Auditing - Financial Analysis, Risk Assessments & Compliance
Auditing - Financial Analysis, Risk Assessments & Compliance
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Despite these early developments, it was not until the late 19th century,
with the innovation of the joint-stock company (whose managers were not
necessarily the company’s owners) and the growth of railroads (with the
challenge of transporting and accounting for significant volumes of
goods), that auditing became a necessary part of modern business. Since
the owners of the corporations were not the ones making the day-to-day
business decisions, they demanded assurances that the managers were
providing reliable and accurate information. The auditing profession
developed to meet this growing need, and in 1892 Lawrence R. Dicksee
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Legal liabilities
Given the nature of the audit function, auditors increasingly find
themselves subject to legal and other disciplinary sanctions. Unlike other
professionals, however, their liability is not limited to the clients who hire
them. Auditors are increasingly held liable to third parties, including
investors and creditors, who rely on the audited financial statements in
making investment decisions.
The issue of auditor independence grew more difficult toward the end of
the 20th century, especially as auditing firms began offering
nonattestation functions (such as consulting services) to new and existing
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