Internal Auditing in Mid-Nineteenth Century Railroad Companies : Comparing the Practices of American and British Railroads

This paper examines internal auditing practices in American and British railroad companies in the mid-nineteenth century. It is a historical/empirical study based on annual reports, minutes and brochures released by those companies. Previous studies on internal auditing have not focused on its history in detail, especially on mid-nineteenth century practices. Some railroad companies had already started using internal auditors by the late 1850s. Their appointment may have been prompted by geographical expansion, the growing scope of operations, increased use of accounting and statistics to control businesses, or the need to detect fraud. This study addresses the following questions as we present the historical evidence: Who performed the audits? What was audited? How was it audited?