ABSTRACT
For the first 5,000 years of recorded history, most auditors worked for the government. Few people, other than monarchs, owned more assets than they could manage personally. Only rulers of large estates or territories depended on stewards or appointed officials to maintain custody of their assets and enter into transactions on their behalf. Auditors, from ancient times through the Middle Ages, helped emperors, pharaohs and kings maintain control of
their realms. Auditors ensured that those entrusted with the ruler’s assets kept proper records and did not use the assets for their own benefit. Deterring and detecting theft were the auditor’s primary responsibilities. The first widespread demand for audits of private enterprises arose during
the industrial revolution of the nineteenth century. British railroads, textile mills, and steamship lines required enormous amounts of capital. Such operations could be financed only through the formation of joint stock companies. Directors oversaw the huge enterprises on behalf of absentee stockholders. To protect investors from directors’ incompetence and/or malfeasance, the British Companies Act of 1845 required corporations to keep detailed accounting records and undergo an annual audit by a committee of shareholders. Accounting historian C.A. Moyer described the purpose of British statutory audits as follows: “The principal function of an audit was considered to be an examination of the report of stewardship of corporation directors, and the most important duty of the auditor was to detect fraud.”2
