Internal Audit Profession-Brief History

Most of us have been doing Internal Auditing and providing wonderful support to achieve the organisational objectives. But it is very much possible that we do not know the history of evolution of the profession. In order to give a brief insight on the subject matter, research was done and following findings were observed.
The practice of internal audit was first formally described in 1938, with the foundation of the Institute of Internal Auditors (IIA),with booming growth of business size and structure it was felt that many businesses did not have appropriate controls in place to permit full achievement of their strategic objectives.
Initially, the IIA comprised only three accountants and a secretary. Early work proved surprisingly successful in convincing the Executive Board of IBM that they should spend vast amounts of money having some complete stranger tell them they needed to sign and date all reports to confirm they had been reviewed. Initial fees were in the order of $700 (worth $12bn at today’s prices). These funds were shrewdly invested, by means of a blind trust, to yield an income equivalent to that of a small (well-controlled) country.
In 1939, the Nazi Party were the first government to recognise the importance of having a well-controlled mechanism for running an evil, world-conquering regime. The IIA were contracted to undertake a series of efficiency reviews in the early weeks of World War II.
However, Heinrich Himmler failed to authorise a proper scope for the work, with the inevitable result that everything became subject to a series of "Value for Money" reviews. Even the Gestapo operated under the cloak of fear that, one day, a pleasant-but-determined auditor might demand to see a complete breakdown of the number of traitors who had been interrogated and, hence, reports on the number successfully converted to patriots.
During the next six years, the IIA became the most feared body in the world, consuming resources and eventually crushing fascism into the ground by demanding to current authorised signatory lists relating to the Holocaust and undertaking regular stock takes at the Eastern Front.
Eventually, the ever-increasing need to comply with interim internal audit reports ensured that the war machine ground to a halt. The Allied Forces, apparently unconcerned with appropriate document retention strategies or enforcing segregation of duties amongst senior managers, swept across Europe and introduced democracy. They also introduced an interesting range of sexually transmitted diseases, but that's not important when freedom is at stake.
With the final report on World War II, a total of 6,395 management action points were raised to enhance controls in the remnants of Germany. The resulting emergence of Europe as a global economic power has since been touted as the greatest success of internal audit in terms of adding value.
During the dark years of the 1960s and 1970s, a number of rival organisations began to challenge the professional standards and objectivity of the IIA. These included such organisations like The Institute of Chartered Accountants in England and Wales, EDP Auditors Association (now known as the Information Systems Audit and Mind Control Association); Auditing Practices Board; The "Real" IIA (a radical splinter faction of the original IIA); and Audit Bureau of Circulation.
To this day, regular street rumbles take place as the various bodies try to establish their supremacy above the others as the de facto providers of high quality, accessible and professional management assurance. Common weapons include slide rules, adding machines and cocktail sticks.
After the world war II, different management philosophy were evolved as growth and expansion was continuously increasing making the business process more complex and fast changing. This made it increasingly difficult for organizations to maintain control and operational efficiency. The shift to a war economy further expanded organizations' responsibilities for scheduling, availability of materials and laborers, compliance with government regulations, and an increased emphasis on cost finding. The Internal Auditing profession evolved steadily with the progress of management science after World War II. It is conceptually similar in many ways to financial auditing by public accounting firms, quality assurance and banking compliance activities. Much of the theory underlying internal auditing is derived from management consulting and public accounting professions.
Management found it impossible to visually observe all of the operating areas in their respective areas of responsibility or to have sufficient personal contact with individuals who directly or indirectly reported to them. In seeking ways to deal with these new problems, management appointed special staff people to review and report on what was happening and to probe for the why. These people came to be known as "internal auditors."
The internal audit function varied greatly as to the number of people assigned to perform it and in the scope and nature of the work being done. In some organizations, internal auditors were used to check on routine financial and operational activities with a heavy emphasis on compliance, security, and detection of fraud. In others, internal auditors were given higher levels of status and were asked to analyze and appraise more substantive financial and operational activities.
As the profession evolved, a number of internal auditors began pushing vigorously for greater understanding and recognition of their function, and began to develop contacts and relationships with professionals in other organizations in an attempt to share problems and to advance their common interests. With the implementation in the United States of the Sarbanes-Oxley Act of 2002, the profession's growth accelerated, as many internal auditors possess the skills required to help companies meet the requirements of the law.
Sources: The IIA, WIKI and other online journals