The Auditing Profession from Ancient Civilization to Today
Records indicate that the audit shows up in civilizations of ancient Greece, China and Egypt, as financial documentation and regulations were needed while conducting business. Though not thoroughly documented, Grecian practices mimicked those of today. Circa 522-486 A.D. revealed an example of the first auditors working as the spies of King Darius of ancient Persia. These individuals were auditing by command from the King and to keep track of the business of the governors in ancient Persian territories. In 1494, Luca Pacioli published the first book on accounting in Venice, Italy, which showcased double entry accounting systems of the merchants of the time.
Summary of the Historical Development of the Modern Auditing Systems
Until the 1930s, the auditing practice was based solely upon transactions relying on internally collected data. Prior to that in 1844, British Parliament had passed the Joint Stock Companies Act requiring directors to report financial data to shareholders through a statement, which became what we know as the Balance Sheet. At this time, it was not required that an auditor should be an accountant, but in 1900, the New Companies Act was passed to change this.
Within the United States, audit practices have progressed since the late 1800s. This evolution towards data collection using the balance sheet continued. The 1929 Stock Market Crash was due in part to the misreporting of massive amounts of financial data. The founding of the Securities and Exchange Commission (SEC) in 1933 influenced the auditing profession worldwide, as the SEC provides regulation of major stock exchange markets within the United States of America. After the SEC was created, companies were then required to issue audited income statements and balance sheets when they traded on the stock markets.
In the 1960s, the auditing profession began to refine itself as the caretakers of the financial statement. The 1970s saw a transition from verifying transactions to relying upon systems. This change was a response to the growth and complexity within companies making it increasingly difficult for auditors to continue verifying every transaction and thus shifted an auditor’s reliance upon a company’s internal controls. Further evolution occurred when auditors began to rely upon risk-based auditing practices where the auditor turns focus to risky areas within a company for analysis.
Development into Modern Auditing Practices Today in the United States
As the size of some companies skyrocketed and the complexities became greater. In 2002, Sarbanes-Oxley Act was passed, which extended the duties of the auditor to scrutinize the adequacy of internal controls over solely financial reporting.
Trusted Southeastern US Audit Firm
In 2019, the auditing profession is emerging as a promising career, lending to the credibility of an entity’s financial statement. The evolution of the audit and auditing profession is rich, starting with early forms of bookkeeping occurring along major merchant cities in ancient civilizations. At The Baird Audit Group, we pride ourselves on upholding the rigors of the complete audit, from planning to resolution of auditing reports. Located in Augusta, Georgia, we are ready to help you with your audit today, call us at (706) 855-9500 or reach out via our website.