Standards of innovation in auditing

This paper examines the impact of the development of Business Risk Auditing (BRA) on international audit standard setting and the implications regarding the potential for innovation in auditing practice. BRA was an audit methodology development promoted by the large international audit firms in the late 1990s as a significant innovation but, ultimately, it did not have the degree of impact on practice initially promised. Our analysis demonstrates that professional and regulatory priorities at the time interacted in ways that led to the most innovative elements of BRA not being advanced for inclusion in formal standards. Intriguingly this outcome was clear well before the critical attention given to auditing following Enron, which was the explanation offered for the fate of BRA in previous studies. We conclude that the capacity for innovative ideas to have a substantive influence on audit practice is highly dependent on interactions between a shifting mix of professional and regulatory interests and preferences. The BRA case illustrates how lasting innovation requires a willingness and commitment both to develop the scope of the audit and to accept variations in aspects of its execution. This will not happen if standardization per se is seen as an essential validation of successful innovation.