ABSTRACT
There is a continuing debate about the reasons for which firms undergo audit. In an influential paper, Watts and Zimmerman (1983: 614) characterise audit as ‘part of the efficient technology for organising firms’, enabling managers to add credibility to their position as stewards or confirming the reliability of information issued to investors. Their opponents argue that audit is not market-driven: firms undergo audit when it suits their needs – for instance, as a means of avoiding stringent regulation of their financial reports or in order to obtain professional advice. Historical evidence provides an opportunity to study the adoption of audit in a variety of different legal and economic environments.
