Who created the profession: the first independent accountant-auditors of the 19th century

It is one thing for a law to say "an auditor shall be appointed", and quite another for there to be a person capable of doing the job. Accounting historians even call 19th-century company audit an "amateur audit": the auditor's role was often performed by people who were not accountants, and there was no formal audit report. For the occupation to become a real profession, specialists were needed who knew the accounts in depth and worked independently. We still hear some of their names today.

Key points

1. A path that began in a bankruptcy office. According to the Deloitte company's history page, William Welch Deloitte was born in 1818 and, at the age of 15, left school and joined the office of the official assignee in bankruptcy for the City of London.
2. His own practice, 1845. According to the same source, Deloitte began working as an independent accountant from 1845 and had about 100 clients in his first year, most of them connected with bankruptcy cases.
3. Railway accounts. The 19th-century railway companies were the largest joint-stock companies of their time. In an 1855 letter quoted on Deloitte's history page, Deloitte described himself as accountant to the auditors of the Great Western, Lancashire & Yorkshire, South Wales and other railway companies. A study of the London and North Western Railway also examines how external accountants began to be engaged to assist the company's auditors: the professional accountant first entered the field as the auditor's assistant.
4. Investigating fraud. According to Deloitte, in December 1856 Deloitte was brought in to investigate a major fraud at the Great Northern Railway company. Later, after the 1867 Act on railway companies, he took part in drawing up the forms required for railway accounts. In this way the auditor's experience also began to influence legislation.
5. From small offices to partnerships. According to PwC archive material, Samuel Lowell Price practised as an accountant from 1849 and, as work grew, took on partners in 1865. The move from an accountant working alone to an office with several partners made it possible to examine large clients.
6. Leaders of professional societies. According to the magazine of the Institute of Chartered Accountants of Scotland (ICAS), the first president of the Society of Accountants in Edinburgh was James Brown. The charter of the Institute for England and Wales (ICAEW) names William Turquand as the first president and Robert Harding as vice-president; according to the ICAEW list, before that, in 1877–1880, Turquand had been president of the Institute of Accountants.
7. The founders' legacy. These figures demonstrated three principles in practice: an auditor must know the accounts in depth, be independent of the management being examined, and answer to a professional society. The same ideas can be seen in today's auditing standards.

Then and now

Example

How a 19th-century accountant thought can be seen in a simple cash count (compiled by the author, hypothetical figures).

At a hypothetical transport cooperative called "Navro'z karvon", the month-end balance per the cash book is 12 400 000 soum. The independent accountant Hamid aka counts the cash.

What matters here is not the figure itself but that Hamid aka does not depend on the chairman of the cooperative: he does not hide the difference, finds its cause with documents and reports to the members. Deloitte and his contemporaries turned exactly this independent "second pair of eyes" into a profession.

Link with the previous and next periods: we have a separate article about the 19th-century laws and the first institutes, while these points are devoted to the people who created those institutes. In the 20th century their experience turned into international standards on auditing.