chapter  10
24 Pages

Auditing

WithJosephine Maltby, Roy Chandler

There are numerous reasons for companies 2 to undergo an audit. Watts and Zimmerman (1983: 614) famously characterise it as a mechanism to enable managers to add credibility to their position as stewards or to confirm the reliability of information issued to investors. Others argue that audit is not market-driven: companies undergo audit when it suits their needs, for instance as a means of avoiding stringent regulation of their financial reports or to obtain professional advice. Historical evidence provides an opportunity to study the adoption of audit in a variety of different legal and economic environments.