History of Auditing in ICAI Module Quiz

Auditing in ICAI Module: A Historical Perspective

Introduction

Auditing is an essential function in organizations, whether public or private, large or small. Its role in ensuring financial integrity, accountability, and transparency cannot be overemphasized. This article provides a historical perspective on auditing, focusing on the establishment and evolution of internal auditing as part of the Institute of Internal Auditors (IIA) module.

Early Beginnings of Financial Auditing

Historians trace the roots of auditing back to ancient civilizations such as Egypt and Rome, where merchants verified receipts for grains brought to market. However, the modern era of auditing emerged during the 19th century with the expansion of corporate business activities. Demand grew for systems of control in companies conducting operations in numerous locations and employing thousands of people.

Establishment of IIA in 1941

The IIA, which has grown to become the most prestigious and globally recognized organization of internal auditors, was founded in 1941 by Victor Zinn Brink, John B. Thurston, Robert B. Milne, and others. Their mission was to promote and develop the practice of internal auditing. The first book on internal auditing, "Modern Internal Auditing", written by Victor Z. Brink, was published the same year.

Shift from Transaction Verification to System Reliance

After the establishment of IIA, the auditing approach underwent significant changes. There was a shift from verifying individual transactions in the books to relying on the internal accounting system and the flow of information. This led to the development of risk-based auditing, where auditors ascertain and document the accounting system and the flow of information, reducing detailed substance testing and making greater use of analytical procedures.

Evolution of Auditing Practices

The introduction of computerization and improved transportation and infrastructure enabled companies to become global. Consequently, auditors started to rely more on advanced computing auditing tools to facilitate their audit procedures. Unfortunately, scandals in the 1980s and 1990s led to additional regulations focusing on corporate governance, risk assessment, and compliance.

Over the years, the IIA has expanded from a small group of enthusiasts in New York City to a dynamic global organization with over 200,000 members worldwide. This growth required selfless volunteerism, dedicated professionals, and individuals passionate about making internal auditing a proud and distinguished profession.

In conclusion, auditing has evolved from its early beginnings as a means of verifying transactions to a robust practice focused on ensuring financial integrity, accountability, and transparency. The IIA module plays a crucial role in promoting and developing these practices globally.