The Strategic Options of Supreme Audit Institutions: The Case of Four Nordic Countries

• DOI: http://doi.org/10.1111/faam.12118
• Author: Kristin Reichborn‐Kjennerud,Jarmo Vakkuri,Åge Johnsen,Bino Catasús,Kim K. Jeppesen,Thomas Carrington
• Published date: 01 May 2017
• Date: 01 May 2017

Financial Accountability & Management, 33(2), May 2017, 0267-4424

The Strategic Options of Supreme

Audit Institutions: The Case of Four

Nordic Countries

KIM K. JEPPESEN,THOMAS CARRINGTON,BINO CATAS´

US,˚

AGE JOHNSEN,

KRISTIN REICHBORN-KJENNERUD AND JARMO VAKKURI∗

Abstract: Based on the theory of professional competition, this paper identifies

and investigates four strategic options of supreme audit institutions (SAIs) through

a case study of four Nordic national audit offices: a performance auditing strategy; a

financial auditing strategy; a portfolio strategy; and a hybrid strategy. The analysis of

the Nordic SAIs shows that while one SAI appears to have adopted a hybrid strategy,

the portfolio strategy has been chosen by the three other SAIs, although with some

variations in the portfolio. The paper concludes by discussing the implications of

these strategic options for public sector auditing.

Keywords: supreme audit institutions, strategy, jurisdiction, performance audit,

evaluation

INTRODUCTION

According to Abbott (1988), encounters between professional groups in the

workplace will lead to a competitive situation in which each group will claim

to have the relevant knowledge to serve the needs of the client in order to win

the jurisdiction. We know from previous research that this is sometimes the

case with the relationship between public and private sector auditing (Karan,

∗The first author is from Copenhagen Business School, Denmark. The second author is from

Uppsala University, Sweden. The third author is from Stockholm University, Sweden. The

fourth and fifth authors are from Oslo and Akershus University College of Applied Sciences,

Norway. The sixth author is from the University of Tampere, Finland. This paper is part of a

project funded by a research grant from the Joint Committee for Nordic Research Councils

in the Humanities and Social Sciences (NOS-HS), project number 219574. An early version of

the paper was presented at the EIASM 6th International Conference on Accounting, Auditing

and Management in Public Sector Reforms, Copenhagen, 1–3 September 2010.

Address for correspondence: Kim K. Jeppesen, Copenhagen Business School, Solbjerg Plads

3, C4 2000 Frederiksberg, Denmark.

e-mail: kkj.acc@cbs.dk

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THE STRATEGIC OPTIONS OF SAIs 147

2003; Jeppesen, 2012). New public management reforms emphasising the liberal

ideology of marketisation (Pollitt and Summa, 1997a, 1999) and pragmatism

have led to the outsourcing of public sector audits to private audit firms in order

to create a competitive situation between the two groups with the purpose of

enhancing the audit quality and reducing the costs. However, there also appears

to be overlaps in knowledge and thus potential competition between public

sector auditing and evaluation (Pollitt and Summa, 1996; Ahlenius, 2000). From

Abbott’s perspective, the competitive situation makes it imperative for public

sector auditors to differentiate their body of knowledge if they want to maintain

public sector auditing as an independent profession. Thus, the development of

a supreme audit institution’s (SAI) strategy and its auditing practices is driven

by the competition with private sector auditing and/or evaluative agencies.

In accordance with the competitive perspective, the purpose of this paper

is to study the strategic options for SAIs, particularly in relation to the

type of audits that they carry out and the way in which they are organised.

Our cases are the SAIs of the four Nordic countries Denmark, Finland,

Norway and Sweden. These four countries are particularly well suited to

illuminating the question of SAIs’ strategic options, because they operate in

environments that have been subject to NPM-induced marketisation of public

sector auditing, because they have chosen to lead the International Organization

of Supreme Audit Institutions’ (INTOSAI) standard-setting1process (˚

Anerud,

2004, 2007; Olsen, 2006; Norgren, 2010) and because they generally consider

themselves to be role models for other SAIs (see the sub-section headed Staffing,

Qualifications and Identity) and engage heavily in ‘capacity building’ in developing

countries.2The Swedish NAO, for example, spends 11% of its budget on

international development (Riksrevisionen, 2013) and the Norwegian OAG 4%

(Riksrevisjonen, 2013). The Nordic SAIs are consequently at the forefront of

developing public sector auditing in a competitive environment.

In the third section, we present the theoretical framework in more detail and

analyse how it affects the SAIs’ strategic choices. In the third section, we present

the research design. The fourth section provides the results of the study, while

the final section summarises and discusses the findings.

THEORETICAL FRAMEWORK

In the sociology of professions, competition between professions is seen as the key

driver behind professional development. Abbott’s (1988) theory on the system

of professions has been widely used to study intra-professional jurisdictional

disputes within the accounting profession (see, e.g., Shafer and Gendron, 2005;

Evans and Honold, 2007), as well as inter-professional jurisdictional disputes

between the accounting profession and other professions (see, e.g., Covaleski

et al., 2003; Edwards et al., 2007). According to Abbott, the link between

a profession and its work is termed its ‘jurisdiction’, and professions are

perpetually in dispute over the boundaries of their jurisdiction. This is because

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2017 John Wiley & Sons Ltd