I found this paper, Early Evolution of Corporate Control and Auditing: The British East India Company (1600-1643 CE), by Dorota Dobija, to be very interesting history of the way markets evolved to respond to the separation of ownership and control long before anybody had ever heard of Berle & Means:
This article examines the early development of corporate control and auditing in the first four decades of the British East India Company. While, in the United States, mandatory auditing of public companies is commonly traced back to the reforms that followed the Great Depression, the origin of modern auditing as an essential tool of control in business corporations, this article argues, most likely occurred four centuries earlier with the emergence of the first joint-stock companies. Separation of ownership from control in those organizations provided an impetus for the rise of auditing and auditors. This paper focuses on the role of control and auditing in effective corporate governance.
Parallels exist between the meaning of auditing in the early East India Company and auditing in today’s corporations. In the first stage of its development (1600–1643), auditing in the East India Company was characterized by ex ante verification of transactions before money could be disbursed from its coffers. However, the increasing number, size and complexity of transactions soon rendered the ex ante approach unwieldy, and led to ex post verification of financial transactions that were used to prepare the financial statements. This paper traces the evolution of auditing over the first forty-three years of the company, and ends with a discussion of some parallels and implications for modern auditing and control.
