n 1904 an international Congress of
Accountants took place in St. Louis. This first
“world congress” drew representatives not only from
across the United States but also from England,
Scotland, Holland and Canada. This congress “was a
major event in the formative years of the U.S.
accounting profession,” according to the Journal
of Accountancy’s AICPA Centennial Issue,
published in 1987. The rise of large corporations in
the decades before the congress—and some spectacular
panics and stock market crashes—underscored the
importance of proper accounting procedures and
financial reporting. This gathering of accountants
at the dawn of the new century was intended as an
event at which the attendees could consider what
kinds of services and procedures businesses required
and what the profession must do to meet those needs.
It took place against the backdrop of the St. Louis
World’s Fair, which attracted nearly 20 million
visitors to 1,500 exhibit buildings where they could
sample groundbreaking inventions that ranged from
the wireless telegraph to the ice cream cone. A
look back at that first meeting shows not only
some of the origins of the profession but also the
importance of the issues being discussed. In a
profession that was still inventing itself in many
ways, the attendees were debating topics such as
auditing, accounting for profits and government
issues, all of them timeless themes. In addition,
the proceedings show the quality of ideas being
generated by those involved. At a time long before
codified generally accepted accounting principles
or auditing standards, participants were
developing and discussing some of the standards
and procedures that would form the basis of
professional practice. “A century is a
good time to take stock,” notes Gary Previts, CPA,
professor of accountancy and associate dean of
undergraduate programs at the Weatherhead School
of Management at Case Western Reserve University
in Cleveland. Previts says many of those who
attended the first world congress would become
important figures in the profession. “What stands
out is how many names are familiar and still
recognized today as potential or actual Accounting
Hall of Fame members,” says Dale Flesher, CPA, a
professor at the University of Mississippi’s
school of accountancy. In addition, in reviewing
the proceedings of this first gathering, “I am
impressed that it is a very important portfolio
about the ideas of practice. The ideas reflect
fundamental issues that face us today,” Flesher
says. This article highlights that pivotal event.
KEY THEMES
Consolidating the profession.
An important but unspoken agenda of
the congress was to try to find a way to organize
the profession nationally. Great Britain had a
more highly developed accounting profession at the
time and many British accountants—such as Arthur
Lowes Dickinson—who had come to the United States
to practice became very influential, but the
American accountants wanted to build their own
profession. “Federal recognition of the profession
of the public accountant can be secured only by a
strong representative national body speaking with
one voice from Maine to California,” the
congress’s chairman, Joseph Sterrett, said in his
opening remarks. Many of the people behind the
congress hoped to lay the groundwork for a single
recognized national organization, but some in
attendance had reservations about the idea.
“There were the same kinds of tensions we see
today, between large and small firms and between
global and regional organizations,” Previts says.
“People learn how to manage these issues, but they
don’t necessarily solve them.” One year
after the congress, the movement toward a single
national organization was strengthened by a merger
of two early national bodies, the Federation of
Societies of Public Accountants and the American
Association of Public Accountants, based on
discussions that had begun at the congress.
A burgeoning market economy.
What was the foundation of the
nascent accounting profession in 1904? The rise in
wealth and commercial activity during the last
half of the 19th century was one factor, according
to Sterrett. “Within the past few years, the
wealth of an empire has been concentrated under
the control of a few great corporations,” he
noted. These developments in the economy led to
better housing, education and transportation. They
also created a demand for more timely
information—a need still felt today. “Men
responsible for the conduct of large enterprises
today require not history but news,” Sterrett
said. “It is of little avail to find out three or
six months afterward that last year’s business was
conducted at a loss.” Sterrett also
outlined the standard accounting professionals
should attain. “The public accountant touches
business life on every side,” he said, adding
elsewhere in his speech that “the crowning glory
of our profession is that it must ever stand for
the highest ideals in the life of the individual
and for the slow but sure evolution of society
into a state where honor and honesty shall not be
mere abstractions.”
Audit companies. Form of
practice was a hot topic at the 1904 meeting and
one the profession has revisited and refined over
the years. At stake were questions such as whether
it would be acceptable for auditors to work in a
corporation—or as part of another business—or
whether they should, instead, work only in
professional practices. More fundamental, however,
was the question of whether an audit should be
presented as something performed by an individual
or by a firm. “In those days,” Previts says,
“there was still a proprietary view of a personal
professional service,” which favored the idea that
an individual performed an audit. “That
changed during the last century because of global
business and consolidations. Capital allocation
processes grew to be so complicated and so
global,” that it became impractical to expect one
person alone to conduct the audit, he says.
At the congress in 1904, George Wilkinson, a
founder of the Federation of Societies of Public
Accountants, questioned the commercialization of
the profession with what were then being referred
to as “audit companies,” but practitioner James
Miller responded that, as long as a professional
had the proper character and ability, “I believe
we cannot say to our fellow accountant how he can
practice.” “The way you practice will
always be controversial because that’s where the
economic realities meet the profession’s ideals,”
observes Previts. “When that collision happens you
are likely to have some friction.”
Measuring profits. Arthur
Lowes Dickinson, the senior partner of the U.S.
branch of Price Waterhouse at the time, gave an
important speech to the congress on the profits of
a corporation. “In its time it was the equivalent
of an intellectual bombshell,” Previts says, even
though in its simplicity the speech did not
encompass topics such as discounted cash flow or
current values. The discussion covered issues such
as the definition of profits, the legal
considerations, the applicable accounting
principles, methods for dealing with capital or
fixed assets, liabilities and consolidated
earnings statements. “From an accounting point of
view, it was a tour de force because it addressed
all the issues involving profit determination at
that time, and provided a good reference point for
understanding the theory of profit and loss,”
Previts says. In an age of speculative ventures
and rampant monopolies, money was lent based on
expected profits, and Dickinson “knew this was the
right time for income determination to become a
more prominent issue.” A few years later,
Dickinson’s ideas would become the basis of
Uniform Accounts, a document published
by the Federal Reserve Board that drew from the
work of a group of distinguished accountants who
provided guidance on audit procedures and the form
of financial statements. “It was a significant
intellectual contribution he was making in 1904,”
Previts says. Dickinson is remembered among other
accomplishments for creating the format for a
consolidated financial report for U.S. Steel Corp.
LOOKING BACK IN 2004
For those who would like to learn
more about the 1904 gathering, the proceedings of
the Congress of Accountants can be found on the
official 10th World Congress of Accounting
Historians Web site at
http://accounting.rutgers.edu/raw/aah/worldcongress/highlights.htm
. The 10th World Congress of Accounting
Historians, which will take place in St. Louis and
Oxford, Mississippi, August 1–5, will take the
subject of world congresses as one of its themes.
—Anita Dennis ANITA DENNIS is a
journalist who specializes in business topics and
is a former JofA managing editor.
| | Profiles in
Accomplishment
Some of the distinguished early
leaders of the profession in attendance at
the first world congress, most of them now
in the Accounting Hall of Fame at Ohio
State University in Columbus, were
|
George O. May , who was
involved in the creation of the landmark
1934 document, Audits of Corporate
Accounts, a joint effort between
the Institute and the New York Stock
Exchange. Along with Robert Montgomery,
May was part of the group of accountants
who contributed to Uniform Accounts,
a key early auditing document
published by the Federal Reserve Board.
Robert H. Montgomery ,
who was an important contributor to
early auditing and taxation literature,
as well as a driving force behind the
1904 congress. A cofounder of Lybrand,
Ross Bros. & Montgomery—a forerunner
of PricewaterhouseCoopers—he also was
instrumental in the development of what
would become the AICPA. He was involved
in launching the publication that
ultimately would become the Journal
of Accountancy. |
Ernest Reckitt , who was
an important local practitioner from
Chicago and a mentor of Andrew Barr, a
distinguished early SEC chief accountant.
Elijah Watt Sells , who
was a founder of Haskins & Sells,
the first large firm established by
American accountants at a time when
British professionals dominated the
profession. A prize given to the top
scorers on the CPA exam is named in his
honor. | |