Organizational Risk in Large Audit Firms

This paper analyze and discuss organizational risk in large-audit firms and contribute to auditing theory on how organizational risk may be analyzed. The study is conducted as a review of literature on audit-firm organization, risk management, professions and organization theory .Large-audit firms are commonly organized as partnerships relying on hierarchy and standardization of work processes to control work. The paper argues that this may be an effective way of organizing audit work in a stable environment. In a volatile environment, however, the strategy becomes highly risky. The focus of the paper is on the organization of large-audit firms and its findings do, therefore, not necessarily apply to small audit firms. The paper presents a general view of the way large-audit firms are organized and controlled. Local variations may occur but these are not analyzed in the paper. Wer analyzes the inherent organizational risk of the common way of organizing audit work and is therefore of direct interest to partners and other professionals in large-audit firms. It may also be seen as an example of how organizational-risk analysis can be applied in the audit process and it discusses the competences needed to perform such analysis