Research Digest Audit firms: key go-betweens in the dynamic process of international standard-setting


In Auditors as intermediaries in the endogenization of an accounting standard: The case of IFRS 15 within the telecom industry, published in Accounting, Organizations and Society (2021), Professor Anne Le Manh and her co-authors examine the role of auditors in the international accounting standard-setting process, based on a case study of a large accounting firm working with the telecom industry.

Why study this

IFRS 15 (International Financial Reporting Standards) established a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Like other internationally-recognized sets of accounting standards, it is meant to improve comparability among reporting entities and has important ramifications for the concerned companies' accounting and financial performance as well as certain operations (IT, legal, etc.). This paper examines how large accounting firms and their clients – in this case, the telecom industry – are jointly involved in the construction of IFRS authoritative meaning at the standards' drafting stage. It is especially important to analyse this stage as the wording of the standard, once set, locks in most of the standard's meaning by restricting the range of possible further interpretations at the implementation stage.


  • Auditors acted as intermediaries in regulatory conversations between the telecom industry and the IASB (International Accounting Standards Board) around the revision of accounting rules pertaining to revenue recognition.
  • Auditors, and more specifically PPF (Professional Practice Functions) members who have an in-depth knowledge of the IASB due process, carried out an important horizontal coordination work by urging the industry to speak with one voice.
  • An important motivation for fostering discussions between the IASB and the industry lies in auditors' expectations that the outcome of this dialogue will help them later, when auditing their clients' financial statements.
  • Auditors were instrumental in facilitating the achievement of a consensus, both by providing the telecom industry with keys to understanding the IASB's conceptual point of view and by suggesting a technical solution to implementation challenges raised by the new standard.
  • The drafting of the IFRS 15 appears to have been a recursive endogenous process, in the sense that the law, far from being a top-down phenomenon coming from formal legal institutions, is also shaped by the organizations regulated under it.
  • This endogeneity was visible both in the legalisation of telecom firms, i.e. in the influence that regulatory logics have on their operational structure such as IT and internal control systems, and in the ‘managerialisation’ of IFRS 15, since practical expedients were incorporated into the draft to accommodate a business (cost-efficiency) logic.

In sum, auditors’ role as shepherds of the telecom industry is played in a subtle way, serving auditors’ interests while demonstrating their concern for the regulator’s and the clients’.

Key insight

Auditors played a pivotal role as intermediaries between the IASB (the regulator) and telecom firms (the targets) and as such contributed to the partial endogenisation of the draft IFRS 15.


Beyond helping the regulator contact certain targets, regulatory intermediaries such as auditors from large audit firms help structure and coordinate targets upstream, at the global industry level. The role of auditors is therefore much more extensive than was previously defined - as translators, interpreters or enforcers, which pertained primarily to the downstream part of the regulatory process (i.e. once the rule had been adopted).

Final takeaways

Auditors not only mediate the regulator-target relationship; they are also involved in rule-setting (by supplying technical solutions) and rule-taking (by calibrating their clients' views on the standard). This potentially increases the political and economic power of auditing firms, particularly the Big Four (Deloitte, EY, KPMG, and PwC).


Hervé Kohler Hervé Kohler Associate Professor of Accounting at Université de la Polynésie Française
Christine Pochet Christine Pochet Professor of Management Sciences at Sorbonne Graduate Business School
Anne Le Manh - ESCP Business School Anne Le Manh Associate Professor in the Financial Reporting and Audit department at ESCP Business School