Read more on the History of Audit…
o Exchequer Auditing
o Auditing in England, Scotland, Italy
o Early Audit Records, and the Livery Companies of London
o Auditing Municipalities
o Parochial Authorities
o History of Auditing Post 1700
Origin of Auditing
The origin of auditing goes back to the early times of accounting. Whenever the advance of civilization brought about the necessity of one man being entrusted to some extent with the property of another, some kind of check upon the fidelity of the former was in place. The ancient Egyptians imposed such a check by arranging that the fiscal receipts should be recorded separately by two officials. In later times, ancient Greeks instituted a system of checking public accounts by means of checking-clerks, every public official having his accounts scrutinized at the expiry of his term of office. Ancient Romans too, as early as the time of the Republic, recognized the salutary distinction between the official who authorises or orders revenue and expenditure and the official who has the duty of handling cash ; and they developed an elaborate system of checks and counter-checks among the various financial officials. In Italy in the Middle Ages, the transactions of a cashier appear to have been checked by means of a separate record of them kept by a notary.
In the list of English Exchequer officials in the reign of Queen Elizabeth, of the year 1593, we find mention of five auditors, each of whom received fees amounting to £10, the Lord High Treasurer receiving £368 and his robes, and the Chancellor of the Exchequer £113 6s. 8d. and his livery.
The demands made on the accounting officers by the Lords Auditors in Scotland, and the penalty incurred by failure to comply therewith, are shown in the following extract from the Exchequer minutes :—
Exchequer Minutes Excerpt
Apud Hcdyruidhous, septimo Septembris, anno 1580.— The quhilk day the lordis auditouris of the chekker ordanis the provest, baillies of Dundee, makaris of the baillie comptis of the said burgh, to compeir personalie befoir thame the day to be affixit in the nixt chekker be the preceptis to be dirrect thairupoun, and thair bring and exhibit with thame the said day to be prefixt be the said preceptis the perfyte comptis of thair commoun guidis, and siclyke of the annuellis and Freris landis disponit to thame be the kingis grace for sustentatioun of the hospitallis and pure of this instant yeir, 1580, and of the yeir nixt heireftir, 1581, to be sene and considerit be the saidis lordis auditouris; under the pane of rebellioun and putting of thame to the home,1 with certificatioun to thame, and thay failye, the said day to be affixt, as said is, being bipast, ordanis letteris to be direct to denunce thame our soverane lordis rebellis, and put thame to the home.
The Scots Acts of Parliament of this period also contain references to the auditing of the national accounts. Thus, Acts of James VI. of 1593 and 1598 provide for the appointment of commissioners for auditing the accounts of the Collector-General. Later, in the reign of Charles I., (Act of 1640), power was given to a committee of the Estates to call the collectors and others to account, and to “appoynt auditoures for heiring and receiveing” the accounts thereof.
The Worshipful Company of Carpenters
The Worshipful Company of Carpenters furnishes yet another example (and more might be given) of careful auditing, from the fifteenth century onwards. Every year at the Court of the Company held in September, a committee consisting of the ” old Master and Wardens ” and some others was appointed to examine workmen’s and tradesmen’s accounts, and to ” the new Master and Wardens and as many as would attend ” was delegated the duty of auditing the accounts of the retiring Warden, and upon their report and the payment of the balance, if any, the retiring Warden’s bond was returned to him.
The Master and Wardens were not allowed ” to sitt at the table with the other assistants untill the auditors have putt their hands to the accompt.” A special gathering was held on the audit day, on which the work of the audit was not allowed to interfere with the more serious business of dining.
In 1671, before the audit was completed, ” as the day was farre spent and the dinner approached,” business was postponed to the following day. In 1602 a question having arisen as to whether the accounts had been properly audited, it was declared that they had been fully examined “and allowed of for good,” and a fine of £5 was imposed on any one who should animadvert upon them as though things had not been ” orderlye and duely performed.” In spite of all precautions, however, abuses crept in. At the audit day in 1673 (on which day only a ” frugal dinner” was ordered) the auditors reported that they found many exorbitant expenses in dinners & reparacons, with divers frivolous and extravagant expenses both at home and abroad, as well upon publique meetings & courts, as in private with old masters and others, and that severall sanies of money were given to the poore over and above their pencons on the qter eves & on hydaies without any order of Court whereby the stock of this Company is unnecessarily wasted & the Company run further in debt & little likehood of getting out unlesse a speedy retrenchment be or some other remedy or redresse found out. And for that purpose they therefore represented the matter to the consideration of this Court; whereupon this Court after some debate in ye premisses doth think fitt and so order upon vote That no more superfluous money be given to the poore on the (jter day eves besides their pencons nor any other money in charity then or othertimes without order of Court or unlesse already ordered and settled. Item that no publique Auditt dinner from this day forward exceed xv1′. Item that noe dinner at the eleccon of Lord Maior on Micftas day & of Sheriffs & on Midsomer day doe from henceforth exceed 50s each day. Item that no dinner on the Lord Maiors day upon his swearing at Westminster doe from henceforth exceed xxvli. Item that noe dinner upon any ordinary or private monthly court day doe from henceforth exceed xl8 a time. Item that the dinner and the expenses on each Court day exceed not xx8 a time.
In 1769 an ” Auditt Room” was ordered to be ” built of brick and arched over, the better to secure the Company’s writings and plate from fire.”
Merchants of the House of Glasgow
The accounts of the Merchants’ House of Glasgow, the earliest of which now existing is of the year 1624, seem to have been regularly audited, and are mostly certified by the Clerk of the House as having been found correct and duly vouched. An audit of private accounts in England about this time is shown by the Household Books of Lord William Howard of Naworth Castle,1 covering the period from 1612 to 1640. The total of every branch of the receipts and of the payments, as well as the total amounts of the receipts and payments, is certified thus: ” Ex. per Tho. Clay, Auditor.” The epitaph of an auditor of such accounts may be seen inscribed on a tomb in the parish church of Chesham, Buckinghamshire, which is as follows :—
Here lyeth part of Richard Bowie who faithfully served divers great lordes as auditor on Earth but above all hee prepared himselfe to give up his account to the Lord of Heaven, and now hath his quietvs est, and rests from his torments and labors. He was a lover of God’s ministers, a father of God’s poore, a help to all God’s people, and beleeves that his flesh, which with the Sovle was long tormented, shall with the same Sovle be aeternally glorified.
He died the 16th of December 1626 and of his age 77.
The accounts of the City of London were, as we have seen, audited from the time of Edward I.
In the same century the auditors of the accounts of the Treasurer of Glasgow, of the year 1659-1660, report: ” Whilk compt befor wryttin, charge and discharge therin conteined, being of befor at lenth hard, red, sein and considered, calculat and laid, was allowed and approvine in everie heid and article therof.”
In Stirling in 1695 steps were taken to make the audit more independent and effective by enacting “that neither provosts nor bailies should be auditors of the accounts, but that, in addition to the ordinary number of auditors chosen by the town council, two merchants should be chosen by the guildry and two tradesmen by the incorporated trades; that the auditors should have the exclusive power to approve or reject the accounts as they see cause; that the burgesses should be entitled to inspect the accounts and state objections during the auditing; and that members of council should, at their election, be sworn to observe these rules in all time coming.”1
In King’s College, Aberdeen, from 1695, the Mortification accounts are certified by the College authorities in the following cautious manner: ” Approved the foresaid Accompts in all the Heads and Articles thereof (errors and mistakes always excepted).”
During the period which we have just considered, namely, from the fourteenth to the seventeenth century, auditing, or ” revising accounts,” was also in operation in Italy.