Judicial views on auditing from the nineteenth century

Abstract

The issue of legal liability presented an early challenge to the nineteenth century auditing profession. Litigation against auditors was to be a two-edged sword. On the one hand, court proceedings revealed the deficiencies of some amateur audits and presented an opportunity for the profession to denigrate the non-professional audit. On the other hand, having effectively captured the market, professional, qualified accountants found that their work often failed to meet judicial standards. The accountancy profession during the late nineteenth century faced a crisis of confidence and a risk of litigation very similar to today's climate. This paper reviews the early cases containing auditing issues and dicta related to the auditing profession in an attempt to locate the professionalisation of the auditing profession in its historical context. It will be seen that the attainment of professional status was achieved against a background of litigation, adverse publicity and critical judicial commentary.