G Model

YCPAC 1791 1–17
Critical Perspectives on Accounting xxx (2013) xxx–xxx

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Critical Perspectives on Accounting
journal homepage: www.elsevier.com/locate/cpa


A [1_TD$IF]genealogy of accounting materiality





Q2 Cardiff Business School[2_TD$IF], United Kingdom



Article history:
Received 30 May 2012
Received in revised form 30 May 2013
Accepted 2 June 2013
Available online xxx

This study explores the relevance of the historical dimensions of the materiality concept and
its past role. Metaphors applied to materiality provide insights into conditions and traces of
power that have shaped its discursive configuration. Rather than viewing materiality as the
gradual development of a technical idea over time, metaphorical discourses suggest that it
has been constituted as multiple categories of knowledge, with divergent roles, as: a moral
responsibility; a solution to the problem of over-auditing; a solid epistemic foundation for
financial reporting; a scientific technique; a quantitative rule of thumb; a risk management
concept; and a mysterious shield. The malleable nature of the concept has allowed the
profession to realign and reinvent it to meet shifting priorities and challenges. Divergence in
the trajectories of materiality discourses is relative to certain conditions, events, actors and
financial scandals. The paper draws on the metaphor of performance, to interpret materiality
as a performative activity at the crux of truth games about making visible, controlling,
taming, managing and hiding translation errors in accounting inscriptions. The extent to
which a genealogical analysis identifies different styles of reasoning that have shaped its
meaning over time has implications for debate about its future development[.]FDI$_T5
ß 2013 Elsevier Ltd. All rights reserved.



1. Introduction


Materiality is a fundamentally important accounting concept (Messier et al., 2005), generally understood to involve the
determination of the importance of a matter for financial reporting purposes (FASB, 1975). It also has a fuzzy ontology that
has persistently evaded precise codification in professional guidance (Power, 1997a,b; Ling Lee, 2004). Decisions about
materiality are a matter of professional [6_TD$IF]judgement and no set of rules can be applied to determine thresholds in all
circumstances (Gray and Manson, 2008; IFAC, 2010a,b). Nevertheless, it is a seemingly time-honoured concept (Lackritz,
2004; Wilcox, 2007), familiar to agents involved in the preparation, audit, analysis and regulation of financial statements
(European Securities and Markets Authority [7_TD$IF]– ESMA, 2012).
Scholarship has explored the nature and operationalisation of materiality. Detailed literature reviews have been
conducted by, amongst others, [8_TD$IF]Iskandar and Iselin (1999), Messier et al. (2005) and Brennan and Gray (2005). Yet, scant
information exists about its beginnings. Little was written about materiality until after the Second World War (Hicks, 1964)
and the importance of its past role, in a social and professional context, has perhaps been overlooked.
The current study seeks to address this gap by exploring materiality’s historical ontology (Hacking, 2004). Historical
ontology is a form of enquiry that considers how concepts retain traces of the influence of their historical dimensions.1 To
* Correspondence address: Accounting and Finance Section, Cardiff Business School, Aberconway Building, Colum Drive, Cardiff [3_TD$IF]CF10 3EU, United
Kingdom. Tel.: +44 029 20 876567; [4_TD$IF]mobile: +44 07968 686297.
E-mail address: EdgleyCR@cardiff.ac.uk.
This term was originally put forward by Michel Foucault, concerned with truth through which we constitute ourselves as objects of knowledge, with
power, through which we constitute ourselves as subjects acting on others and with ethics through which we constitute ourselves as moral agents. Ian
Hacking expands this term to examine all manner of constitutings and the relevance of the historical dimensions of concepts. Some problems with concepts
may be traced back to their past (Hacking, 2002, p. [9_TD$IF]37).
1045-2354/$ – see front matter ß 2013 Elsevier Ltd. All rights reserved.

Please cite this article in press as: Edgley C. A [1_TD$IF]genealogy of accounting materiality, Crit Perspect Account (2013), http://

Section 4 evaluates themes in metaphor applied to materiality to probe factors that have underpinned the development of materiality discourses. truths provided for us by our discourses have a history contingent upon certain past events. as a linguistic tool. Materiality is often referenced. [10_TD$IF ]139). The specific contribution of the paper lies in developing two. may broaden horizons within which materiality decisions are reached.1016/j. Jones et al. happenings. Edgley / Critical Perspectives on Accounting xxx (2013) xxx–xxx 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 this end. Bentham. Foucault developed genealogy as a tool to query what lies beneath the emergence of discourses. related ideas.G Model YCPAC 1791 1–17 2 C. relative to systems of domination that are powerful enough to influence ways in which we think about the world (Macintosh. technical discourses and expertises that have constructed it. p. a scientific technique. themes in scholarship on the subject are explored. Miller and O’Leary (1987) interpreted standard costing and budgeting as an apparatus of control over the performance of individuals. manage. Crit Perspect Account (2013). Second. relative to ideas about immateriality (Miller. reflective or critical) demonstrate how its construction has not been the product of any single. the stuff of the world (Dale. 2009. a solid ‘thing’ and epistemic foundation for reporting. First. Sections 3 and 4 attempt to suggest that a genealogical analysis may assist reflexivity about materiality by considering its historical dimensions and systems of thought that have shaped it as an object of knowledge. prior scholarship has investigated the past of other key accounting concepts and practices. Concepts are not the gradual. [14_TD$IF]2010. As a precedent for this type of critical history. Discursive figures of speech are used. 1824). powers and events have shaped the trajectories of materiality discourses. First. By power. tame. Hacking. ignore. are solid and timeless. Problematics associated with inconsistencies and vagueness in definitions are discussed.cpa. 2005). His ambition was to fragment and de-familiarize beliefs that ‘‘we tend to feel are without history’’ (Foucault.06. 2004). This critical analysis questions such assumptions. [1_TD$IF]Bartleson. The objective of this historical analysis is therefore not to ask what materiality ‘is’ or unveil misconceptions or hidden truths in discourses but to question how others have sought to construct it (Foucault. Our beliefs change. Foucault was referring. Stephen. The focus is on the constitutings of materiality (Hacking. traces of power and expert discourses that have shaped its existence. dominant. 1986. 1995. the paper explores how assemblages of factors. it refers to an abstract notion of materiality. particularly on the conditions. as if its meaning. The current study reflects on the role of materiality as attempts by competing powers and expertises (Samiolo. The paper attempts to adopt a novel method.doi. not to a specific authority. 2012) to make visible. to investigate conditions that have shaped our knowledge of materiality. 2004).. a commercial solution to over-auditing. a risk management tool. Materiality in accounting and auditing 66 67 68 69 70 The following section provides a context for the current study. http:// dx. 2009). but to anonymous arrangements that exercise control over systems of thought (Hacking. The paper may also have a practical significance for practitioners in understanding how materiality has historical dimensions. 65 2. A [1_TD$IF]genealogy of accounting materiality.001 . events. mediate. Themes within metaphors applied to materiality and modes of use (whether strategic. hide or downplay errors and ambiguities in the process of translating the elements of an organisational context into accounting inscriptions (Robson. 1970) but are configured through discourses (Macintosh. Section 3 explains why a Foucauldian methodological approach provides a relevant framework for an analysis of materiality and discusses the method of analysis adopted. Viewing materiality decisions as a performance by a group of actors. Maltby (2000) identified links between prudence and the practice of the social regulation of capital. 71 2. 2002. As a metaphysical construct. 2004). Second. a mysterious professional lens and shield. Concluding remarks summarise the paper in [13_TD$IF]Section 6. 2011).2013. different expertises and metaphorical discourses have constituted materiality as a multiplicity of knowledge objects including: a moral responsibility. 1992). Therefore. the paper undertakes a genealogical analysis. at times conflicting. to unearth clues about relevant genealogical factors. where expertises are drawn upon and ranked.1. drawing on Foucault. Kearins and Hooper. Section 2 of the paper contextualises the study and begins with a review of the materiality concept in accounting and auditing. The study also builds on the seminal work of Carpenter et al. the term denotes substance or importance in evaluating criteria and reaching judgments (in the OED. seamless. 2009). control. Kennedy. 2005). Background 72 73 74 75 76 Materiality is a pluralistic term (OED. Macintosh. actors. expertises. A related notion of a test of materiality (or significance) has spread into professional discourses such as law and accounting. (1994) who were amongst the first to explore materiality as a social and behavioural rather than a technical or cognitive phenomenon. Power (2012) explored fraud risk as a system of intense organisational governance and discipline. 2010) representing. 1860. 1789. 1980. the obscure beginnings of materiality and early references to the concept are considered. with a discussion of findings in [13_TD$IF]Section 5. Metaphors and similes complement a genealogical approach because they provide an insight into traces of power.org/10. teleological development of ideas over time (Foucault. in a simple sense. The findings of the current study seek to contribute to the accounting literature. primary logic. Please cite this article in press as: Edgley C. a rule of thumb. shaped by different. Sikka and [12_TD$IF]Willmott (1995) explored the power of independence in building and defending a professional accounting jurisdiction. systems of thought and truth games that underlie meanings. Q3 Metaphorically. ruptures and struggles between power blocs (Foucault. 1986. Multiple factors have sculpted its complex ontology.

Companies are required to disclose a true and fair view in law but this is subject to uncertainty. 1967). Flint.’’ 6 Kohler was the editor of the Accounting Review.06. independent decisions about thresholds are reached by auditors (Gray and Manson. Prior scholarship 120 121 Not surprisingly. p. p. Second. Initial decisions about accounting materiality are made by management in preparing financial statements.’’ ISA 320 no longer attempts to define materiality but states[2_TD$IF]: 102 103 104 105 ‘‘they (financial reporting frameworks) generally explain that: misstatements. Furthermore. or item whereby its disclosure or the method of giving it expression would be likely to influence the judgment of a reasonable person. it is important to mention that materiality is relevant in both accounting and auditing. Materiality allows a degree of flexibility. p. Where a financial audit is undertaken. Empirical research.1016/j. judgments about materiality are made in light of surrounding circumstances and are affected by the size or nature of a misstatement. p. 1984). 1972). issued by the American Institute of Certified Public Accountants (AICPA) (Newman and Mellman. First. For example. 8). In contrast. [23_TD$IF]4) have identified shared characteristics of materiality. Many subsequent definitions of materiality have been produced. Accounting historians have assumed that the concept was legalistic in origin.’’ Central Railway of Venezuela v Kisch (1867). could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. 1952.5 As the accounting profession began to develop formalised guidance in the US. the notion of Kohler’s reasonable person signals different information needs compared to an informed investor. no source of guidance has. 119 2. including omissions. p.cpa. Holmes suggested that a sense of legal obligation is implied in this context by the term bound. materiality decisions are a matter of professional [6_TD$IF]judgement. by professional accounting bodies. Edgley / Critical Perspectives on Accounting xxx (2013) xxx–xxx 3 77 78 79 80 81 82 83 84 85 86 87 88 In accounting. 94 95 96 97 98 99 100 101 Kohler defined materiality as a characteristic attaching to an item. particularly from 1938 onwards [19_TD$IF](Dyckman and Zeff. in Holmes. Lee. Definitions of a technical understanding of materiality [20_TD$IF]materialised. A [1_TD$IF]genealogy of accounting materiality. in the 1950s investigated quantitative variables involved in decisions. 1984.’’ Dicksee [17_TD$IF](1892. For example. first appeared in accounting and auditing texts at the turn of the twentieth century and in US guidance.’’ (IFAC. From the outset.6 91 92 93 A few years later. or a combination of both. the term material. with variations around the subject of the definition and the degree of uncertainty involved (Brennan and Gray. Wharton’s (1883) legal dictionary explained the term material as ‘‘the subject matter of the statement (or concealment) related to a fact or circumstance which would be important to the decision to be made as distinguished from an insignificant. Such differences raise important questions about broader genealogical and not just technical factors that lie beneath divergences in discourses. In scoping the study. 106 107 108 109 110 111 112 113 114 115 116 117 118 Brennan and Gray (2005.b). The focus of this paper is on materiality in auditing because it is through financial audit that the concept is linked to ideas about fair representation and quality in reporting (Lee. materiality has attracted academic interest. a discursive shift took place. 1988). Crit Perspect Account (2013). [15_TD$IF]46). the Journal of the American Association of University Instructors (Dyckman and Zeff. 2005).org/10. common law and statute but none have been in complete agreement (Brennan and Gray. 46). 3 Holmes (1972. are considered to be material if they. as an adjective. [16_TD$IF]1892).G Model YCPAC 1791 1–17 C. 46) mentioned the following examples ‘‘In any prospectus no misstatements or concealment of any material fact ought to be permitted. the American Accounting Association (AAA) produced the following definition. for whose benefit the concept operates. to date.b. codified the concept precisely (Power. 1908. Zeff. the Securities and Exchange Commission (SEC). fact. to refer to the importance of instructions for auditors (Dicksee. The concern of this paper is with an examination of factors that have underpinned different discourses about this elusive concept. 1972. 19). which this study seeks to examine. Scholarship has sought to explore what materiality is and how it is operationalised. individually or in the aggregate. 2005). References to material facts have been traced back to UK legal cases in the 1860s and the Companies Act 19853 (Holmes.4 The term was probably introduced to the US in the late 19th Century by emigrating British accountants. However. Kohler’s dictionary for accountants in the US defined materiality as[21_TD$IF]: 89 90 ‘‘the characteristic attaching to a statement. as a sense of obligation2 in setting out material facts (Holmes. p. 2005). 1972. in a simplistic sense. in addition. Lord Davey’s committee in updating the Companies Act 1985 reported ‘‘every contract or fact is material which would influence the judgement of a prudent investor.doi. http:// dx. The word material has also been used. This heterogeneity is specifically mentioned in International Standard on Auditing (ISA) 320. p. 1984). under an ‘‘if’’ condition. Brennan and Gray. 2010a.2. 1997a. 1979. trivial or unimportant detail.’’ 4 ‘‘The printed instructions cannot be more than a mere outline of an Auditors duties but they can be so framed as to be of material assistance to the audit clerks. 1957. 5 [18_TD$IF]Holmes (1972) did not provide any examples but legal definitions did certainly exist. Please cite this article in press as: Edgley C. para 2). 317). These meanings are related but distinct (Thomas and Krogstad.’’ (Kohler. It was not formally defined at this time although legal definitions existed (Holmes. the AAA linked the concept with professional [6_TD$IF]judgement. ‘‘financial reporting frameworks may discuss materiality in different terms. 2008).’’ (AAA. 1984.2013. Early 2 ‘‘The public accountant is bound to see that all material facts are set out in his certificate. 2009). 1972.’’ (Dickinson.001 . information is considered material if its omission or misstatement could influence the economic decisions of users. ‘‘An item should be regarded as material if there is reason to believe that knowledge of it would influence the decisions of an informed investor. different ways of thinking about materiality were apparent.

Auditors reach authoritative judgments about thresholds for the benefit of users but without any responsibility to disclose the criteria that underpin decisions (Roberts and Dwyer. 1983. The institutionalisation of the concept in accounting and auditing standards. Third. 1974. Carpenter and Dirsmith. 2012). auditors. Later studies confirmed this finding but significant variations in materiality thresholds were observed (Bernstein. Chewning et al. qualitative factors influenced judgments. 1970). Edgley / Critical Perspectives on Accounting xxx (2013) xxx–xxx 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 studies. Instead. especially cues and factors influencing decisions. Carpenter et al. 1998. (1994). An archaeological approach probes disruptions and investigates how the apparent ‘‘continuous development of meaning is crossed by discontinuous discursive formations’’ (Dreyfus and Rabinow.G Model YCPAC 1791 1–17 4 C. These heterogeneous groups demonstrated different thresholds because of their divergent motivations (Firth..doi. Although auditors were homogenous in their beliefs about materiality as a significant error. Individuals became differentiated by their hierarchical position suggesting that materiality is a social. According to Foucault. the task of the historian is to unearth the foundations of every day concepts. from the 1970[24_TD$IF]s and 1980s onwards. Critical studies have highlighted a lack of transparency in the concept of materiality. 2011.. 7 Materiality remains a topical and controversial subject. Materiality is thus an enigmatic problematic. Experienced individuals applied more scrutiny in non-routine transactions and experience was influential in less structured tasks (Messier. 1982. 1954).7 Interdisciplinary. Brennan and Gray. 1994). we acquire knowledge through the medium of discourses. 1984). through which concepts become meaningful. Messier et al. 2004).06. For Foucault. information users and accounting enforcers about its application. such as age and place of employment could also affect materiality decisions (Estes and Reames. On the one hand. Messier et al. p. using case study questions and questionnaires.. an apparatus (Foucault. Power. Foucault distrusted histories that rationalise concepts as the gradual refinement of ideas over time. 1979. He focussed his analysis on discursive statements.. leaving the profession open to charges of mystification and paternalism. adopted a cultural anthropology approach to exploring materiality.2013. particularly experience. 1967). 2005). Macintosh (2009) has drawn attention to the effectiveness of analysing accounting concepts through a Foucauldian lens. A recurring theme within recent discussions at the European Enforcers Coordination [29_TD$IF]Sessions has revolved around the divergence in views between preparers. 2001). 2005). 1988). 106). as an episteme or in his later work. behavioural phenomenon and the consequence of social interaction in the context of firm culture. Contrarily. Crit Perspect Account (2013). only nominally serving the interests of users of financial information (Brennan and Gray. 2012). organic firms versus highly structured mechanistic firms. 1997). 2005). 2011). Differences were observed in the number of cues used by less structured. Our beliefs may seem familiar but on investigation are logically dependent for their existence on certain a priori conditions. Variation in [6_TD$IF]judgement amongst preparers. [26_TD$IF]Holstrum and Messier. Certain belief systems prevail and influence ways in which we see the world whilst others are overpowered (Hook. identified the percentage effect of an item on net profit as a dominant determinant in judgments (Woolsey. Second. A genealogical approach to exploring accounting materiality 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 The following section attempts to explain why a genealogical approach facilitates a critical history of materiality. academics and lawyers and has been described as a dilemma and a source of insecurity (Reininga. 1987. 1968. 1976). they scaled variables differently at various levels of management (Ward.. 1983. 1987). actors and foundations (Jones et al. materiality was a relative notion where the size of an item relative to net profit was a primary cue in decision-making ([25_TD$IF]Iskandar and Iselin. 1968. he viewed history and the production of knowledge as a struggle between powers attempting to impose systems of domination (McNay. 1981.1016/j. qualitative research has investigated materiality not as a technical or cognitive phenomenon but in a social and organisational context. Concerns about divergence led to numerous calls for more detailed professional guidance and case studies (Reininga. words. calculating consequences rather than considering duties (Shaub. it is linked to the concept of a true and fair view and quality in financial reporting (Chastney. Wright and Wright. Lee. a process he termed archaeology..org/10. Jennings et al. 1982. in their seminal study. 2005). These conditions that underpin the possibility of knowledge were referred to by Foucault. queried the circumstances of auditor materiality judgments. 2005). Differences were also apparent in thresholds between auditors and the courts (Jennings et al. materiality judgments varied between management. 1989). auditors and users. auditors. information users and accounting enforcers remains a concern amongst practitioners. Findings varied because of the different items and contexts studied but a number of themes were apparent (Messier et al. events. 1984. Please cite this article in press as: Edgley C. [28_TD$IF]1984–1985. Moriarty and [27_TD$IF]Barron (1976) found divergence in auditor judgments in evaluating quantitative and qualitative factors. has resulted in a view that auditors are being materialistic. Ling Lee. Firm size and industry factors were further factors that affected auditor judgments (Pattillo and Siebel. interpret the world and act. as a network of rules. 1983. 1975. 160 3. First.. http:// dx. The term is not well specified or applied consistently. Holstrum and Messier. Later research. 1992).001 . A [1_TD$IF]genealogy of accounting materiality. with a focus on processes rather than truth telling. Higher materiality levels were observed amongst partners of large audit firms (Messier. it is criticised for being secretive. 2005). Frishkoff. paternalistic and materialistic.. Knowledge therefore operates as a form of power that exercises control over how we construct ourselves.cpa. Section 3 suggests that a genealogical analysis may assist reflection on the concept. viewing human thought as a culturally coded product. Krogstad et al. 1999. The European Securities and Markets Authority (ESMA) has been charged with seeking and evaluating views on materiality in financial reporting (ESMA. Personal characteristics.

Metaphor has been used extensively in scholarship because it provides an insight into perceptions of reality. A mechanism was needed to filter and analyse the data in a meaningful way. An analysis of metaphor complements a genealogy by unearthing underlying conditions and events through which meanings are assigned to objects. 9 The method used was simple but effective. Robson (1992) has emphasised the importance of asking not just ‘‘what’’ but ‘‘how’’ and ‘‘why’’ metaphor draws attention to processes of organisational behaviour and control. the benefit of asking how metaphors represent cues (signalling thought processes. Accounting Organizations and Society and Critical Perspectives on Accounting amongst others. They may be employed to highlight certain features of an object or idea. Archaeology queries how forms of knowledge and meanings are created by networks of statements. using search engines such as ABI inform. http:// dx. The focus is on gaps and ruptures in archives (Macintosh. 2002). styles of reasoning (Hacking.. 1984). as a form of dispersed power that permeates micro-practices. Foucault used similar methods to practice archaeology and genealogy. 1994. Metaphors point to systematic underlying thoughts and hidden meanings. which is often the case in the humanities (Steen et al. whilst suppressing others (Lakoff and Johnson. p. 1994. whether used strategically. A genealogy. It is inevitable that material has been overlooked. This study intentionally adopted the latter. Amernic and Craig (2009)10 and Gibbon (2012). and its operation. The Journal of Accounting Research. Electronic search engines were used to locate academic papers.. p. metaphors and similes were used as a scoping mechanism to unearth clues about relevant genealogical factors. 1980. They influence our beliefs and define our perceptions and experiences as ‘‘implicit images or cognitions about our perceived realities. Foucault was careful not to prescribe specific methods but a genealogy should consider traces of organisational arrangements and events (Dean. p. Nietzsche called into question the value of values and conducted a history of morality.9 A vast (although not exhaustive) body of data was collected covering cases and discourses from mid nineteenth case law and emerging discourses around the beginning of the twentieth century onwards to the present day. 1998). 1980. p. p. Methodological approaches to metaphor analysis are varied and controversial. In accounting. in his later work. physical objects. They can take divergent forms (grammatically as a noun or adjective) and may be cognitive.org/10. Foucault developed these insights into a critical problematisation. especially information that has not been digitalized.’’ (Suddaby [3_TD$IF]et al. journals and literature. consistent with a genealogical approach. structuring what we perceive and how individuals relate with each other. The analysis is on connections and discontinuities between discourse and practice (Burrell. 149. Both focus on the same conditions or elements that provide a foundation for knowledge (O’Farrell. 2011). p[34_TD$IF]. textbooks and academic papers about materiality were sourced.’’ (Nietzsche[31_TD$IF].1016/j. A genealogical approach to exploring materiality thus seeks to investigate the influence of power upon discursive truth games. 10 ‘‘Examining how metaphors are used in various accounting contexts can be productive and illuminating. techniques or abstract concepts). All language and therefore all truth and error is metaphoric in origin (in Gibbon. whilst others suggest that classification is a matter of interpretation.8 A genealogy evaluates the significance of rhetorical battles that underlie meanings where the past may reveal traces of the influence that power has had upon truth games (Rabinow. p[35_TD$IF]. 2010). 2004) and expertises that have shaped materiality as categories of knowledge. knowledge. Some claim that analysis should be subject to a form of scientific measurement. Lakoff and Johnson (1980. The content of individual academic journals was also searched..doi. interpretative approach. Metaphors may construct reality from a particular point of view and be selectively employed (Walters and Young. and no real knowing apart from metaphor. 2011. This involves exploring knowledge. scientific ideas. Competing metaphors have been observed to provide an insight into truth games over contested meanings of audit. 105). Similes also make associations but allow ideas to remain more distinct (as a comparison). A [1_TD$IF]genealogy of accounting materiality. 109). Metaphors can be strategic or tactical. where truth has a history (Dean. 2009. allegorical. 2009). is opposed to the search for origins but focuses in a meticulous manner on factors that have shaped beliefs (Kearins and Hooper. Given a striking abundance of rich figures of speech applied to materiality in discourses. 8 In his genealogy of morality.’’ (Dreyfus and Rabinow. 110). 1982. Metaphors or transferences were identified in discourses. a sufficient quantity of data was gathered that is broadly representative of different networks of statements about materiality. developed Nietzsche’s idea of genealogy as an archaeological tool to investigate concepts as a form of social power (Dean. for conducting a genealogical analysis. professional accounting guidance. Metaphors can be viewed as a transference in meaning where we think of one thing in terms of another (Walters and Young. [30_TD$ IF]35). New modes of description can consequently bring about new possibilities for action (Hacking.2013.cpa. p. 50). However. Groups of metaphors and their manner of use could be linked to distinct metaphorical discourses. The Accounting Review. extending to law and social science literature and landmark cases on materiality in the US and UK. embedded within social relations of power (Sikka et al. 204).G Model YCPAC 1791 1–17 C. as a critical history. 1998).06. 2008). p.. A genealogy probes the influence of power upon knowledge and ideas about truth (O’Farrell.’’(Amernic and Craig. Edgley / Critical Perspectives on Accounting xxx (2013) xxx–xxx 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 5 Foucault. ‘‘The genealogist is a diagnostician who concentrates on the relations of power. ‘‘there is no real expression. 882). 1872/1999. Nietzsche specifically linked critical discursive analysis with metaphor. values and/or cultural changes) has been noted by Dirsmith and Haskins (1991). The use of metaphors can create new ways of thinking about objects (Lakoff and Johnson. especially those with long a publishing history including the Journal of Accountancy. Please cite this article in press as: Edgley C. Themes were evident amongst these metaphors (where materiality has been thought of in terms of people. 2005). 2002). Crit Perspect Account (2013). descriptively or unconsciously and were grouped according to subject matter. 2007). To conduct the current study. 1994). 2012. paralogical or even contradictory. [32_TD$IF]103) explain that metaphorical concepts provide a way of conceptualising a pre-existing reality. Jones et al.001 . 242). These papers in turn provided references to other useful data and publications. 2008). concepts and discourses.

Crit Perspect Account (2013). with an increasing separation between management and ownership. http:// dx. A Genealogy of accounting materiality through metaphorical discourses 236 237 238 239 240 241 The findings discussed in this section suggest that materiality is not a term. 12 Holmes was an influential US academic historian and a practitioner.and at most. factors. calculation and classification of data (Robson. it is a vulnerable concept requiring due care but institutional and hierarchical boundaries are clearly drawn. 14 An image that can be traced back to the common law of fraud and cases at the turn of the twentieth century (Hewitt. This humanistic imagery is socio-legalistic and draws attention to a legal apparatus. 1932). 16 A term used by the Attorney general. events. 259 260 261 ‘‘The term ‘‘material’’. informality and inconsistencies in approach between practitioners. In addition. economic recovery and the continuing growth of capitalism. . 13 Regulation S-X set out the form and content for financial statements to be filed under the Securities Act of 1933 and the Securities Exchange Act of 1934. 15 Changes in the organisational control of companies had been taking place (Berle and Means. as an arm of the state that has shaped materiality as an ethical responsibility. The assemblages of actors. A [1_TD$IF]genealogy of accounting materiality.12 Two observations about power games are relevant here. p. a risk management technique. materiality has been fostered upon the Profession. The traditional association in professional accounting guidance between materiality and significant errors and omissions for the 11 The term assemblages refers to flexible heterogeneous connections between people. drawing on the work of Deleuze. distinct themes within imagery and metaphorical discourses imply that materiality has been constituted as multiple categories of knowledge with divergent discursive trajectories and roles.1016/j.1. a rule of thumb. the US Securities and Exchange Commission (SEC) stepped in to protect investors. 2006). A striking metaphor that provides an insight into the constitutings of materiality as a knowledge object in relation to a moral responsibility. with a core meaning. Through expertises. Sir William Howitt in Rex v Kylsant (p. Edgley / Critical Perspectives on Accounting xxx (2013) xxx–xxx 228 229 230 231 232 233 234 The term expertise refers to discourses through which members of a professional community demonstrate expert knowledge in professional writings. members align themselves with the aims of their professional community. expertises describe technologies of discovery and techniques involved in the measurement. happenings and words. a tolerable error. the SEC gave visibility to. 1991). triggered by disputes about items that could be construed as a peril16 for the mythical man. and empowered the mysterious image of the ‘‘average prudent investor. concerned with rebuilding investor confidence. . as a safety test. 235 4. Expertises thus play a role in discursive truth games in the production of knowledge through promoting the beliefs and tacit values of the relevant disciplinary culture (Bhatia. The paper classifies these knowledge objects as: a social responsibility. Materiality and socio/legal imagery [36_TD$IF]– a responsibility 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 258 A strong theme within imagery is humanistic. [38_TD$IF]1933). 1977). 2004).2013. 49). 2007). 1972. mythical man for whose benefit materiality should operate. where materiality has been objectivised as a moral responsibility to protect investors.13 262 263 264 265 266 267 268 269 270 271 Through this rule. if not given visibility. a foster child of accounting. the study attempted to probe the fluid assemblages11 of factors. Materiality was configured as a regulation imposed upon the work of accountants (Rutherford. A capitalist rationale and a need to protect the material wealth of investors from the damaging consequences of misleading information underlie this construction. First.G Model YCPAC 1791 1–17 6 C. 87) see note 20 below. Second. 1977). The idea of materiality as an ethical responsibility to protect the mythical investor was rooted in economic and political policy objectives at the time. This. These constitutings have been episodic.’’14 Materiality should operate as a test.org/10.06. 2009).15 Legal discourses and the courts have continued to play an influential part in codifying and socialising an idea of materiality. organisations. Rather. for the SEC to expand disclosure requirements and protect investors ([39_TD$IF]Weiss and Schwartz. The figure of mysterious. Regulation S-X. when used to qualify a requirement for the furnishing of information as to any subject. personified the concept as a ‘‘child of law. a member of the American Institute of Certified Public Accountants and British member of the Association of Certified Chartered Accountants. actors and events that have underpinned the emergence of different discourses on the subject. and a mysterious professional lens and shield. to leave him impartial. A foster child is a ward of court.001 . resulted in widespread calls from prominent academics and contemporary authors. on the editorial board of the Journal of Accountancy[37_TD$IF]. unbiased and objective in his actions (Hewitt. This image accords with observations about early (and continuing) legal influences on the profession. Rule 3-06 was issued to respond to strong calls for enhanced disclosures and to address public concerns about investor vulnerability. Rule 3-06. In accounting. He was also a historian. amongst practitioners. in Boston. Expertises are therefore relevant to an examination of truth games in shaping beliefs about materiality.’’ (Holmes.’’ (SEC. It was following the catastrophic Wall Street Crash in 1929 that a federal power. is deeply embedded in discourses. events and expertises that have shaped these heterogeneous discourses are explored.cpa. led to widespread criticism of the profession and scandals in the UK and US (Loft. a solution to the problem of over-auditing. a solid epistemic foundation for auditing. As accountants began to establish themselves as providers of validation services. 1977). in the day-to-day care of guardians but ultimately the courts make all the important decisions and remain in loco parentis. 242 4. as a safety test for the mythical investor. He was a manager of Peat Marwick Mitchell and Co. Please cite this article in press as: Edgley C. 1986. The appeal of an idea of assemblage is that it does not attempt to privilege the importance of any one level of organisation (at a macro or micro level) over another (DeLanda. Zeff. limits the information required to those matters as to which an average prudent investor ought reasonably to be informed before purchasing the security registered. for his safety. combined with a growing appetite amongst the public to speculate in purchasing stocks.doi.

v. The impact of the case. 485 U. p. 20 Judgments about the extent of auditor legal liability have widened and narrowed over time. the ruling highlighted serious flaws in practitioner [6_TD$IF]judgement (Ashton. 2006). or reasonable person? We must identify him. the courts have considered qualitative and performance issues (Bean and Thomas. Second.doi. battles over the boundaries of materiality as a moral responsibility have produced a maze of black letter law (Jennings et al. Inc. paragraph 2). The conditions for materiality are thus dependent 17 Rex v Kylsant [1932] 1 KB 442. For example. Lord Plender. Mr. or prudent man.S. 1970. It was therefore important for practitioners to ascertain whether investors were sufficiently empowered by information to vote responsibly. with resource and legal liability implications for practitioners[46_TD$IF]: 304 305 ‘‘The possible effect of misstatements on specific individual users. this body of judicial expertise operates loosely as a form of dispersed power/knowledge that encourages practitioners to reflect upon the way in which they organise themselves as willing. mysterious investor has permeated accounting discourses and has encouraged practitioners to reflect on the workings of materiality decisions. 1976). Where practitioners have tended to view materiality in quantitative terms. view the duty of care of an audit firm as being to shareholders as a group. The important ruling in Caparo Industries plc v Dickman [1990] 1 All ER 568 would suggest that the courts in the UK. Northway Inc.org/10.. 1984). moral agents. 279 280 281 282 283 284 285 286 287 Although the company auditor was acquitted.001 . 1957). Inc. 1988) of whether the magnitude of the event and the probability of it happening are high enough that the information becomes material under the foregoing standard. mediated by an external authority (Rabinow. 139). as a rational collective (Young. v. as an expert witness. 22 Escott v. 21 The attention of interested readers is directed to Karmel [48_TD$IF](1978).’’ (Hicks. v. 224. [47_TD$IF]1984–1985. Justice Avory stated. 2010a.b.. Evidence supporting this opinion was provided during the hearing by an influential and prominent member of the profession.23 provided knowledge of materiality as a likelihood that an omitted fact would be viewed as significantly altering the ‘‘total mix’’ of information made available. we have to assume his position in order to judge how financial statements or particular items therein will influence him. A [1_TD$IF]genealogy of accounting materiality. 438 (1976). In the Court of Criminal Appeal.cpa. Bean and Thomas (1990) and Ling Lee (2004). Escott versus BarChris Construction Corp. In effect. whose needs may vary widely. The American Accounting Association (AAA) re-characterised him as an informed investor. [42_TD$IF]159).G Model YCPAC 1791 1–17 C. accountants were thereafter expected not just to comply with the law but to use ethical and moral [6_TD$IF]judgement in making materiality decisions.21 Viewed through a Foucauldian rather than a legal lens. Rex versus Kylsant [40_TD$IF](1932). The image of the mythical. This later became known as the Basic v. ‘‘An item should be regarded as material if there is reason to believe that knowledge of it would influence the decisions of an informed investor[’F]I$DT5_4 ’ (AAA..’’ (p. truth games have been played in debating the mythical man’s identity and his needs. At best.20 306 307 308 309 310 311 312 313 314 315 316 317 Over the course of decades. BarChris Construction Co. The court viewed the matter from an investor’s perspective. Levinson. 1964. the idea of a material item was extended to omitted data and not just errors (Edwards.17 At the heart of the dispute. 1990). 426 U. 1990). http:// dx. This style of reasoning underpinned the future development of materiality in professional guidance. [49_TD$IF]Supp. 23 TSC Industries. 288 289 290 ‘‘Who is this beholder. Viewed through humanistic imagery. Crit Perspect Account (2013). the ruling in the landmark US case. Northway.1016/j. Not surprisingly. which Camfferman (1998) has compared to a bomb that disrupted the accountancy world. where non-disclosure could imply that an investment was safe. 643. Inc. is not considered. This move towards an informed investor signals a growing expertise among users but also a desire by the profession to tailor judgments to the needs of experienced users. in a type of guessing game as to ‘‘what and how much influences the [6_TD$IF]judgement of a reasonable person’’ [43_TD$IF](Rose et al. but because of what it does not state. legal expertises socialise practitioners into framing materiality judgments in a prescribed manner. when the position was otherwise. 1986). Levinson test (Basic.’’ (IFAC. Bean and Thomas. 283 F. However. TSC Industries Inc. 1998). Edgley / Critical Perspectives on Accounting xxx (2013) xxx–xxx 7 272 273 274 275 276 safety of the reasonable investor.06. this is no easy task. The courts have at times used the term ‘‘reasonable man’’19 instead of ‘‘prudent investor’’ (Jennings et al. First. ex President of the ICAEW and a partner with Deloittes. Reserve accounting was considered prudent (and useful for management) by eminent practitioners18 (Edwards. 277 278 ‘‘the document as a whole may be false not because of what it states. Discursive shifts in his profile are traces of battles between practitioners and the courts. The case concerned the omission of certain facts from a proxy statement. 291 292 293 294 295 296 297 298 299 300 301 302 303 An important element in decision-making therefore involves finding credible evidence to justify an approach. [4_TD$IF]1984–1985).. for our materiality decisions ultimately depend upon how we perceive him.S.. can be traced back to judicial discourses in a landmark UK case. 18 Please cite this article in press as: Edgley C. [41_TD$IF]92). Individual perceptions of materiality amongst uninformed investors may be unreasonable. (1968)22 linked materiality with a performance imperative for all practitioners within a firm to observe internal as well as professional guidelines in reaching materiality judgments. was the practice of supplementing profit measurement through undisclosed transfers from secret reserves. p. was interesting in two respects.2013. The case reportedly had a greater subsequent impact on audit practices than all previous case law and legislation (Camfferman. 19 As cited in Kohler’s early dictionary definition (1952). [4_TD$ IF]1984–1985). because of what it implies. the reasonable man test implies a lower materiality threshold because knowledge about capital markets is not assumed (Jennings et al. 1989).

1964.24 The accounting profession has been socialised into shaping practices to respond to legalistic expectations[50_TD$IF]: 322 323 324 ‘‘In the end. 1992) and notions of efficiency were influencing business practices (Miller and O’Leary.b). A central question linked to financial audit has always been how much testing should the auditor do (Power. unwarranted amounts of time would almost certainly be spent on insignificant matters. introduced in the UK Companies Act 1947 (Evans. 1997a. interpreted materiality as an effective. However. . p. 1948). The economics of auditing in the early Twentieth Century forced auditors to be selective about audit work (Power. where a clearer judicial codified discourse on accounting materiality has emerged than in the UK (Sherman. we must go to the level of the micro-practices. 1964. 68). ‘‘Although materiality has been defined differently in different contexts. New York. materiality is a pluralistic term in law. 411). 335 4. A group of US academics. as a prominent member of the SEC declared. Man’s work is burdensome enough without his having to pay attention to trivia. Expertises linked materiality with the competent. 328 329 330 331 332 333 334 An extensive network of statements about materiality has therefore been constituted through a legal apparatus.doi. in fraud statutes. he is recognizing materiality. mythical man. 1973. . 2008. 1998. don’t bother with it. 2010) allowed an idea of materiality to develop that complemented a more flexible audit opinion (Lee. p.’’ (Hicks.’’ (p.. 26 Assistant Professor. In the US.G Model YCPAC 1791 1–17 C. with links to the profession. A [1_TD$IF]genealogy of accounting materiality. extending to the materiality or significance of a crime in criminal law or the significance of a fact. cuts through to the matters of significance. [42_TD$IF]159). p. 2010)25 lawyers still comment on the vagueness of accounting definitions (Ling Lee. 1973. Crit Perspect Account (2013). 1984). 158). To legitimise the term. or disclosure of omitted fact(s).’’ (Hicks. [59_TD$IF]p.’’ (Fritzemeyer [58_TD$IF]and Carmichael. p. however. 25 Please cite this article in press as: Edgley C. For example. and financial statements would undoubtedly be cluttered with useless or unimportant information. . auditors may be answerable for the quality of their work in a court of law and therefore the level at which they set the materiality level is highly likely to be highly influenced by what they can believe can be justified in court. ‘‘Materiality means simply this: if it doesn’t really matter. despite calls that the courts might be more likely to abide by a universal materiality standard if a specific accounting definition could be developed (Bean and Thomas.org/10. was a Commissioner of the SEC. 24 Roberta Karmel. 351 352 353 354 In the UK. 1978). As providers of a service and commodity. 1992). 3). 2004). Both in the UK and US. .’’ (Bernstein. University of Oregon[56_TD$IF]. In the US. applying the technique of ‘‘management by exception’’. all of these definitions are grounded on the legitimate expectations of the reasonable investor. [61_TD$IF]158).1016/j. Edgley / Critical Perspectives on Accounting xxx (2013) xxx–xxx 8 318 319 320 321 on the needs of the mysterious. Materiality [54_TD$IF]– a cost/benefit idea and a solution 336 337 338 339 340 341 342 343 344 Other metaphors promoted by practitioners have positioned materiality as a category of commercial knowledge and a cost/benefit solution to the problem of over-auditing.2. its day to day operation.the concept is widely and frequently used. obscuring the necessary and important facts and relationships they are intended to convey. http:// dx. p[5_TD$IF]. Under the total mix test. accounting and legal definitions have not fully converged. 1987). 1978. prunes away details. efficient organisation of practitioner time[57_TD$IF]: 348 349 350 ‘‘A lack of understanding of the materiality concept can result in over-auditing by the conscientious professional.’’ (Karmel. as having significantly altered the ‘‘total mix’’ of information available to the investor (Sherman. the political technologies in which our practices are formed.26 Bernstein agreed: 345 346 347 ‘‘The concept of materiality is part of the wisdom of life. Its basic meaning is that there is no need to be concerned with what is not important or with what does not matter.001 . presenting non-financial data in reports to stockholders.’’ (Hicks. 2010).cpa. A lens that facilitated expediency within audit was considered vital (Frishkoff. A shift to a true and fair view. In the UK. practical filtering mechanism for trivia. [53_TD$IF]185).06. 1990).without such a rule. it was suggested that materiality was widely used in business[62_TD$IF]: 359 360 361 362 363 ‘‘To help keep the subject in perspective. This lack of a complete agreement between legal and accounting understandings is partly to be explained by the existence of competing metaphorical discourses that have shaped materiality as multiple categories of knowledge. the materiality concept was deemed incompatible with a true and correct view of financial statements (De Paula. materiality was strategically linked with utilitarian and efficiency logics[60_TD$IF]: 355 356 357 358 ‘‘if financial statements are to be prepared and examined with anything approaching reasonable economy. practitioners have an interest in securing the material value of their labour (Sikka et al. he is recognizing materiality. 1964. As Dreyfus and Rabinow (1983) explain[52_TD$IF]: 325 326 327 ‘‘To understand power in its materiality. the core definition of material information is the well-recognized ‘‘total mix of information’’ test. when a business executive.2013. 1970). This quote is from a national speech to the investor relations institute. When the president of a corporation. Power. courts ask whether there is a substantial likelihood that a reasonable investor would have viewed the misrepresented information.’’ ([51_TD$IF]Gray and Manson.

that underpins the quality of information[72_TD$IF]: 407 408 ‘‘if financial statements are[73_TD$IF]. Its outputs.28 A cornerstone is the first stone set in the construction of a building. Lee. a solid object and technique 381 382 383 384 385 386 387 388 389 390 391 392 393 394 395 396 397 398 399 400 401 402 403 404 405 406 Other conceptual metaphors. which. Other metaphors of authority. guiding foundation for audit helps the profession and similarly. 1970. to reassure the public about the quality of financial reporting and the substance of professional [75_TD$IF]judgement. Without such a rule. [4_TD$IF]1984–1985). Promoting the idea of materiality as a solid. reliability. in a Foucauldian sense.b. . Two logics appeared to underpin expertises promoting this role. 2007). First. . http:// dx. maintaining the traditional cultural and symbolic capital of the profession..29 at a time when investors were concerned about ethics in reporting (Weiss [71_TD$IF]and Schwartz. The melding of these two logics echoes observations that firms are caught between two logics. a solid object and a doctrine.27 367 368 369 370 371 ‘‘When we (all of us: the press. in the public interest.’’ It was assigned two reporting functions as a principle and a standard. . not from leading audit practitioners but from accountants outside the profession) the ICAEW issued the ‘N’ Series of Accounting Principles. have helped to configure materiality as a code. in the form of a doctrine and rules..When I ask. the Auditing Practices Committee (APC) was established. .’’ (Frishkoff. 1992). 1984). . implying importance or substance but scant detail was provided about its meaning. along with the frequent repetition of other vague technical terms such as adequacy. [67_TD$IF]6). 158) 409 410 411 412 Reification and rhetorical positioning of materiality as a matter of expertise and professional knowledge have enabled the concept to emerge. Humphrey et al. 372 373 374 375 376 377 378 379 A network of statements." (SAB 99.001 . It determines the position of all other stones and the entire structure. In response to concerns about a lack of clarity in accounting principles and calls for guidance (interestingly. a technical term. it enhanced the quality of financial statements for users by eliminating clutter. Such views have become mythologised over time[63_TD$IF]. p. Please cite this article in press as: Edgley C.’’ (Hicks.. between 1942 and 1969 (Zeff.org/10. rhetorical and overly concerned with appearances and public reassurances (Hopwood. have been deemed protective. 28 In a review of the significance and implications for audit of materiality published by the ICAEW. Edgley / Critical Perspectives on Accounting xxx (2013) xxx–xxx 9 364 365 366 Practitioners portrayed materiality as a form of knowledge that balanced good [6_TD$IF]judgement with value for service and clarity in reporting. This repetition rhetorically positioned materiality as a technical term. refers "a great deal of the time might be spent during the accounting process considering insignificant matters[64_TD$IF]. .. The image was used by the Advisory Committee on Corporate Disclosure in its 1977 report to the SEC. 1964. 1992). Over-auditing was a burden and over-disclosure was pessimistic (Jennings et al. . where the visibility of a material item resembles ‘‘an index of time and trouble in relation to the amount in question. [70_TD$IF]48). 1984). is strikingly visible in the rhetorical entrenchment of the term material in professional guidance in the UK from the 1940[68_TD$IF]s to the early 1980s. p. There were 126 references to materiality peppered throughout these standards (Lee. 1981) has a focus on the material value of the audit and its role as an organising concept. .doi. . note [65_TD$IF]50). employed by the profession. they depend upon each other for success (Malsch and Gendron.1016/j. following a series of critical reports about auditor performance (Humphrey et al. 2013).due to the significantly increased amount of time that audits are taking.3. such a doctrine (of materiality) is indispensable. Amongst 192 pages of guidance. Congress) talk about the level of burden that accounting firms have been placing on corporations these past five years. ‘‘The materiality concept is the cornerstone of the disclosure system established by the federal securities laws. The reification of materiality as expert knowledge. This role. Crit Perspect Account (2013). 1992. Second.G Model YCPAC 1791 1–17 C.2013.They appear to have lost any sense of the timehonoured accounting concept of ‘‘materiality’’. have portrayed materiality as a thing of substance. 1990. Materiality has also been discursively depicted as a solid structure and has [20_TD$IF]materialised as ‘‘one of the cornerstones of accountancy. 27 For example SEC Staff Accounting Bulletin 99.cpa. p[74_TD$IF].b). (Wilcox. relevance. such as the SEC. 29 As a principle for the inclusion and exclusion of information in investor oriented disclosure documents and as a standard for determining whether a communication omits or misstates a fact of sufficient significance that legal consequences should result (Advisory Committee on Corporate Disclosure. 1977). which perhaps resembles impression management. 2009). 1997a. product of professional power (Power. companies. there were 175 references to the word material. . . . trying to tease out exactly why they are taking longer and why more people are involved is difficult. to be meaningful and useful. 1997a. If presentations of financial information are to be prepared economically on a timely basis and presented in a concise intelligible form. the concept of materiality is crucial. which included the first set of auditing standards. . Although these logics are diametrically opposed. materiality constituted a solution to inefficiency. Given the weak knowledge base upon which the craft of audit has developed (Power. 1977). In the early 1970[69_TD$IF]s. as a sculpted. 380 4.. I get a host of different but related answers.06. .’’ (Jeffries. commercialism (a need to develop their economic capital) and [6_TD$IF]professionalisation. regulatory agencies. sufficiency and judgement did more to standardise presentation than provide useful detail (Humphrey et al. lobbyists. reducing time wasting in relation to unimportant details. an understanding of materiality as a solid object or authoritative technique has helped to convey an impression of substance to auditor [6_TD$IF]judgement. A [1_TD$IF]genealogy of accounting materiality. This metaphor reified materiality as an epistemic foundation for the entire audit process and disclosures.

base constraint. calculates and determines the visibility of errors. p. guidance setters in the US and UK have continued to use metaphors associated with measurement. numbers and statistical methods provided a code. reveals how the profession has objectivised materiality as an acceptable level of error in reporting. [78_TD$IF]116). whether or not this was a material error might dependent on its relevance in a specific context. Materiality – as an object of scientific knowledge 414 415 416 417 418 419 Another theme amongst metaphors. Illustrating this point. 435 436 437 438 439 440 441 442 443 444 Materiality was represented in SFAC 2 as a pervasive. p. [80_TD$IF]1964. Shifts in discourses about the legitimacy of magic numbers can be traced back to certain events and happenings. 2005. As the profession promoted its expertise in providing a neutral. 32 Scandals including for example the collapse of the Equity Funding Corporation in 1973. quantitative thresholds have been promoted by expertises. the fallout from a series of financial scandals32 and the SEC’s Watergate Related Enquiry in 1973/1974 (investigating secrecy and undisclosed payments) ruptured traditional beliefs about the value of a ‘‘fixed and easy’’ objective standard of materiality (Karmel. paragraph 126). 1995). Implicit therefore within a rule of thumb is a simplistic assumption that fluctuations of less than 5 percent of net income would not influence investor decisions (Vorhies. paragraph 3. underpinning all other concepts (FASB. Brennan and Gray. by embedding judgments in neutral criteria (Samiolo. it began to enhance the scientific authority of audit processes and [6_TD$IF]judgement (Power. Scientific metaphors have depicted materiality as a technique that measures.28). or an omission large enough. 170). 2008. risk appraisal and capital investment decisions. based on scientific. 432 433 434 ‘‘Materiality judgments are concerned with screens or thresholds. If data were not reliable. [51_TD$IF]Gray and Manson. assist decision-making and generally position materiality within a range of [81_TD$IF]5–10% of net income.’’ (Frishkoff. backed by scientific process. 1978). to a user. Vorhies.org/10. This involved a consideration of materiality as a buttress for other related concepts. particularly relevance and reliability. 31 More recently. 1978). raised concerns at the time about tunnel vision in professional [6_TD$IF]judgement. The SEC re-constituted a new. where a foundation for decision-making is neutral. 422 423 Materiality was associated with a tolerable or acceptable error. 1970.doi. the ASB represented materiality. Materiality constituted ‘‘the final test’’ of what information should be included in financial statements (ASB. 1999. rebut criticism and deflect possible problems with litigation. Edgley / Critical Perspectives on Accounting xxx (2013) xxx–xxx 413 4. has been that of a rule of thumb (Fang and Jacobs. diagrammatically.06. their validity has been qualified or refuted in the strongest terms. p. considering its nature and the attendant circumstances. positioned above other concepts. 1977).5. a percentage of 5% of net income has been used in the US. 426 427 428 429 430 431 Calculative logics have assisted the profession in trying to transcend a subjective view of decision-making. The appeal of science in shaping materiality discourses was probably engendered by auditors as a means of providing evidence to support judgments. A [1_TD$IF]genealogy of accounting materiality. 2008.cpa. To control errors within accounting inscriptions. Is an item. as a standardised process. p. to pass over the threshold that separates material from immaterial items?’’ (FASB. calculability to the technical formulation of materiality judgments. [7_TD$IF]85) calculative logics were increasingly used by practitioners to compute materiality thresholds. Scientific processes added credibility but more importantly. 2005) and a closely related image of magic numbers (Hicks.’’ (Gray and Manson. The concept was also portrayed as a cut-off point (IASB. 2000. technical point of view (Sikka and Willmott. Under certain conditions. Views about the information needs of the average prudent investor also changed (Hewitt. a tolerable error is equal to the materiality level set by the auditor.30 In contrast. intelligent idea of materiality that extended to matters of social significance and management integrity (Karmel. the most prevalent metaphor in the audit field. p. 1997a. an error. Please cite this article in press as: Edgley C. guidance setters and regulatory bodies in debating the legitimacy of magic numbers. perpetrated by staff over a decade.b. 420 421 ‘‘Let us define materiality in accounting thus: the relative. in the US in the 1970[69_TD$IF]s. This distinct. Even after statistical sampling methods lessened in popularity in the auditing community. such as statistical sampling. This picture persists in current auditing texts and professional guidance[79_TD$IF]: 424 425 ‘‘When testing amounts. with all qualities subject to a materiality threshold.31 Truth games have been played between practitioners. 419). 1992). At other times.G Model YCPAC 1791 1–17 10 C.001 . The failure of the organisation’s auditors to detect a significant fraud.2013. 1980). http:// dx.4. as a supra threshold.1016/j. quantitative importance of some piece of financial information. magic numbers and legitimacy 446 447 448 449 450 451 452 453 454 455 456 457 458 459 Amidst shifting configurations of materiality. 2005). 2012). With the rise of systematic audit processes. Rules of thumb or magic numbers are pragmatic. 16. amongst practitioners. The SEC concluded that a sharper understanding of the materiality concept was required. linked to science and standardisation. 445 4. Financial matters alone should not be the sole criteria for the determination of materiality. 1980. scientific territory in discourses has emphasised the importance of an understanding of materiality. Crit Perspect Account (2013). 30 There was a perceived ‘trade off’ in SFAC 2 between reliability and relevance. IFAC has suggested that 5% of profit before tax is often used. in the context of a decision to be made. 1989) which is a term associated with capital budgeting. Rules of thumb. systematic sampling processes. from the late 1950[76_TD$IF]s onwards (Power.

I suppose back in the days when the concept of materiality was first introduced. that exclusive reliance on this or any percentage or numerical threshold has no basis in the accounting literature or the law. with the intention of reducing the probability that the total of uncorrected misstatements exceeds financial statement materiality.org/10. auditors then had the same issues we face now with performance materiality. 2008. paragraph 3). This is where performance materiality should be applied.cpa. Materiality [54_TD$IF]– a technique linked to the management of audit risk 502 503 504 505 506 507 Another historical development has constructed materiality as a risk management technique that manages uncertainty and reduces audit risk. 2007). amidst growing concerns about a wave of creative accounting practices amongst large listed companies in the 1980[83_TD$IF]s (Shah. which had been in the process of publishing a discussion memorandum on materiality.doi. . Policy makers positioned materiality as a qualitative concept (Karmel.06. Thresholds were introduced in other SSAPs. that the bottom line effect of identified errors was immaterial.’’ (Staff Accounting Bulletin (SAB) 99). ISA 320 recognises that some account balances or disclosures might be affected by misstatements that are less than the materiality level for the financial statements as a whole. 466 467 468 469 470 471 472 473 474 475 In the UK. 33 As well as the UK. Rules appeared to encourage the manipulation of thresholds in calculating the materiality of an error (Blakemore and Pain. the lower the audit risk and vice versa. . reporting problems of a different nature. In Statement of Standard Accounting Practice (SSAP) 3 (ASC. created new problematics. Accounting Standard 1031 suggested that 10% of a base amount was material while 5% or less was not (AASB. Views about the value of fixed thresholds were disrupted. in seeking to reduce divergence in judgement. standard setters.6. [91_TD$IF]As the concept becomes more established. A theoretical relationship was established between materiality and audit risk. [90_TD$IF]there is no guidance on how auditors should calculate it. 1979. 493 494 495 496 497 ‘‘The concept of performance materiality does seem to have thrown confusion amongst professional auditors. 501 4. . will not generally be a sufficient basis for a materiality judgment. pragmatic and are of practical assistance to the practitioner in reaching a [6_TD$IF]judgement about an item’s importance. paragraph 10). To reduce divergence in judgments.33 However. have developed quantitative thresholds as ‘‘rules of thumb’’ to assist in the preparation of their financial statements. Following a series of economic crises and scandals in the mid 1970[92_TD$IF]s and 1980s (Sikka and Willmott. . shifted towards a dual quantitative and qualitative understanding[84_TD$IF]: 476 477 478 ‘‘an expression of the relative significance or importance of a particular matter in the context of financial statements as a whole. . Edgley / Critical Perspectives on Accounting xxx (2013) xxx–xxx 11 460 461 462 463 Around the same time. [82_TD$IF]7). 1995). the Accounting Standards Committee (ASC) defined materiality as a percentage. . in specific standards (Rutherford. the Australian Accounting Standards Board (AASB) also issued a quantitative definition. 1995).’’ (FASB. . a risk-based approach to audit emerged amongst firms in the 1990[93_TD$IF]s (Power. Interestingly. 485 486 487 488 489 490 491 492 Commissioner Levitt (1998). Crit Perspect Account (2013). 1972) a percentage threshold of 5% in the computation of earnings per share was established.1016/j. ISA 320 refers to the use of benchmarks in calculating materiality which perhaps finally recognises that metrics are widely used in practice (Collins and Laudato. when challenged. 1980. The Auditing Practices Board. [87_TD$IF]The staff reminds registrants and the auditors[8_TD$IF]. . the Chairman of the SEC. concluded that it was impractical to produce quantitative materiality guidelines that applied in all situations (Thomas and Krogstad. p. without regard to the nature of the item and the circumstances in which the judgment has to be made.’’ (Accountingweb. Please cite this article in press as: Edgley C.001 . Iselin and Iskandar. concerns about creative accounting and the use of benchmarks to manipulate materiality judgements.2013. 2000). Such approaches are straightforward. However. http:// dx. encouraged the configuration of quantitative thresholds for materiality. 2010). . 1996). the higher the materiality level. with the objective of reducing audit risk to an acceptable level[94_TD$IF]: 508 509 ‘‘There is an inverse relationship between materiality and the level of audit risk. 1995. 2004). the guidance is vague[89_TD$IF].’’ (IFAC. Statistical sampling dwindled in popularity and analytics began to drive audit planning and practices. a new concept of performance materiality has been introduced in the recently clarifies ISA’s. fixed rules.G Model YCPAC 1791 1–17 C.’’ (APB. software providers and Continuing Professional Development (CPD) providers could well come up with calculations on how to arrive at performance materiality. . 1978) and these changes were signalled to practitioners in SFAC 2. A [1_TD$IF]genealogy of accounting materiality. rejected rules of thumb as a blatant ‘‘numbers game’’ where practitioners ‘‘sheepishly’’ argued. 464 465 ‘‘Magnitude by itself. 479 480 In the US. 2010). 498 499 500 This observation signals a preference amongst practitioners for an understanding of materiality based on benchmarks and rules of thumb. over time. that is. rooted in concerns about inconsistencies within accounting rules. led to the SEC to condemn rules of thumb in the strongest terms[86_TD$IF]: 481 482 483 484 ‘‘Certain registrants. [85_TD$IF]Materiality is not capable of general mathematic definition as it has both quantitative and qualitative aspects. the newly formed FASB. 1998). Materiality was reinvented in professional guidance as a category of knowledge that complemented a risk management approach.

Shaub. 2000. The emphasis of the Act has been on the responsibility of management to implement a control risk reporting process to ensure the timely identification of material issues. . The focus of the audit was directed towards systems as the auditable object rather than the reality of underlying transactions (Power. Big Five Audit Materiality Task Force. think again. fictional and mythical objects. from planning through to the audit opinion. 2008.G Model YCPAC 1791 1–17 12 C. 1995. 34 The impact of the fraud on net assets was a reduction in shareholders’ funds from $11. yet nobody is prepared to define it so that it does not ultimately rest on someone’s judgment. 2004. with a focus on management responsibilities. paragraph. allows flexibility and shields [6_TD$IF]judgement from public scrutiny[104_TD$IF]: 549 550 ‘‘The question of what is material has puzzled a great many people over a great many years.b). 537 4. is a mythical shield and form of protection from a powerful. Bernstein (1967. where materiality is applied by management to evaluate each one. p. Latitude in [6_TD$IF]judgement afforded by a vague definition of materiality has been described as hazardous.’’ (Blough. 2005). 1970) and like beauty. In response to internal control failures at Enron.. . A [1_TD$IF]genealogy of accounting materiality. 2004) is strategically advantageous and operates.1016/j. at the evaluation stage. Materiality – a mysterious shield and shooting [10_TD$IF]target 538 539 540 541 542 543 544 545 546 547 548 Another metaphor combination. This relationship was represented as a Venn-diagram.’’ The secrecy about materiality (Ling Lee.35 531 532 533 534 535 536 A re-construction of materiality linked the concept with four categories of misrepresentation: [96_TD$IF](1) misstatements or errors. [102_TD$IF]90) famously characterised materiality as a black box where the workings of professional [6_TD$IF]judgement are hidden. in qualitative terms. referred to as evaluation materiality (Gray and Manson. 1997a.001 . [95_TD$IF]2012). 1998). 1949. Misrepresentations in Enron’s financial statements were aggressively intended to overstate profit and the company’s auditors.’’ The aegis.’’ (Hylton. and the wider profession. 2005. [105_TD$IF]13).6. 35 With four types of key control exceptions. [107_TD$IF]63). A notion of planning materiality was introduced (APB.1. http:// dx.7. 215). Finally. measured in quantitative terms.cpa. 521 522 523 524 525 526 527 528 4. its fuzzy workings in the field. [98_TD$IF](3) accounting estimates[9_TD$IF].3bn.doi. A definition lacking precision. Edgley / Critical Perspectives on Accounting xxx (2013) xxx–xxx 510 511 512 513 514 515 516 517 518 519 520 Textbooks depicted materiality as ‘‘a subset’’ of risk (Millichamp and Taylor. 2008. The recommendations that followed strengthened the links between materiality and risk management as a category of knowledge. placing materiality in a logical relationship with evidence and audit risk (Cosserat. the overall responsibility for detecting material errors and the governance of fraud risk as a future possibility was increasingly been emphasised as a management responsibility (Power.org/10. 529 530 ‘‘If you think you understand materiality and its uses. 411). Materiality and risk management [36_TD$IF]– post Enron The extensive regulatory fall out in the US following the collapse of Enron triggered a reconstruction of the materiality construct. in Greek mythology. [106_TD$IF]Griffin (1959. [97_TD$IF](2) internal control deficiencies. 2007). the Act has missed an opportunity to reflect more widely about rationales underpinning materiality in financial audit[10_TD$IF].. 556 557 558 ‘‘Materiality is used to justify practices and procedures which we recognize as wrong.06. knowledgeable higher authority. Brennan and Gray (2005) referred to the concept as ‘‘accounting’s best kept secret. However.2013. there were multiple oversights and points of break down in decision-making (Cullinan. protective shield but also as a shooting target. Chabrak and Daidj.5bn to $10.. 2008). 298) warned about the dangers of standing behind the ‘‘aegis’’ of materiality. p. and (4) frauds. where the criteria that underpin auditor materiality decisions are not transparent or disclosed. 2004). Porter et al. 2005).’’ (Vorhies. p. the Sarbanes-Oxley Act 2002 assigned a ‘‘new importance’’ to materiality that placed a greater emphasis on the governance responsibilities of management to detect material errors[89_TD$IF]. ‘‘for it will undermine the significance of precision as a mental discipline and instead encourage inexactitude and approximation.’’ (Rose et al. 2005) instead of challenging management (Cullinan. where the practitioner’s role is one of assistance (Vorhies. Materiality judgments thus responded systematically and logically to audit risk assessments. drawing on abstract. p. [103_TD$IF]159). 2000. p. as being ‘‘in the eye of the beholder. Commentators have suggested that this adjustment was bordering on immaterial. 1998) to assign materiality levels to each component in the financial statements (Cosserat. accounting estimates and fraud. Crit Perspect Account (2013). Materiality guided the entire audit process. debate about uncertainty in reporting and contested meanings of financial audit (Sikka et al. 151). Please cite this article in press as: Edgley C. as a mysterious shield. has positioned materiality as a mysterious.there exists a real danger of opening a Pandora’s box in the accounting world because materiality is not well defined and its applications not defined at all. the materiality of actual and potential errors would be evaluated. or at least as questionable. The foundation of this metaphorical discourse is rooted in vague definitions of materiality. this shield also manifests as a knowledge object that auditors are able to manipulate or hide behind to give authority to unprofessional practices. 551 552 553 554 555 However. 1961. p. Materiality has been described as a ‘‘mystery concept’’ and ‘‘part of the art of accounting. Cullinan (2004) has suggested that in responding to the symptoms of internal control problems at Enron. p. p. Arthur Andersen. including misstatements or errors. At the same time. were criticised for adopting a mechanical focus of materiality34 (Shaub. The extent of audit evidence gathered was theoretically linked to identifiable audit risks and materiality thresholds. The Sarbanes-Oxley Act of 2002 has put demands on management to detect and prevent material control weaknesses in a timely manner. 1964.’’ (Hicks. internal control deficiencies. in a tacit sense.

But most information is allowed to be reported quarterly or yearly. malleability of the concept has facilitated its re-alignment and re-invention to meet reporting priorities and challenges. ‘‘Companies are required to tell the public ‘material information. ‘‘like beauty. 2011). 1972. Sherman. managing or hiding errors or ambiguities that arise in the translation and materialisation of information into accounting inscriptions (Robson. greater transparency and detail still abound (Chewning and Higgs. Materiality determines the importance of a matter in processes of translation. it has been constituted as multiple categories of knowledge as: a moral responsibility to protect the material capital of investors. are required to be reported within two business days. 602 603 Materiality resembles an enmeshing of material and social processes. 2002. 2000–2001). 2010). Brown. 604 605 606 607 ‘‘other notions of materiality are relevant in analytical review. Please cite this article in press as: Edgley C. qualitative understandings of materiality have been described as a ‘‘murky world’’ [109_TD$IF](Miller.’’ (Henning. 77). mirroring and strengthening changes in the craft of audit.1016/j. led to calls for protocols about when issues related to an executive’s health should be revealed to shareholders (Henning. in the eye of the jury. events and ongoing battles over its meaning. A [1_TD$IF]genealogy of accounting materiality. a genealogical analysis suggests that under different conditions of possibility. these calls are rooted in the impossibility of eliminating the expectations gap (Sikka et al. Concerns about vagueness and cries for certainty about materiality however are ultimately linked to wider debates about uncertainty in financial reporting and audit quality. 1992). p. 37 The medical issues of Apple’s chief executive. following the Financial Crisis.’’ (Frishkoff. A lack of disclosure for example about the deteriorating health of a CEO may now be considered grounds for litigation (Davidoff. 2004. an organising. or a type of performance involving complex interactions within actor networks. Edgley / Critical Perspectives on Accounting xxx (2013) xxx–xxx 13 559 560 561 562 563 564 565 566 567 568 569 570 571 572 573 574 575 576 577 578 579 Negative discourses concerned about secrecy have constructed materiality as a type of target for critics to shoot at. 2005. 580 5. a technology and solid foundation for audit to reassure the public about quality in reporting. Discussion 581 582 583 584 585 586 587 588 589 590 591 592 593 594 595 596 597 Our understanding of accounting materiality today is built upon assemblages of historical conditions. for every decision made in accounting there is a prior. [108_TD$IF]44). 1998). with accountants scurrying around like white rabbits. In the recent Senate Banking Securities Subcommittee investigation into the Accounting and Auditing Profession. Decision-making could be explored as the enactment of metaphors and truth games amongst groups of actors 36 American securities laws do not require. the absence of a clear definition was still being lamented. However.37 There is a growing public perception that practitioners too easily defend their decisions in court by raising reasonable doubt about the materiality of an item relative to the ‘‘total mix’’ of information available to investors.doi. Crit Perspect Account (2013). Its shifting configurations have been episodic. 1970. companies must periodically file reports with the SEC disclosing all material information. Instead. The nuances of materiality judgements extend well beyond professional guidance. Steve Jobs.. de-cluttering concept but with a focus on the material value of the audit. never quite getting to grips with the subject (Holmes. The inherent. p. 608 609 Interpreting materiality as a performance amongst actors and a performative activity potentially opens up new avenues for research. http:// dx. At the same time. in 2011. Thus. is the metaphor of materiality as a performative activity that determines what is included or lost in translating data into inscriptions. Calls for a review of what materiality really means.001 .’’ (Thomas and Krogstad. These inscriptions manifest as financial statements that need to be fit for purpose and show a true and fair view.’’ (Valukas. it was reported that ‘‘accountants and auditors need to quit hiding behind materiality. to classify a transaction.G Model YCPAC 1791 1–17 C. On the contrary. 598 599 600 601 ‘‘The assumption that the item in question is in some sense material is implicit in every decision to render some event into a financial datum. linear manner. Vague.’ but ‘what’s frustrating about ‘materiality’ is that there is no clear definition’’.2013. 2011). 2011). New York University’s Stern School of Business. As such. Materiality as a shooting target is prevalent again in the media in the US. Ling Lee. by investors. in selection and application of audit procedures in personnel assignments and even to time budget allocations to various aspects of the audit and in judging the sufficiency of evidence gathered. The implication is that that materiality judgments increasingly lie. that all material information be disclosed on a continuous basis. 1999). a risk management tool with a focus on systems and governance. as they may do in other jurisdictions. materiality is increasingly being associated. Implicit within all these understandings. materiality operates at the crux of truth and power games about making visible. chairman of the accounting department. Through a Foucauldian lens. and a shield to allow flexibility in decisions which also manifests as a shooting target for critics. The Wall Street Journal described materiality as an Alice in Wonderland [6_TD$IF]judgement.cpa. Brennan and Gray. metaphorical discourses indicate that it has been constituted as multiple categories of knowledge. often subconscious decision that the item in question is material. p.org/10. 1979.06. a scientific technique to standardise decisions and deter litigation. New York Times Davidoff [10_TD$IF](2011). to dispute some controversial accounting treatment. Materiality is not a reporting concept that has developed in a continuous. 2011). like director resignations. US investors are concerned that vague disclosure guidelines36 encourage less information to be divulged instead of more (Henning. Thirty years later. a pragmatic rule of thumb to assist decision making. Certain categories of such information. 2011). Policy makers have literally avoided defining materiality’’ [43_TD$IF](Wall Street Journal. [78_TD$IF]116). in evaluation of internal control strengths and weaknesses in compliance testing. with softer issues that influence share prices. says Paul R.

metaphorical discourses and expertises may conflict. 1987. new metaphors open up possibilities for new actions and practices (Hacking. Cooper and Robson (1996).org/10.39 Viewed through a Foucauldian lens. styles of reasoning. managing or hiding errors and subjectivities in the translation of accounting inscriptions. materiality operates at the site of truth games about making visible. either externally imposed or strategic. Although the idea of moving towards a more stakeholder orientated understanding of materiality in financial reporting was briefly considered in the UK. Its flexibility has enabled its alignment and reinvention to meet socio/legal and professional objectives and priorities. (1998). Underpinning these constitutings. at times conflicting. Florida. perceptions of investor needs. These suggestions played an important part in significantly improving the paper. a tolerable error. an index of time and trouble. to reveal its shifting configurations and multiple histories. [1_TD$IF]1987. a professional lens. 1981). Mol. by members of the Interdisciplinary Perspectives on Accounting Research Group at Cardiff Business School. in an audit engagement. controlling. Foucault (2002). 1968)38 which may need to be justifiable in court. Crit Perspect Account (2013). The concept is so familiar that its rich historicity and conditions that have shaped it as different types of knowledge object may easily be overlooked. Expertises have constituted materiality as a multiplicity of knowledge objects: as a moral responsibility. These knowledge objects cannot be understood in isolation from expertises that have responded to challenges. Also acknowledged are helpful comments. demonstrate the malleability of the concept and its multiple roles. Future research into the resolution of ambiguity may be relevant for practitioners. or a mythical shield. Vestiges of legal power and shifting concepts and technologies in developing systems of [6_TD$IF]professionalisation are all reflected in its construction. 2001). a subset of risk. 623 6. For practitioners. and SEC (2013. professional accounting and regulatory bodies. 1999).doi. including legal apparatuses and the courts. a safety test. September 2011 and the EAA Annual Congress in Ljubljana. Accounting materiality is one of the most iconic and important concepts associated with audit [6_TD$IF]judgement. A [1_TD$IF]genealogy of accounting materiality. Where there is ambiguity. and risk management approaches) and practitioners through the way in which they construct and organise themselves and their practices. a solid foundation for audit. 39 Please cite this article in press as: Edgley C.2013. Law and Mol. a scientific tool. 1995) where boundaries between the material and the immaterial. 2004). although not a panacea for resolving the materiality problematic. from the outset. a solution to over auditing. the concept is legalistic and rooted in a capitalist ethos. An analysis of imagery applied reveals that the meaning of the concept has been influenced by different. a cornerstone and doctrine. 38 Executive Vice president of the AICPA. a rule of thumb. a risk management process.cpa. Chewning et al. July 2011. threats and constraints within the work of accountants. Edgley / Critical Perspectives on Accounting xxx (2013) xxx–xxx 14 610 611 612 613 614 615 616 617 618 619 620 621 622 and shifting configurations of materiality. Certain expertises may exist outside the socio/material setting in which a decision is reached and may be overlooked (Foucault. objectives. http:// dx. Its meaning has not developed continuously over time but has been episodic. during the Company Law Review in the early 2000’s. taming. Concluding [12_TD$IF]remarks 624 625 626 627 628 629 630 631 632 633 634 635 636 637 638 639 640 641 642 643 644 645 646 647 648 649 This study has attempted to explore genealogical conditions that lie beneath the emergence of materiality discourses and its past roles. the value of this analysis may lie in unravelling a familiar concept. The variety of figures of speech apparent: as a child of law. A fresh genealogical approach. viewed as a performative activity. the Accounting History Review Conference at Cardiff Business School.001 . Nina Sharma and Stephen Walker. are constructed through micro dynamics.G Model YCPAC 1791 1–17 C. contingent on changes in the craft of audit. may encourage reflexivity about its multiplicity and constitutings. an item cannot be both material and not material at the same time. professional technologies (such as statistical sampling. There are two key observations. 2002). priorities. with particular thanks to Mahmoud Ezzamel. The mode in which ambiguity is resolved may involve the ranking of certain expertises over others or a negotiation where a new understanding is formulated or through suppression (Latour. where there is a process of drawing a line in decisions (Olson. Different understandings have to be resolved especially in the context of an audit. the committee reverted to a traditional shareholder focus (Company Law [14_TD$IF]Steering Group. rather than the interests of a wider audience of stakeholders[13_TD$IF]. Keith Robson. constructive comments provided on earlier drafts of the paper by the two anonymous reviewers and the editors of the journal. 650 Q4 Uncited references APB [15_TD$IF](2008). part of the wisdom of life. a screen or threshold. 651 652 Acknowledgements 653 654 655 656 657 658 659 The author is very grateful for the helpful. with a focus both on protecting the material capital of the mythical man and the material value of the audit. 2012). Many different powers have played a part in the materialisation of this construct. A material item becomes visible only in the context of the socio-material arrangements in which it is enacted (Latour. 2012. The author also wishes to thank participants at the Critical Perspectives on Accounting Conference in Clearwater.06. Second.1016/j. and a mysterious lens. First. economic conditions and financial scandals. Power (2003). triggering epistemological battles in the way the materiality of an item is evaluated (Samiolo.

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