The Internal Due Process of Epistemic Objects, or How a Big Four Firm Constructs Its Global Comment Letter for the IASB

Abstract

Unlike most existing research on accounting standard-setting, which examines the content (and/or influence) of comment letters from participants during the due process phase, we focus on what happens behind the scenes. Specifically, we endeavour to document the enormous resources expended by the Big Four in response to an exposure draft by an accounting regulator to produce a global comment letter that reflects the views of their members internationally. However, it is not their global comment letters per se that interest us in this study but what we call their “internal due process.” We zero in on one of the Big Four (herein called Case Firm for reasons of confidentiality) and document that which precedes the drafting of their global comment letter and the benefits that the hundreds of auditors involved, in bureaus scattered around the world, say that they derive from their participation in said process. We find that they obtain three types of gains—epistemic, social and reputational—from their discussions with IFRS experts, industry experts, field auditors and sophisticated clients, all of whom have a stake in the epistemic object underlying the new accounting standard in the making. This study is the first not only to document the internal due process of a Big Four firm – which we conceptualize as the social journey of an epistemic object—but also to highlight the benefits that auditors and indirectly the firm, derive from their participation.