Essay on History of Auditing

3126 Words13 Pages
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|The History of Auditing |
|A detailed overview |
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Margin borrowing by investors allowed huge amounts of debt to be taken on without proper risk mitigation. Investors, knowing no better, had dumped small fortunes into the market. The fragile infrastructure of the system couldn’t handle the load and eventually caved in. Those companies that would survive the crash needed standardization and change in order for the investors’ faith to be restored. The Federal Trade Commission stepped in to fill this need. The first official document: “Verification of Financial Statements,” which was solely dedicated to provide guidance for audit, was released the same year as the crash. This document dove further than the previous decades’ pamphlets did, focusing in on small and medium sized companies, as well as the general need for the customized auditing tailored to each different companies, based on need. In response to the extreme amounts of personal wealth destroyed during the stock market crash in 1929 and the ensuing depression, Congress was forced to take even more action. The suggested guidelines outlined by the FTC were just not enough to ensure a stable economy. The regulation of business and the accounting firms is commonly recognized to have been born just after the Securities and Exchange Commission (SEC) was established in the mid 1930s. Despite public investment being in an advanced stage at the time, corporate regulation
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