How Auditing Companies Have Evolved Over The Years

Auditing companies have the job of analyzing the financial performance of entities, usually companies, for broadcast to the outside world. This is an old profession, but the advent of computer technology has changed it beyond recognition. Modern auditing can be applied to public bodies or to companies, with the most common auditing carried out on companies who are trying to raise further finance. There are a handful of large companies who secure most of the business, simply because the firms paying for the audits know their names command respect.

Auditing has an extremely long history overall, but the twentieth century was when there was the first real growth in the number of professional auditing firms. This happened as a result of tightening government legislation, increasing complexity in company structure, and the fact that so many companies wanted auditing carried out so they could present themselves to investors for funding. This trend has gathered pace in recent decades, with the top firms greatly increasing in size. It is very hard for a new company to compete in the auditing business, simply because they have no prestige name.

It may seem that an auditing business has a relatively easy task, in that all they have to do is analyze data from other businesses. They never have to produce any products or offer a service in a highly competitive market. They get all of the business they need from established clients, and they will keep getting business because of their established name and reputation. These things are all true, by the way, but there is another side as well. This is a very exacting industry, and in the recent Enron scandal where a major company went bankrupt, the accountants with the responsibility for auditing Enron were put out of business.

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The Enron scandal has had a dramatic impact on accounting firms, as thy realize that they simply cannot afford to make the kind of mistakes which were made there. We are seeing a move towards external auditors mirroring the procedures of internal auditors, as it becomes obvious that an analysis of the way a company operates is likely to uncover any anomalies. Once you can see a clear pattern, it becomes easy to see breaks in the pattern.

The biggest change of all for auditing companies has been the introduction of computer software into the profession. It is not so much that procedures have changed, more that the options have become so much greater. The ability to process many calculations at any one time has meant that a far more in depth survey can be carried out across many departments. This has also created new possibilities of discovering anomalies, where money or goods have been moved from one department to another with falsified accounting. Times are changing for the major auditing companies.

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