This paper studies the identity transitions of East German audit recruits during the fundamental ideological, economic, and societal change brought about by the reunification of Germany in 1990. Integrating the identity work literature with key concepts from Pierre Bourdieu and Erving Goffman, we build on semi-structured interviews with two groups of recruits—university graduates and former state auditors—to explore and theorize the marked differences observed in these recruits' transition processes. In line with wider processes of territorial stigmatization, we argue that the West German audit firms pragmatically instrumentalized their local personnel, seeking to deploy them without intending to integrate them into the profession. In turn, the audit recruits met with this exertion of symbolic violence by managing a ‘spoiled identity’. The university graduates found it easier to recognize and accumulate legitimate forms of capital, thereby submitting themselves to the inculcation of the profession's socialization process, which ultimately yielded their institution into the profession. In contrast, the former state auditors' local knowledge and access to client networks provided immediately useful capital to the West German firms, which, however, sought to retain a status differential vis-à-vis these recruits. As a result of such strategies of condescension, the former state auditors maintained key aspects of their identity as a salient part of their self-conception. We further highlight the role of the local audit offices in the recruits' transition processes, as they evolved from flexible spaces, which allowed for experimentation and improvisation, into more structured units. This process embedded professional values and practices, thereby creating localized office identities.

ABSTRACT This paper draws on the social control and sensemaking literatures to study how a Big 4 audit firm in the Netherlands sought to contest the national oversight body's inspection findings on one of its audit engagements. Our case study leads us to develop the concept of professional ambiguity to capture the multiple, coexisting meanings and interpretations of audit evidence and professional judgment inherent in audit work. We show how professional ambiguity creates a space for discursive struggles between auditors and inspectors, enabling audit firms to engage in strategic sensemaking aimed at contesting looming inspection findings. In our case, this process entailed the mobilization of senior firm actors who reinterpreted the focal engagement as broadly acceptable—or “good enough.” Yet, when enacting this pragmatic reframing, the firm ultimately failed to overturn the oversight body's findings. Despite this outcome, we argue that audit firms seek to mobilize professional ambiguity and engage in strategic sensemaking to reshape oversight bodies' interpretations of audit engagements in inspection processes.

ABSTRACT Errors reflect unintended deviations from plans or goals and commonly carry negative connotations. Although errors cannot be eliminated, they offer opportunities for learning and innovation. Audit firms employ powerful mechanisms, such as review processes, to prevent or detect audit errors and safeguard their work in the public interest. At the same time, the profession recognizes positive long‐term outcomes of errors in terms of continuous learning to enhance auditor skills and, ultimately, audit quality. The current study employs semistructured interviews with Dutch auditors to investigate how they manage the tensions emanating from extant public and regulatory demands for flawless audits while embracing errors as opportunities for learning. Our findings reveal that auditors express a positive attitude toward openly communicating audit errors, but, in substance, they espouse negative emotions and defensive strategies for fear of repercussions. We argue that the excessive emphasis audit firms and oversight bodies place on error prevention conditions auditors into perceiving errors as negative and avoidable events. We assert these attitudes result from the profession's efforts to maintain status and legitimacy in the eyes of the public and the regulator, where any auditor error may shed doubt on auditors' work in the public interest. In sum, our findings indicate that viewing errors as incompatible with audit work makes the profession susceptible not only to repeating errors but also to missing out on opportunities to improve services and to achieve innovation.