A short and somewhat selective history of how Internal Audit services came to be provided as a distinct service by the audit firms. It’s selective and somewhat biased because I developed it with the help of a gentleman who was instrumental in the initiative described below at Continental Bank. He was my boss there, my first job out of college. He is currently a partner at PwC.
• The first large scale co-sourcing of internal audit – Continental Illinois National Bank and Trust and PriceWaterhouse (PW) in 1991.
• At that time, Arthur Andersen was the only firm that had an Internal Audit practice. At about the same time, E&Y External Auditors had just won a large engagement at US Bank in Minneapolis.
• PW won an engagement at Union Planters in ’91, but it also was a joint engagement with the external audit team.
• In early 1990s, PW still didn’t have a separate Internal Audit practice, Coopers and Lybrand had started one, E&Y was just starting one and D&T was planning on it.
• In 1995, Jefferson Wells was founded as an independent alternative to the Big X firms for internal audit services. Bought by Manpower, Inc in 2001.
• In 1997, PW started their IA practice.
• In June 2002, Robert Half International formed a new subsidiary called Protiviti (a group risen from the ashes of Arthur Anderson’s Risk Management Services practice and acquired by Robert Half), to provide independent internal audit and risk management services.
• The Sarbanes Oxley Act of 2002, signed July 30, 2002, prohibited a company’s external auditors from also providing internal audit outsourcing services, thereby precipitating the growth of the separate Internal Audit practices within the accounting firms and the phenomenal growth of many other independent firms providing this service as well as Sarbanes-Oxley services. (Resources Global, Hudson Financial Solutions, Control Solutions, Smart Business Advisory, etc. are some larger non-audit firms that are active in Chicago area)