10.1111/abac.
12017
ANNA SAMSONOVA-TADDEI
Social Relations and the Differential Local

Impact of Global Standards: The Case of
International Standards on Auditing
This article contributes to the literature exploring the contextual condi-tions

that lead international standards to produce a differential impact with regard to
inducing convergence in local practice. The article docu-ments three types of
responses by local audit firms to the implementation of International Standards
on Auditing (ISAs) in Russia, namely: (1) those that claim to follow the
national auditing standards modelled on ISAs and mandated by audit law; (2)
those that voluntarily provide ISA audits in accordance with original ISAs; and
(3) those that provide pseudo audits (black audits) and ignore auditing
standards. The study investi-gates a link between these different responses and
the degree of the indig-enous firms social embeddedness in relation to the
international audit firms that first introduced ISAs to Russia. The article argues
that the higher the embeddedness levels the more likely the audit firms will
genu-inely commit to following the standards. It also shows that social
embeddedness is influenced by a number of conditions, including geo-graphical
proximity between the indigenous and international audit firms, as well as
commonalities in their professional characteristics, such as aspi-ration to
intraprofessional status and target clientele. The studys findings demonstrate
that the local impact of international standards is dependent not just on the
characteristics of the local institutional environments in which the adopters
operate but also on the social structures and relation-ships within which they
are embedded.
Key words: Auditing; Geographical proximity; Russia; Social embeddedness;
Standards.
INTRODUCTION
Many studies have documented the proliferation of international accounting and auditing
standards in the modern globalized world (Roussey, 1996; Bennett et al., 2006; Kotlyar,
2008; Brown, 2011). The importance of these standards in the
ANNA SAMSONOVA-TADDEI (anna.samsonova@mbs.ac.uk) is a Lecturer in Accounting at Manchester Business

School, University of Manchester.
The author expresses her gratitude to the anonymous reviewers, Stuart Turley, Chris Humphrey, Marie-Laure
Djelic, Martin Walker, Pamela Stapleton, Andrea Mennicken, Sven Modell, Trevor Hopper and Peter Moizer,
and participants of a research seminar at ESSEC Business School for their constructive feedback on earlier
drafts of this article.
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Abacus 2013 Accounting Foundation, The University of Sydney
S O C I A L R E L AT I O N S A N D AU D I T S TA N DA R D I Z AT I O N
building of the new international financial architecture has been reinforced as a result of
the global financial crises of the last 20 years (Humphrey et al., 2009). What appears to
be happening now is a shift in rhetoric from discussing adoption of international
standards to a realization of the importance of compliance with standards. The extant
literature provides ample evidence suggesting that the actual outcomes of the
international accounting and audit standardization projects vary not just across countries
but also significantly differ from those intended (Nobes, 2006, 2011; Walter, 2008; Daske
et al., 2008, 2011; Leuz, 2010). Some scholars, for example, warned of the existence of a
compliance gap (Walter, 2008, p. 43), especially in developing environments, in terms
of differences between desired and actual compliance with international standards despite
significant pressure from global regulatory and market institutions. Among the likely
causes of such differences are the characteristics of not just the standards themselves but
also of the standardization environments. Leuz (2010) points to the significance of the
elements of a countrys broader institutional infrastructure that serve as the contextual
conditions that can significantly modify the intended impact of inter-national standards.
Prior research has identified a number of such contextual factors, including: a legal and
judicial system, such as securities laws, tax rules, and commercial codes (Bushman and
Piotroski, 2006; Zeff, 2007; Holthausen, 2009); market forces, such as the size of the
countrys capital market versus its public debt (Ball et al., 2003); a political system, such
as the extent of government involvement in regulation and internal politics (Ball et al.,
2003; Zeff, 2007; Walter, 2008); law enforcement practices (Daske et al., 2008, 2011;
Holthausen, 2009; Byard et al., 2011; Landsman et al., 2011); traditions and culture
(Gray, 2005); the level of education (Judge et al., 2010); and the residual effects of
previous practice rules replaced by the new standards (Eden et al., 2001). It has been
argued that these environmental conditions create incentives that shape the local adopters
behaviours and attitudes towards international standards (Ball et al., 2003; Bushman and
Piotroski, 2006; Daske et al., 2008, 2011).
This study contributes to the literature by providing further insights into the effects of
environmental influences on the dynamics of standardization. The articles empirical
focus is on the standardization of Russian auditing along the provisions of International
Standards on Auditing (ISAs) developed by the International Audit-ing and Assurance
Standards Board (IAASB).1 With reference to a common view of standardization
essentially as a process of dissemination of knowledge about best
1 Since their first publication in 1979 as the then International Auditing Guidelines, ISAs (now 36 standards
in total) have been adopted, in one way or another, by 126 national jurisdictions worldwide (IFAC, 2011).
ISAs are one of 12 standards of best practice designated for priority implementation by the Financial
Stability Forum (now Board) in 1999. In 2009, ISAs were recommended by the Inter-national Organization
for Securities Commissions (IOSCO) for conducting cross-border audits and also are used by the World
Bank (WB) as a benchmark in their Reports on the Observance of Standards and Codes (ROSC). The latest
format of ISAs is an outcome of the Clarity Project carried out by IAASB in 20042009 with the aim of
making ISAs more understandable and sufficiently demanding in their technical definitions (IAASB, 2004,
2008).As with many other voluntary standards, ISAs are principles-based and developed with a degree of
abstraction as a way to enhance their appeal to a variety of national contexts. ISAs therefore do not define
exactly what a high-quality audit is but
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practice (see, for example, Brunsson and Jacobsson, 2000), the study explores how the
local audit firms social ties influence the outcomes of such a process. The reference to
outcomes does not mean that the study seeks to determine the level of local compliance
with auditing standards or indeed the quality of audit reports before and after ISA
adoption, but rather to establish local audit firms perceptions of, and stated commitment
to, following the standards.
The study shows that the adoption of ISAs has so far produced divergent responses by
Russian audit firms. Specifically, three types of responses have been identified, namely:
(1) firms that voluntarily provide the so called ISA audits;
(2) firms that commit to the minimum required by law, which is compliance with the
national auditing standards; and (3) the so called black auditors that show a complete
disregard of auditing standards. The study employs a qualitative research methodology
together with a social network perspective to explore the relationship between these
different responses to standardization and the local audit firms social embeddedness in
relation to members of the international audit firms that first introduced ISAs to Russia
(Granovetter, 1973, 1985; Davis, 1991; Davis and Greve, 1997; Gulati and Gargiulo,
1999). The article argues that the higher the embeddedness levels the more prone are the
local firms to show genuine commit-ment to following the standards, and identifies the
conditions that influence social embeddedness. Among such conditions is geographical
proximity (Yeung, 1998) between the local and international audit firms, as well as
similarities in their pro-fessional characteristics, such as their aspiration to
intraprofessional status and the target client base (Abbott, 1988). This analysis provides
an alternative ratio-nalization for the local sources of a differential impact of international
standards, which has so far been overlooked in prior literature. Specifically, the article
points to the need to see the local adopters behaviours and attitudes towards inter-
national standards as not only shaped by the institutional environments in which they
operate but also by the social structures and relationships in which they participate. 2
ISAs IN RUSSIASOME HISTORICAL BACKGROUND
The introduction of a financial statement audit and the adoption of ISAs in Russia were
part of economic reforms that started in the second half of the 1980s and continued into
the post-Soviet period. As has been shown in prior works by Mennicken (2008a, 2010)
and Samsonova (2008), the first legislative acts where the term auditing was mentioned
in Russia were the state Decrees (Nos 48 and 49 of 13 January 1987) on joint venture
operations, both prescribing that checks
instead specify the appropriate procedures for performing an audit while leaving it for the auditor to decide
which particular technique to employ (Hayes et al., 2005).
2 It is worth noting, however, that there is an evident link between the social structures and the institutional
environments in the sense that the latter are themselves shaped by social relations (see, for example, the
seminal works by Meyer and Rowan (1977), DiMaggio and Powell (1983) and Scott (2001)).
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of financial and commercial activities of joint ventures on the correctness of tax

calculations are carried out by a Soviet self-financing audit organisation for pay.
Mennicken (2010, p. 338) points out that in this regard the Decrees were effec-tively the
official point of departure for Russian audit development, marking the beginning of the
time when financial controls were no longer exclusively carried out through the control
apparatus of the state. The demise of the Soviet Union in 1991 and the subsequent
emergence of the new Russian state under President Boris Yeltsin brought further
relaxation of state controls and their gradual replacement with market-oriented
governance structures with the aim of stimu-lating private business undertakings
(Gustafson, 1999; Kotkin, 2001). At this time, what became widely known as the shock
therapy (Gaidar, 2003) begana program of economic reform designed along the
principles of neoliberalism with radically diminished state intervention. The program
triggered, among other things, the privatization campaign that began in July 1992 and the
establishment of the countrys capital market (Gustafson, 1999; Westwood, 2002). The
common winners of privatization were company insiders and party nomenklatura who
used their political affiliations to obtain exclusive control over privatized compa-nies.
This was a period of massive embezzlement and unlawful sales of corporate assets when
quick fortunes were made (Kotkin, 2001; Stroev, 2002). In contrast to the initial goal of
commercializing the economy and dispersing business owner-ship, privatization led to
monopolies in most key industries. Ledeneva (2006) shows how large industrial
enterprises dominated the market and funded (effec-tively bribed) the state in exchange
for monopolized controls. These events set the scene for the corporate environment of
todays Russia dominated by insider own-ership and hindered by bureaucracy and multi-
layered corruption (Ledeneva, 2006).
In Russias turbulent post-Soviet economic realities, the practice of auditing had to

play a significant role (Enthoven et al., 1998; Enthoven, 1999; Mennicken, 2008a, 2010;
Samsonova, 2008, 2009). In many respects, it was an order-making tool for disciplining
the emerging private sector with its extreme imbalances, while at the same time gradually
loosening some government controls (Petrov, 2000; Shokhin, 2002). In this sense, the aim
of auditing was to redefine the roles of the state, enhance efficiency, reduce bureaucracy
and extend rationalities of market-oriented exchange and accountability (Mennicken,
2010, p. 338). The first Russian audit firm was established in 1987 as a result of the
issuance of the aforementioned Decrees on joint ventures, followed by a rapid growth in
the number of audit firms and practi-tioners in subsequent years. 3 However, accounts of
that period (Terekhov, 2003; Guttseit, 2003; Sokolov and Terekhov, 2004; McGee and
Preobragenskaya, 2005) show that Russian audit beginnings were significantly influenced
by the Soviet
3 According to the latest audit market survey by the Russian Finance Ministry (Finance Ministry, 2012a), the
total number of audit firms operating in the Russian audit market now stands at 6,200 (of which 1,000 are set
up as sole proprietorships), whereas the total number of auditors is nearly 27,000.
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accountancy culture that emphasized state revision4 (the pre-existing means of financial
control over Soviet enterprises). Specifically, in the early 1990s, when audit-ing had just
emerged, the vast majority of first auditors previously had years of experience as
enterprise accountants or state revision inspectors. This led to revision techniques often
being integrated into developing audit practice and to auditing itself being seen as a
monotonous routine concerned with ensuring that company reports complied with
government directives and regulations (Danilevsky et al., 2001; Guttseit, 2003; Remizov
and Podlesnyh, 2003).
One of the effects of post-Soviet economic liberalization was that it opened doors to
Russia for the international audit firmsthe then Big 6 firms (now Big 4), 5 Grant
Thornton and BDOthat all opened their offices in the country in 1989 and the early
1990s (Alon and Dwyer, 2012). Internationally, these firms have long been known for
their strong reliance on ISAs as a methodology (Robson et al., 2007; Humphrey and Loft,
2010), which has been instrumental in their ability to achieve a dominant position in the
global audit market (Cooper et al., 1998; Barrett et al., 2005; Cooper and Robson, 2006;
Suddaby et al., 2007). Likewise, soon after their arrival in Russia, the firms, notably the
then Big 6, became leaders in the local audit market. In 1995, for example, one of
Russias reputable business periodicals heralded the magnificent six conquer the sixth
part of the world (Kommersant No. 47, 16 March 1995). Importantly, the international
auditors initially were the only firms providing so-called ISA audits, that is, audit checks
carried out in full compliance with original ISAs as issued by the IAASB, targeting
mainly the Russian arms of multinational companies and also indigenous companies with
international capital influence. Such firms effectively were ISA pioneers in Russia as
they arrived at a time when local firms had no, or very limited, knowledge of a
standardized audit process, let alone international standards of practice. Also, it was not
until after their arrival in Russia that the countrys audit regulatorthe governments
Finance Ministryendorsed, in 1993, a first set of 37 national auditing standards based
on ISAs. Pyatenko (1998, p. 9, cited in Mennicken, 2010, p. 343) notes in this regard that
[i]n the eyes of the Russian reformers and new auditors, the big firms demonstrated the
need for professional services and strengthened the belief that the establishment of
private audit firms constituted an appropriate response to the political and economic
reform demands.
4 Revision was a key mechanism of state financial control in the Soviet economy where enterprise
performance was routinely compared with the state plan. It was in the form of inspections carried out by
state revision departments and was mostly concerned with uncovering theft and mis-appropriation by taking
an inventory of an entitys assets and examining its accounting records (Campbell, 1963; Bychkova, 1996).
Mennicken (2010) explains how Soviet revision inspectors were state servants that received orders from
government ministries, and points to the mechanical nature of the inspections themselves, which constituted
detailed, highly formalised checks of procedural compliance (p. 339).
5 The Big 6 audit firms included Coopers & Lybrand, Price Waterhouse, KPMG, Deloitte, Arthur Andersen,
and Ernst & Young. In 1998, a merger between Coopers & Lybrand and Price Waterhouse formed
PricewaterhouseCoopers (PwC). In 2002, Arthur Andersen went out of business in the after-math of a
collapse of the U.S. energy giant Enron. These events turned the Big 6 into the Big 4.
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Mennicken (2008a, 2008b) and Samsonova (2008, 2009) emphasize that the inten-tion
of developing national auditing standards based on ISAs was to move Russian audit
practice away from the traditions of Soviet revision towards the forms of Western-
oriented audit professionalism (Mennicken, 2008a, p. 393), and also, to fill a regulatory
vacuum (Samsonova 2009, p. 549) that occurred after the old system of financial
reporting was dismantled. The adoption of ISAs was also promulgated by international
agencies, such as the World Bank (WB) and the International Mon-etary Fund (IMF)
(Stroev, 2002; World Bank, 1992, 2002), both of which Russia joined in 1992.
Samsonova (2009), however, demonstrates how the Russian govern-ment officials
reference to the first auditing standards as ISA equivalents was an overstatement as they
were highly prescriptive and contained additional provisions. In addition, the use of the
standards was voluntary. Therefore, in more recent years, the focus of audit
standardization has shifted towards ensuring that auditing stan-dards were used by all
auditors, and also, towards moving the standards closer to ISAs. Such a focus on greater
convergence with international standards was also reinforced in the wake of the 1998
Asian financial crisis, which renewed calls inside Russia and elsewhere for more
economic transparency (Wright et al., 2003; Judge and Naoumova, 2004). Consequently,
in 2001, the audit law (Federal Law on Audit-ing 2001) mandated the standards for all
audit practitioners and firms. Also in the same year, a start was made on the development
of the second set of national auditing standards more closely compliant with ISAs
(Remizov, 2001; Remizov and Podlesnyh, 2003; Shneidman, 2005). As a result, many old
standards have since been amended or abolished, and new standards have been
introduced (recently, in response to the issuance of new clarified ISAs). The subsequent
version of the audit law (Federal Law on Auditing 2008) reinforced the emphasis on
achieving full compliance with ISAs.
In the context of Russian auditing, Mennicken demonstrates how, in order to work,

ISAs need to be translated into the local auditors daily routines (2008a, 2008b). Through
interaction with one post-Soviet audit firm providing ISA audits, she explores the
different connections that are established between the standards, local practices, people
and instruments, as well as the wider networks of actors, expectations and demands
involved in defining what it means to work in accor-dance with international standards
(Mennicken, 2008a, p. 389). Her later work (Mennicken, 2010) expands the above by
exploring the significance of a broader societal context and the meaning of audit as a
practice that only exists in relation to other arenas of economic, political and social
activity (p. 335).
One of the observations made by Mennicken of particular relevance to this studys
objectives relates to the significance of auditors existing identities and environments for
their understandings and application of ISAs. Specifically, she argues in this regard that
ISAs often come to inhibit multiple, contradictory con-texts (Mennicken, 2008a, p.
386), and that it is the specificities of the communities of practice . . . within which the
standards become circulated that define how ISAs should be used and interpreted (p.
390). Further, she portrays Russian auditing as a differentiated environment (p. 401) in
terms of auditors views on what counts as auditing as well as the perceived objectives of
standardization, noting two conflicting
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rationalizationsone where auditing and auditing standards were promoted as a means

to enhance state control and stimulate compliance with Russian taxation and accounting
laws and the other drawing on more capital market-oriented views, which regarded
auditing as a control mechanism . . . to enhance the information content of financial
statements for economic decision makers (p. 402). While acknowledging these
contradictory trends, Mennickens work nonetheless focuses mainly on the audit firms
and practitioners that seek to demonstrate their commit-ment to the Western, capital
market-driven approaches to audit practice and to voluntary use of ISAs. This study seeks
to extend that work. In particular, by drawing on the imagery of standardization as a
process embedded within social structures and relations (Davis, 1991; Davis and Greve,
1997; Gulati and Gargiulo, 1999), it will explore the reasons that lead some Russian audit
firms to become more susceptible to the contagion of ISAs compared to other firms, and
also typify and rationalize other responses to audit standardization, including slower
acceptance and even resistance to the standards.
SOCIAL EMBEDDEDNESS AND THE DYNAMICS

OF STANDARDIZATION
One way to view standardization is as a process of dissemination of expert knowl-edge

about best practice (Brunsson and Jacobsson, 2000). Underlying this process are social
relations in the course of which participants acquire an understanding of practice norms
conveyed by the standards. Hence, the nature of such social dynamics is likely to have
some bearing on the way in which standards spread as well as how they are received by
local adopters.
The consequences of social relations are analysed in the seminal works of Granovetter
(1973, 1985), who notes that behavior [of individuals] is closely embed-ded in networks
of interpersonal relations (Granovetter, 1985, p. 491) that shape their understandings of
external reality, and hence human activity is directed by social structures. Granovetters
view of a social network, which has also been adopted in this study, is centric in the sense
that the focus of the analysis is on the consequences of the participants social
embeddedness in relation to the networks centre (for a similar approach, see also Davis,
1991; Davis and Greve, 1997; and Gulati and Gargiulo, 1999). The term centre is not
necessarily defined here by reference to any physical space. In the analysis of how
knowledge circulates within a social network, the term centre may refer to the network
participants who introduce new knowledge, effectively kick-starting the subsequent
processes of knowledge dissemination across the rest of the network (Davis and Greve,
1997). From the standardization perspective, the term may be used to mark a starting
point of the standardization process and to explain why the process may generate
different responses among network participants. In particular, it helps to establish a link
between the responses and the extent of the participants social embeddedness in relation
to the networks centre (Davis and Greve, 1997; Lazer and Friedman, 2007). In this
regard, prior research has shown that:
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the density of [social] ties among individual actors and the aggregate structure created by those
ties . . . determine the route and speed with which practices will spread. Practices will spread
more rapidly in dense networks than in thin ones, just as viruses spread faster in urban areas than
in rural ones. (Davis and Greve, 1997, p. 7)
The density of social ties mentioned abovewhich is the proportion of potential ties
[between participants in a network] that actually exist (Lazer and Friedman, 2007, p.
677)is one of the characteristics of social embeddedness. Different parts of the social
network may have different density. Dense social relations are character-istic of the
central players effective network with whom they interact most intensely and most
regularly whereas the remainder constitute the extended network (Granovetter, 1973, p.
1370, quoting Epstein, 1969, pp. 11011). Furthermore, dense social relations between
network participants have been linked to a higher likeli-hood of them developing
relational proximity to one another, which is another characteristic of social
embeddedness associated with shared norms and values of conduct (Nooteboom, 1999,
p. 144; see also Schamp et al., 2004). Of course there is also a reverse causality in the
sense that relational proximity may in turn encourage more dense social interactions.
Therefore, it may be expected that network partici-pants in the effective network of dense
social ties are more likely, compared to those in the extended network, to develop more
quickly relational proximity to the centre and adopt the central players norms of practice.
This study uses the above rationalization drawn from the social network perspec-tive to
explain the extant variation in the Russian audit firms responses to ISAs and audit
standardization in general. Specifically, it identifies the local audit profession as a social
network where different forms of social relations between firms influence their practices
and behaviours.6 Furthermore, it considers the arrival in Russia of the international audit
firms as a starting point of standardization, and the firms them-selves as the centre of
the social network because, as discussed in the previous section, they first introduced
ISAs and the notion of a standardized audit to Russia and hence effectively kick-started
the dissemination of knowledge of such an audit across the rest of the network.
This articles focus is on exploring the link between the indigenous firms responses to
audit standardization and the degree of their social embeddedness in relation to the
international audit firms. The expectation here is that the knowledge of standards spreads
faster across the international firms effective network of social ties, so the local firms
there are among the first to develop a genuine commitment to following the auditing
standards. The rationale for this is that dense social relations characteristic of the effective
network mean that such audit firms are more likely to develop relational proximity
toward the centre and, as a result, adopt the central players practice rules, such as
auditing standards. At the same time, it is the ability of ISAs to penetrate the international
firms extended social network in Russia that determines how far the standards travel and
how widely they are accepted and
6 Such a perspective is in line with the common view of professions (such as auditing) as social institutions
(see, for example, Freidson, 1986; Abbott, 1988).
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followed. Here, the article argues that understanding the conditions that determine the
degree of the local firms social embeddedness (characterized by the density of social ties
and relational proximity to the international firms) may help to explain their varying
responses to standardization.
Often, relational proximity has been linked to geographical proximity (Schamp et al.,
2004; Yeung, 1998). Yeung (1998), for example, argues that the geographically specific
localities that actors occupy influence their practice norms. Indeed, geo-graphical
distance is a strong impediment to relational proximity as it greatly restricts the
development of social relations. In the words of Greenwood and Hinings (1996, p. 1036),
peripheral actors may lack the intensity of commitment to the status quo found in firms
that are more centrally located. Conversely, close geographical proximity to the centre
yields an opportunity for establishing and maintaining dense social ties and, with time,
relational proximity between network participants. Hence, the local audit firms
geographical proximity to (distance from) the international audit firms may influence
their willingness (reluctance) to accept and follow auditing standards.
However, it clearly would be overly simplistic to suggest that all geographically

peripheral indigenous audit firms are the outliers in the standardization process. Schamp
et al. (2004) argue, in this regard, that the social network perspective can be criticized
for overestimating the meaning of geographical proximity and under-estimating other
forms of proximity, such as professional proximity between experts who share a
common understanding and frame of reference (p. 609). Indeed, the distinctive nature of
auditing as a professional practice and the auditorclient relationship point to other
possible drivers of relational proximity. In this regard, Abbotts (1988) work on the
sociology of professions shows how the strategic behaviours of professional entities are
determined by their actual or aspired to intraprofessional status, and also, by the demands
of their target clientele (p. 117).
Abbott links status to the professionals knowledge base, and hence, status reflects
degree of involvement with this organizing knowledge. Here, [t]he more ones
professional work employs that knowledge . . . the more one enjoys high status (Abbott,
1988, p. 118). And so, as storage of global knowledge about best practice (Brunsson and
Jacobsson, 2000), international standards may serve as an instrument for building a high
intraprofessional status. In other words, the aspira-tions of some indigenous audit firms to
gain a status enjoyed by the international audit firms may be an important driver of social
relations between them. Here, stated commitment to following auditing standards may be
both a sign of relational proximity to the centre developed over time as a result of dense
relations and a means to demonstrate this proximity (and hence a high status). In contrast,
other audit firms may lack these status aspirations, and consequently, a motivation for
developing social ties with the centre, which in turn may influence their attitudes to
standards.
Furthermore, common demands of the target clientele of international and local audit
firms may also influence social embeddedness levels. Abbott (1988, p. 122) argues that
professionals tailor their strategies in ways that better serve their clients
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expectations. This involves performing the tasks, acquiring the appropriate skills, and
adopting the practice norms that are believed to yield easier access to what profes-sionals
consider to be their target market niche. Therefore, a shared client base provides a strong
stimulus for developing social ties, so international audit firms are likely to have denser
relations with those indigenous firms that target a similar type of clients, specifically
companies with international capital influence. Conversely, divergent client demands may
restrict opportunities for developing social ties between some local firms and the centre,
hence potentially reducing such firms exposure to the world of ISAs. Therefore, it is
important to explore the relationship between audit firms responses to standardization
and the audit needs of their clientele.
RESEARCH METHODOLOGY
Fieldwork for this study covers a 10-year period from 2003 to 2012 and was con-ducted
in three stages; the total period spent in Russia was 21 weeks (see sources of empirical
data summarized in Table 1). During the first stage (early 2003), I reviewed documentary
data, including business and professional periodicals, manuscripts, reform project reports,
and policy documents issued by the Russian Finance Ministry and audit professional
bodies. The objective was to form a preliminary under-standing of the Russian audit
market, key developments with regard to audit
TABLE 1
SOURCES OF EMPIRICAL DATA FOR THE STUDY
Documents
Professional journals and periodicals, reports by transnational agencies (the World Bank,
IMF, EU)
Policy documents issued by the Finance Ministry and professional auditing associations
Audit market reviews and ratings
Tacis Project materials
Interviews
Auditors 36
Presidents of professional accounting bodies 6
Government official 1
Academics 4
47
Observations of professional gatherings
Meetings held by professional auditing associations 2

Practitioner workshops 4
Presentations at the Tacis Implementation of Auditing Reform in Russia conference 14
(January 2005, Moscow)
20
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standardization, and audit firms general sentiment toward auditing standards. It was
through the document analysis that variation in the audit firms responses to the standards
was first identified. Specifically, in addition to the majority of audit firms that became
mandatory adopters of ISAs as a result of the issuance of the 2001 audit law, two other,
smaller audit groupings were identified that were noticeably different from the rest. In the
first grouping were audit entities referred to in Russia as *crnyc (black) or pocket
auditors that, as a Russian audit scholar Guttseit describes, do not carry out a proper
audit check and issue a clean audit opinion on financial statements despite knowledge
of their fraudulent nature (Guttseit, 2004, p. 63). Such audits therefore represented cases
of complete disregard of auditing standards. Furthermore, document analysis showed that
audit malpractice and black audits were systematically considered more common in the
regions (a term used to refer to the countrys provincial periphery). The other audit
grouping iden-tified consisted of audit firms that, in addition to audits compliant with the
national auditing standards, also chose voluntarily to offer the so called ISA audits
compliant with the original ISAs. The extant literature drew parallels between such firms
and the local practices of international audit firms as colleaguescompetitors.
During the second stage (20032005), document analysis was supplemented with
participant observations and active interviewing. The preliminary findings during
fieldwork motivated the choice of the social network literature as a theoretical frame to
explore how audit firms commitment to following the standards is influenced by their
social relations. Importantly, during data collection, the objective was to trace the effects
of such relations between local and international audit firms as they drive the
dissemination of knowledge of standards across an audit network. Hence, the social
dynamics taking place at the level of an audit firm was left outside the scope of this study
and should be subject to a separate investigation.
Several observations of auditor professional gatherings were carried out, includ-ing an
international audit reform conference held in Moscow in 2005, which pro-vided an
opportunity to witness social interactions between audit firms in a natural setting. Also,
31 face-to-face semi-structured interviews were completed with audi-tors, government
regulators, presidents of the professional bodies, and university academics (see Table 1).
The duration of the interviews ranged from 40 minutes to two hours. Many interviewees
took an active part in audit reforms, produced books and publications in practical
journals, or were involved in teaching on various auditor training programs. The vast
majority of the interviews were tape-recorded (unless the interviewee objected) and
transcribed. The choice of the interview loca-tions was deliberately made to trace
developments in both Russias urban centres (Moscow and St Petersburg) and outer
regions (Khabarovsk city in the far eastern periphery). Perhaps unsurprisingly, none of
the interviewees explicitly referred to him/herself as a black auditor. Therefore, the
portrayal of black auditors con-structed with reference to the extant literature was cross-
verified through mainly third-party accounts provided by the interviewees to ensure that
the findings are trustworthy.
Interviews were conducted in a way that not only captured audit firms attitudes to
standardization per se or stated commitment to following the standards (e.g., Do
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you find standards relevant to your work? Is there variation in the way standards are
followed?) but also the nature of social interactions to trace the sources of influence on
such attitudes (e.g., Who or what has the biggest influence on your firm? What is your
view of the influence that international audit firms have? Does their presence in the
audit market have any influence on your firm and how you do things?). I also asked
questions to detect commonalities that could explain what drives social interaction (e.g.,
Who needs auditing in Russia and why? Can you describe your firms typical client?,
etc). In the course of data analysis, I travelled back and forth between the theory and
empirical data as a way to confirm, revise, or discard theoretical explanations for the
emerging empirical evidence. On the basis of the interview transcripts, a list of thematic
categories was developed to enable a systematic analysis of the interviewees subjective
accounts that were later developed in writing.
The last stage of fieldwork (20102012) involved further document analysis and 16
follow-up interviews. Three interviews were in person, and the remainder were telephone
interviews. The aim was to trace recent developments, such as the effects of the 2008
financial crisis, and also to delve more into the reasons for why different audit firms are
less or more socially embedded in relation to the centre (e.g., Is being associated
(working) with international audit firms important for you personally, for your firm?
Why is it so?).
Thus, over the 10-year period, 47 interviews were carried out of which 33 were with
practising auditors, including five with members of the international audit firms; 11 with
auditors from the Russian firms providing ISA audits (one from Khabarovsk and the rest
from Moscow and St Petersburg); and 17 with auditors who claim to observe the national
auditing standards (10 of which were with auditors in Khabarovsk). Therefore, I believe
that the studys findings are credible and repre-sentative, given the fieldwork is conducted
in both Russias urban centres and periphery, draws on multiple data sources to enable
cross-checking, and covers a significant time frame.
THE EFFECTS OF SOCIAL EMBEDDEDNESS ON LOCAL AUDIT FIRMS

RESPONSES TO ISAs
The analysis that follows will apply the theoretical framework outlined above in order to
explain the sources of variation in the indigenous auditors responses to standardization,
particularly focusing on the social ties between the local and inter-national audit firms as
vehicles through which the knowledge of a standardized audit has disseminated across
the local audit profession.7 More specifically, broad categories of ties will be discussed
together with their effects on the local firms
7 Given such a focus, outside this studys scope are other forms of influence on the dynamics of
standardization, such as the effects of the standards enforcement and compliance regime operated by the
Russian Finance Ministry or the audit professional bodies (for a more detailed discussion of some of these
influences, see, for example, Samsonova, 2009).
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stated commitment to following the auditing standards, including relations develop-ing (i)
as a result of staff mobility between international and local audit firms,
(ii) within formal business partnerships, such as when indigenous firms join inter-
national audit firm networks, (iii) during conferences, open-access workshops and other
educational events involving the international audit firms, (iv) in the frame-work of
foreign-funded audit reform projects, and (v) in the course of joint audit engagements.
Standardization Dynamics within the Effective Network: The Rise of ISA

Auditors
As argued earlier in the article, the arrival in Russia of international audit firms had a
significant influence on the local audit market in terms of creating early awareness of
ISAs and a standardized audit in general. After their arrival, international audit firms
gradually started to expand their largely international staff base by recruiting among
locals. By the end of its third year in Russia, Ernst & Young, for example, had grown its
staff base from two to 250 employees of both foreign (such as German, French, British
and American) and Russian origin.8 One interviewee gives his recollection of that time:
Since they first came here, the big firms have been recruiting more and more among the Russian
auditors. The big firms influence on the Russian audit market was mainly through their work
standards and their expertise in international audit methodologies. (An auditor from a firm
providing ISA audits, Moscow 2012)
For the local members of staff, the international firms offices offered not just novel
work environments but effectively training sites for developing international audit
expertise that, at the time, could not be acquired elsewhere. Day-to-day routine
interactions with their foreign colleagues, many of whom had degrees from interna-tional
universities and years of experience of Western audit culture, provided an opportunity
for the local practitioners to absorb the international firms work ide-ology modelled on
ISAs. Below are comments from Russian auditors relating to the early 1990s:
Before joining PwC in the early 1990s I had had some experience of working as a revision
inspector. Revision was effectively a form of internal control, and we had no idea about things
like sampling, materiality, or professional judgement in auditing. There was no one in Russia at
the time other than international firms that I could learn these things from. (An auditor in a firm
providing ISA audits, Moscow, 2012)
Our firms strategy at that point was to create a pool of both young talent and experienced
individuals from all sorts of backgrounds. Then they were put through intensive training
programmes with one main objectiveto erase many of the things that they had learned
previously [smiling]. (An auditor in one of the Big 4 firms, Moscow, 2011)
In the beginning, their [international firms] function was something akin to missionaries who
came to Africa to disseminate Christian beliefs among local tribes. (An auditor from a firm
8 See Auditors celebrate their anniversary in Russia in a close circle of friends, Kommersant, 29 June 1993
(in Russian).
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The above comments point to the gradual enculturation of the local audit prac-titioners
working in the international firms practices with ideas about ISAs and Western audit
practice. These developments were highly significant because they created a critical
mass of like-minded local auditors with knowledge of a standard-ized audit and, as
argued earlier, provided a starting point for the subsequent diffusion of such knowledge.
Among the vehicles for such diffusion were instances of staff mobility (over the years,
estimated to have been in the region of 15% per annum) 9 between the international and
indigenous audit firms. These instances are an example of social interactions that
effectively marked the beginnings of the international firms effective network
(Granovetter, 1973) of professional ties in Russia. Geographically, such interactions
concentrated mainly around Russias urban centres, predominantly Moscow and St
Petersburg, where international firms opened their first offices in Russia. For example, a
number of Russian auditors interviewed in Moscow and St Petersburg, who now practice
in local audit firms that offer ISA audits, had experience of working for the Russian
practices of interna-tional audit firms earlier in their careers, and many have maintained
such contacts subsequently. As one such interviewee comments:
I had a clear idea that having work experience with the Big 4 would open up possibilities in my
future career . . . besides, there were emerging a number of ambitious Russian firms that were
eager to recruit people like me. (An auditor from a firm providing ISA audits, St Petersburg,
2005)
In addition, an important driver of social interactions between international and
indigenous audit firms was the fact that, in the beginning, the rules required forms of
collaboration, such as joint ventures. One example is BDO, which in 1992 entered the
Russian market by partnering with the local audit firm Unicon, and has since been known
as BDO Unicon. In addition, as soon as they arrived, international audit firms were eager
to demonstrate their long term commitment to improving the standard of audits delivered
by the local firms and raising such firms awareness of international practice standards
(such as ISAs) by, inter alia, hosting open-access professional training programs and
educational events. In the first half of the 1990s, for example, Coopers and Lybrand,
Deloitte and KPMG, together with the United Nations Centre on Transnational
Corporations and the British Council, ran profes-sional training programs on the Moscow
and St Petersburg campuses of Russias business schools and universities. Organized as a
series of workshops, such programs were designed to develop a class of local audit firms
with expertise in applying international accounting and auditing standards. Events like
these presented such firms with a rare opportunity to learn from what one interviewee
who took part in one such program termed more senior colleagues, referring to staff
from the international audit firms.
Participation in such programs was voluntary, which means the attendees were driven
by a genuine motivation to learn about ISAs. As Abbott (1988) explains,
9 See Ernst and Young vs. PricewaterhouseCoopers: Staff policies, Trud (Labour, national newspaper), No.
134, 23 July 2008.
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aspiration to an intraprofessional status may be a significant influence on profes-sional

behaviours. And so, one can argue that attending such programs was part of an attempt by
some local audit firms to gain an intraprofessional status similar to that enjoyed by
international audit firms. In this regard, ISAs were attractive as a tool for status building
because they were thought of as requiring a special type of expertise and training, which
could be difficult for other local firms to demonstrate. Here, it is worth noting that there is
a link between status-conscious behaviours of audit firms and their staff in the sense that
it is the ambitions of the latter that shape the status-driven agendas set by the former. The
excerpts below provide some further insight:
They [international auditors] motivated us to improve ourselves. We wanted to prove we were no

worse. (An auditor from a firm providing ISA audits, Moscow, 2004)
It was our managing partner . . . He did not choose to simply earn quick money. He went the
longer way when he decided to establish a firm and develop its reputation, a firm that would
eventually be able to compete with large international audit firms. (An auditor from a firm
According to Abbott (1988), professional entities status aspirations are often linked to
their desire to appeal to target clientele. The aforementioned educational events coincided
with the influx in Russia of foreign capital, leading to the growing numbers of both
foreign businesses and indigenous companies with international capital influence. These
companies were first in the country to start compiling finan-cial reports in accordance
with internationally recognized accounting standards and requiring ISA audits to attest
such reports. As mentioned earlier, such audits initially were provided mainly by Russian
practices of international audit firms. It was becoming clear that opportunities for
competing with international firms for these sort of clients were dependent upon the local
audit firms ability to demonstrate expertise in ISAs.
[In the mid-1990s] we saw more client businesses starting to go international, and their auditors
had to follow suit by making sure they could offer the required expertise, including knowledge
of ISAs. (A university professor and a former auditor, Moscow, 2004)
Furthermore, what the above analysis also shows is how the density of social ties
between members of international and local audit firms continued to be visibly higher in
Russias cities of Moscow and St Petersburg. As noted earlier, dense social relations with
central players are more likely to be established by network partici-pants located in
relative geographical proximity to the centre (Yeung, 1998). As a consequence, the
impact of such ties was also greater in terms of creating opportu-nities for the audit firms
in these locations to grow relationally closer to the centre and, as a result, to develop
appreciation for ISAs (Granovetter, 1973; Nooteboom, 1999). Starting from the mid-
1990s, one could see a handful of indigenous audit firms starting to market themselves as
alternatives to international audit firms for their ability, like the international firms, to
offer ISA audits in addition to audits in accordance with national auditing standards. As
mentioned earlier, their acceptance of ISAs was voluntary and took place before the first
ISA-inspired set of national auditing standards was mandated by the audit law in 2001.
Among such firms
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interviewed during fieldwork, all were headquartered in Moscow and St Petersburg

(where, as mentioned earlier, head offices of international audit firms were also located),
which confirms that geographical proximity to the centre potentially could have been
among the factors that contributed to the firms stated commitment to ISAs (Yeung,
1998).
The firms voluntary decision to follow ISAs led to changes in their audit approaches.
In this regard, Mennicken (2008a) demonstrates how such changes involved a
reconfiguring of some key intra-firm processes. In relation to one such firm, she
documents, for example, how the firms indexing system for internal docu-mentation was
made a close replica of that developed by one of the international audit firms to enhance
the consistency of this firms work approaches with ISAs. Importantly, she notes that
adopting ISAs did not imply that they were simply used in place of the Russian auditing
standards, but that instead both standards were fused and re-joined (as opposed to
juxtaposed) through the creation of the firm-specific standards based on the provisions
of both ISAs and the Russian audit-ing standards (p. 397). This studys findings echo
those above by confirming that formalization of the audit process was one of the key
changes in audit methodology introduced by the indigenous audit firms providing ISA
audits. A senior auditor working for such a firm comments as follows:
The audit process needs to be standardized. There should be rules, programmes, and instructions,
and you need to teach your staff to understand and follow them. Thats what we did in 199697.
As a result, we lost some very experienced staff, former chief accoun-tants and [Soviet] revision
inspectors, who did not think it was necessary to have planning, audit documentation, or quality
control . . . Although some clients adored them, with time, we realized that methods of their
work conflicted with the firms ambitions. (An auditor from a firm providing ISA audits,
Moscow, 2004)
Nonetheless, one should not assume that the grouping of audit entities that may be
referred to as Russian ISA auditors represent a homogenous body of firms and
professionals. Some commentators, for example, argued that larger financial gains from
more prestigious and lucrative ISA audits was the only reason behind the enthusiasm
with which some (particularly second-tier) audit firms declared their commitment to
following ISAs, noting low trust of such audits from the inter-national users (see the
commentary by the countrys reputable business periodical Expert).10
Subsequent years have witnessed Russian firms providing ISA audits grow in number,
size and geographical reach. Specifically, the early 2000s saw several mergers between
such firms creating a web of their regional offices across Russia (Kommersant No. 225,
16 December 2002 and No. 234, 24 December 2003; Vedomosti, 13 August 2003).
Interestingly, it was some years later that international audit firms established similar
regional representations in Russia. For example, among the six offices of
PricewaterhouseCoopers outside Moscow and St Peters-burg, only one was opened in the
late 1990s (in Sakhalin, to service some major
10 See Expansion of the middle class, Expert, No. 13, 5 April 2004, http://expert.ru/expert/2004/13/13ex
-audit_30560/.
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international energy companies) whereas the rest were established a decade later. 11 These
developments were important not just because they helped Russian audit firms providing
ISA audits to challenge more aggressively the international firms standing in the Russian
audit market but, more importantly, because they facilitated the diffusion of knowledge of
ISAs into more geographically peripheral settings. An auditor from the Khabarovsk office
of a Russian audit firm providing ISA audits comments:
We have standards which are close to ISAs in their provisions and our Universities and
professional bodies teach us how to use them in theory. So, we have many auditors claiming they
know what auditing in accordance with international standards should be. What makes our firm
different is that we have practical experience of doing such an audit. (Khabarovsk, 2012)
Hence, one can see a two-way relationship between the indigenous ISA audi-tors
social embeddedness in relation to the audit networks centre and their atti-tudes toward
ISAs. On one level, social ties with international audit firms created opportunities for
local firms to learn about ISAs. Here, geographical proximity (Yeung, 1998) directly
increased the likelihood of such social ties actually devel-oping. Furthermore, the above
analysis also shows the significance of similarities in the Russian and international audit
firms professional characteristics and strate-gies (Abbott, 1988). On another level,
commitment to ISAs displayed by the Russian ISA auditors has in turn encouraged their
denser social interaction with the international firms. Mouritsen and Thrane (2006, p.
243) describe the nature of such interactions as occurring between potential competitors
that cooperate in relation to the customer information, the development of new
knowledge and, not least, the development of brand assets. In this respect, Mennicken
(2008a) argues that, in order to gain international acceptance and stature, adopting ISAs
appar-ently was not sufficient. Russian audit firms providing ISA audits also had to
create further linkages to the international world, through international coopera-tion, the
achievement of external accreditation and other internationally oriented activities (p.
404). One vivid example of such pursued linkages is the decision made by several
Russian firms providing ISA audits to become members of inter-national audit firm
networks, such as PKF, MGI, Morison International, AGN International, DFK
International, and many others. Membership in such profes-sional alliances was not just
designed to extend the firms business opportunities but was also clearly driven by their
status aspirations (Abbott, 1988) and a desire to demonstrate and authenticate, in a very
public fashion, their expertise in ISA. Further, Samsonova (2009) also shows how some
firms, together with their col-leagues from international firms, fuelled the debate
unfolding in the late 1990s about the overly prescriptive nature of the first set of auditing
standards and their diminishing relevance to the rapidly evolving business realities. These
audit firms became later involved in the capacity of experts in the drafting of the second
set of the national auditing standards more closely compliant with ISAs. Such work
11 See http://www.pwc.ru/ru/about/offices.jhtml.
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commenced in the early 2000s and was carried out within the EU-funded Tacis Russian
Audit Reform project where Russian audit firms were full-time partners to international
project participants.
The above shows that, with time, the Russian providers of ISAs audits became seen not
just as experts in ISAs and alternatives to the international audit firms but also part of the
audit networks centre.12 Over the past years, such firms have consistently generated
revenues comparable to those of international firms,13 not least because of the gradual
expansion of their target client base or, in the words of Leonid Shneidman (head of the
state agency in charge of audit regulation), con-stantly growing numbers of auditees that
compile their reports in accordance with international accounting standards. 14
Nevertheless, these firms still remain a minor-ity (200 out of 6,200 audit firms (Finance
Ministry, 2011)), with most concentrated in Moscow and St Petersburg (in the top 25
firms, only one firm is headquartered elsewhere).15
Extending the Geography of Standardization or Breaking Through the

Extended Network
From the social network perspective, audit standardization may be seen as a con-tinuous
process where the knowledge of a standardized audit flows faster through the effective
network and then gradually spreads across more socially distant settings as a result of
social relations developing between audit firms there and the central players (i.e.,
international and indigenous firms providing ISA audits). Fieldwork for the study shows
that the processes of knowledge diffusion have been slow as a result of many Russian
audit firms being only loosely connected to the centre. Hence, one of the challenges in the
course of audit standardization has been to find channels through which this extended
network of loose ties could be socially linked to the centre. One example of attempts to
achieve such an objective was the aforementioned Tacis Russian Audit Reform project
launched jointly by
12 It is important to note, however, that the belief that Russian ISA auditors provided a real alternative to the
big audit firms and therefore could themselves be seen as central players in the audit network was initially
characteristic mainly of members of the Russian audit firms and much less of their international colleagues.
Mennicken (2008a), for example, points to the existence of the division of audit labour in the Russian audit
market in the 1990s to early 2000s in terms of a common perception among auditors from the big firms that
the ISA audits they provided were somewhat superior to those offered by the Russian firms. Mennickens
account confirms this studys findings by showing that such a perception started to change gradually in
subsequent years as some Russian audit firms were becoming more closely integrated into the international
audit world, such as through membership in the international audit firms networks discussed above.
13 Recent audit market surveys by the Finance Ministry (Finance Ministry, 2009, 2012a) revealed that the
audit market share held by the international audit firms had fallen to approximately a third over the past
years (based on total revenues). The surveys also show that the majority of top 50 firms controlling around a
quarter of the audit market are indigenous providers of ISA audits.
14 An excerpt from Leonid Shneidmans interview to the business periodical Kommersant, No. 196, 21
October 2009, p. 22.
15 See the 2011 audit market report prepared by the countrys reputable Expert RA rating agency,
http://www.raexpert.ru/rankingtable/?table_folder=/auditors/2011/tab14/.
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the Russian government and the European Commission in 2001. The project did not just
aim at developing the new national auditing standards more closely mod-elled on ISAs
but also at educating local firms about various aspects of standards implementation and
compliance. Among other things, this involved preparing practical guidelines and
organizing open-access training sessions across Russia to show how to apply the new
standards. International firms and Russian audit firms providing ISA audits were in
charge of delivering such sessions. The coordinator of one of the stages of the project also
working for a Russian firm providing ISA audits comments:
The amount of methodological materials that have been issued within the project is
unprecedented, and I personally, together with colleagues from the big firms, have travelled
pretty much all over the country, noting a great deal of interest from the regional [audit] firms.
(Moscow, 2004)
A President of one of the professional accounting bodies in Russia also gives his
recollection of the sessions:
The training sessions provided a good opportunity for learning [about the auditing stan-
dards] . . . You often saw same faces there, I knew many of the auditors as members [in this
professional institute]. (Moscow, 2010)
Social events such as those above have been significant in terms of extending the
geography of social ties of ISA auditors within the local audit profession beyond their
effective network (Granovetter, 1973), and particularly, across more geo-graphically
distant environments. However, the impact of these social processes and structures as
regards to incentivizing indigenous audit firms to adopt original ISAs has been limited.
The absolute majority of firms (6,000 out of 6,200 (Finance Ministry, 2011)) commit only
to what is mandated by the audit law, which is the use of the national auditing standards.
Below are excerpts from the interviews with three auditors from such firms in both urban
centers and province:
Standards have perhaps the most significant influence on how we [the firm] approach our work. .
. . Auditors from my firm try and attend different educational events, including those devoted to
the use of the standards . . . they are helpful in terms of keeping up with the developments.
(Moscow, 2005)
We have local offices of the professional institutes here, there are also regional conferences and
workshops . . .
Author: Do you attend similar events held in Moscow?
Auditor: We have a vast country and the eight hours that it takes to reach Moscow by air does
not really help . . . we need to think about cost. (Khabarovsk, 2012)
I am sceptical toward the international firms. They dont understand our private sector, and they
would not change their methods of work just because they work in Russia. (Khabarovsk, 2012)
The comments above exemplify mixed attitudes to the national auditing standards and
also show how members of some indigenous audit firms display low levels of both
characteristics of social embeddedness, that is, the density of ties and relational proximity
to the central players. They also suggest that one plausible explanation for this may be
such firms geographical distance from the centre (Yeung, 1998). Such a
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distance leads the firms social ties to become more localized, which in turn restricts
knowledge diffusion. As a result, peripheral audit firms are more likely to exhibit what
Greenwood and Suddaby (2006, p. 29) term locked-in behaviours linked to past
professional experiences where the contrast between old (the culture of fol-lowing
instructions from the Soviet times) and new (ISA-inspired) audit ideologies is more
persistent. Comments below help illustrate the resilience of such a contrast over time:
Over the course of three years [19992001], I interviewed 26 audit firms in depth both here in
Moscow, St Petersburg and Vladivostok. It was eye opening. I found local firms that didnt
understand what audit working papers were or what standard documentation should be. Some
firms had very weak methodology. It was more simply a checklist versus under-standing what
audit methodology truly is. (A former WB officer who was involved in an initiative concerned
with identifying audit firms in Russia capable of auditing WB projects, Moscow, 2004)
Things that international auditors do which are in accordance with ISAs dont work here. For
example, I do not find sampling particularly helpful. I prefer to check everything. (An auditor
from a firm in Khabarovsk, 2012)
Furthermore, the interview data also vividly demonstrate that the stark differ-ences in
the understandings of the roles of an audit and the perceived importance of standards
between the indigenous and international audit firms are not isolated to geographically
peripheral parts of the audit network, but also are found in Moscow and St Petersburg.
Indeed, despite the proximity to the central players, some audit firms there have been
slow to absorb and accept the idea of the more judgement-based, descriptive (i.e., not
prescriptive enough like the state directives), and less practical (i.e., containing fewer
practical examples and illustrations unlike the more detailed first Russian auditing
standards) new standards, let alone original ISAs. In this regard, the firms have viewed
such standards as something that they cannot easily translate into daily audit routines, and
also have been rather reluctant to engage in professional learning, such as by developing
social relations with more knowledgeable colleagues from the local and international
firms. Instead, many firms were found to criticize and therefore undermine the value of
the new Russian standards and ISAs:
My impression is that the [new] standards are simply a translation of some foreign text-book. In
my opinion, the standards are insufficiently informative and, at the same time, full of useless
details. I mean that they contain a lot of information of a descriptive nature and very little
practical information. (An auditor from a firm based in Moscow, 2005)
Our national auditing standards are being constantly revised . . . now they are even vaguer than
before. (An auditor from a firm based in Moscow, 2012)
On the one hand, the above interview excerpts vividly demonstrate one of the
fundamental challenges of global standards such as ISAs in that local audit firms struggle
to become comfortable with an identity which, to a large extent, is both offered and
defined by the West (Mennicken, 2008a, p. 386). On the other hand, they also
demonstrate that, apart from geographical distance, there appear to be other rationales
behind the scepticism expressed by auditors from such firms about the usefulness of
auditing standards to their daily practice. Specifically, the analysis of
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empirical data for the study suggests that the audit firms responses to standardiza-tion
are closely linked to the accounting and audit needs of their target clientele (Abbott,
1988). In this regard, it provides some further evidence to confirm and extend prior
accounts of Russias corporate reporting culture showing that it was and still is much
more focused on compliance with tax regulations and government decrees (Mennicken,
2008a, p. 402), resulting in a lack of voluntary demand for auditing. Indeed, the majority
of audits carried out in Russia are a result of a statutory audit requirement. 16 To a large
extent, this reality has its roots in the nature of the countrys economic and business
environment. Widespread insider ownership mentioned earlier in the article has
contributed to the low value of corporate disclosures as a reliable source of information
about business performance (Judge and Naoumova, 2004). When trust is established
through informal connections and personal relationships rather than an opinion from a
stranger (i.e., auditor), the perceived need for auditing becomes greatly diminished.
The fieldwork for this study indicates that the so called state unitary entities (SUEs),
that is, businesses in which a significant part of capital is owned by the state, form a large
part of the client base in many, particularly smaller, audit firms. SUEs are subject to a
statutory audit requirement.
I think that the audits of SUEs present a fundamental problem for the Russian audit profession.
These audits are very different from audits according to the international auditing standards. The
profession will change dramatically when the requirement for SUE audits changes. To me, this
type of audit is not necessarily about expressing an opinion [on financial statements]. There is
very little room for materiality or things like subsequent events or going concern . . . some of
these fundamental things are not part of Russian audits of SUEs. (An auditor who recently
moved to Russia from North America and now works for a Moscow-based Russian audit firm
that offers ISA audits, 2011)
This kind of audit is mainly performed by small audit firms. The clients there put a very different
type of pressure on their auditors, and their understanding of audit quality is also very different. I
would not expect them to find ISAs very helpful. (An auditor in a Big 4 audit firm, Moscow,
2010)
SUE audits are both initiated and paid for by the state, specifically municipal or federal
departments that often see auditing as effectively a compliance review for state control
and tax purposes rather than a means to attest the quality of financial reporting. The
interview analysis clearly shows that tenders for such audits are organized on the basis
that audit cost is of primary importance when selecting an auditor. The clients
preoccupation with cost as the main selection criterion does not only provide an indirect
indication of the perceived value of the audit to the client but, in extreme cases, may
mean that undertaking a proper audit process (in accordance with auditing standards)
becomes economically unviable, which makes poor compliance with the standards more
likely.
16 In Russia, entities subject to statutory audits include open corporations, banks, insurance companies, stock
and commodity exchanges, investment institutions, non-budgetary funds, charity funds, state unitary
entities, and companies with a total annual turnover or total assets above the threshold determined by the
state.
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Our firm does not even try to participate in tenders for audits of SUEs because there the focus is
on cost minimization, and what they would be willing to pay would not be enough to even cover
our cost of doing an audit. (An auditor in an audit firm providing ISA audits, Moscow, 2011)
Hence, the analysis above has demonstrated marked differences between SUEs with
their strong focus on tax compliance, and target clientele of audit firms provid-ing ISA
audits that rely on audited financial statements as a tool for boosting (international)
investor confidence. From the social network perspective, the effect of such differences is
that they have reduced the common basis upon which social ties (and potentially
relational proximity) between ISA auditors and local firms that target mainly SUEs could
be established and developed (Schamp et al., 2004). The interview data presented above
show that, as a result of loose social ties, SUE auditors are both more relationally distant
from the centre and have different expectations as to what auditing standards are
supposed to provide. Specifically, they consider inference-based audit techniques that
ISAs promote less relevant to their daily routines as SUE audits are not concerned with
attesting fairness of accounting judgements but merely with checking the correspondence
of accounting records with relevant tax laws.
Thus, any changes in the local audit firms sentiment towards (and compliance with)
the auditing standards are always going to be dependent on the respective changes in the
accounting and audit needs of their clients. Recent years have seen two noteworthy
developments that may have a potentially significant effect on the status quo. One is the
amendments to the Russian audit law raising the statutory audit threshold17 that have
already triggered further consolidation among the indigenous audit firms and pushed
some smaller audit firms (that have been more often accused of poor compliance with
auditing standards, see Finance Ministry, 2012b) out of the statutory audit market. 18 The
other development is Russias commitment to implementing International Financial
Reporting Standards (IFRS).19 The potential effect of these developments is that they are
likely to increase the presence of ISA auditors in the market for statutory audit because
the requirement to comply with IFRS directed at a wider range of Russian businesses will
in turn boost demand for ISA audits. This, in turn, will provide
17 The amendments came into effect in January 2011. They increased the turnover threshold to eight times the
previous amount and the assets threshold to three times.
18 See, for example, an article Auditors without the right to sign in a reputable business periodical Expert
(No. 12, 26 March 2011), http://expert.ru/expert/2012/12/audit-bez-prava-podpisi/.
19 Since 2004, Russian banks have been required to compile their financial reports in accordance with IFRS.
In 2010, the new law On Consolidated Reporting (No. 208-FZ, 27 July 2010) extended such a requirement
to a larger number of preparers, including credit and insurance organizations, listed companies, and those
entities that are required by law to compile consolidated accounts. The above rules apply to financial reports
published from 2013 onwards. All such reports are subject to statutory audit requirements.
527
2013 The Author
A BAC U S
further opportunities for developing and maintaining social ties between local firms and
the centre.20
The Audit Underworld: Exploring the Audit Networks Periphery

While the above analysis reveals cases that highlight poor compliance with auditing
standards, there is also empirical evidence pointing to the existence of non-compliance
so called black auditors, that is, local firms that completely ignore auditing standards.
Over the years, concerns over their professional behaviours have been expressed in
comments by audit regulators (Shneidman, 2005; Maximova, 2012), the professional and
business press (Kapustin, 2001; Ivanova and Bogachova,
2003), and auditors themselves (Smirnov, 2005). The emergence of the black audi-tors
dates back to the start of the aforementioned post-Soviet privatization cam-paign in the
early 1990s. During this time, some audit firms were established with the sole purpose of
helping client company insiders to prepare and approve false finan-cial accounts that
undervalued company assets in order to increase insider owner-ship at a lower cost
(Kapustin 2001; Sokolov and Terekhov, 2004). The majority of black auditors have been
set up as individualniye auditory (individual auditors), that is, small businesses that
have the legal form of sole proprietorship.
The key feature of black audits is that there is no audit process (Kapustin, 2001;
Ivanova and Bogachova, 2003; Guttseit, 2004; Smirnov, 2005). An audit judgement is
effectively a gimmick as the audit client dictates the content of an audit report. Black
auditors often disguise their non-compliance with standards by falsifying audit files to
create an impression that the necessary audit steps (such as sampling, substantive tests,
and others) have been followed:
They [black auditors] would prefer to be perceived by their clients as . . . [somebody] who
would do what the client would want and keep clients secrets without asking questions and
requiring high fees. (An auditor in a Moscow-based audit firm, 2004)
Over the years, black auditors have excelled in ensuring their existence is difficult to
detect. According to the interviewees, they may veil their location by registering under
one address and working under another. Also, many close offices in one place just so that
they can start again in another under a different name. Excerpts from the recent
interviews provide third-party accounts of black audit behaviours and show that such
firms continue to be seen as a serious problem in todays Russia:
I am not saying that all auditors in the province are cheating . . . far from that . . . but I have
travelled up and down the country enough to be able to compare. .. There are auditors that try to
survive by all means, even if it means forgetting about ethics. (An auditor in Moscow, 2011)
I would agree with those who say that here [in province] there are more opportunities for this
sort of behaviour. . . . We are far from the centre [of Russia] . . . and so the belief is that
20 One recent example of such collaboration is the merger in 2011 between a Moscow-based audit firm
Rosexpertiza specializing mainly in the provision of audits based on the national auditing standards and
the Russian practice of the international audit firm Grant Thornton (that opened its first office in Moscow in
1994).
528
2013 The Author
one can get lost easier . . . and some unprofessional individuals use it. (An auditor in
Khabarovsk, 2011)
I know they [black auditors] continue to be a problem. I would not call them audit
professionals, they are more of an isolated minority. (An auditor in a firm providing ISA audits,
Moscow, 2012)
The interview excerpts above confirm earlier observations made by Russian com-
mentators (see, for example, Guttseit, 2004) arguing that, while black audit behaviours
may be found in all parts of Russia, concentration of such auditors is highest in the
countrys outer regions. Black auditors geographical distance (Yeung, 1998) from the
centre seems to have significantly reduced the likelihood of them developing social
relations with members of audit environments where a standard-ized audit is a norm
(Granovetter, 1973; Davis and Greve, 1997). Furthermore, from the network perspective,
black auditors can be placed on the extreme end of the social embeddedness spectrum
compared to other indigenous audit firms. In the course of the fieldwork, interviews were
conducted in different years with several auditors displaying clear signs of relational
detachment from the central players, although it was impossible to establish with
confidence whether or not these interviewees were indeed black auditors. Some
interviewees, for example, talked of working with whatever clients I am able to get
because one has only oneself to rely on and that it is easy for those guys in Moscow to
think about standards as they are spoiled for choice (in terms of having access to the
best audit clientele).
Apart from geographical proximity, another factor that has influenced the social
disembeddedness of black auditors is the particularly distinctive nature of the demands
of their clients (Abbott, 1988). Specifically, such demands emphasize the need for an
auditor to ignore (or sometimes even help to conceal) traces of so called double
accounting practices (for references in the Russian business press, see Bryukov, 2004
and Medvedeva, 2006). Double accounting refers to the organiza-tion of a companys
accounts in a way that allows two sets of accounting records and, consequently, two sets
of financial reports. The first, clean set is for submission to the tax agency and
potentially other external users, and the second is for internal use by management for
control purposes. The two sets differ in terms of the scope of disclosure (with some
unwanted transactions concealed) to minimize tax and other duties.Therefore, the target
clients of black auditors are companies (including some SUEs) that are subject to
statutory audit requirements and engage in shadow economic activities concealed by
means of double accounting. The auditor is there-fore paid for signing off a clean
report on the financial statements, fully aware, as is the client, of their fraudulent nature.
The excerpt below from an interview conducted in 2004 continues to be relevant:
For some Russian businesses, an auditor is a requirement that needs to happen. They dont want
related party transactions, dont want significant commitments disclosed, even the ownership
fully disclosed. So, when you have something to hide, of course, the auditing is simply not
needed. There are firms that simply look for auditors who give a clean opinion. (An auditor and
a former World Bank officer, Moscow, 2004)
Client demands described above are highly distinct not only from those of the clients
of ISA auditors but also of other Russian audit firms. Russian providers of
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A BAC U S
ISA audits, for example, have emphasized their reliance on a rigid, standardized audit
process as a way to access the best (most lucrative) clients. In contrast, the interview
excerpts above demonstrate that black auditors do not view their clien-tele as a status
symbol; nor do they see a high intraprofessional status as being central to their ability to
retain clientele. It is their complaisant conduct and will-ingness to ignore professional
ethics in exchange for an agreed fee that, in their view, best secures their survival. In this
sense unethical behaviour is not just widespread but is at the core of the black audit
firms business model and therefore systemic. Arguably it is a key factor that has
contributed to such firms social detachment and resistance to standardization (Schamp et
al., 2004).
The attempts of the audit regulators have so far failed to eradicate black audits. Since
2005, for example, the government has run an external quality control review program,
which prescribed that audit firms submit annual activity reports to the Finance Ministry.
But these contain mainly descriptive data (such as audit firms staff structure,
membership in the professional auditing bodies, or types of audits carried out) that are
insufficient for any objective assessment of the audit firms actual performance. Also, the
audit law now requires that the professional auditing bodies subject their members to
regular mandatory quality control checks. However, the rigorousness of such checks has
been undermined by intense competition among the bodies for potential members.
Furthermore, auditor liabil-ity rules that would make it possible to hold auditors liable for
providing substan-dard services have been quite difficult to apply. Samsonova (2008), for
example, argues that Russias Civil and Criminal Codes, as well as audit-specific
regulations, limit auditor liability to that stipulated in the contract between audit firms
and their clients (company management), making it often impossible for the share-
holders or third parties to file a court case against an audit firm. Also, identifying the
causality between the damages suffered by the plaintiff and the audit firms actions is
problematic, and auditing standards are rarely used as a reference in Russian courts. As a
result, the existing liability regime has been unable to prevent black auditors from
colluding with company management. Also, the above may be seen as yet another
example of the capital market being a less significant consumer of audit services in
Russia compared to the dominant roles of state institutions of tax and fiscal control.
The interview data collected in 2012 suggest that changes in the economic envi-
ronment, specifically those triggered by the 2008 financial crisis, put a strain on the
financial position of many audit firms, especially small and medium-sized firms, as a
result of a slowdown in general business activity, affecting the outer regions of Russia the
most. As a result, pressure to reduce the cost of audit raised concerns over the continued
commitment of such audit businesses to carry out all steps of the audit process properly
(see the Russian Finance Ministrys survey of the audit market (Finance Ministry, 2011)).
Some interviewees suggested that the crisis led to a growth in substandard audit practices
as full adherence to auditing standards is perceived to be more costly, and also in the
number of black audits, following a rise in shadow economic activity. This represents a
reversal of the previous trend where both the size of the shadow economy and the volume
of
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black audit behaviours were slowly declining.21 The comments below provide some
further insights:
I think things have become worse after the crisis in terms of the quality of audit. A full adherence
to the [auditing] standards requires financial resourcesjust look at the cost of staff training!
which many firms simply dont have . . . Pocket auditors have always been a problem, and the
crisis certainly did not help in terms of reducing their numbers, quite the oppositewe have
seen more companies concealing significant parts of their business from the taxman. (An auditor
in Moscow, 2012)
In general, the specific phenomenon of what in Russia is known as black audits will
vary from one national context to the next. Indeed, substandard audit behaviours are
regularly found in professional groups that are believed to observe standards. However,
the underlying issues that such audit practices reveal have a general significance for our
understanding of the dynamics of standardization. Spe-cifically, they damage the
international audit harmonization project by demonstrat-ing that there appear to be issues
that are problematic for the regulatory and academic discourses on international
harmonization to uncover. Russias secretive black auditors represent the practice arenas
that research struggles to enter and investigate from inside.
DISCUSSION AND CONCLUSIONS
The objective of this article has been to rationalize variation in the local adopters
responses to international standards. The article has investigated the effects of the social
dynamics among audit firms in Russia on their attitudes to auditing standards.
Specifically, it has presented the local audit profession as a social network where the
centre marks the starting point of standardization and is represented by the inter-national
audit firms that first introduced ISAs to Russia. The articles specific focus has been on
the relationship between the indigenous audit firms commitment to following auditing
standards and their social embeddedness in relation to the audit networks centre
(Granovetter, 1973, 1985; Davis, 1991; Davis and Greve, 1997). In particular, it has been
argued that the density of social ties with the centre deter-mines the likelihood of audit
firms developing relational proximity (Nooteboom, 1999; Schamp et al., 2004) toward
the central players and hence accepting their practice norms, such as standards. The
article has distinguished between different parts of the social networkthe effective
network (of those local firms with whom the international firms have dense social ties)
and extended network (of remain-ing social ties)in order to portray standardization as
a gradual process where standards are accepted more widely by the local firms belonging
to the effective network and encounter more difficulties penetrating less socially
embedded settings in the extended network.
21 After peaking in the mid-1990s at more than 50% of GDP, Russias shadow economy was slowly shrinking.
However, a recent public statement by the Deputy Head of Russias State Statistics Department indicates
that, after the 2008 financial crisis, the size of the shadow economy started to rise again, reaching 25% in
the countrys peripheral regions in 2011, see http://auditfc.ru/php/ content.php-id=2448&pr=print.htm.
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The article has further argued that identifying the conditions that influence the social
embeddedness levels may help to explain better why audit firms show varying
commitment to following the standards. One such condition is the local firms
geographical positioning (Yeung, 1998). Here, the case of Russian ISA audit pro-viders
has been used to show how geographical proximity to the centre is among the reasons for
some indigenous audit firms to accept standards more quickly and with more enthusiasm
(Yeung, 1998). Specifically, geographical proximity has provided opportunities for denser
social relations and, consequently, for more intensive learn-ing about ISAs. The article
has shown how most local firms belonging to the effec-tive network are located
relatively closer to the centre and how such firms constitute the majority of Russian ISA
auditors. However, despite the voluntary acceptance of ISAs by the ISA auditors, the real
challenge of standardization has been to penetrate fully more geographically peripheral
parts of the extended network where audit firms develop knowledge of, and
commitment to, auditing standards more slowly. The resilient scepticism expressed by
some peripheral audit firms towards both ISAs and the national ISA-inspired auditing
standards signals that geographical distance from the players that advocate
standardization may adversely influence commitment to following the standards.
Furthermore, the phe-nomenon of black audits has been used to show how geographical
distance can also be used as a tool for disguising non-compliance with standards.
A significant influence on the stated commitment to following ISAs and auditing

standards in general has been the extent to which some indigenous audit firms see the
standards as a tool for building their intraprofessional status (Abbott, 1988). The
indigenous providers of ISAs audits, for example, used the standards effectively to
differentiate themselves from the rest of the local audit community. In this respect, the
standards have been relied upon, in the words of Brunsson and Jacobsson (2000), as a
means for such firms to show that they are a particular kind of actor (p. 132) as well as
to develop and demonstrate relational proximity to what they perceive as higher-status
colleagues, that is,the international audit firms. However, the fact that the majority of
Russian audit firms are mandatory adopters of ISAs (through the mandating of the
national ISA-inspired auditing standards) may mean that some firms consider a high
intraprofessional status less important (or difficult to attain), relative to other means of
achieving client loyalty, such as providing their services at a lower cost. The history of
black audits shows that, in extreme cases, a lack of status aspiration may lead to
unprofessional behaviours and disguised non-compliance with standards. In this regard,
this articles findings echo those of Daske et al. (2008, 2011), using capital market effects
as a proxy for identifying the true impact of standardization, who concludes that such
effects are most pronounced for voluntary rather than mandatory adopters, and that
mandatory adopters are more likely to treat standards as a label rather than a true
commitment to quality.
The article also shows that social embeddedness and hence the perceived value of
standards to the adopters are significantly influenced by the demands of their target
clientele (Abbott, 1988). Denser social ties with the centre developed by the Russian ISA
auditors (which have facilitated their decision to voluntary adopt original ISAs) have
been driven by a desire to enter the central players market niche, that is, audits
532
2013 The Author
of international businesses and local companies with foreign capital influence. ISAs have
been chosen not just as a means to change existing audit practice but also to demonstrate
to potential clients that those changes had taken place. On the other hand, the article has
also demonstrated in the case of the auditors of SUEs that the differences in audit realities
experienced by such audit firms and their international colleagues have made dense social
relations between them less likely, which, in turn, has deepened the gap in their
understandings of the roles of an audit. Specifically, the procedural complexity of ISAs
appears to be of lesser importance to SUE auditors because their clients demand what is
effectively a simple test of compliance with tax rules. As a result, such auditors see
significant investment in the development of audit methodology and staff training
required by ISAs as well as the national auditing standards as unnecessary cost. Hence,
the above empirical observations indicate that the reality of making the international
auditing standards apply to a variety of contexts and environments is highly sensitive to
the question of who needs an auditor and why.
Furthermore, although this articles primary focus has been on the effects of social
relations on the adopters responses to standardization, such relations nonetheless should
not be viewed in isolation from broader institutional conditions. Leuz (2010), in this
regard, points to institutional complementarities as a potential impediment to
standardization because in order to preserve institutional fit, countries need to change (or
adjust) several elements when they change one (p. 248). Therefore, the effect of such
complementarities is that they subject the new standards to the same institutional and
market pressures that shaped the old standards (Leuz, 2010, p. 248). In this vein, this
study has shown that the resilience of black audit behaviours is directly linked to the
widespread occurrence of hidden economic activities. It is likely therefore that Russias
black audits are going to persist for as long as the countrys shadow economy and multi-
layered corruption.
The phenomenon of black audits is an extreme example of Walters (2008) concept of
mock compliance, which he defines as formal compliance or even disguised non-
compliance. At the opposite end of the compliance spectrum, he identifies substantive
(high quality) compliance, noting however that, in developing environments, low quality
compliance (for example, when standards are formally adopted but not rigorously
followed in practice) is both common and persistent. He further asserts that mock
compliance strategies are viable, both at a country and firm level, when the cost of
compliance is perceived by the adopters to be high and also when third-party compliance
monitoring arrangements are costly and/or ineffective (p. 36). This articles findings, in
this vein, show how scepticism about the relevance of auditing standards is especially
characteristic of less wealthy peripheral audit firms. Limited financial resources available
to such firms not only restrict opportu-nities for building social relations (and hence
professional learning) but also lead to a wide-spread perception that full compliance with
auditing standards is economi-cally unviable, hence affecting levels of standards
compliance. The problem has been made worse by the ineffectiveness of the mechanisms
for sanctioning audit failure (such as auditor liability or oversight arrangements). While
the analysis of the effects of enforcement on the dynamics of standardization has been left
outside the scope
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A BAC U S
of this study, there is a clear interdependence between the two that needs to be
acknowledged (see Daske et al., 2008; Holthausen, 2009; Leuz, 2010).
Therefore, audit firms social embeddedness and hence compliance with standards
should be seen as a dynamic process. The article has documented two conflicting trends.
On the one hand, a growing number of local businesses switch to IFRS, which is set to
boost demand for ISA audits. Here, the changing needs of audit firms clientele, as argued
earlier, may serve as an incentive for social learning and poten-tially a genuine interest in,
and commitment to, following the auditing standards. On the other hand, however, we are
also seeing the adverse effects of the 2008 financial crisis in terms of increasing the scope
of mock compliance as economic crises tend to raise the perceived cost of full adherence
to the standards (see Walter, 2008, p. 170, for a similar view).
In conclusion, it is clear that the expansion of global standards, such as ISAs, into areas
previously controlled by nation states has raised issues regarding standards compliance.
The history of ISAs in Russia points to a limited analytical value in viewing standards
compliance merely as a either/or, compliance/non-compliance category. In this regard,
this study has sought to contribute to the prior literature on accounting and audit
standardization that portrays such a process as a project potentially leading to a variety of
outcomes (Walter, 2008; Daske et al., 2008, 2011; Leuz, 2010). One implication of the
studys findings is that there may be value in tailoring standards implementation
strategies in ways which would respond more to the specificities of what it is that the
adopters do (i.e., the nature of their work tasks, the type of services provided, or the sort
of clients they target). Applied to the Russian case, the underlying issue is about whether
an audit of, for instance, Russias SUEs mainly consumed by government agencies
should be performed in the same manner as an audit of a large multinational with
dispersed (international) capital influence; and consequently, whether these two audits
should be drawing on the same set of standards. The aim of this article has not been
necessarily to provide a straightforward answer to these questions. Rather, it has been to
highlight the importance of understanding the differences in audit objectives within and
across national standardization locales in terms of their bearing on the adopters percep-
tions and use of standards. Walker (2010), in this regard, points to the value of developing
competing perspectives and standards that would be tailored to the specific demands of
the worlds variety of national socio-economic models. Argu-ably, it is the failure to
respond adequately to the adopters conditions and contex-tual constraints that is a major
reason for why international harmonization efforts have often struggled to produce a
desired impact locally (Leuz, 2010; Walker, 2010).
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ABACUS, Vol. 49, No. 4, 2013 doi: 10.1111/abac.

Social Relations and the Differential Local

This article contributes to the literature exploring the contextual condi-tions

ANNA SAMSONOVA-TADDEI (anna.samsonova@mbs.ac.uk) is a Lecturer in Accounting at Manchester Business

ISAs IN RUSSIASOME HISTORICAL BACKGROUND

of financial and commercial activities of joint ventures on the correctness of tax

In Russias turbulent post-Soviet economic realities, the practice of auditing had to

In the context of Russian auditing, Mennicken demonstrates how, in order to work,

rationalizationsone where auditing and auditing standards were promoted as a means

SOCIAL EMBEDDEDNESS AND THE DYNAMICS

One way to view standardization is as a process of dissemination of expert knowl-edge

However, it clearly would be overly simplistic to suggest that all geographically

SOURCES OF EMPIRICAL DATA FOR THE STUDY

Meetings held by professional auditing associations 2

THE EFFECTS OF SOCIAL EMBEDDEDNESS ON LOCAL AUDIT FIRMS

Standardization Dynamics within the Effective Network: The Rise of ISA

aspiration to an intraprofessional status may be a significant influence on profes-sional

They [international auditors] motivated us to improve ourselves. We wanted to prove we were no

interviewed during fieldwork, all were headquartered in Moscow and St Petersburg

Extending the Geography of Standardization or Breaking Through the

The Audit Underworld: Exploring the Audit Networks Periphery

DISCUSSION AND CONCLUSIONS

A significant influence on the stated commitment to following ISAs and auditing

Mouritsen, J. and S. Thrane, Accounting, Network Complementarities and the Development of

Scott, W. R., Institutions and Organizations, Sage Publications, 2001.

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