Accounting Sign Changes and the Early Development of Modern Internal Audit

This paper uses Baudrillard’s orders-of-simulacra theories to investigate the use of inspections at the Hudson’s Bay Company. These inspections were comparable to “modern” internal audits. They were being conducted in 1871, 50 years prior to the accepted date of the arrival of modern internal auditing. Inspections were started as the Hudson’s Bay Company was getting easier to manage, which was contrary to the accepted history of internal audit; the modern internal audit was believed to have been developed to assist with the management of large and complex companies dependent on financial statements and financial information. Investigating with Baudrillard’s ordersof-simulacra allowed the analysis of inspections to be observed outside conventional understandings. The findings suggest that as accounting practices of the Hudson Bay Company became more abstract and detached from reality, inspections were devised to ensure an explicit attachment to reality. These findings also suggest that modern internal audit may not have been a respons e to increased complexity; it may have been a response to the increased abstractness of financial accounting.