gether with associated issues affecting the contemporary practice of auditing, are examined in this study.
The certifications of financial statements by independent auditors are intended to assure the users of such statements that financial performance has been presented fairly in accordance with generally accepted accounting principles.5 If this outcome of an audit is to be attained, two significant actions by the auditor are required to gain and maintain public confidence. First, the auditor must distance herself or himself from the company audited.6 Second, fraud detection must be the primary focus of the audit.7 With regard to each of these requirements, the auditor is often confronted with conflicting demands. A short excursion into the history of auditing helps to clarify the contemporary situation.
The earliest audits known concerned the manorial household.8 In the manorial household, the auditor was a person of some importance; however, his importance was not recognized outside of the manor. The audit of the household was followed by the subjecting of certain public officials to an audit of their public accounts. This extension of the function of the auditor initiated the concept of the auditor's independence, which is essential in contemporary society. The methodology of auditing changes with the requirements placed on the auditor. When the objective of the audit was to account for the activities taking place within the household, the auditor's method required penny accountability. When the objective of the audit changed to the determination of the fairness of the financial position reflected by financial statements, the auditor's methods required the development of tests and relationships.
The auditing profession began to experience major change subsequent to 1850. Between 1850 and 1905, the auditing objective was expanded to include the detection of clerical error, in a...