Derek Matthews' book on the history of auditing is a fascinating and timely book. Matthew's introduces the research covered by his book with reference to Enron and where it is likely to be placed in the history of auditing. However, Matthews' book is much more than just another book about corporate scandals or a string of historical facts about auditing. It is a product of a substantial research project and it provides a reasonably comprehensive narrative history of the audit process in Britain. The book is focused on the history of auditing in terms of the techniques used in the audit, but it also discusses the purpose of the audit, audit quality and costs, as these relate to the audit process.
This book fills some substantial gaps in addressing “the impoverishment of historical sources about audit practice” (Power, 1992). The research upon which the book was based was funded by the Institute of Chartered Accountants in England and Wales (ICAEW) and, unlike some previous historical research, it relies on multiple research methods. Matthews and his co‐researchers use questionnaires as well as oral history, which entailed a programme of interviews with both retired and active chartered accountants. Such comprehensive oral history of accounting and auditing is uncommon, and is consequently valuable and well received (Morley, 2006). Over and above these sources of research/historical data, Matthews uses surveys of company reports (this part of the project was funded by Leverhulme Trust) for research of such reports and companies' audit reports.
Matthews' book is particularly appealing to researchers interested in the economics of auditing. It is written from a positivist perspective, using empirical methodology to provide evidence on the idea that audit service is part of the financial services sector and that auditing in the last hundred years responded to the needs of the auditee. In other words, the causes of the developments in auditing process are determined by the economic changes occurring among audit clients. Matthews' methodology is therefore different from a number of works in critical research (Cooper, 1997; Funnell, 1997; Sikka et al., 1998; Gaffkin, 1998; Keenan, 1998; Merino, 1998) which tends to explore cultural and social constructions in discussing developments in auditing.
For a non‐historian, Matthews' book also provides a wealth of interesting information. Current issues, such as auditor independence, methodologies used by audit firms in the auditing process and the impact of IT (computers) on auditing are well placed in historical context in Matthews' book. It transpires from his findings that auditee size and economic factors, such as the increasing cost of labour and competitive pressure on audit fees, are the major factors in the development of auditing over the last 100 years, particularly in the last forty. Possibly one of the most interesting conclusions that Matthews offers is that the increased commercial pressures on auditors in recent decades has not only had an impact on auditors' independence but even more so on audit techniques, leading to the possibility of a decline in the quality of audit assurance.
Matthews' book also provides a brief review of US auditing and its influence in Britain. Accordingly, it might also be of some interest to US researchers and historians. For readers and researchers in other Anglo‐Saxon countries, which adopted British corporate law and the auditing profession model from the nineteenth century onwards, this book is a valuable source of historical information that has considerable relevance to developments in auditing in their own countries.
The book consists of nine chapters. The first chapter provides an introduction. It explains how the research project underlying the book eventuated, as well as the methodology used. Chapter 2 discusses the “bookkeeping audit”, while Chapters 3, 4 and 5 discuss the rise and the use of audit documentation as well as the use of audit techniques, such as testing, sampling, and reviews of internal control systems. Chapter 6 discusses the “balance sheet audit”, while Chapter 7 explains computing and auditing. In the latter chapter, computers are seen as an exogenous factor in the audit change process. Chapter 8 discusses the introduction and the increasing use of such audit concepts as audit risk, materiality and analytical review. Chapter 9 provides an excellent conclusion to the book. This conclusion could provide a good resource for teaching both undergraduate and postgraduate audit students.
Overall Matthews' book on history of auditing is a worthwhile read. The book reads well, has an extensive bibliography, and could be a useful resource in one's own research.
