What are exams for?

My daughter is about to start her exams (again!), but what are they for?  This might seem a silly question, but the answer determines an awful lot of other issues.

Broadly the choice is that exams are either to show the innate intelligence of children or to determine which children are most suited to further education or various jobs.

When I did exams I believe that they were to determine who was most suited to further education and jobs but somewhere they seem to have morphed into ways of showing innate intelligence.  Does this matter?  If you believe (as I do) that innate intelligence is not a good correlator for the ability to do a good job outside of academia then it does mean that exams are no help for this.

Universities and employers still appear to want to select the "best" (or perhaps most appropriate) candidates. However exams no longer provide this information.  I also recently got involved in a conversation about extra time for exams.  In the real world if someone needs additional time, or special surroundings that is potentially a drawback to carrying out their duties, but exams no longer tell this.

The problem is that universities are starting to set their own exams because they cannot determine what they wish to know from public exams, and I suspect that more employers will start to do the same.  When I was recruiting we used literacy and numeracy tests together with psychometric profiling - what is the literacy and numeracy other than an exam?

So why do we have the exams we do?  Answers on a postcard please!