An audit is an independent examination of a company’s financial statements performed by a licensed CPA.
The objective is to provide reasonable assurance that the financial statements are free of material misstatement, whether due to error or fraud.

An audit results in a formal CPA audit opinion, which is often required by banks, investors, or regulators.

Ancient Beginnings

The roots of auditing can be traced back to ancient civilizations. In Mesopotamia around 3000 BC, records were meticulously kept on clay tablets, detailing transactions, including the exchange of goods and services. As trade expanded, the need for accuracy and transparency in financial dealings became paramount. This necessity laid the groundwork for what would eventually evolve into the formal practice of auditing.

The Birth of Double Entry Bookkeeping

The Renaissance marked a significant transformation in financial accounting. In the 15th century, the Italian mathematician Luca Pacioli published “Summa de Arithmetica,” which introduced the concept of double-entry bookkeeping. This revolutionary system required that every transaction be recorded in at least two accounts: debits and credits. This not only enhanced the accuracy of financial records but also laid the foundation for modern accounting and auditing practices.

The double-entry system allowed for a more rigorous approach to financial transparency and accountability, providing a clear trail of money flow. This innovation was critical, particularly as trade networks expanded across Europe, requiring more robust financial oversight.

The Purpose of Auditing

Auditing serves myriad purposes, historically driven by the need for credibility and accountability. Initially, it was primarily focused on ensuring accurate financial reporting to prevent fraud and mismanagement. As societies grew more complex, auditing evolved to encompass the assessment of operational efficiency, compliance with regulations, and the safeguarding of assets. Today, the purpose of auditing extends to providing stakeholders—be they shareholders, investors, or regulators—with an independent verification of financial statements.

Auditing Under Monarchies

During the age of Monarchies, particularly in the 16th and 17th centuries, auditing took on additional significance. Kings and queens employed auditors to scrutinize the financial activities of their treasuries and ensure that public funds were managed efficiently. The role of auditors during this time was essential in maintaining the integrity of state finances.

In England, for example, the role of the auditor was formalized with the establishment of the Public Accounts Committee in the 19th century. Auditors were tasked with reviewing government expenditures, a practice that reinforced the principles of accountability and transparency in governance.

Chartered Accountants: Guardians of Investor Interests

As capitalism took root in the 19th century, particularly in America, the role of accountants evolved further. The emergence of chartered accountants marked a new milestone in audit history. These professionals specialized in financial reporting and auditing, providing essential services to businesses and investors.

In America, the establishment of the American Institute of Accountants in 1887 (now known as the American Institute of CPAs) solidified the profession’s credibility. Chartered accountants played a vital role in safeguarding investor interests, particularly as capital markets grew. They conducted audits to assure investors about the integrity of financial statements, helping to foster trust in the emerging economic landscape.

The Global Spread and Modern Era

The principles of auditing and accounting spread globally, adapting to various legal and regulatory environments. Standards were developed, such as the International Financial Reporting Standards (IFRS), to ensure consistency and transparency in financial reporting across borders.

Today, auditing has evolved into a highly specialized field, involving not just financial audits but also operational, compliance, and forensic audits. Technology has further transformed the landscape, with data analytics and artificial intelligence enhancing the efficiency and effectiveness of audits.

Conclusion

The history of auditing is a fascinating journey that reflects the evolution of commerce, governance, and accountability. From ancient record-keeping practices to the sophisticated auditing frameworks of today, auditing remains a critical component in the fabric of global finance. As businesses and economies continue to grow increasingly complex, the role of auditors will undoubtedly adapt, ensuring transparency and trust in financial reporting for generations to come.

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The History of Certified Public Accountancy in the United States

Early Beginnings

The profession of accounting in the United States has roots that date back to the early 19th century. As the United States transitioned into an industrial economy, the need for systematic financial reporting and accountability became evident. In the 1880s, the concept of professional certification emerged, largely prompted by the increasing complexity of business and the demand for skilled accountants.

The first known CPA designation was established in 1896, in New York. The state began issuing “certificates” of proficiency to candidates who passed a rigorous examination crafted to ensure their competence. This concept of certification soon spread, leading to the establishment of similar laws and examinations in other states.

Development of the Licensure

By the 1900s, several states adopted their own certification laws, often influenced by the New York model. The early 20th century saw the profession formalizing, as various state boards of accountancy were established to oversee the licensing and regulation of CPAs. The American Institute of Accountants (later the American Institute of CPAs or AICPA) was founded in 1887, further standardizing the profession and advocating for higher qualifications and ethical standards.

Growth in Number of CPAs

In the decades that followed, the number of licensed CPAs in the United States grew significantly. The Great Depression in the 1930s brought about increased scrutiny in financial reporting, further emphasizing the need for qualified accountants. The profession saw a surge in demand as businesses and regulators sought transparency and accountability.

By the 1950s, there were approximately 40,000 CPAs practicing in the U.S. The number continued to grow steadily, driven by post-war economic growth, increased corporate activity, and regulatory requirements. As of the year 2025, estimates suggest that there are approximately 800,000 CPAs actively practicing in the United States, reflecting a substantial increase over the past century.

Current Landscape and Licensure Process

As of 2024, CPAs are licensed in all 50 states, with each state having its own licensing board that establishes the requirements for obtaining and maintaining a CPA license. To become licensed, candidates typically must meet the following criteria:

1. Educational Requirements: Candidates must have completed a specified number of college-level accounting and business courses, often totaling 150 semester hours of education, which usually requires earning at least a bachelor’s degree.
2. Examination: Candidates must pass the Uniform CPA Examination, a rigorous four-part exam administered by the AICPA. The exam tests proficiency in accounting, auditing, taxation, and business concepts.
3. Experience: Most states require candidates to have a certain amount of professional experience under the supervision of a licensed CPA, typically ranging from 1 to 2 years.
4. Ethics Exam: Many states also mandate that candidates pass an ethics examination.

Maintaining Licensure

CPAs are required to keep their licenses active by fulfilling continuing professional education (CPE) requirements. This ensures that CPAs stay updated on the latest developments in accounting standards, tax laws, and regulatory changes. Typically, CPAs must complete a specific number of CPE hours every year or every few years, depending on state regulations.

Conclusion

The profession of Certified Public Accountancy has evolved considerably since its early beginnings in the late 19th century. As of 2024, with around 800,000 licensed CPAs, the profession continues to adapt to changes in the business landscape, technology, and regulatory demands. The commitment to education, ethical standards, and public accountability remains at the core of the CPA profession, ensuring that CPAs play a critical role in maintaining the integrity of the financial systems in which they operate.

A review is a CPA attestation engagement that provides limited assurance.
It involves analytical procedures and inquiries rather than detailed testing.

A review report states that the CPA is not aware of any material modifications needed for the financial statements to be in conformity with the applicable accounting framework.

You may need an audit or review if:

• A bank or lender requires it
• An investor or ownership agreement specifies it
• A regulator or licensing body requests it
• You are preparing for growth, refinancing, or a transaction

If the requirement is unclear, a short discussion can usually determine the correct level of assurance.

Sometimes—but only if the financial statement users agree.

Banks and investors typically specify whether they require:

• An audit
• A review
• Or another form of assurance

Choosing a lower level of assurance than required may delay financing or approval.

An attestation engagement is when a CPA provides assurance on information prepared by management, such as financial statements.

Audits and reviews are the most common types of attestation engagements for nonpublic companies.

Timelines depend on:

• Size and complexity of the company
• Quality of accounting records
• Responsiveness to requests

As a general guideline:

• Reviews are typically completed faster than audits
• Early planning significantly reduces delays

Management is responsible for the financial statements.
However, CPAs often provide guidance, clarification, and adjustments as part of the engagement—while maintaining independence.

No. Many small and mid-sized private companies obtain audits or reviews due to:

• Financing needs
• Ownership requirements
• Risk management considerations

Engagements are scaled to the size and complexity of the business.

Most nonpublic companies use:

• U.S. GAAP
• Other acceptable frameworks if permitted by users

The appropriate framework is determined at the start of the engagement.

No. While compliance is important, many companies find that an audit or review:

• Improves financial discipline
• Identifies risks or control weaknesses
• Enhances credibility with stakeholders
• Supports better business decisions

If issues arise, the CPA discusses them with management and works toward resolution before issuing the report, when possible.

The goal is accuracy and clarity, not surprises.

The first step is a brief conversation to determine:

• What level of assurance is required
• Who the financial statement users are
• Expected timelines and scope

From there, an engagement can be tailored to your company’s needs.