Chapter 2 A Brief History of the United States Standard Auditor’s Report

In this chapter, we study the evolution of the auditor’s report from its emergence more than 150 years ago to the present. During this period, the standard auditor’s report has evolved from a rudimentary form to its current and more sophisticated structure with a clearly defined title, addressed to specific entities, and systematically divided into sections that are meant to highlight certain aspects of the audit examination. We describe the major events that have affected the financial reporting environment in the United States and, in turn, how these events have transformed the auditor’s report over the last century. As will be demonstrated in the chapter, the progression of the presentation of the auditor’s report, from being a certification to the standard report of the present day, has been guided primarily by the kind of information that investors and creditors wanted to know in relation to their investments in public companies. However, the desire for that information was often influenced by periodic incidents of corporate scandals. These scandals made it imperative that a monitoring mechanism was established to maintain the confidence of investors and creditors in the reporting of financial information about companies and the overall functioning of the capital markets.