Corporate Responsibility Reporting (6)

Right lads, let's get serious.

Hopefully by now, we have established that the independence of the Big Four is organised within a system of laws, standards, guidelines and compliance mechanisms which are directed towards financial audit. The AA1000 series and the G3, which don’t pertain to financial audit, don’t extensively thematise independence. The Code and other instruments aligned with it, which do talk about independence in quite a bit of detail, pertain both to assurance and financial audit. 

So we can now look at how independence is entangled with an idea of professionalism. There is a long tradition of political and social thought which considers professionalism a socially integrative force, with a coherent pattern of influence extending outside its occupational specialisms. Does the element of professionalism give the Big Four’s independence, despite its orientation to financial audit, some kind of broader applicability?

Well, objectivity requires the practitioner “not allow bias, conflict of interest or undue influence of others to override professional or business judgments” (IESBA 2005:100.4; cf. IESBA 2005:120.1).  Independence of mind is the “state of mind that permits the expression of a conclusion without being affected by influences that compromise professional judgment, allowing an individual to act with integrity, and exercise objectivity and professional skepticism” (IESBA 2005:290.8). The recursive definition of objectivity by independence, and independence by objectivity, is elaborated outward towards more substantive markers with the mention of professional norms, in the phrases “professional or business judgment(s)” and “professional skepticism.” 

The term professional skepticism appears throughout the IESBA’s Code and the ICAEW Manual as something which ought not to be compromised, but it is never directly discussed.  The discussion of ISA (UK and Ireland) 240 is as follows: “The auditor should maintain an attitude of professional scepticism throughout the audit, recognising the possibility that a material misstatement due to fraud could exist, notwithstanding the auditor’s past experience with the entity about the honesty and integrity of management and those charged with governance.”^[1]

In the US, SAS 99 takes a similar approach: “Professional skepticism is an attitude that includes a questioning mind and a critical assessment of audit evidence.  The auditor should conduct the engagement with a mindset that recognizes the possibility that a material misstatement due to fraud could be present, regardless of any past experience with the entity and regardless of the auditor’s belief about management’s honesty and integrity [...] in exercising professional skepticism in gathering and evaluating evidence, the members of the audit team should not be satisfied with less than persuasive evidence because of a belief that management is honest.”^[2]

These elaborations are reminiscent ICAEW’s more bureaucratic-rationalist formulation of objectivity, as “the state of mind which has regard to all considerations relevant to the task in hand but no other” (q.v.).  Their appeal is to pedantically “doing the job” – that is, to a bureaucratic rationality which rejects inductive opportunism, and the short-cuts offered by networks of social capital, in favour of minute compliance with procedure. 

What manifests locally as a laborious literalism is part of the profession’s collective self-constitution.  In this process a social form is created – the unfailing agent of a stipulated practice  – whose utility should outweigh the aggregate utility of various more pragmatic attitudes in their local contexts.

Shall we be a little Habermassy for a moment? So far, everything suggests that the professionalism of accountancy is a feature of systemic integration only. The steering medium of power, institutionalised in the regulatory standards and organisations that have been mentioned, standardises practitioners in an instrumental-purposive orientation.  Compliance with this professional template facilitates the coordination of action by the other major steering medium, money.  To the extent that different practitioners follow like courses in like situations they facilitate the mediatization of those situations. 

Correspondingly, the social substrate of independence seems to be systemically integrated.  It is no accident that the institutional forms of the independent auditor and corporation emerged coevally.  The Limited Liability Act (1855) capped the potential loss of any shareholder at the amount subscribed for in shares.  Similar legislation soon appeared in the US and Western Europe.  The Joint Stock Companies Act (1844) permitted companies to incorporate without royal charter or special parliamentary provision.  The Act also required that shareholders appoint auditors to arbitrate in the event of insolvency.  Initially, these auditors were drawn from among the shareholders themselves (Strange 1996:136).  As corporations grew larger and more complex, specialist insolvency practitioners diversified their services in order to fill the role.  These two Acts are the institutional foundation for the mediatization of owners’ relations.  In other words, nothing here bestows professional independence with a suggestion of applicability outside the audit of financial statements.  If we left our analysis here, professional skepticism would consist at heart of purposive-instrumental rationality.  The appeal to the “reasonable and informed third party” would simply be to the profit-maximising, risk-minimising subject of economic interests.

But another aspect of professional skepticism remains to be excavated. “An attitude of professional skepticism means the practitioner makes a critical assessment, with a questioning mind, of the validity of evidence obtained and is alert to evidence that contradicts or brings into question the reliability of documents or representations by the responsible party” (IAASB 2005 para 40).  This discussion recapitulates the tendency to discuss the constituents and supports of independence with reference to what they are not.  But there are also some hints here of professional skepticism as an attitude of temperance and restraint. The practitioner is asked to be vigilant against momentary lapses. The practitioner should also not set out to seek contradictory evidence, merely be alert to it. IIASB (2005) continues that the practitioner need not authenticate documents, but should consider “the reliability of the information to be used as evidence, for example photocopies, facsimiles, filmed, digitized or other electronic documents, including consideration of controls over their preparation and maintenance” (para 41).

Other discussions of professional skepticism position it more explicitly as a virtuous mean. It's a Goldilocks thing. Professional skepticism can viewed as the contextually appropriate amount of suspicion. The Canadian CICA manual states that an attitude of professional skepticism “means that the auditor makes a critical assessment with a questioning mind, of the sufficiency and appropriateness of audit evidence obtained and is alert for evidence that contradicts or brings into question the reliability of documents or management representations.  It does not mean the auditor is obsessively sceptical or suspicious” (CICA, 2003, 5090.07).

This notion of moderation and contextual appropriateness is the second aspect of the entanglement of independence and professionalism. It should be understood in relation to the ever-evolving ensemble of inferential techniques used by assurors. Seen in this light, professional independence is the capacity to draw knowledgably upon the precedent set in previous use of an inferential technique, while being alert to the inimical features of the circumstances in which it is applied, and the possible necessity of departing from tradition and forming new precedent.

The term inferential technique requires some unpacking.  Independence presupposes that the assuror is not directly familiar with the subject matter.  It is thus invested in the feasibility of some kind of indirect familiarisation.  For assurance to exist as a commodity, the assuror must have techniques to readily gain reliable knowledge of whatever subject matter for which the market demands assurance.

The techniques available to assurors to organise their investigations in particular areas, and to infer further information, often generalising their findings across larger data populations, have been historically variable.  Block tests, such as the detailed inspection of every transaction within a particular month, were a commonplace audit technique in the late nineteenth century, but now are seldom ever used.

In the audit context, three main trends in inferential familiarisation have taken place over the twentieth century.  The first is the rise in importance of internal controls.  Internal controls consist of management procedures and the measures in place to ensure compliance with them.  To take one example, clarity and precision in the allocation of responsibilities and reporting lines is considered a type of internal control.  The segregation of duties is another.  Supply purchasing may be divided into “initiation (e.g. the works foreman decides the firm needs more lubricating oil), authorisation (the works manager approves the purchase), execution (the buying department order the oil), custody (on arrival the oil is taken in by the goods-in section and passed with appropriate goods-in documentation to the stores department) and recording (the arrival is documented by the goods inward section and the invoice is compared with the original order and goods-in note by the accountants department, and recorded by them in their books)” (Mill champ 2002:87).  By the 1940s, the status of the reporting entity’s internal controls also had assumed great significance in determining the scope and methodology of individual audits.  This remains the case.

The next trend is the rise and partial decline of scientific sampling. According to Power (1997:73-75), statistically precise notions of representativeness first took hold in the 1930s.  However, their incorporation into audit practice was far from straightforward.  Clearly a scientistic idiom could improve the eminence of accounting expertise, but it could also erode the exclusivity of professional judgement, if audit were perceived as mechanistic.  See Gwilliam (1987), Elliott (1983) and Abbott (1988) for more on the relationship between audit and statistical methodology. 

The third and most recent trend is the rise of risk-based methodology.  The 1980s saw a shift in audit from the principle of scientific representativeness to one of selectivity based on risk (Power 1997:76).  An auditor will identify key risk areas on a client-by-client basis – for example, allowance for doubtful accounts, inventory obsolescence, accrued royalties, accrued trade spending, classification of intangibles and useful lives, long-term debt classification and revenue recognition – and concentrate scrutiny in these areas.  An event is considered to be risky as a function of both the likelihood of its occurring or having occurred, and its magnitude, typically formulated financially.  Risk provides a common framework for considering both the value of assurance to the client, and the assuror’s liability.

Each inferential techniques is historically variable in the sense of what assurors do, in the typical consequences of their practice, in the reputation attaching to the technique in various segments of society, and in the legal duty of care associated with it. 

This last point deserves expansion.  For it to be worthwhile to accountants to provide assurance, the general level of liability must not be prohibitively high in relation to the inherent limitations of the techniques at hand.  For example, in the landmark ruling re Kingston Cotton Mill [1896] 2 Ch. 297, the courts decided that it was not the auditor’s duty to take stock to check against management representations which were prima facie unsuspicious.  “An auditor is not bound to be a detective, or [...] to approach his work with suspicion or with a foregone conclusion that there is something wrong.  He is a watch-dog, but not a bloodhound.  He is justified in believing tried servants of the company in whom confidence is placed by the company.” 

Inferential techniques which overlap with threats to independence correspond with particularly fierce negotiations of liability and regulatory responsibility.  For example, SOX now obliges US listed firms to rotate their auditors on a regular basis.  Long-term auditor-client relationships, which arguably make it easier for auditors to gather information, are recognised by this legislation as a threat to independence.  This has specific bearing on the technique of rotational testing, in which auditors work their way rotationally through different client site visits and systemic emphasis over a number of years.  Similarly, consultancy work arguably produces an epistemological advantage which can be carried over into audit.  SOX also proscribes the provision of a variety of consultancy services by auditors.

The question which now arises is whether the professional stewardship of this ensemble of inferential techniques, and its relationships with state, market and socio-cultural system, can be understood as systemically-integrated action, characterised by purposive-instrumental rationality.  My view is that it cannot.  Certainly the audit process exists within an envelope of mediatization, insofar as it aims to optimally prepare the audited organisation for steering by the non-linguistified communication medium of money, in its various institutional forms of taxes, fines, investment, loans and so on.  The negotiation of liability is also subordinate to a system imperative.  To put it bluntly, the more the accountancy profession can reduce its liability through the courts, the more lucrative its monopoly franchise on the statutory audit commodity.  But within these territories circumscribed by steering media, communicative action of various strengths plays a significant role.  In its market relationships, the accountancy profession is engaged in educative and learning processes with each audit client.  In familiarising themselves with internal controls, auditors act communicatively with management and employees.  In testing them, important forms of evidence include oral discussion and confirmation in writing.  On its frontier with the state, the profession defends and reformulates its interests deliberatively through the courts and various consultative forums.  In relation to the socio-cultural system, the profession replenishes its head-count not only by training new accountants, but by socialising them into a tradition of the contextually appropriate exercise of an ensemble of inferential techniques. 

The lifeworld resources which the profession draws upon include a permanent regime of training, career progression involving formal and informal mentoring, a tradition of professional congeniality and discussion, a preoccupation with ethics, as well as a relatively homogeneous pool of cultural and ideological norms. 

As well as the purposive-instrumentally rational subject of economic interests, the Code’s appeal to the “informed and reasonable third party” implies an appeal to an agent of this lifeworld.

Phew! This completes the analysis of professional skepticism. Philosophical skepticism with respect to a proposition concerns more than doubting the proposition’s truth. The philosophical skeptic will not assent that the truth of the proposition is in principle knowable. Philosophical skepticism is more than a variety of contrarianism, since there may be many technical and normative implications which follow from a proposition being knowable or not.  A similar concept can be seen to exist within assurance, inasmuch as techniques of inference are supposed to be able to reduce the probability of misstatement, but never to zero.  

But the modifier “professional” of “professional skepticism” does not indicate that the subject of the Code should be philosophically skeptical in relation to a particular object set characteristic of the profession, or that she should endlessly disperse any aura of indubitability that may emanate from this zone of professional responsibility.  The two main connotations of professional skepticism are rule-based consistency and moderation.  Thus professional skepticism is held in tension between a bureaucratic rationality, which emphasises rules, and a legal rationality, which requires balance between tradition and sensitivity to inimitable contexts, and which sediments a particular history of technological development of inference, and the legal negotiations surrounding it. 

Corporate Responsibility Reporting (5)

Okay, this completes the groundwork for our analysis of the concept of independence, as it applies to the independent checking of corporate responsibility reporting.

There is a close link, within liberal political theory, between independence and autonomy, and so between independence and various debates around the ability of individuals to rule themselves, and the conditions under which self-imposed law can be considered authentic. Independence is also an important idea within constitutionalism, especially as pertaining to the separation of powers. There the focus is the insulation of government functions, especially the judiciary, from untoward influence. Appropriate constitutional form is seen by some constitutional thinkers as an important prerequisite of state neutrality. The problematiques of autonomy and constitutionalism are coextensive, inasmuch as questions about the sources of authentic self-imposed law resemble those about the legitimacy of judicial decisions which have regard to private interests.

That very same preoccupation with a mode of non-compromising influence is shared by the literature around assurance. Independence is defined as “freedom from those pressures and other factors that compromise, or can reasonably be expected to compromise, an auditor’s ability to make unbiased audit decisions” (ISB, 2000); it is also described variously as “the conditional probability of reporting a discovered breach” (DeAngelo, 1981:186), “an attitude/state of mind” (Moizer 1994:19; Schuetze 1994:69); “the ability to resist client pressure” (Knapp, 1985).

In this literature, and in the system of overlapping laws, standards, guidelines and compliance mechanisms I’ve alluded to in a previous post, independence is given a concrete discursive form. (Independence is also discursively entangled with a concept of professionalism. I’ll get into that in the next blog post). In this post I want to think about how elements of that concrete discursive form are geared towards the audit of financial statements. In other words, I want to think about how this independence is not really geared towards checking on corporate responsibility reporting, except insofar as there are one or two serendipitous overlaps between financial audit and CRR assurance. So I’m hopefully getting started unpicking some of the complex ways in which the Big Four sometimes have/use/want the wrong kind of independence for what it is they’re doing. Again, some of this isn’t exactly up-to-the-minute, so I’d be very, very interested in any updates from scholars, industry, assuror fandom, etc.

The AA1000AS (2008) and the G3 (which are specific to the CR context and have no applicability to financial audit) had surprisingly little to say on independence. The G3 required that assurance be “conducted by groups or individuals external to the organization who are demonstrably competent in both the subject matter and assurance practices” and “who are not unduly limited by their relationship with the organization or its stakeholders to reach and publish an independent and impartial conclusion on the report.” The AA1000AS (2008) contained the same wording (AccountAbility 2008:14), and required disclosure of mechanisms which ensure independence, and of “any relationships (including financial, commercial, preparation of the report, governance and ownership positions) that could be perceived to affect the assurance providers ability to provide an independent and impartial statement” (ibid.).

Big Four alignment with the AA1000AS (2008) requirement typically comprised just a succinct paragraph, noting that the firm complied with the Code and with internal independence mechanisms which exceed the Code’s requirements, but providing no further detail. (The ISAE3000 referred to the concept of independence elaborated in the Code of Ethics for Professional Accountants (IESBA 2005, referred to hereafter as “the Code”). Two other key guidance documents for the Big Four in connection with independence, the IAASB’s ISA 200 (IAASB 2009), and the ICAEW Members’ Handbook, Section 3, were also aligned with the Code).

The Code applies to financial audit as well as assurance. It divides independence into two necessary conditions: independence of mind, and independence of appearance. Independence of appearance exists if and only if a reasonable and informed third party would judge that independence of mind exists. Independence of mind is considered to consist in a lack of prejudicial relationships. In particular, a professional accountant “should not allow bias, conflict of interest or undue influence of others to override professional or business judgments” (IESBA 2005:100.4). “Relationships that bias or unduly influence the professional judgment of the professional accountant should be avoided” (IESBA 2005:120.2). Independence of mind is characterised as the state of mind “that permits the expression of a conclusion without being affected by influences that compromise professional judgment, allowing an individual to act with integrity, and exercise objectivity and professional skepticism” (IESBA 2005:290.8). ICAEW (2009:283) follows this wording (save for a typo!). The Code characterises objectivity, as it does independence of mind, by what it is not: “The principle of objectivity imposes an obligation on all professional accountants not to compromise their professional or business judgment because of bias, conflict of interest or the undue influence of others.” (IESBA 2005:120.1). There are however a few touches of positive definition here. Professionalism is one, which I’ll be looking at in a later post. The Code expands a bit on “integrity” by insisting on the professional accountant’s “honesty and straightforwardness.” (IESBA 2005:100.4).

Straightforwardness is undefined, honesty is only briefly mentioned again at 150, in the context of professional dignity in self-promotion. See ICAEW 2009:165 for the Members’ Handbook’s limited elaboration of these terms.

We can try some scholarship here. Everett (2005), writing about the Canadian context, trace a shift in accountancy ethics from a Christian idiom based around the concept of a calling, to a scientistic idiom based around objectivity. They note that the chance was gradual and involved many intermediate “mixed” idioms. The unglossed appearance of “honesty and straightforwardness” could be a kind of vestige of this earlier idiom.

The ICAEW Members’ Handbook also provides two definitions of “objectivity,” one using the same wording as the Code (ICAEW 2009:160), and the other that objectivity “is the state of mind which has regard to all considerations relevant to the task in hand but no other” (ICAEW 2009:165). Objectivity here strongly resembles aspects of Max Weber’s ideal type of bureaucratic rationality, in its “exclusion of love, hatred, and every purely personal, especially irrational and incalculable, feeling from the execution of official tasks” (Weber 1960:421). The Code identifies five non-exhaustive categories of threats to independence: self-interest; self-review; advocacy; familiarity; intimidation (IESBA 2005:100.10). The Code attempts ostensive definition because it is “impossible to define every situation that creates such threats and specify the appropriate mitigating action.” (IESBA 2005:100.5). Assurors are expected to use inductive reasoning to recognise threats to independence which are not among the examples, and those which don’t fall neatly into any of the categories. The examples given of self-interest threats are: a financial interest in a client; jointly holding a financial interest with a client; “undue” dependence on total fees from a client; concern about the possibility of losing a client; potential employment with a client; and contingent fees relating to an assurance engagement; a debt arrangement with a client (IESBA 2005:200.4). Self-review threats include: the discovery of a significant error during a re-evaluation; reporting on the operation of systems after being involved in their design or implementation; preparing data used to generate records which become the subject matter of the engagement; and having recently worked for the client (200.5). Advocacy threats include: promoting a client’s shares; and acting on the client’s behalf in litigation, or in informal disputes (200.6). Familiarity threats include: family relationships; gifts and hospitality; other threats (e.g. self-interest threats) pertaining to a family member (200.7). Finally, intimidation threats include: fear of dismissal or replacement; fear of litigation; pressure to inappropriately reduce fees or timetables (200.8). So there we go.

Threats to independence of mind are not decisive, however, since many can be neutralised by appropriate safeguards. Examples of safeguards at the assuror level are “Chinese walls” arrangements, which isolate sensitive information through internal rules and controls, software, and physically secured working and storage spaces. PwC’s code of conduct states, “[w]e aim to avoid conflicts of interest. Where potential conflicts are identified and we believe that the respective parties’ interests can be properly safeguarded by the implementation of appropriate procedures, we will implement such procedures” (PwC 2008:8). Moreover, the threat categories are non-exhaustive. 

Okay, I think we are now in a position to trace the orientation of this concept of independence to the audit of financial statements. In a way, this part of the argument is a fortiori, since we have already established that those sources with substantial things to say about independence are expressly interested in audit rather than assurance!

However it could still be useful to develop a more detailed analysis, particularly for when I come to look at the entanglement of independence with professionalism. The first thing to note is that in the Code, as in the GRI and Accountability formulations, independence of mind is considered essentially a privative quality, not a positive one. It is about something that is not there. And the thing that can’t be there is, roughly speaking, a relationship of interiority, or what you might call being “all up in” the client. Independence of mind is a relationship of duly-influenced exteriority with respect to the client (compare GRI definition q.v.).

Various factors can be decisive in creating a relationship of interiority or undue influence. One type of factor, however, dominates. That is, independence of mind is threatened if the practitioner’s action is steered by money or power which either originates in the client or steers her client.

This factor is exemplified by the first two threats to independence mentioned by the Code, the existence of a financial interest in the client or a financial interest held jointly with the client. Financial auditing constitutes organizations as economic entities and economically specifies their continuity over time. Thus, the orientation to financial audit is expressed in the priority given to threats enacted in steering media. Complete causal isolation would obviously be an absurd construal of independence; there must exist some causal stream between auditor and audited organization! But so long as no economic forms supervene on the causal microfoundations of audit, they are likely to be considered insignificant.

We can expand on this point by returning to the term materiality, which I think I previously treated as a loose synonym for significance. The International Accounting Standards Board (“IASB”) defines materiality, in the audit context, as follows: “Information is material if its omission or misstatement could influence the economic decision of users taken on the basis of the financial statements. Materiality depends on the size of the item or error judged in the particular circumstances of its omission or misstatement. Thus, materiality provides a threshold or cut-off point rather than being a primary qualitative characteristic which information must have if it is to be useful.”

In this definition, judgments about materiality are to be founded on the rationality characteristic of the economic sphere. (What a surprise). One might anticipate that for assurance of CR report, judgments about materiality should be steered by consideration of rational decisions characteristic of the spheres of social and environmental governance, reflecting Elkington (1994)’s triple bottom line. The idea of independence upon which assurance depends would correspondingly be construed according to threats exceeding this materiality threshold. Indeed, the G3 defines the Reporting Principle of materiality as follows: “The information in a report should cover topics and Indicators that reflect the organization’s significant economic, environmental, and social impacts, or that would substantively influence the assessments and decisions of stakeholders” (GRI 2006:8). The G3 definition contains both elements – the triple bottom line, and the appeal to the decisions of users – but it stops short of combining them. This is unsurprising, since it is difficult to imagine models of “socially rational” or “environmentally rational” decision-makers which would not be torn apart by the de facto plurality of norms, dispositions and interests constitutive of the former, and by the ideological conflict for the custody of the latter.

Economic rationality, by contrast, can suppose a comparatively harmonious orientation towards the highest profits at the lowest risks. Even those who do not share this orientation will promptly recognize it as the basis on which they are addressed as economic agents. The G3’s vague and inclusive definition is an indication of how difficult it is to reorient the materiality concept for settings which are not highly systemically-integrated; roughly speaking, for places that aren’t completely saturated with economic incentives and/or administrative power.

However, certain of the exemplary threat categories, which I’ve just mentioned, suggest that independence of mind may also be sensitive to social integration factors. It’s not all about stacking paper and ticking boxes! For example, gifts and hospitality, and acting on a client’s behalf in informal disputes, imply some level of communicative action involving the assuror and client.

But before we allow this to argue that the orientation to audit is not complete, we should see it in light of the relationship between independence of mind and independence of appearance. An important corollary of “independence of mind” is that organisations do not have minds. The subject of the Code, and the basic unit of independence, is the practitioner. A threat to independence is thus first affectively disclosed. The practitioner is the first to know about it, and is responsible for escalating it into the regulatory architecture. For example, if a Big Four practitioner has any doubts about her independence, she can speak to one of the partners in charge of her project or her regional service line, to a national risk partner, to dedicated in-house legal teams, to the anonymous ethics helpline which each Big Four firm maintains, to the ICAEW, to the professional body of which she is personally a member (for accountants whose training is Big Four-sponsored, usually the ICAEW or ICAS), or even to the AADB. Such appeals are practical approximations of the Code’s appeal to the “informed, reasonable third party.” The regard of this regulatory architecture cannot be principally to affective status of the practitioner, so it is again to homo economicus, the rational economic subject. Some of these mechanisms are punitively specialised, but the run-of-the-mill independence threat will not be met with investigative and disciplinary procedures. It will be resolved by the institution of safeguards, a change or clarification of engagement scope, the transfer of the practitioner to other duties out of the zone of risk, or in an extreme case the withdrawal of the organization providing assurance. Independence of mind is characterised through a labyrinthine system of recursively-defined terminology including integrity, objectivity, professional, honest, straightforward, fair, bias, undue influence and conflict of interests. The most substantive elements of this system are its several exemplary threat categories. But these cannot straightforwardly determine whether or not independence of mind exists, since a safeguard may potentially neutralise each threat, and the Code does not contain criteria to arbitrate the skirmish of threat and safeguard. However, the Code assumes that margins of safety are cheap, and so the practitioner is directed to draw them generously. If the practitioner receives any hint that her independence of mind is jeopardised, there are abundant candidates, unambiguously economically disinterested, to fill her position. The Code gives an overall impression of great fungibility of practitioners. The assumption of easy disengagement is emphasized by the fact that “concern about the possibility of losing a client” (q.v.) is itself identified as a threat to independence. Because there is so much room to manoeuvre, so much opportunity to switch practitioner for another, it is appropriate to situate the mechanism for invoking regulatory oversight in the affective state of the very person whose judgment is potentially impaired.

The orientation of this idea of independence to audit can be made clear by a comparison with the CR context. For the assurance of CR reports, by contrast, a far more claustrophobic topology of interests obtains. The typical assurance engagement is one in which nobody is disinterested. Social and environmental independence cannot be privatively formulated as feasibly as economic disinterest can.
Were the Code’s concept of independence were oriented to assurance, rather than audit, it would probably have to relinquish the ideal of a materially disinterested assuror, and acknowledge that material threats to independence are ineradicable.

It would have to accept doubt as a constant accompaniment of independence. It would have to address in far greater detail how threats to independence are exacerbated and mitigated in their interactions with one another and with various safeguards.

Okay, it’s worth emphasizing that I’ve only been examining the discursive construal of independence in the Code. I don’t mean to suggest that assurors really walk about in a reverie of internal monitoring, frequently deferring to regulatory oversight as their independence of mind undergoes some questionable shift! Indeed, most evidence is to the contrary. The Big Four have enthusiastically taken to the principle of safeguards, and employ sophisticated computerized conflict check systems to automate the allocation of practitioners to projects. PwC’s code of conduct states, “[w]e aim to avoid conflicts of interest. Where potential conflicts are identified and we believe that the respective parties’ interests can be properly safeguarded by the implementation of appropriate procedures, we will implement such procedures” (PwC 2008:8).

This may demonstrate professionalised preoccupation with independence of appearance over independence of mind. Independence of appearance exists if and only if a reasonable and informed third party would judge that independence of mind exists. This stipulation may at first appear redundant. The factors which, to a hypothetical third party, could argue a lack of independence, are coterminous with the factors for which the subject of the Code is supposed to take responsibility. As the subject of the Code has responsibility for hypothesising the reasonable and informed third party, it is at first unclear what constraint the provision adds. But the provision is not redundant. I think there are three reasons I can give for this. First, the term “informed” implicitly includes practical limitations to evidentiary completeness. The subject of the Code may have spent the day in a room with a snazzy pink folder containing sensitive information, and not have opened it; the subject knows that her independence of mind is not compromised, but fact that the subject definitely did not open the snazzy pink folder must be excluded from the information possessed by the hypothetical third party. Next, the hypothetical third party provides any disciplinary interpreter of the Code with a ready-made cast to occupy and to control in response to situational political imperatives. Making the role of a reasonable and informed third party a decisive one gives a very free hand to the concrete institutions invested with authority to decide upon the Code. To a lesser extent, the same can be said of the recursive system of normative terms loosely associated with honesty. These generate an ambience of raised normative expectation without microfoundation in any concrete norm-governed practices. In favouring a “principles based” approach over detailed specifications, the Code concentrates powers in the hands of concrete authorities. Most importantly however, the derivation of independence of appearance from independence of mind is not a one-way process. The categories of threat which the Code lays out are impersonal, public phenomena. They are not a phenomenology of independence. They do not suggest what it might feel like if independence were threatened. They belong, in short, to the sphere of appearance.

The subject of the Code is thus as likely, or more likely, to use independence of appearance as a yardstick for independence of mind, as the other way around. Indeed, inasmuch as the Code requires the practitioner to escalate any doubt about independence, its basic cognitive mode it requires is one of dubitable doubting (in other words, of apparent doubts, which can be studied to determine if they “actually are” doubts), a mode difficult or even impossible to inhabit except via an imagined intersubjectivity.

The assertion that independence of mind is foundational for independence of appearance is thus contradicted throughout the Code.

The appeal to the reasonable and informed third party pervades the Code; in its pervasiveness, independence of mind, ostensibly a definiendum from which independence of appearance is derivative, actually emerges coevally with it. I see two main ways of understanding this pervasive appeal to a reasonable and informed third party. Both of these confirm independence’s the orientation to audit, rather than assurance. First, it could be considered the Code’s positivist moment. “Reason,” in this interpretation, is regarded as unproblematically homogenous and accessible, and to be “informed” is merely to possess all the “facts.”

While parts of the Code pay lip service to consensual, rather than objectively-given reality, their significance can be traced to this conviction that there is what you might call a transcendental givenness which conforms itself both to thought (“reason”) and to the world (“information”). This understanding is plausible, and is roughly the position taken by Power and Laughlin (1992:116): “the image of accounting as a simple mapping of an independent reality is naïve […] a more radical critique of the representationalist credentials of accounting would see it as a practice that was “creative” in a much deeper sense, i.e. not as a deviation form an objective standard but as a practice without objectivity.”

The second understanding, which I prefer and will further develop, is that the appeal to the reasonable and informed third party is actually one of the places in which the Code most explicitly acknowledges its basis in consensus. “Reasonable” and “informed,” on this interpretation, must be understood as outcomes of socialisation, not positivist indexicals. The independent practitioner is the professionally reasonable and informed practitioner. As Power (1997:80) notes, “Auditability is a function not of things themselves but of agreement within a specialist community which learns to observe and verify in a certain way.” The consensual basis of independence is reproduced through professional practice, which will be the subject of the next installment!

Notes on Hoke's Bluff

There are these two fairly good jokes they always tell at the Edinburgh Free Fringe, and the one is about how it's free to get in to see the show but not free to leave, and then the other one is something about, "blahdy blahdy blah, boop boop boop, fold your donation into this hat [or bucket]." Well I have busy since mid-May with my little jeweler's saw and soldering iron and pathetic kleinen hinges, crafting my foldable tuppence to perhaps fuck up that latter gag for keeps, and tonight I finally went along to Hoke's Bluff at the Forest Fringe (huorned over to the Out of the Blue Drill Hall, goodness) to debut my devious little comeback, and do you know what -- I had to give them a bloody fiver!

Yes, cast and crew of Hoke's Bluff: the fiver was from me.

Now I can't really do a proper review, but here are some discombobulated notes.

Hoke's Bluff is a play about sports, and perhaps particularly American high school sports, and perhaps particularly especially about movies about American high school sports. There is a jock, a cheerleader and a ref. There is a lot of poppy dance music, and lots of getting the audience to cheer and clap. They sell you popcorn and then make you feel guilty about eating it by running up and down and doing star jumps.

The sport in question is a sort of excellent synthesis of American football, baseball, basketball, ice hockey and soccer, in roughly that order of precedence, but really we all know it's Calvinball:

As well as Bill Watterson, it's reminiscent of Don DeLillo: Americana and -- especially! -- End Zone. There was that sense of sports talk (commentary, smack talk, pep talks, etc.) as being its own proper oral tradition, with its own integrity and complexity. It wasn't just that the beautiful writing of Hoke's Bluff had transmuted sports talk into poetry -- yes, that happened a bit, but sports talk was also allowed to be whatever it already is when it is fully, extravagantly realised. Something akin to poetry, perhaps. The sister arts: ut playbook poesis.

It is a crackerjack series of beautifully staged little spectacles. Detail, yes! And there was a steadiness to it, a confident occupation of attention which left me with the impression of the characteristic pacing of sketch comedy. Processes which sound like they should be boring to watch instead became the milieu in which little well-chosen details continually shifted.

(Sometimes, when you say to someone, "You must be so bored of people asking you x," they say something like, "Oh, not really. Everyone says it in a different way!" And yes, everyone who says that says "Everyone says it in a different way!" in a different way).

Given the deliberately archetypal and somewhat fragmentary storytelling, the characters conveyed a surprising richness.

The artifice is so bright and straightforward it almost feels as if it is handed back to the audience to control. Feelings can operate more like thoughts: you can move around in feeling, choosing different branches, like you can move around in thoughts. (Although a film like Christoffer Boe's Reconstruction (2003) shows that drawing attention to a trope does not necessarily significantly change its emotional impact. (Perhaps it's different with Hoke's Bluff because when it comes to cheesy sports movies, we're already used to suspending disbelief in some particular way?)).

Something else about Hoke's Bluff -- something about its hyperreality -- means if we choose to feel with the grain, we probably won't be distracted by the falseness, by tropes constructed to create a certain feeling. It is false here, but it's true somewhere. (Perhaps this is peculiar to small town sports obsessions).

You know that hokey gag where an orator -- coach, say -- gets carried away in a speech supposedly about general and noble things, and inserts various personal hang-ups and/or uncomfortably intimate information? (I'm not sure if it really is a gag. It's seldom funny). Something like that happens in Hoke's Bluff. But the movement is not always from the general and proverbial to the specific and private. It is another mode of oversharing altogether.

These epic lists! The names are funny, sometimes. There's that Chris Morris-y way of creating names. (I don't know, maybe they were all real). Is this perhaps the counterpart to Romantic irony -- to that sense that anything could always have been otherwise? A kind of Romantic bathos, or something? I don't know.

That's it. I really liked it.

A review of Baxter's biography of JG Ballard

The Inner Man is a smart, supple and jolly biography. I particularly enjoyed the brisk but forbearing way Baxter dismisses info from the horse’s mouth – no, he didn’t do that, no, he must have imagined that, nope, he didn’t read that then, I don’t care what he says etc.. There are good anecdote – Ballard hated Sister Wendy and avoided going to events where she’d be present; the British Board of Film Classification screened Cronenberg’s Crash for eleven paraplegics to make sure it was all right; Ballard would pleasantly acquiesce to requests for references, but write separate letters to the reference recipients, warning them to disregard the references. There’s also a pretty good harvest of witticisms and wry remarks. Baxter doesn’t seem overly bothered about spoilers – but then again, for most of his life, Ballard is just sitting in his house in Shepperton, so it does make sense to focus on his writing. Avoiding fetishizing Ballard’s experiences as the meaning of his works, Baxter still manages to keep up a stream of plausible suggestions of persons, incidents, environments and atmospheres which may have been fictionalised. In terms of critical curation, Baxter’s preferred cultural contexts, especially for Ballard’s sf, are mostly visual art, and are generally quite convincing. He also emphasizes the importance of advertising – the born advertiser waging holy war against consumer culture is the closest Baxter comes to a summation of Ballard. Without conspicuously cheating, and without rendering Ballard any less idiosyncratic, Baxter renders him rather a lot less enigmatic. A few reservations: I felt there was too much about movies. There were also a few too many arbitrary summaries of context: "it was 196X, the Beatles were in Tibet, opposition to the Vietnam conflict was growing, everyone was watching aliens on Star Trek, yoda yoda yoda." More importantly, I’d have liked more emphasis on the gender and sex politics of Ballard, his work and his era. Baxter suggests that if Ballard’s young wife Mary had not died, he would have forever remained a second rate writer. The main implications of Ballard "knocking around" his girlfriend are apparently her changing her look and a hiatus in Ballard’s friendship with Moorcock. Finally, I’m dubious of the handling of what you could call the critical moment in Ballard works. Baxter does Ballard a disservice by drawing so few comparisons with postmodern theorists, critical theorists and post-marxists – leaving him seeming to celebrate a rather drab brand of swaggering nihilism and butch self-fashioning. Also, Colin Waters raises what seem to be some rather sensible points in his review for The Herald!

Hai Drone Jin Sim Natter

An eensy bit terser version of this review appeared in Interzone 243. Of course it makes rather bittersweet reading now, especially the last bit. Iain Banks you were wonderful & you are missed.

The Hydrogen Sonata tells the story of a crisis sparked by the impending rapture (“Subliming”) of a major galactic civilisation (the Gzilt) into a sort of extra-dimensional transcendental afterlife or überlife thingamajig. As the blessed day draws closer, scores are settled and secrets revealed; rules, manners and mores unravel; meanwhile, scavengers push and shove on the perimeter, ready at the first sign of a civilisation-wide, blissed-out puff of smoke to pounce on whatsoever cool tech and well-appointed worlds that might be going spare. Pretty swiftly everyone’s favourite super-advanced post-scarcity utopian anarchists (the Culture) can’t resist poking their smug pug noses (or hulls, I guess – many of the Culture characters are, crudely speaking, space ships) into the affair.

So I make that … ten Culture books now? Technically each one is stand-alone, though some – The Hydrogen Sonata for one – will surely bewilder the beginner more than others. That’s not to say The Hydrogen Sonata is “a bad place to start” exactly – there are pleasures peculiar to wandering in in media res and figuring out, detective fashion, an already well-established world, and even to feeling the weight of obscure presences you never fully descry. For Banks aficionados awaiting a fix of courageously intelligent, consistently droll, and sporadically pyrotechnically-savage space opera, The Hydrogen Sonata can’t be said to short-change. The cool tech is cool; the intriguing teamwork is intriguing, the gratuitously exotic backdrops are exotic as ever; the grotesque revels are gross as ever (a minor character can have too many penises, you know, Mr Banks); the lovable sidekicks must needs be loved; and the Imperial pomp is copiously pompous (though not technically Imperial). There are tense, matter-of-fact, “one-hobbit-with-one-HP-survives” style military set-pieces. There are pilgrimages to gurus. There is pluck. There are some links to Surface Detail (2010) too, in which disputes over the ethics of simulated Hell escalates into political and military crisis. We’re also in Excession (1996) territory, with the Deep Space Natter novel form – you feel a bit like you’ve stumbled onto a cosmic Wikipedia talk page waaay above your security clearance.

There’s really so much crammed into The Hydrogen Sonata that it may seem an odd choice to dwell so carefully on the wordy and prying committee of principled AI meddlers (whilst, for instance, the thread about the murderous Septame Bangestyn felt ever-so-slightly cursory). Still, I don’t think Banks was wasting skill by selecting this focus and making it work.

Here’s why. Culture novels have been getting good at extrapolating around various sf mainstays (especially VR simulations, subjectivity saved games, and dealings between AI and biological life) in ways which could be catastrophic for storytelling and emotional investment and pacing, but aren’t. For instance – can scenes ever-liable to dissolve as sims, or sims-within-sims, be built such that readers still care for their outcomes? Maybe not! Do readers care about characters who can be restored off a disc if they die? Maybe not! What can an author give a flesh-and-bones hero to do, if AI and snazzy tech can obviously handle the heroism so much better? Maybe nada — “You won’t be contributing, you’ll be jeopardising,” an AI avatar tells Sonata protagonist Vyr Cossont as she insists on protagging along to a climactic battle (p. 432). In general Banks has been admirably reluctant to fudge these snags. Treated candidly, they can serve as sources of strange energies and cathexes and seemingly-warped-yet-utterly-logical narrative structures (contrasting with the flamboyant structural elegance of books like Use of Weapons (1990), Feersum Endjinn (1994) and Inversions (1998)).

I think that’s part of what’s going on in Matter (2008), Surface Detail and The Hydrogen Sonata, and I think it’s part of a larger struggle in many of Banks’ books between materialism and storytelling. That is, between the obligation to the messiness of the universe, and the obligation to freight history with meanings and values which might distort and artificially neaten it.

If I have a niggle – and how many fans will share in it, I don’t know – I could happily have heard a little more overt moral chat!

Sure, various values are implicitly represented and tested – especially those swirling around the themes of prediction (sims again), risk and self-sacrifice (both pointless and pointed). But more explicit lines might have been drawn, and/or a more contemporary aura invoked – Surface Detail was about Hell, and one of its highlights was a level-headed dispute with a thinly-veiled American theocon. The Hydrogen Sonata in a way is about Heaven, plus the whole connected secular caboodle of utopia, revolt and so on. Subliming offers the opportunity to think about the operation of moral calculation and moral instinct in anticipation of salvation, about the ways in which vangardists confront sacrifices and terrible trade-offs (“to murder so many so that so many more may one day –” yadayadayada), and about how they may successfully solicit and/or delusively project such sacrifices and terrible trade-offs, with stunningly complex outcomes. We know Banks is capable of more in-depth and subtle interrogations of eschatological psychology; so maybe he didn’t think we were capable or inclined to attend to them?

Well, I’m not wistful for The Hydrogen Sermon or anything, and to be fair, whilst Subliming is prodigiously fleshed out (ectoplasm’d out?) in that novel, plenty of new mysteries and prospects are generated in the process. So perhaps there is more about this whole Subliming business yet to come. Actually that's quite an exciting thought.

Corporate Responsibility Reporting Assurance (4)

Okay, a sort of interlude to peer into how the accountancy profession and other assurance providers hope to systematise CR reporting. My info here may be a little archaic (often to the tune of four or five years); I’ll try to bring it more up-to-date eventually, but in the meanwhile anyone who wants to chip in, please do!

Standards

Despite the mostly voluntary character of CR reporting and assurance, there are many signs of standardisation. Most of the largest 250 companies worldwide use guidelines developed by the Global Reporting Initiative (“GRI”), and they seem to try to keep pretty up-to-date.

Look a little closer, and the full extent of this standardisation is difficult to decipher. The GRI guidelines are widely used in some form or another, but the guidelines are designed to be incredibly flexible. Compliance with the G3 version of the guidelines comes at three “Application Levels” according to how many CR indicators the company is able to report on; compliance can be self-assessed, or checked by the GRI or by a third party; reports can also be assured or not (the next iteration, G4 is likely to drop this feature).

Assurance may also be restricted to certain aspects of a report, and it may be either at the “reasonable” or “limited” level. This last distinction relates to the amount of work done to verify the subject matter. Reasonable assurance results in a positive form of the assurance statement (“is fairly stated”) whereas limited assurance results in a negative form (“nothing has come to our attention to suggest that it is not fairly stated”). Statutory audit of financial statements is always at the reasonable level. Limited assurance is used in a variety of other contexts, for example, in quarterly reviews of financial statements. A KPMG survey in 2008 showed that “the majority of the G250 (51 percent) obtain report assurance that is a ‘limited level’ of assurance—a lower level that requires less work from the assurance provider and therefore lower costs. […] From a company perspective, choosing a limited level is not surprising since assurance on corporate responsibility information is mainly a voluntary activity.”

The most significant standard of assurance provision applicable to the Big Four is the ISAE3000, maintained by the International Federation of Accountants (“IFAC”) through the International Auditing and Assurance Standards Board (“IAASB”). For member organisations, ISAE3000 has become compulsory where there is no national alternative (such as the Australian AS/NZS 5911 standard). This applies to the Big Four through their memberships in ICAEW. Specialist assurance providers (such as SGS and Two Tomorrows) typically don’t use the ISAE3000. It is a very flexible, generic standard, applicable to a wide range of non-audit assurance engagements. It assumes that the scope of the assurance engagement will be set by the reporting entity. In the UK, the Auditing Practices Board (“APB”) has responsibility for implementing standards issued by the IAASB. It does not currently promulgate the ISAE3000. The APB has expressed the view that the ISAE3000 aims to address too broad a range assurance engagements.

Then there’s the AA1000AS standard. The AA1000AS was developed by the non-profit organisation AccountAbility specifically for the assurance of CR reporting. The Big Four comply with this standard at their clients’ discretion. The AA1000AS (2008) seems still to be the most recent incarnation.

KPMG describe their use of the AA1000APS (2003) as a two phase process. Phase 1 considers whether the scope and materiality of the report is appropriate. During Phase 1, KPMG run their own analysis of scope and materiality. This consists of establishing five input channels: stakeholder engagement; media search; sector knowledge (e.g. peer CR reports, industry body guidelines); client knowledge; and prior year CR commitments. Phase 2 considers whether the individual claims are accurate and complete. Phase 2 is a lengthy process of identifying and taxonomising material assertions. “This results in a detailed assurance plan (including a list of people to be interviewed and a list of the required documentary evidence) at corporate, business/regional and site level (if relevant), together with the selection of sites to be visited. The type and amount of evidence required varies depending on the type of assertion and the level of assurance being sought.”

AA1000AS was developed to complement ISAE3000. For example, AA1000AS’s moderate and high levels of assurance, which the standard recommends for “new” and “mature” issues respectively, are intended to be consistent with ISAE3000’s “limited” and “reasonable” levels of assurance.

One important difference between the AA1000AS series and the ISAE3000 is that the assuror’s consideration of “materiality” is not limited in a scope set by the reporting entity. Materiality is a crucial concept of financial audit methodology, that has been carried over into assurance. Very loosely speaking, material information is significant information. It’s what matters. (I may get more detailed elsewhere).  Under the AA1000AS series, the assuror assesses the degree to which the reporting entity’s scope has correctly identified its stakeholders and their needs. In other words, the assuror must make judge the reporting entity’s choices about what is and is not significant, by appeal to its stakeholders.

So those are the main standards used in the assurance of CR reporting. The Big Four have also developed their own tools relating to CR reporting, for instance Deloitte’s Sustainability Reporting Scorecard (2004), thirty criteria against which to assess a CR report. I’m not sure how much uptake there was of this.

Monitoring

There is comparatively little independent monitoring of this assurance itself (well, you do have to stop somewhere, I suppose). The G3 includes guidance on satisfactory assurance, but compliance must be self-assessed. One GRI representative commented, “An organization should look at the definition on pg. 38 of the GRI Guidelines and make its own assessment in conjunction with the assurance provider as to how they wish to communicate their engagement publicly. We will not take a position on whether a given engagement does or does not constitute ‘external assurance’ as it is impossible for us to assess the full range of engagements put in front of us” (2009).

AccountAbility don’t monitor the use of the AA1000AS (2008) to a detailed level. Each use of the AA1000AS (2008) in an assurance statement requires payment of a license fee to AccountAbility. AccountAbility pre-checks only the statement itself, although an acceptable statement must include a description of methodology. In partnership with the International Register of Certificated Auditors (“IRCA”), AccountAbility offers individuals training and certification in the use of AA1000AS (2008). AccountAbility also has an assuror membership programme (which includes all of the Big Four). However, neither of these are requirements to use the AA1000AS (2008).

The accountancy profession’s self-regulation mechanisms monitor compliance with the ISAE3000. In the context of indepedence, it's worth pointing out that the organisations which embody these mechanisms scoop their members from the cream of the accountancy profession, including Big Four partners. A quick scan suggests that about half the members of the APB are current or former associates of the Big Four, with the remainder drawn from business, law or academic backgrounds. The Big Four are also well-represented on the IFAC board.

High-level oversight of the ISAE3000 is provided by the Public Interest Oversight Board (“PIOB”), an extension of IFAC. In the UK, an infringement of the ISAE3000 would be reported to the professional body of which the firm or one of its employees was a member. All of the Big Four are institutional members of the Institute of Chartered Accountants in England and Wales (“ICAEW”). The Financial Reporting Council (“FRC”) is the UK’s independent regulator responsible for the accountancy and audit profession. The FRC, through its Professional Oversight Board (“POB”) has a statutory responsibility to ensure that these bodies have effective arrangements in place to investigate complaints against their members and member firms. The FRC recommends that professional bodies escalate cases concerning the public interest to its Accountancy & Actuarial Discipline Board (“AADB”). The AADB may also autonomously initiate investigations. As noted above, the APB does not currently promulgate the ISAE3000. In 2009, Executive Director of the APB commented, “While the ICAEW have some sort of monitoring of all services provided by audit firms in the UK (Practice Assurance), in reality I think it is fair to say that there is no monitoring of compliance with it [the ISAE3000].” There is thus something of a regulatory gap; certainly there is less oversight of this standard than of comparable audit standards.

A few more bits & pieces

In addition to all these standards and frameworks described, the Big Four aim to conduct their assurance work in accordance with the Code of Ethics for Professional Accountants, maintained by IFAC’s International Ethics Standards Board for Accountants (“IESBA”), as well as with their own codes of conduct and independence policies, and with appropriate national laws.

Important national legislation includes SOX, enacted in the US in 2002 in the aftermath of a number of major corporate and accounting scandals, above all the collapse of Enron and subsequently of their auditors, Arthur Andersen. Among its provisions, it prohibits professional services firms from doing audit and certain consultancy work for the same client. SOX also extends the scope of statutory audit to a range of internal fraud-prevention controls. ICAEW comments, “The most effective way to ensure the reality of independence is to provide guidance centred around a framework of principles rather than a detailed set of rules that can be complied with to the letter but circumvented in substance.” The focus of these blog posts is the UK system, characterized by this “principles”-based approach. It should be noted however that in the US context, largely as a consequence of SOX, threats to independence are subject to far greater “bright line” legislative specification and governmental regulation.

Finally, an there is the Audit Firm Governance Code, a code of best practice applicable to firms that audit more than twenty listed companies. This comprises the Big Four and four other large professional services firms. As far as I’m aware this doesn’t contain any provisions which are not chiefly oriented to the audit of financial statements.

Okay! Onward!

Rather dull note for Public Administration Select Committee about digital democracy

This is a note about the way forward for online participation of the UK citizenry in our government.

Public consultations justly have a bad name. So indeed do stakeholder consultations.

For a period of several years I was involved with private sector market research and, frequently, public sector consultations. Confidentiality forbids me from sharing specific examples, but I grew used to hearing the growing horror of stakeholders gradually realising how limited their scope of influence was, on issues on which they were more passionate, more informed, and more directly influenced by than whoever was driving policy, and despite the trappings of open and responsive governance.

E.g.:

(a) I think the government tends to forget that it has a responsibility to assess the invested interests of those who participate in consultations. In particular, there is a tendency to think that businesses are experts in their own affairs, and that they can therefore be expected to make the best decisions for the economy and the country on sector-specific issues. In fact we live in such an interconnected world that there is no such thing as a purely sector-specific issue; the government have a responsibility to be critical of these sources, and to try to work out what the big picture is.

(b) I think stakeholder mapping is usually very badly done. There is often a slippage in sense from "anyone whom this issue affects" (a good definition of a stakeholder) to "those who are already influential in this area, and/or already present themselves as knowledgeable" (a poor definition).

(c) My strong intuition is that no matter how hard government (or any organisation) promises to itself it really will listen to its stakeholders this time, the only way to genuinely drive policy change through stakeholder engagement is to delegate real power to stakeholders - or at least to allow stakeholders to impose penalties if, in their considered judgement, the engagement process has not been material.

The issue, of course, is then whether you have the courage to delegate power to stakeholders who may disagree with you!

*

None of the following suggestions really make my heart leap, but I find it tricky to come up with anything better.

I am slightly worried that such measures might be adopted and executed badly. They might then serve as evidence that online participation is simply impractical.

So here are a few thoughts on online participation (apologies; they are slightly disjointed).

The UK should be leading the way in online participation, not half-heartedly trying out experiments we know will probably fail, so that we can have the excuse, "Well, we gave it a bloody good shot!"

I suppose a good principle to begin with is what the de facto citizen is like.

We shouldn't romanticize the notion of the citizen. We are often: overworked, harried, short on time, money, patience, passionate about issues but also nervous and defensive about a lack of deep knowledge of them, willing to learn, but also distrusting of all information on topics of public interest, without necessarily the time nor the inclination to be critical of that information, and craving the security and simplicity of authoritative information sources, or of timeless truths (typically cynical and/or vague dogmatism).

So "involving" us isn't just a matter of making government more permeable to the pre-existing knowledge, energy & deliberative resources of the citizenry. It is also finding ways to cultivate & nourish those things.

The trouble about polls is that there are just so many of them. One avenue worth exploring is making participation in official polls a bit more like voting: for instance, you can only vote in these polls once per month, so you'll choose the issue that's important to you, and not feel guilty about the rest. (Twelve votes per year might be better than one per month, for the sake of flexibility).

Letter-writing & petitions obviously have their place, but they feel rather dated. They take time and energy. The results are often discouraging (38 Degrees campaigns are a partial exception). They are only indirectly educative. We surely now have the technology to make the activities of government far more transparent, and to be able feedback on those activities at a fine grain, and for our government to be minutely responsive to that feedback. We have social networking and social browsing; why not social scrutiny of government?

We need to think about the notion of the "popularity" of information, and how the effects of particular items "going viral" could be usefully included in the interface between public and government. Not everything can receive equal attention, but it is not for the government to decide what is and isn't important. Nor can we any longer trust the opposition and traditional media to make such a selection. We the public must also be directly involved in determining relevance. At the same time, this is obviously risky territory. Information can become popular based on shallow considerations.

So in terms of online interaction, we also need to think about the relationship between the serious & official, and the casual, satirical, just-for-fun. Obviously not every tweeted joke, every "OMFG!" or ever photoshopped jpeg is an equally venerable and sacred exercise of a democratic right. At the same time, if you simply exclude the flippant, anarchic & playful side of things, you risk creating an arena for engagement which is dull, excessively hard work, and unrepresentative of the citizenry - being dominated by anoraks, humourless sorts, and special interests. You fail to cultivate & nourish the knowledge, energy & deliberative resources of the citizenry. (We also need to think about trolls. We also need to think about astroturf).

I don't have any big answers, but a small example might point us in roughly the right direction. Scenario A is that there is a comments section beneath Parliament TV. It obviously looks rather like the thread of pretty much any YouTube clip, and it confirms everyone's suspicion that we, the British public, are idiots.

Scenario B is that Parliament TV is integrated with Facebook, Twitter, Tumblr, etc., as well as bespoke social networking sites. Users can comment on issues raised and share specific segments of the filmed proceedings, or transcripts thereof, and can filter the annotative activity of other users in a variety of ways. There is, for example, a "readers who liked this comment tended to also like these comments" feature, so it's not just a matter of what's popular or not - people with common purposes or ideas can find one another. There are incentives for independent fact-checking to flourish. Where jargon or specialised language appears, it is easy to click through to get definitions and explanations. Those readers who persevere on such a path can even find educative resources in the underlying theory. You may start your day seeing a funny photoshopped pic, proceed to the news story on which it is based, then find yourself enrolling in an online course in economics or environmental science. Openness is a guiding principle throughout. The online architecture has been designed with the frictionless experience of the end user, the citizen, kept firmly in mind.

But at the same time, we learn what the culture of parliament is like. What is it like to be an MP or a civil servant? What restrictions do they feel upon their speech and action? What is it they think the public don't understand about their position? What is it they feel they are blamed for that is beyond their control? How do even those who are in government feel their ability to govern as they would like, to make the decisions they really want to make, is restricted by their party, by the markets, by the economy, by specific commercial interests, by existing statutes and case law, by the media, by the European and international context? It may sound paradoxical, but e-democracy isn't just about increasing and improving the participation of the public in governing. It's also about increasing and improving the participation of the governors in governing.

To summarise slightly reductively: online participation needs to be frictionless, fun, and educative. It needs to imaginatively exploit cutting edge technologies, not just transfer pre-digital practices online.

What have the more far-thinking and imaginative theorists of e-democracy proposed? Has the Public Administration Select Committee interviewed anyone who fits that description?