ons of that period (Staub, 1942).” Fraud was still the main concern of auditing in the late 1890’s, therefore the main objectives of auditing were the detection/prevention of fraud and the detection/prevention of errors. Auditing in the United States began to branch from the heavy influences of Britain in the 1900’s. The main objectives of auditing in the United States were to obtain accurate financial conditions and earnings of an enterprise and secondly to detect fraud and errors. Auditors in the early 1900’s were primarily used to submit a certified balance sheet to banks to obtain credit. Bankers were no longer loaning money based on good character, but now focused on the definite knowledge of the financial affairs of the borrowers. Large life insurance companies also began using independent public accountants to certify published statements since the Hughes investigation of 1905(Staub, 1942). The improvement of accounting practices and standards were the main concerns of the accounting community in the early 1900’s. The Interstate Commerce Act of 1906 prescribed a uniform annual report should be submitted to the Commission and what accounts should be kept. Any deviation from the Interstate Commerce Act was forbidden and punishable. The business world also began to feel the need for improvement of accounting principles when the businessmen’s pocketbooks were being squeezed during the World War I era. Income taxes before World War I were at such a low rate that they had no or little effect on the accounting practices of the business world. In 1917 and 1918, the U.S. Government significantly increased income taxes and a new tax was enacted that was a heavy graduated excess profits tax. These taxes made the business world see the need for improvement of accounting principles and the need for accountants to mitigate the increase in taxes (Staub, 1942). Public accountants were now commonly called on f...
