Internal auditors of large organizations have historically been dominated by managers. Recent changes in federal regulation of financial reporting require managers of publicly held corporations to be dominated by directors. These requirements require a fundamental change in the relationship between managers and internal auditors, and create an expectation of internal auditor objectivity. This paper will describe the history of internal auditing services and objectivity, and identify reasons why internal auditors have not been objective in the past. This history has continuing relevance to agency theory, the rule of law, and governance of publicly held corporations.