ABSTRACT
The origins of auditing in Germany are linked to the Fugger and Welser trading houses and to the government trading companies which were founded in the sixteenth century. These often had many widely dispersed branches in Germany and beyond, whose managers were given considerable independence. This later became the reason for the introduction of internal auditing. The large amount of capital needed by the trading companies mostly came from external investors, which in turn entailed a separation of ownership and management. Senior executives had to write reports to account for their activities, and external auditors, who were independent of the company, were required to review these reports. The amendment of the German company law of 11 June 1870, which for the first time expressed a legal monitoring duty, was decisive for auditing in Germany. In 1870, § 225a, 2 Old German Commercial Code (Allgemeines Deutsches Handelsgesetzbuch, ADHGB), specified that the audit of the financial statements and the suggested distribution of profits were the duty of the supervisory board.
