Railroads played a major role in the growth of the nineteenth-century US and British economies, and their contribution to the development of accounting and auditing has attracted considerable scholarly attention. 2 The first important aspect of railroad accounting is related to the way they were founded – as joint-stock companies, a type of business organization that created agency problems and the need for governance. Because railroads grew effectively and efficiently, they came to need accounting information and auditing services. Since accounting and auditing were unknown or little developed in the mid-1800s, the railroads had to devise effective practices to operate their businesses. Many of the procedures they developed were later adapted for use by industrial corporations. As a result, the railroad industry can be looked to for an explanation of the formulation of many accounting techniques.