Introduction
In this paper we will examine thoroughly what exactly an independent auditor does, what his role is within the company, what responsibility he has to the company, clients and shareholders as well as the government and any additional third parties.
History of Auditing as a profession
Background
The establishment, growth, and evolution of the contemporary internal auditing profession is closely intertwined with the history of The Institute of Internal Auditors (IIA), an organization founded in the United States in 1941. In the recently released edition of 60
Years of Progress Through Sharing, chronicling the history of The IIA, internal auditing historian Dale L. Flesher notes:
“The IIA’s 60-year history is illustrious and each of the highlights featured in this 10- year narration [supplementing the 50-year history of The IIA] have contributed to the organization that The IIA is today:
• The primary international professional association dedicated to the promotion and development of the practice of internal auditing.
• The recognized authority, chief educator, and acknowledged leader in standards, certification, research, and technological guidance for the profession worldwide.
• Global headquarters for 76,400 members in 141 countries.” (Flesher & McIntosh,
2002, ix)
Considering The IIA’s rather humble origins — a small band of 24 charter members who held the inaugural IIA meeting in New York City1 on December 9, 1941 — this worldwide expansion, continuing relevance, and increasing influence and recognition of The IIA and the internal auditing profession over the last 60 years constitutes remarkable growth and progress. Indeed, the internal auditing profession certainly appears poised for continued dynamic growth and promises to become “a profession for the 21st century.”2
II. Internal Auditing: An Historical Perspective
The demand for both external and internal auditing is sourced in the need to have some means of independent verification to reduce record-keeping errors, asset misappropriation, and fraud within business and nonbusiness organizations. The roots of auditing, in general, are intuitively described by accounting historian Richard Brown (1905, quoted in Mautz &
Sharaf, 1961) as follows:
“The origin of auditing goes back to times scarcely less remote than that of accounting…Whenever the advance of civilization brought about the necessity of one man being intrusted to some extent with the property of another, the advisability of some kind of check upon the fidelity of the former would become apparent.” (Ramamoort 2003)

What is the importance of an Audit?
Internal audits provide a number of important services to company management. These include detecting and preventing fraud, testing internal control, and monitoring compliance with company policy and government regulation. Smaller companies may require these functions even more than large companies. A small business simply cannot afford employee fraud, waste, or a government fine. Establishing an internal audit function provides a vital step in the growth of a small business.
Fraud
Small businesses lose millions of dollars every year to employee theft. Types of fraud committed by employees include skimming payments from customers, check tampering, cash theft and misuse of company credit cards, and improper payroll transactions. Many small-business owners may believe they lack the staff to create an internal audit policy or carry out audits to combat these problems. However, even with a small staff, a small business may create a program for monitoring employees and their behavior. An announced policy of internally auditing financial transactions for fraud may inhibit an employee from misusing company resources.
Monitoring Internal Controls
A formal internal audit policy, even if conducted part time by individuals normally assigned other duties, performs other tasks besides detecting fraud. Examining policies and