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THE
PROFESSION OF ACCOUNTANCY
A THESIS
IN ACCOUNTING
by
Jimmle Lee Mason
Approved
Texas Technological College
• May, 1953
^Z^^^'^^ A
THE
PROFESSION OF ACCOUNTANCY
A THESIS
IN ACCOUNTING
Submitted to the Faculty of the Division of Graduate Studies of Texas Technological College In Partial Fulfillment of the Requirements
for the Degree of
MASTER OF BUSINESS ADMINISTRATION
by
Jimmle Lee Mason, B. B. A,
Plainview, Texas
May, 1953
TEXAS lECnNOLOGICAL COLLEGE LIBRARX LUBBOCK, TEXAS
yic t^
PREFACE
Accounting is an essential in our economy. As a
systematic aid for management, it makes large-scale produc
tion possible. As a method for expressing the results of
business operations, it provides a common ground on which
the different elements in business—investors, bankers,
government, labor, owners, and management can meet. As a
technique for recording business history, it provides a
basis for progressive planning. And, as a form of profes
sional activity, T.ith high standards set by a formal code of
ethics, accounting serves the public Interest generally.''
Because of the groi-rth of our economy in complexity
and specialization there is an ever increasing demand for
more and better trained accountants. This paper has been
written with the hope that it might be of some help to
prospective students of accounting and to those now engaged
in this study.
The first chapter gives the history of accounting
from 3600 B. C , when it was Just a part of a general field
of record keeping, to the present date, when it has become
a composite of many different and highly specialized branches.
Various "firsts'* in accounting are given, including the first
audit report, the first professional accountant, and the
ill
first accounting organization in this country.
The second chapter explains the educational require-
\ ^
\ mente of this profession. This profession has been growing
rapidly In the past few years, and it has become necessary
for the student of accountancy to become familiar with the
various phases and theories before he attempts to earn a
satisfactory livelihood in accounting. Such a program is
found in that leading to the degree of Master in Professional
Accounting now being offered by the University of Texas.
Also Included in this chapter is a short explanation of the
Certified Public Accountant's examination and several tables
giving some of the requirements, by states and territories,
that must be met before a person may qualify to take the
examination.
The third chapter discusses the ethics of the profes
sion and gives, in full, the sixteen rules of professional
conduct as set up by the American Institute of Accountants
In their by-laws and the procedure for enforcing these rules
among the members of the Institute.
The last chapter gives the outlook for employment in
public, private and governmental accounting and in teaching.
Included in the survey are such items as working conditions,
remuneration and duties. At present, peoplf=? graduating v lth
majors in accounting have a wide selection of Jobs in almost
any field of accounting. CO in en
iv
TABLE OF CONTENTS
Page LIST OF TABLES vi
Chapter
I. HISTORY OF THE DOUBLE ENTRY ACCOUNTINa
SYSTEM AND ITS aROV/TH IN THE UNITED STATES . 1
II. EDUCATION FOR THE ACCOUNTING PROFESSION. . . 25
III. THE ETHICB OF THE PROFESSION OF ACCOUNTANCY. kQ
IV. EMPLOYMENT IN ACCOUNTING 66 BIBLIOGRAPHY 84
LIST OF TABLES
Table Page
1. Age and Residence Requirements for the C, P. A. Examination by State 38
2. Citizenship and Character Requirements for the C. P. A. Examination by State 40
3. Education Requirements for the C. P. A. Examination by State k2
4. Public Accounting Experience Requirements for the C. P. A. Examination by State 44
5. Companies Intervieifing Accounting Majors for Employment in Private Accounting 76
6. Median Salaries of Full-Time Faculty Members, by Rank, in 51 Land-Grant Institutions; 1949-50 and 1951-52 79
7. Salary Rates Within Grades Showing Periodic Increases 62
vi
CHAPTER I
HISTORY OF THE DOUBLE ENTRY ACCOUNTING SYSTEM
AND ITS GROWTH IN THE UNITED STATES
Accounting as a profession has Just recently been
recognized, but the art of accounting is nearly 6,000 years
old. At first, it apparently was not a separate art, but
Just a part of a general field of record keeping. The earli
est records known to us today were found in Babylonia, dating
back to 3600 B. C.^ Other records, left by the Jews, date
back to the days of Abram, The British Museum has some
contracts that were written In 2300 B. C. Also, archaeolog
ical excavations in Suza (Africa) have produced evidence
that laws governing the recording of merchants* accounts
were issued under Hammurbl, who ruled as King of Babylon
from 2285 to 2242 B. C.^ Although these earliest records
could not be called books of accounts, they showed a method
of record keeping that Included the elements of law and
^Arch Rounsaville, "Some Little Known Facts About How Accounting Got To Be What It Is Today," The Journal of Accountancy. TThe American Institute Publishing Company, Sept. 1949;, page 232.
^Dr. Curt Gruenberg, "Early History of the Accounting Profession," Tfte Accountants Digest, page 221.
accounting. The scribes were considered of paramount impor
tance, for they kept their kings informed as to the amount I of wealth the treasury contained. At times these scribes
were given the death penalty for negligence, something for
the modern students of accounting to consider.
The career of scribe in ancient Egypt was a very
honorable and profitable one, but it was very exacting in
Its requirements. There were two schools of scribes at this
time In history, one at Memphis and the other at Thebes.
Any young man that was fortunate enough to be allowed to
enter these schools was expected to leave them with a
thorough knowledge of the language, literature and history
of his country, as well as the ability to write and draw
with almost perfect skill. Furthermore, he had to be well
versed In law, management of personnel, general administra
tive procedures, mathematics and bookkeeping. Upon graduation
from any of these schools, he automatically became a member
of the educated official class.
Probably the first approach to the separate status
of books of accounts is the records of a firm of bankers in
Babylonia about 1000 B. C. The wealth of this firm was
enormous, enabling it to undertake financial ventures of any
denomination; it employed bills of exchange and checks in
transactions. The accounting officers in Babylonia were
also called scribes; they recorded the receipts and disburse
ments of any properties in the community.
3
Municipal accounting originated about 500 B. C. in Greece.
Physical inventories, records of receipte and disbursements,
and computations of rents and interest were prepared by them
and made known to the public as prescribed by law. L^ter,
In the Roman republic, a high degree of perfection was achieved
in bookkeeping, but there, as in many other fields, progress
stopped, and little improvement is noted throughout the dark
ages, although recording of taxes and other phases of govern
mental bookkeeping began again in England under William the
Conqueror in 1066.^
Modern accounting techniques are based on a double
entry system; therefore, this short history of accounting
will confine itself chiefly to infoirmatlon that involves
double entry accounting. This system records the full effect
of a transaction, usually involving tvro or more accounts,
whereas the sin le entry system may have e. transaction
recorded in only one account. The double entry system is
more precise than the single entry, as well as being very
adaptable to the various circumstances and situations that
arise in complex business organizations of the present time.
According to some sources,^ the ledger -ps the first
double entry book to be used. It probably had its origin in .—i—.^.«»j i • I timmmmmmm^ i I • « i n mmmmm-mm i i • li • • ttm^-^mmmammmmmmmmmmmm^i^m^m,^ I i i i ii i j , , ^ , ^ . ^ , , , . . ^ . ^ , , ^ ^ ^ ^
Edward Peragallo, Origin and Evolution of Double ^ntry Bookkeeping, (American Institute Publishing Company, New York, 1938), page 1.
the debtor and creditor relrtionshlps of the merchants. The
accounts of the ledger were divided vertically and these
accounts were supported by numerous memorandum books. Due
to the increase of transactions, assets, liabilities,
expenses and income were included In this ledger. Some time
later the Journal was created to consolidate the mnny memo
randum books previously used. Its origin lies in the era of
the commercial Renaissance, rather than with one person or
group of persons. It was during this period thpt everyday
transactions of business became more and more complex. The
entries in the Journal were classified as debits and credits
and with each transaction was carried a full explanation.
The records of the Massarl of the Comnune of Genoa,
dating from the year 134o, are the most ancient double entry
books still in existence today. This set of records was
used by the city of Genoa to keep a record of its finances.
It consisted of two ledgers: one ke' t by the two treasury
officials of the city, called Mrssari, and the othf r kept by
two Maestri Razionall.^ It was the duty of the latter to
check the work of the Massarl and to keep a duplicate ledger.
However, this system had probably been in existence many
years before this time as the ledgers are written in perfect
double entry iorm. More than likely this system was begun
around 1327 when many reforms were introduced in the Genoese
government. In the period before this, many frauds had been
^Ibld., page 4.
3
occurring in the government; so to prevent these, ledgers
and other similar records patterned after those used by
medieval banks, were kept. Although no ledgers of these
first banks are known to exist today, the earliest existing
bank records are a ledger and a manual of the bank of
St. George, dated 1408, and they do not differ in any impor
tant aspect from the records of the Massarl of the Commune
of Genoa."
The earliest writings on accounting were contributed
principally by Italians and began to appear about the time
Italy entered into a period of political decadence. The
writings did not appear until the double entry system was
well developed and widely used. The first writers were not
bookkeepers at all, but learned men who included in their
treatises a few chapters in all fields of knowledge.
For all practical purposes, this literature is
divided into three different phases or cycles, the first
lasting from 1458 to 1558.' During this period, neither the
writers nor the bookkeepers attempted to develop a theory
of double entry nor did they ever go beyond the needs of a
mercantile firm. These first writers were interested in
setting forth the mechanics of bookkeeping as developed by
^Ibid.
7lbld., page 53.
business. However, in the second cycle, extending from 1559
to 1795* a new element appeared. It was in this period
that double entry bookkeeping extended its field of applica
tion to other types of organizations, such as monasteries
and the state. With the widening of the sphere of bookkeep
ing, theoretical research was begun on the subject. The
third cycle extends from 1796 to the present time.9 During
this cycle, a complete theory of accounts has been developed
and bookkeeping has evolved into the practice of accounting.
Benedetto Cotru,'ll, a native of Dalraatia, is considered
to be the first to write on double entry accounting. He
was a Judge at the court of Naples under King Alfonso, and
under the son, Ferdinand, and was ambassador to many princes
and republics. His book, Delia Mercatura it del merchante
perfetto. was written because of the Insistence of a
certain Francesco Stefanl, a merchant of Ragusa. Cotru ili
was undecided for a time as to which language to use—Latin,
because Latin was more dignified and noble, or in Italian,
because Italian was more intelligible to the merchants. He
finally decided on Italian. In his dedication, he said that
he was often interrupted in his writing because of his many
other duties. According to the last page of his book, he
^Ibid.. page 78.
^Ibid., page 97.
^^Ibid.. page 5^.
7 finished It on Jluguet 25, 1458, but it remained unpublished
for more than a century. It was found by a certain Giovanni
Guiseppe, who had a copy made and brought it to Venice. The
book, a short treatise on the institutions of commerce, was
published in Venice in 1573. There is only one short chap
ter on bookkeeping in the work, but enough is said to estab
lish the identity of double entry.
According to Cotrugll, three books were necessary to
keep adequate records for every business: a ledger, a
Journal, and a memorandum book. The importance of record
ing the transactions of every business was also stressed.
He suggested that any merchant, unfamiliar with the art of
bookkeeping, should either learn it or hire a bookkeeper.
He recommended that all transactions be Jotted down in a
memorandum book as they happen, thus assuring complete and
accurate records. Later these were to be taken from the
memorandum books and recorded in the Journal, and at the end
of eaoh day they were to be posted to the ledger. He suggested
that a trial balance was to be taken at the end of each
year after all accounts vere checked. There is no mention
made of an inventory, but he suggested that all profits and
losses should be taken up in a capital account.
The most exacting and detailed writing on double
entry, in the form current at Venice in the fifteenth century,
was set forth in the renowned Distinctio Nona—Tractatus XI.
Particularis de computes et scrlpturis. included by Luca
8
Paciolo in his Sumna di arithmetica geometrica proportloni
et proprotionalita. which was published at Venice in 1494.^^
The treatise on bookkeeping was included in his Sumna de
arithmetica in order that it might be complete. The only
direct communication between the two is that a fair knowledge
of the principles of arithmetic is needed for the proper
application of bookkeeping. Paciolo, a Franciscan monk,
dedicated himself to the study of theology and mathematics
and traveled to the various cities of Italy teaching both
subjects. Paciolo Is the most important writer of this first
period. Shortly after his work was published, knowledge of
the double entry system was carried beyond the boundaries
of Italy, and was known as the Venetian method,
Quaderno doppio col suo riornale. second 11 costume 12
dl venezla. by Domencio Manzoni, published at Venice in
several editions dating from 1534, was the next most impor
tant work after Paciolo. Manzoni is probably the first
writer who was also a bookkeeper by profession. In addition
to being a bookkeeper, he was a teacher of penmanship,
abacus and bookkeeping. In his work, he said that he had
kept several sets of important books in Venice.
Many chapters of his work were copied word for word
from the works of Paciolo, but the value of his work lies
11 Ibid., page 55*
%
^2ibid.. page 60.
9
In what he omitted from Paciolo. He added to the text of his
work a complete and very instructive set of double entry
books, thereby revealing his knowledge as a practical account-
ant. There were several changes in procedure and in the
type of book to use for the various entries.
Other writers of this first period are Gerolame
Cardano, Alvise Casanova, Giovanni Tagilente, and Bartolomeo
Fontana, none of whom contributed much to the ideas advanced
by the first writers. It is quite interesting to note that
not even Paciolo had as the basis for his new concept the
equality of debit and credit resulting in the equilibrium
of the trial balance, but rather the proprietor's cap^tal
account, and its relationship to the other accounts. In
spite of this, the contribution of Paciolo was so sound that
It constitutes an underlying assumption In bookkeeping today
and has suffered no basic changes during the 450 years which
have elapsed since his time.
The literature of the period 1559-1795 reflects the
change brought about by the emergence of large scale busi
ness units. Double entry had outgrovm the bounds of the
simple, single proprietorship and was being applied to the
new kind of enterprise in which the owner and manager were
no longer the same person.
At the end of the Renaissance, Italy lost the great
political and commercial importance she had enjoyed, and
this probably caused the laxity in developing accounting
10
theory, as compared to the period before. This period shows
the beginning of accounting critique among writers and
sporadically accounting theory appears, but nowhere are these
fragments woven together to show any major change in theory.
The significance of this period lies in the fact that the
use of accounting was becoming widespread. Knowledge of the
system was made available by many translations of the best
Italian works of the first period, and also by the original
writings of authors of other nations, although these writers
drew heavily from the Italian treatises.
The beginning of the third, cycle in the development
of accounting was marked by the French Revolution which
brought about a great political and social upheaval trans
forming governments, finance, laws, and customs. This period
begins in 1796 and continues to the present time, France,
under the rule of Napoleon, was to serve as a model for the
new social order. When Napoleon made his descent into Italy
he set up a new democratic constitution, abolished feudal
laws and customs, encouraged education, built roads and
carried on a vast program of reconstruction.
Most Important to the progress of aooo\mtlng at this
time, however, was the complete reorganization of public
flnamoes. Prina, Napoleon*s minister of finance in Italy,
converted the governmental system of accounting to the
double entry system and regularly published the budget.^^
13i]2i4.. page 97.
11
After this was done in Italy, Napoleon sought to Improve
financial conditions all over his empire. Count Mollien,
the most famous accountnat in France, was called upon to
create a system that would allow better control of the wide
spread operations. This system, created by Mollien, was far
inferior to the system created in Italy by Prina, and never
proved satisfactory.
With Napoleon*s defeat at Waterloo, Austria took
possession of Lombardy and Venice, and restored to their
thrones all the tyrants of the Italian states overthrown by
Napoleon. Absolute autocracy triumphed again and the work
that had been done under Napoleon's rule was largely undone.
Wherever Austria ruled, the cameral system was used as the
standard method of governmental bookkeeping. Under this
system all transactions were considered as receipts and dis
bursements were classified accordingly. This system became
imbedded in custom and It was some time after the unification
of Italy before the Italians, who finally objected to the
cameral system's cumbersomeness and other shortcomings,
sought a more efficient system. Therefore, for the first
fifty years of the ninteenth century, progress was almost
stopped due to the complete use of foreign methods and theories
of accounting. After this, however, new theories were rapidly
developed and the basis for some of the present day principles
was laid.
The long evolutionary process of double entry has not
12
brought about many changes in the essential characteristics
and standards set forth by writers four centuries ago. Many
theories were advance, few of which contributed anything to
our present system. Logismography, created in this period
by Guiseppe Cerboni aroimd I872, was the only method that
created any sensation whatsoever. As a result of this new
system, Cerboni was made accountant general of the state
(Italy) in I876. This gave him the opportunity to apply
his logismography on a wide scale, which he did by apply
ing it to all state accounting, thereby bringing all the
elements of the administration under one system of bookkeep
ing.
The system Cerboni used had only two fundamental
accounts. One was the account which included everyone with
whom the employer had any dealings (employees, debtors and
creditors) and the other was the proprietorship account.^^
The first association of professional accountants,
the Collegio del Raxonati, was founded in the Republic of
Venice in 1851.^ The main purpose for the organization of
this association was to create the requirements for entry
into the field of accounting. The requirements for admission
created by this association were very similar to the modem
requirements used in licensing public accountants. They
^^Ibid.. page 103.
^^Gruenberg, OP. cit., page 222.
13
required the applicant to submit a certificate of fitness
signed by a magistrate, serve a six year apprenticeship with
a practicing accountant, and finally, pass an examination.
The only people allowed to practice accountancy were the
members of this assoication.
George Watson, born in 1645, is usually regarded as
the first professional accountant In Scotland. The first
accountant's report on record was made by George Snell of
London, following an examination of the books of a subsid
iary of the South Sea Company.
The next evidence of public accountants was about
1742 when the government of Milan issued provisions for the
amount of fees for professional accountants. However,
neither then nor many years later, could the accounting
profession have been described as overcrowded. The British
Universal Dictionary, for Instance, according to the Encyclo
pedia Brittanlca, contains the names of only five accountants
for the year 1790. In great Britian, the number of practic
ing public accountants did not increase substantially until
the large business operations, undertaken by limited liability
companies and the Bankruptcy Act of I869, clearly showed the
necessity for better accounting systems and for better control.
With the rise of industrialism during the nineteenth
century, professional accounting began its growth. Uruguay
was the first country in the western hemisphere to make a
legal distinction between the bookkeeper and the accountant.
14
Public accountancy received this recognition in Uruguay in
1825.^^
This distinction or recognition vas made by Arptentina
in 1836. Later, accountants began organizing in Scotland
in I854 and in England in 1870. In 1880 the Institute of
Chartered Accountants of England and Wales was given a royal
charter, whereby it announced as its object,
the elevation of the profession of public accountants as a whole, and the promotion of their efficiency and usefulness by compelling the observance of strict rules of conduct as a condition for membership, and by setting up a high standard of professional education and knowledge.^'
Public accounting, as it is practiced today in this
country, had its beginning in the I880's in the United States.
In Australia, public accounting was recognized in I885, when
the first accounting society was organized in that country.
Accounting societies were formed in France in 1881, in the
Union of South Africa in 1894, in Holland in 1895, and in
Sweden in 1899. Before the end of the century there was an
accounting organization in Germany, and public accounting
was well established in Canada.
With the turn of the century, the establishment of Mi .MM<w—>..MB>M>Mi.a«iiKMMiiaM«aMM^>..«aiiMnMHM.vaiBia>MlaMMMMHMMnaKaaiMMi^MMia^
^^Arch Rounsaville, "Some Little Known Facts About How Accounting Got To Be What It Is Today," Th? Journal of Aocountancy« (The American Institute Publishing Company, Sept. 1949), page 233.
^'Howard Brazee, "History of Accountancy," The Accountants Plges' , page 29.
15
public accounting accelerated greatly by the organiration of
professional societies and the enactment of legislation re
garding accounting. The profession was established in Poland
and Belgium in 1903, in Austria in 1904, Rumania in 1905,
Denmark in 1909, and Finland and Mexico in 1910. In 1906,
the state recognized public accountancy in Italy; Denmark
in 1909; Norway in 1910; Rumania in 1921; Finland in 1925;
and Poland in 1929. A society w e formed in Japan in 1917
by Japanese students, who had previously been sent to various
countries to study accounting, A decree, defining the
requirements for those who sought to become public acco\mtants,
was issued by the Republic of Cuba in 1927, Some progress
has been made in Chile, Czecho-Slovakia and in China, but
the profession does not exist in Russia, nor in most Central
and South American countries.
The accounting profession came to America with a
rich inheritance of European tradition, but united itself
with the New World, to become an American institution. The
accounting profession absorbed more and more American talents
while ignoring and discontinuing many of the European methods.
The immediate decade following 1875 witnessed the creation
of small associations of accountants in various states. As
early as 1882, the first association composed of both public
and private accountants within the United States was organ
ized in New York. This society was known as the "Institute
• ' : • : ' .
16
of Aooountants and Bookkeepers. ''1
Bstween 1880 and 1889 a firm of English and Soottish
a tioountants carried out the first Important public aooounting
work that was done in the United States. This work was for
an English syndicate which wished to put securities of Ameri«»
can Brewries on the London market. Aooounting was introduced
into the educational system of this country in 1881 at
Wharton School, which was founded as a part of the University
of Mnnsylvanla. The first American accounting firm, Baz*roW| K I
Wads, atitherie, and Company,! was founded in 1883, by two
members of an English accounting firm and an American actu-
ary«^^ In 1890, Jones Geasair and Company, now Price, Vater-
teouso,«and Company, was established and in this same period
llaokins and'Soils, and l«ybrand, Ross Brothers and Montgomery
wore also organised.
iis/> Because of the aotlTlties of accountants in New 7ork«
Pennsylvania and the other seaboard states and the rapid rise
of accounting in that decade, the first association of pro«> >
fessionml«aooountants was organized^ This association, •V:
created la 11186, was called the American Association of Publio
Aoootait«ntm« The first membership of the association con
sisted of approximately Ham persons.
^^3tUk** P*K* 29.
^'Aroh Roimsaville, "Some L i t t l e Known Facts About How Aooo«itl]ig><k>t To Be What I t Xs T^day," yh^ Journal of \fioountan|f. (The American I n s t i t u t e Publishing Company, Eept7l9ifri pagt 23^. v >
17
' With the passing of years it became apparent that
accountants should have a designated title as had members
of other learned professions. In 1894, legislation was
submitted to the State Legislature of New York. The tltlo
proposed was Certified Publio Accountant; also included in
the bill were educational requirements which had to be met
in order to have the privilege of using the title of C.P.A.
This law also provided for a certificate of qualification to
practice as a Certified Public Aooountant, with a penalty
attaching to the fraudulent use of the professional desig
nation, O.P.A. Under this law was founded a regency exeua-!
^nation presupposing a very fair knowledge of practical
aooounting, of the theory of accounts, of auditing and of
commercial law. In 1896 the bill was passed. By 1906 ten
states had passed similar laws. In 1920 and 1921, Mississippi
and New Mexico, which were the last two states to do so,
passed O.P.A. laws. The District of Columbia followed in
1923. Since that time, the Philllpplnes, Hawaii, Alaska, and
Ptaerto Hleo have passed similar laws.
By I897, the first society of certified publio account
ants was organised in New York. Professional education in
hl^er accounting received recognition when New York Univer
sity established the first department of accounting. This
was done at the request of the profession and in conjunction
with the movement for economic culture.
il L By the turn of the century, large eoale businesses
18
and corporations had created a need for new accounting tech
niques that would allow management to control their varied
operations. Also, the laws in some states provided that the
corporations must submit annual financial statements to their
stockholders. This provided, for the accountants in practice
at that time, a marvelous opportunity to show their skill
and ability. Also, in this new tjrpe of business, there were
many new securities issued, making other examinations necessary
to assist clients and bankers in giving information about
the companies which included the value of the securities
and the risks involved.
New government regulations beginning in I906 with
those issued by the Interstate Commerce Commission, required
public utilities, railroads, and other enterprises affecting
public interest, to submit annual reports to the governmental
commissions responsible for maintaining fair rates and ade
quate public service.
Shortly thereafter the income tax laws and excess
profits taxes opened up new opportunities for the accountant.
The high rates of taxation applying to corporations, as well
as to individuals, made detailed study by the accountant
necessary in order to save his client from unnecessary taxa
tion. For the next few years the public accountant established
a reputation for his knowledge in tax matters.
Two occurrences have had a major effect on the activ
ities of the profession since 1920. Probably the most
19
important, as well as the first, v/as the passage of the
Securities Act of 1933 and the Securities Exchange Act of 1934.
These acts granted authority to the Federal Trade Commission
and the Securities and Exchange Commission to prescribe rules
and regulations, including forms of financial statements to
be followed in preparing annual reports for corporations.
These acts, passed for the protection of stockholders and
potential security purchasers, provided for penalities to
be incurred by anyone, expert or otherwise, who attached
their names to statements that were false or misleading,
and it was proved to be a part of the statement for which
the expert was responsible.
The second occurrence was the modification of audit
ing procedures used by the public accountants. C.P.A.'s
felt that they had to take more responsibility for the veri
fication of accounts receivable and inventories, due to
several important cases wherein public accountants were
accused of negligence, because of losses that v;ere suffered
by stookholders and others.
From the increased demand by business and government
has arisen an entirely new technique and accounting theory.
The need for adequate record keeping is steadily increasing
and now there Is a separation of the duties of the bookkeeper
and the accountant. The accountant is now concerned mainly
v;ith audits, interpretations of financial operations, and
Installations of accounting systems, rather than with the
20
keeping of financial records.
There has been a rapid and steady increase in the
number of people engaged in professional accounting. In
1951» there were approximately 260,000 engaged in public,
private and governmental accounting to say nothing of the
number of people engaged in teaching accounting in the
various colleges over the nation.
The following table shows the rapid increase of
C.P.A.* 8 in the United States.
Year Number of C.P.A.*s
1900 250 1910 1,700 1920 5.000 1930 13,600 1940 20,000 1947 26,000 1951 42,000
According to a recent survey by the Bureau of Labor
Statistics, half of the C.P.A.*s in the United States, and
more than half of all the public accountants, are located
in four states. These states are New York, Illinois,
California and Pennsylvania.
The complexity, as well as the magnitude, of modern
business and finance have brought developments in specialized
fields closely related to public accounting. Cost accounting,
one of the more recent developments in specialized accounting,
f lPPlpyW yit O^nqq^ in AP^punting, Bulletin No. 1048 (1952), United States Department of Labor, Bureau of Labor Statistics, page 12.
21
provides management with a more detailed picture of operations.
Another branch of public accounting is internal control which
consists of formulating a plan of procedure and function,
which Justifies maximum reliance on the accountinp- records.
Auditing has become very necessary, as well as very special
ised, especially in the larger companies. Auditing is
essentially a check—up on accounting. The firms records
and statements are checked against cancelled checks, vouchers,
and other supporting documents, to verify the recordings and
classifications that have been made in accounts. Tax account
ing and consultation on tax matters has become very necessary
to business, and to be well informed, the accountant must
know the tax laws, administrative legislation, and court
decisions interpreting the tax laws. There are some account
ants who specialize in planning and setting UP accounting
systems and office procedures for various businesses which
will provide the needed reports and information at the low
est possible cost.
Professional accounting societies have several funda
mental purposes. Some of these are; to maintain high stand
ards of conduct, to improve the techniques of their profession,
to serve as spokesmen of the profession before the public,
to encourage friendly relations among members of the profes
sion, to assist in the education of students and the continu
ing education of practitioners. These societies have done
much to further the educational system in accounting. They
22
conduct educational programs, give lectures and lead discus
sions, and offer scholarships at various colleges and univer
sities all over the country.
Professional accounting societies had their beginning
soon after accounting came to the United States. The
Institute of Accountants was founded in New York City in
1882. Five years later the American Association of Public
Accountants vras organized. In 1897 state societies were
begun in New York and Pennsylvania. In 1902 the Federation
of Societies of Public Accountants was started, and three
years later, this organization and the American Association
of Publio Accountants merged under the name of the American
Association of Publio Accountants. In 1916, this organiza
tion disbanded and the American Institute of Accountants
was formed. The latter has become the largest and most
respected of the many accounting societies in the account
ing world.
The American Woman's Society of Certified Publio
Accountants was formed in 1933 to promote the professional
interest of women certified accountants. Three states,
Illinois, Indiana and Wisconsin, were represented by C.P.A.
certificates held by the eleven charter members of the organ
ization. In 1944 the American Woman's Society of Certified
Public Accountants had a membership of 83 women C.P.A,*s,
representing twenty-three states. Soon after the organization
of the A.W.S.G,P,A., it became evident that their influence
23
among women in accounting would be restricted to a very small
group, due to the fact that there were so few women C.P.A*s.
Therefore, at their annual meeting in September, 1937» the
idea of organizing an American Society of Women Accountants
was introduced. This was to be an affiliated society open
to Junior accountants and students of accounting, in the
hope that interest for the accounting field would be created
in women and would help bridge the gap between the aspiring
young woman accountant and the professional society. The
first chapter of the American Society of Women Accountants
was started in Indianapolis in 1938. Before the next two
years were over, chapters had been formed in Chicago, New
York, Spokane and Detroit,
Strong groups of highly competent industrial account
ants, notably the National Association of Cost Accountants,
the Controller's Institute, and the Institute of Internal
Auditors, as well as outstanding collegiate instructors in
accounting who are banded together in the American Account
ing Association, are becoming increasingly influential.
These bodies all issue accounting pronouncements.
In the industrial groups, the publications deal largely with
practical operating problems which, naturally, involve the
application of accounting principles, but which do not deal
with such principles in the abstract sense. The American
Accounting Association, on the other hand, issued a tenta
tive statement of accounting principles in 193^, followed by
24
a revision in 1941, both of which were valuable contribu
tions to the literature of accountancy, although both con
tained some ideas which lack authoritative support in existing
practice.
With the introduction of taxes based on income in
the United States, the professional accountant has become
an intermediary between businesses and the government agencies
which regulate business, a channel through which these
agencies obtain credible information required as a basis
for regulation. As the importance and acceptance of their
work has grown, public accountants, as a group, have greatly
influenced the standards of corporate financial reporting
and the development of accounting principles on which regula
tion and taxation are based. With rather startling speed,
accounting has become a potent social force in the inter
pretation, direction, and control of our evolving national
economy. Increased reliance upon accountants has naturally
increased the responsibilities and stature of the profession.
History shows that the fall of many notions and
oivlllzations was caused not only from wars won and lost, or
high taxes, but from corruption. Accounting is now becoming
developed enough to act as a preventive against such politi
cal decadence and this service offers a great challence to
accountants and a great hope to modern society. If sound
accounting theories are practiced at home and abroad, our
oivilization can easily avoid such corruption.
CHAPTER II
EDUCATION FOR THE ACCOUNTING PROFESSION
All vocations call for certain technical skills. In
some they are few and easily mastered, calling for little
practice and a small degree of mental aptitude, while in
others there is neeri for very much training and experience.
Professional status is not gained by mechanical ability
however. The true professional individual is one who is
placed in a responsible personal relationship with the public
to serve in a capacity which requires him to weigh facts and
propositions, advise intelligently and carry out his conclu
sions when required. Therefore, personal Judgment and
independent mental appraisal are required in a profession.
The professional man must also be an individual of
highest integrity, both intellectual and moral. He must
be mentally able to Judge a problem fairly, with a high level
of accuracy, and have the courage to present his convictions
and stand by them. He must be able to think and reach con
clusions independently, to choose among the experiences and
Judgment of others, and to devise the procedure needed to
carry out applicable principles.
25
26
One who intends to enter the profession of aooount
ing might well benefit from a proper understanding of the
part accounting plays as a social institution as well as the
Ultimate use of accounting in administration. However, as
specialists, they would be called upon to know much, much
pore. Their knowledge of aooounting ideas and techniques
will need to be very thorough and detailed. They must be
able to distinguish between the good methods and bad methods
and be able to eliminate any unnecessary procedures. Besides
a complete education in accounting theories, the px*ofessional T
student will find It necessary to understand the variations
they will come in contact with and which of these theories
will produce the desired results.
Any student of business will find a general knowledge
of accounting very useful and it would be wise for each stu
dent to understand the application of accounting. However, »
it will be necessary for the professional student to b«
skillfully taught a great deal about the complexities and
specialisations of this field. Eaoh different branch of
accounting has techniques of its own, and the aooountant is
Called upon to collect the facts from the different situations,
rogardlees of how involved or interrelated. This ability is
obtained only after a thorough study of the theories and
techniques involved.
i*' Two factors vhio^ Influence the system of accounting
education more than any others are (1) the time the student
27
has to spend upon formal education and (2) deciding how much
•srphasis should bo placed on each accounting subject.^ The 1
seoond factor will be determined by the various ideas con-
eomlng the best way to prepare for a successful future in
accounting, whereas the first will depend upon each individi|al
and his ability to learn.
It is hard to base a rule regarding how much time
one should spend on the theory of each different technique
for a successful career In professional accounting. However,
when a maxlmiam of useful preparation is desired in a minimum
of time, there will be a tendency to stress accounting tech
niques alone. Therefore business education would be put
aside as secondary and general education above the high
sohool level would be abandoned altogether.
I Our present economio system shows the need for pro
grams of study that are intensively specialized. Many
|}eople find it necessary as well as useful to rely on night
Olassee and correspondence courses in continuing their educa-I
tion. In some cases the person or persons may be at a dis- '
advantage i^en using these to supplement their prior eduoation
due to the fact that the two are not well interwoven or that
the latter did not end on the same level that the former begins.
^A. C. Littleton, "The Meaning of Accounting Educa-tion," TbAL f^p9m%lm Saaitt <Juiy, 19^2), xvii, 215.
28 r-
A complete eduoation for a career in professional
accounting would necessarily be extensive; probably, it
Ihould run longer than four years. It should be very inclusive
in that it covers the general field of business, as well as
en extensive study of accountancy. The latter should, if at
all possible, incorporate both texts and problems, and exper
ience in accounting employment.
It would be necessary, for the best results, for the
etudent to make his choice of accounting as a career early
and that he have the necessary time, money and ability to
l onefit from extended preparation. Also, suitable eduoa-
fional programs would have to be available or be organized,
and extensive cooperation with professional firms allowing
interim employment and continuation of staff education be
yond the C.P.A. certificate.
In the ideal situatioh, education lays the foundation
by providing the proper background of aooounting theory,
whereas, the opportunities for acquiring skill in using
these theories are provided by experience and practice. The
theory received in formal education and practice are inter
related. Sach serves the other, with theory providing the
principles to which the practical work is carried out and
praotleo providing the basis for their rejection.
Many misconceptions have arisen in regard to theory
and practice. In fact, some times there is a spirit of theory
torenspraotloo, ImpXyiag conflict rather than cooperation.
29
Bome misconceptions have arisen because of a failure to
distinguish between the ability to accomplish a desired
result and the soientiflc principles and rules of procedure
in accordance with which the work must proceed if the desired
result is to be obtained. Actually, the only times there
ehould be a conflict between the theory and practice is when
"the theory has become outmoded; the theory has been rigidly
construed without regard to the exceptions; the theory has
been improperly stated; or the practice is unsound."^
Recognising >rtiat accounting theories are applicable
to a given problem and applying those theories skillfully
to the solution thereof is of the greatest Importance. The
employer does not pay his employee for what he knows, but
for his skill in the application of his knowledge; also, the
client does not care how extensive his accountant's knowledge
Of theory may be, provided he is able to serve the client
properly.
A man with limited knowledge of accounting theory,
but having the ability to use it well may be able to serve
certain clients very well, so long as the problems arising
in his practice involve only the accounting theories with
whloh he is familiar. A man with rer'y extensive knowledge
of aooounting theory, on the other hand^ may not be able to
put his knowledge into practice.
mammmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm^mmmmmmmmmmmmmmmmm^ m i i ——.—,—ii»
2 Christian Oehler, "Theory and Practice," The Account-
jijUL Sixln ( r* 1942), xnz, 277.
30
l*raotloe is the only means of obtaining skill in the
application of aocoimting theories to the solution of practi
cal problems. That Is the primary reason why so many practical
men lay so much stress upon experience. The aooountant who
makes of every engagement a means of improving himself in
his ability to apply his knowledge becomes a better account
ant with every bit of experience that he acquires. The
Important point is that he becomes a better aooountant as
his skill increases even though he may add nothing to his
knowledge of theory.
An accountant is not automatically a practical
accountant because he does not possess a sufficiently compre
hensive knowledge of general accounting theory before he
begins his practice. If he becomes a practical accountant
at all, it is in spite of that fact, rather than because of
it. His experi' noe will be of very little value to him
actually, unless he used it as a means of acquiring a sound
knowledge of theory. If he does not acquire this knowledge
as a result of his experience, he cannot become an able
accountant or a practical one at all. It is probably correct
to say that the knowledge of theory acquired this way by an
accountant is usually learned the hard way and frequently at
the expense of his employer, the client, or both.
The p3*oper place to acquire the knowledge of account
ing theory is the college, university, or technical school.
The knowledge may be acquired in this manner in a much shorter
31
time and at less expense. The method of acquiring a knowl
edge of accounting theory while working as an accountant,
and depending solely upon the opportunities for the study of
theory afforded by the performance of practical vorc, is
entirely too slow. Without a doubt, this method can be
very effective, but it requires a considerable amount of
time. Seniors are usually much too busy to undertake the
systematic instruction of their assistants, and even if they
were willing to do it, it would of necessity be subordinated
to the principal task of completing the professional engage
ment to which they have been assigned. Progress would have
to be confined to the opportunities afforded by the particular
engagement; and whatever progress was made, rairht conceivably
be made at the expense of the employer or of the client.
Regardless of where the knowledge of accounting theory is
acquired, whether at the college or university or in the
field while actively engaged in practice of accounting, skill
in the amplication of theory comes only as a result of exper
ience, and of practice. Therefore, where the knowledge of
theory is obtained in school, practical experience is needed
in order that the requisite amount of skill may be acquired.
The most important of all the qualifications which
are necessary for the public or private accountant are,
probably, sound Judgment and common sense. Judgment may be
defined as the ability to decide correctly by the compr.rlson
of facts and ideas, that is, facts with ideas, facts with
32
facts, or ideas with ideas. The ability to make correct
decisions, in the varying circumstances, is a necessary ac
companiment of common sense and both may be improved by
experience, provided, the acquisition of experience and the
resulting skill is based upon a thorough knowledge of theory.
Common sense is the use of discretion, good Judgment and true
and practical wisdom applied to common life.
In 1948, the University of Texas offered a new degree,
in an effort to advance academic recognition of the account
ing major's completion of formal studios. The title of the
new degree is Master in Professional Accounting. ITie new
degree is offered at the graduate level after the completion
of a five year curriculum and a period of full time intern
ship training in practical accounting work. It was felt that
an accounting major can hardly take the necessary technical
courses and the desired broadening subjects in less than
five years.
The Master in Professional Accounting degree is in
tended to be the highest degree souf ht by those who enroll
for it. Candidates for the new M.P.A. must possess a bache
lor's degree and must have credit for the following:
1, At least seventy semester hours of courses normally offered outside a business administration college or department; there must be included six semester hours of principles of economics,
2, Twenty-four semester hours in business administration including some work in business law, statistics, finance, business organization and business report writing.
33
3. Eighteen semester hours of accounting including courses in intermediate, cost, and internal accounting procedures.
After these prerequisites have been met, the require
ments for the M.P.A. degree are as follows:
1. Completion of thirty semester hours of senior or graduate level courses with grades of A or B, including either a course in Evolution of Accounting Theory, and either a three semester-hour thesis or a graduate accounting seminar.
2. Six months of successful full-time internship in public or industrial accounting. A report of this training must be approved by the employer and a member of the accounting graduate faculty. In the event that the internship training is in the industrial field, it must show evidence of rotation and broad training. Students presenting twenty-four semester hours of advanced accounting as undergraduates may receive credit for four semester hours of a report covering the internship training.
3. Passage of a general examination covering courses and internship training along the lines usually required of a candidate for a master's degree.3
The internship training program is not original with
the University of Texas as similnr programs were operating
in several large universities before the war.
It is believed that the requirements for the M.P.A.
degree are more stringent than for the M.B.A, Even though
the thesis is optional, an adequate check on the candidate's
ability to write papers is provided in some of the graduate
courses and in the internship training report.
^Charles T. Zlatkovich, "University of Texas Offers A Graduate Degree in Professional Accounting," The Accountants pigest (March, 1949), page 175.
34
It is very possible that, within the next few years,
separate schools of accountancy will be founded on the
campuses of larger universities throughout the nation. A
proposal for such schools was voiced in 1944 by Professor
Ernest J. Moludle in an article in the Journal of Account
ancy. More recently the Committee on Eduoation of the New
York Society of Certified Public Accountants issued a report
saying that accounting education requires more speclali/ed
training than can be given under the present system of higher
education. They also recommended that steps be taken towards
the establishment of professional schools for the education
of those who sought careers in professional accounting.
The accountant is expected to share the social, moral,
and economic responsibilities of those who have festered the
profession. That is, he is required to follow the code of
ethics which has long been the pride of his profession and is
equaled by few other professions. He must willingly reject
stereotyped and dogmatic rules that can no longer be used
expeditiously and must conform to those accepted principles
and practices which are formulated to aid business. The
accountant must focus his attention to a degree of dependability
never before experienced and he must reiterate the confidence
in the principles. He must exercise all effort toward
4 Ernest J. Moludle, "Education for Public Accountancy," Journal of Acoot^ntancv (Sept, 1944), LXXVIII, 215.
35
learning the laws of the business world, the properties of
the things lie must work with, and the teohniques for manipu-
-latlng them. He must be practical minded and, therefore, not
to be thought of as one easily influenced by attractive but
untested propositions in business affairs. The accountant
must build up good work habits, and he must acquire sufficient
goneral bskokground and training in other specialized cultural
subjects^ which lead to the development of aooounting teoh
niques, and which will give him a broad general background
in business administration.
As an accountant progresses in his profession from
an inexperienced to an experienced accountant, he becomes
more fully aware of the vastness of the field of aooount-
anoy and the futility of hoping to understand it in detail*
Yet, an accountant by his inborn nature is driven to know
hii place in the system of existing things, reasoning about
sind understanding, at least in general, the controlling pro-
oedures and practices that engender order in the apparent
chaos of his profession. He must know that throughout the
years there has been progressive change in the profession,
and he does not stand in the way of progress and needed
reform. He also must realize the hazards that surround him
and seek an understanding of those principles and practices
set by precedent* He knows that fundamental principles,
virtues and traits of human nations change little from day to
dAZ2 .aQ4 M^J^f MOQBplishes the daily tasks, he must fully
36
appreciate both the complexities and the possibilites of added
new phraseology or expressions of dubious meaning, as this
alone mi^t foster an entirely new concept of a new applica
tion that migjit revolutionize the work of an entire decade.
Accounting is not a static thing; therefore, it is
logical that aooounting principles, wliich have evolved down
through the years and which will continue to evolve with
the current business requirements, be flexible. There is
little room for standard of stereotyped opinions and tecli-
niques in the profession.
Another essential quality which society should look
for in a professional accountant is an ability to design,
work and interpret systems of account which record, analyze
and classify in the most significant way possible, in terms
of monetax*y units, the vast range of transactions. With
this as a foundation he must become responsible for other
related duties. He must also have concern for the competence
and honor of his profession.
Probably every student of aooounting has the desire
to obtain the certificate of Certified Public Accountant.
There are several reasons for this. Some need the certificate
before they may praotioe as a publio aooountant, others
want the self satisfaction that comes with knowing that they
were able to meet the qualifications and pass the rigid
examination given, i^ile still others seek the prestige that
comes with having a certificate.
37
Those who apply for the certificate of Certified
Publio Accountant must meet minimum requirements of educa
tion and experience and must pass an examination which re
quires much knowledge and ability. Actually, there are five
exams given, covering a period of two and one half days.
There is an exam covering commercial law, one on auditing,
one on accounting theory and two on accounting practice, the
latter dealing with problems on governmental accounting,
cost accounting, tax accounting and consolidations. The
scope and content of these examinations have been continu
ously improved through the quiet but persistent efforts of
the state boards of accounting and the board of examiners of
the American Institute of Accountants. All forty-eight states,
Alaska, the District of Columbia, Hawaii and Puerto Rico
now give a uniform C.P.A. examination prepared by the American
Institute of Accountants. On the following pages there are
tables giving information concerning some of the requirements
of the forty-eight states, Alaska, the District of Columbia,
Hawaii, and Puerto Rioo.^ The requirements given are mainly
personal, regarding age, residence, citizenship and character,
however the requirements for education and experience are
also given.
Texas requires that the applicants have four years
^ydus Henry Buss, C.P.A. Examination Requirements. (Urbana, Illinois; American Accounting Association, 1951» Complete works).
38
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45
of public accounting experience before they will be allowed
to take the accounting practice part of the examination.
However, If the applicant is a graduate of a Junior or senior
college with thirty or more semester hours In accounting,
business law, economics, and finance, of which at least twenty
semester hours are In accounting, only one year's exnerlence
In public accounting will be required; or if a graduate of a
Junior or senior college has not comoleted the required
thirty hours of accounting and business administration sub
jects, he will be required to have three years of public
accounting experience before he will be allowed to take the
practice part of the examination.
Passing grade Is 75 per cent on all four parts.
Since the Public Accountancy Act of 19^5, State of Texas,
was amended In 1951, any candidate who successfully passes
at least one subject, will be given credit for that part or
parts and will be required to taXe the examination In only
the remaining subjects and when all the subjects are passed
he will be entitled to the certificate. Before the act was
amended an applicant was required to pass two subjects before
he would be given credit for any part of the examination.
An applicant Is entitled to any number of re—examina
tions. The fee for taking the examination the first time Is
twenty-five dollars, and If no subjects are passed the fee
for any re—examinations Is fifteen dollars. If, at the time
for re—examination, the candidate has credit for two subjects,
46
the fee I0 ten dollars and If he has credit for three sub-
Jeots, the fee Is :';7.50. The examinations are given twice
a year, In May and November, In three towns designated by
the State Board of Public Accountancy.
Half of the C.P.A.'s in the United States are located
m New York, Illinois, California and Pennsylvania and more
than half of the public accountants are located in these
same states. The number of C.P.A.'s in Texas increased
from I86I in 1951 to 2164 in 1952, which puts Texas In fifth
place for the largest number of C.P.A. «s In one state."
The public Interst dictates the prerequisites to pro
fessional recognition. The professional degree, license or
certificate enable the public to distinguish those practi
tioners who have given evidence of their competence. Unfor
tunately however, there ha.8 always been some misunderstanding
of the purpose of high professional standards and there Is
always the cry of monopoly. The public must understand that
the certificate of certified public accountant Is Just like
any professional degree or license, and serves to protect
businessmen, credit grantors, stockholders, government
officers and the public In general. These people who rely
"Employment Outlook In Accounting. Bulletin No. 1048 (1952), United States Department of Labor, Biireau of Labor Statistics, page 5»
'"CPA's m Professional Societies," The CPA. (The American Institute Publishing Company, New York, December, 1952). page 15.
on aocount«nt'B reports will be the losers if credentials
ATA handed out indiscriminately.
CHAPTER III
THE ETHICS OF THE PROFESSION OF ACCOUNTANCY
Dictionaries define ethics as "the science of human
duty; the basic principles of right action; the science of
ideal htunan character. ••
A code of ethics Is a system of behavior adopted by
a group to Insure tolerable relations between Its members
and to enhance the esteem and resoect with which the public
regards the Drofesslon and its work, thereby providing greater
opportunities. Good faith. Judgment, experience and the
conscience of the Individual members of the group will prob
ably lead to Inconsistent or even conflicting views, however,
if he has agreed to the published code of professional conduct,
all may know what to reasonably expect.
Rules of professional conduct or ethics were adopted
in Great Britain in 1880. The predecessor of the American
Institute of Accountants, the American Association of Public
Accountants, Issued a set of by-laws in 1899, which Included
many of the forerunners of the present Rules of Professional
Conduct. Admirable progress has been made over the years,
winning observance by the public, in developing the ethics
48
vhich have been adopted by the American Institute of Account
ants and most of the state societies.
These rules do not, nor could they ever hope to,
embrace every situation or area of behavior that the Certified
Public Accountant mi/siht find himself faced with. However,
they do describe the acts or behavior that accountants have
agreed to avoid, esoeclally where experience has shown some
question of integrity involved, Howeveij there are no rigid
definitions set up, as to do so would orovide opportunities
for the unscrupulous to evade them or afford grounds for
persecution, from the viewpoint of the more cautious. The
rules simply try to describe the acts or behavior to avoid
and try to frustrate any attemot to violate the Intent by
apparent literal oorapllance without suffering the consequences.
These rules are not hard to grasp and anyone desiring to
comply will find it easy to do so.
These rules are not the highest conceivable rules
of performance, manners, taste, or Judgment. They describe
the status of the profession in this country at this time
and the level which the profession will try to maintain.
Naturally, good taste and Judgment of conscience will inhibit
conduct not specifically prohibited by the rules and as this
occurs it is hoped that ethics will evolve and develop) the
standards of individual members, thus allowing the ethics of
the profession to grow and be continually expanding.
The Rxaes of Professional Conduct as they are now.
TEXAS TECHNOLOGICAL COLLEGE UBRARZ LUBBOCK, TEXAS
JO
after their revision in 1948, are set fort?, below. These
rifles have been amended and chanf ed from time to time to de
fine the infractions for which the members will be disciplined
and to eliminate any general statement.
(1) A firm or partnership, all the individual members of which are members of the Institute may describe itself as '•Members of the American Institute of Aooountants,^ but a firm or partner-chip, not all the individual members of i/hich are members of the Institute, or an Individual practicing imder a style denoting a partnership when in fact there be no partner or partners, or a corporation, or an individual or individuals practicing under a style denoting a corporate organization shall not use the designation "Members of the American Institute of Accountants."
(2) A member shall not allow any person to practice in his name who is not in partnership with him or in his employ.
(3) Commissions, brokerage or other participation in the fees or profits of professional work shall not be allowed directly or indirectly to the laity by a member. Commissions, brokerage or other participation in the fees, charges or profits of work recommended or turned over to the laity as incident to services for clients shall not be accepted, directly or indirectly by a member.
(4) A member shall not engage in any business or occupation conjointly with that of a publio accountant, which Is incompatible or inconsistent therewith.
(5) In expressing an opinion on representations in financial statements which he has examined, a member shall be held guilty of an act discreditable to the profession if: (a) He falls to disclose a material fact known
to him which is not disclosed In the financial statements but disclosure of which is necessary to m.-'ke the financial statements not misleading; or
(b) He falls to report any material mis-statement known to him to appear in the financial statement; or
(c) He is grossly negligent in the conduct of his examination or in making his report thereon;
51
(d) He falls to acquire sufficient information to warrant expression of an opinion, or his exceotions are sufficiently material to negative the expression of an ODlnlon; or
(e) He falls to direct attention to any departure from generally accented accounting principles or to disclose any material omission of generally acceoted auditing procedure applicable in the circumstances.
(6) A member shall not sign a reoort ouroorting to express his opinion as the res Jlt of examination of financial statements unless they have been examined by him, a member or an employee of his firm, a member of the Institute, a member of a similar association in a foreign country, or a certified oublic accountant of a state or territory of the United F tates or the District of Columbia.
(7) A member shall not directly or Indirectly solicit clients by circulars or advertisements, nor by personal communication or interview not warranted by existing personal relations and he shall not encroach uoon the practice of another public accountant. A member may furnish service to those who request it.
(8) Direct or Indirect offer of employment shall not be made by a member to an employee of another public accountant without first informing such accountant. This rule shall not be construed so as to inhibit negotl?^tions with anyone who of his own initiative or In response to a public advertisement shall aooly to a member for emoloyment,
(9) Professional service shall not be rendered or offered for a fee which shall be contingent ur>on the finding or results of such service. This rule does not a-oply to cases involving federal, state, or other taxes in which the findings are of the tax authorities and not those of the accountant. Fees to be fixed by courts or other authorities, which are therefore of an indeterminate amount at the time when an engagement Is undertaken, are not regarded as contingent fees within the meaning of this rule.
(10) A member shall not advertise his orofessional attainments or services: (a) The publication of what is technically
known as a card Is restricted to an announcement of the name, title (member of American Institute of Accountants, CPA, or other
52
TDrofessional affiliation or designation), class of service, and address of the person or firm, issued in connection with the announcement of change of address or personnel of the firm, and shall not exceed two columns in width and three Inches in depth if appearing in a newspaper, and not exceed one-quarter of a oaf e if appearing In a magazine or similar publication.
(b) A paid listing in a directory is restricted to the name, title, class of service, address and telephone number of the person or firm and it shall not appear in bold type, box or other form of dlsolay or in a style which differentiates it from other listings in the same directory.
(11) A member shall not be an officer, director, stockholder, representative or agent of any corooratlon engaged in the practice of public accounting in any state or territory of the United States or the District of Columbia.
(12) A member shall not permit hlc name to be used In conjunction with an estimate of earnings contingent upon future transactions in a manner which may lead to the belief that the member vouches for the accuracy to the forecast.
(13) A member shall not express his opinion on financial statements of any enterorlse financed in whole or In part by public distribution of securities, if he owns or is committed to acquire a financial interest in the enterorlse which is substantial either in relation to its capital or to his own personal fortune, or if a member of his immediate family ov ns or is committed to acquire a substantial interest in the enterr)rlse. A member shall not express his opinion on financial statements which are used as a basis of credit if he owns or is coraraitted to acquire a financial interest in the enterprise which is substantial either in relation to its capital or to his own personal fortune, or if a member of his immediate family owns or is committed to acquire a substantial interest In the enterprise, unless in his report he discloses such Interest.
(14) A member shall not make a competitive bid for professional engagements in any state, territory or the District of Columbia, if such a bid would constitute a violation of any rule of the recognized society of public accountants
53
or the official board of accountancy in that state, territory, or district.
(15) A member of the American Institute of Accountants engaged in an occupation in which he renders services of a tyoe commonly rendered by public accountants, must observe the by-laws and rules of professional conduct of the Institute in the conduct of that occupation.
(16) A member shall not violate the confidential relationship between himself and his client.
The first rule needs very little explanation.
Naturally, only those persons who have met the requirements
should be allowed to use the titles "Member of the American
Institute of Accountants" or "Certified Public Accountant."
The public has a great need for Drotection against lack of
skill and if anyone were allowed to use these titles, with
out first showing their knowledge as skilled accountants,
there would be no protection for the oubllc, because it
cannot itself Judge the quality of technical work.
The second rule was created to prevent others from
practicing under the name of a member who is in retirement
or engaged In some other occupation. This is also -orotection
for the public against those who are not ouallfied to do
technical accounting work.
The rule banning giving or acceoting fees, commis
sions, or other forms of gratuities, seems BO obviously
soimd as to require no comment. Accountants should be
^Paul E. Baoas, C.P.A., The Successful Practice of Accountancy. (Prentice-Hall Inc., New York), page 390.
54
scrupulously careful to preserve a strictly Independent
relationshlo with their clients. There is often a temDta-
tion to purchase goods at r lscounts Intended only for emoloy-
ees and thus place themselves under obligation to the client
or of the employee of the client. Most ryenr^le delipht in
securing something for less than the going price. Account
ants should be careful not to make a practice of that, when
their clients are involved. Also it would be unwise to make
any compensation to anyone for helo given In securing an
engagement or to receive a fee from any supoli^r of station
ary or other suoolies for using their r>nrticuln.r rjpoduct.
Accountants usually find themselves In hot water when
they try to conduct some other activity, such as real estate,
or insurance, and at the same time conduct an accounting
practice. Accountancy is a t rofession and not a business.
Sooner or later the member finds that as a result of his
other activities he is accused of advertising, soliciting
or some other conduct banned by our rules of orofessional
conduct.
The responsibility of an accountant is a very grave
and serious one. The present rule t laces uoon an account
ant the obligation of performing his task with skill which,
by virtue of holding himself out as an accountant, he
represents he possesses; any failure or absence of that
quality in the performance of his work ren' ers him liable for
the loss sustained by his client. The absence or failure of
55
this skill is regarded as negligence. To no small extent
the liability is governed by the contract or stipulation
under which he was employed. The extent and punooses of an
audit may limit or extend the obligation and fix the degree
of responsibility. The accountant will be held guilty if he
fails to carry out the procedures deemed necessary, by the
Institute and all reoutable accountants, to good accounting
practice.
Rule number six is somewhat of a continuation of the
preceding rule. It forbids any member to sign a reoort
that has been made by a person that is not a certified public
accountant or who is not a partner or employee of the member.
Besides being protection for the public, it strives to pro
tect any member from any loss he might sustain by attaching
his name to any reoort prepared by an unqualified oractltioner,
Solicitation of clients of other accountants would
tend to lower the esteem of professional status and would
soon lead to price-cutting and other practices that would
completely eliinlnate professional status. There Is nothing
to be gained by the solicitation of other accountants'
clients. If it were allowed, in order for one accountant
to win over the client of another he would more than likely
have to show where he could either render the client more
efficient and competent service, which would cast reflections
on the accountant who had the client, or render the service
at a lower fee. Solicitation of former clients is no
56
exceotion to the rule, If they have since become the client
of another accountant. If this were allowed, all firms
that had ever changed accountants would be fair game for
those who had served them. An accountant may accerjt an
engagement when offered to him without sollcntlon on his
part. However, personal relationship and frlendshlD is not
a sound basis for a chanfre in accountants and it would be
wise for members to suggest this to orospectlve customers.
It would be wise as well as courteous to discuss an engage
ment with the Drevious accountant, when a new account is
offered and it is possible to do so. This would heir) elimi
nate any ill-feeling between accountants as to the circum
stances under which the change was made and to determine
whether or not the account is a desirable one.
In some cases it is difficult to distinguish between
advertising and solicitation. The Institute holds that firm
bulletins should not be sent outside the Issuing organiza
tion to others than clients and personal friends. Hov/ever,
these bulletins should not be sent to oersonal prlends where
they are known to be the clients of other accountants. If
the bulletin is issued In regard to a new oractlce and the
announcement contains the same Information that is T^ermissible
in a newspaper or magazine, it seems unreasonable to exclude
It from the mail. This exception is generally ar)r>lied to the
beginnings of new practices, openings of new branch offices,
or the introduction of new partners, but is not extended to
57
cover changes in personnel other than oartners or subsequent
information of any kind. The matter contained in such announce
ments should not go beyond that which is Toerraissible in pub
lished cards and the recurring mailing of such announcements
would be a violation of rule seven.
Stealing clients is only a little worse than luring
the staff of a fellow accountant by promises of greater re
wards or opportunities. Rule eight seeks to eliminate this
procedure as the Institute thinks it is undignified and
improper to discuss employment with an eraDloyee of another
member until the employee has definitely severed his connec
tion or the consent of the present employer is obtained.
Stability of employment is, or should be, one of the aims
of the profession and It is not believed that good relations
with employees is hampered, although some have said that
this makes it difficult for employees to change Jobs.
It has been difficult for some members to interpret
the rule regarding contingent fees, because, in one sense,
every fee is contingent on future events, for some unfore
seen event may make It impossible for a client to pay what
he has promised to pay. The real sense of the word, for our
pui^ose however Is intended to cover cases in v hlch account
ants might be Influenced to condone coloring of facts to
insure success for the clients with larper fees for the account
ants. This could be a great temptation especially in regard
to tax matters.
58
In the earlier days advertising was aoparently con
sidered necessary and was relied upon quite heavily in build
ing up a practice, although now, with the passing of the years,
the futility of using this method to attract the public has
been fully realized. Rule ten forbids this practice as it
is felt that such actions cast discredit ur on the whole
group. Suspicious newcomers, who fancy themselves forbidden
to advertise because established practitioners fear their
competition are sadly mistaken. The ban on advertising is
a great advantage to the newcomer, since if the established
practitioners, with resources far greater than his, made a
practice of advertising, he would surely be outclassed in
the contest, from which no one would derive much benefit.
Rule number eleven was created to help maintain the
personal touch in the services rendered. To give proper
professional services it is best that each account be taken
individually and not handled strictly by a set of rules set
up for that particular tyt)e of business. Also, in a corpora
tion, the accountant would not be held oersonally liable for
his work. Therefore for the advancement of the orofesslon
it seems wise to rule out the practice of accounting by a
ooz*poration.
It is impossible to forecast the future earnings of
a business, therefore to protect the practitioner and the
public, the Institute has seen fit to forbid members from
allowing their names to be shown in conjunction with any
59
estimate of earnings that might lead the public to think that
the member has made the forecast or that he thinks the fore-
cist is accurate.
The greatest threat to the Indeoendence of the
accountant lies in the undue fear of losing the engagement
if the results found do not agree with the vrishes of the
client. Independence of viewpoint is very Important to the
Value of the v;ork being performed. ReDorts m^d.e after an
audit are largely a matter of opinion, and the auditor per
haps unconsciously, might allow his own personal Interests
to affect the statements and reports prepared. This might
mislead prospective and present stoclsholders, not only by
the value assigned to the various items appearing in the
statements but also by their form and arrangement and failure
to present the Information in detail. This rule doesn't
forbid one of the members from acting as an officer or
director of a corporation which he or his firm audits, but
common sense tells us that It would be difficult for a
member, as auditor to find fault with his action as a director
or stockholder. Also, independence rules out the ownership
of securities of corporations being audited by them. To
go one step further, real independence would prevent any
member of the firm and their families from owning securities,
of a corporation being audited. It is easy to see the embar
rassing position a firm might be placed in if the services
they have rendered are later subjected to criticism and it
60
Is found ttet maaHmra of the firm were officers, or dirootors,
or stookSiolders as well as auditors of the same oorporation.
t Oempotitlve bidding is opposed not because of a
doiire to restrict tVAe and fair oompatition, nor in an
•ffort to monopolize aooounting practice, but rather in tho
•Inoere belief that oompetitive bidding for aooounting ser-
'Vleee is not in the interest of the publio or the aooounting
profession. Where price oompetition exists, there is a
strong temptation, with the unscrupulous, to submit a bid
that makes it impossible to carry out the necessary teohniques
and proeedurea needed for adequate performance. To realize
a profit it may be necessary to assign incompetent people to
important tasks or leave them out entirely. The final product
of an accounting engagement is usually an opinion based on
the aeeountant^s examination. This opinion would be value
less if it were oarried out by Bit incompetent practitioner
or based on an incomplete examination. Those who oppose
competitive bidding do not wish to regulate fees or cut out
oompetition, it is simply in the best interest of the pro
fession to do so. If competitive bidding is eliminated,
aooountants will eventually be selected in the same way that
lawyers and dootore are seleoted.
1'* Rule fifteen was created to show what stand would
be taken regarding violations by members engaged in some
ottxAEA business or rendering services compatible to the
accounting services. The member must observe all sixteen
61
rules In any other 0ooiiqp>ation he chooses to engage in while
earrying on an aooounting service. Thus if he were accused
of some violation he could not use as his defense the idea
that he was engaged in his other occupation at the time.
The very nature of a profession dictates the neces
sity of the last rule. No information of a confidential
nature should ever be made public by an accountant, and any
time there is any doubt as to whether or not the information
is secret, it too should be kept secret. This last rule,
nvdsber sixteen* is very important and should never be
violated if the honor of the profession is to be maintained.
In an attempt to enforce these rules of professional
eonduot, the American Institute of Aooountants has provided,
in its By^^^aws, for a committee on professional ethics, a
trial boaz*d and has granted authority to the executive com
mittee to summon those members who are accused of violating
the rules of professional conduct, to a meeting of the trial
board.^
i The By«4«aws of the A«I.A. designate the committee on
pZH>fessional ethios as the group to whom eomplaints against
Biembers are sent. This committee considers the complaint
and if it is their opinion that a reasonable complaint has
been preferred^ showing a violation of any by-law or rule of
ST 19M, Article VI. Trlali ^mende^ JwiAsBBSLSt 1 ^ ^ Article VI. Trials and P« American institute for the year 1948-1949, page 38.
62
conduct that casts discredit upon the Institute or public
accounting profession, the case is referred to the executive
committee. The executive committee siiramons the member to
appear in answer at the next meeting of the trial board.
If the complaint is dismissed by the committee on
professional ethics or is not acted on within ninety days,
the members preferring the complaint then have the right to
present it to the trial board. If the trial board finds a
Just complaint after investigation they refer It to the
executive committee who summons the member Involved to appear
before the trial board.
After hearing the case, the trial board has the power
to admonish or suspend the member for a period of not more
than two years with a majority vote of those members present,
or with a vote of two thirds of the members present they can
expel the member against whom the complaint is made. The
case is published in the Journal of Accountancy either with
or without the name of the member Involved.
Besides the above duties, the committee on profession
al ethics may advise anyone applying to it as to whether or
not a submitted action or state of facts warrants a complaint
against a member. However, if the committee is unable to
express an opinion this will not constitute an endorsement
of the action or state of facts.
In 1951 there were twenty cases referred to the com
mittee. An analysis of these show that ten were on charges
63
of advertising, five charging solicitation, one involving
competitive bidding and the other four Involved confidential
relationships. None of the members charged v:ere expelled or
suspended from membership, although several were warned
against such actions and promised that they would discontinue
them.
A total of fifty-five inquiries were made regarding
ethics and other matters of conduct. A breakdown of these
shows: -
Advertising 37 inquiries Firm Names 3 « Independence 9 " Solicitation 5 " Practice with others... J " Misc 4 "
As has been said before, these rules do not attempt
to set the highest conceivable standard of ethics, but they
do attempt to bring about a better understanding of what Is
to be expected from the profession, among the accountants
themselves and by the public. There are many other things
necessary in a professional accountant. A pleasing personality
plays an important part in success in any occupation and
accounting is no exception. The ability to secure the co—
operation of others and to Join wholeheartedly and enthusi
astically in the plans of others should not be overlooked.
A pleasing approach that inspires confidence, along with
Annu ;L Reports of Officers and Committees for the Yeay QH 19 Q-lQ'jj,. American Institute of Accountants, New York, page 43,
64
vision and imagination, the ability, in writing and in talk
ing, to express his observations and suggestions are impor
tant in the public accountant.
In any field there are certain traits that contri
bute to one's success, and in accounting several of these
are indispensable. Character, ability and Industriousness
are very necessary. Without courage and love of hard work,
failure Is certain.
There must also be liking for figures as every phase
of accounting involves figures. V/lthout this natural liking
for figures the work would definitely be a burden. Any
person who aspires to be a success, must plan to spend much
time studying. This is necessary not only while acquiring
a good foundation In theory, but the accountant must continu
ally be studying the current material and techniques in pub
lications and laws.
Ethics alone cannot make a profession. The follow
ing Is a summary of some of the attributes necessary in a
professional accountant. They are: extensive knowledge of
his profession, general experience and training, ability to
make decisions, ability to assume and exercise responsibility
without undue strain; ability to Judge character, and sensi
tiveness to human reactions, personal habits, appearance and
manner that builds and maintains confidence; Integrity, firm
ness and sincerity; forcefulness, energy and perserverance;
ability to inspire, reach and develop men; open mindedness,
65
tact, self control and a sense of humor; and physical health
above the average.
CHAPTER IV
EMPLOYMENT IN ACCOUNTING
Some of the most important things to consider in
choosing one's life work are the working conditions, the
renumeratlon one will receive and the outlook for employment
opportunities in that field.
The working conditions are about the same for all
phases of accounting work. It is all office work and it
all deals with close figure work calling for an aptitude
for that type of work. Accountants usually work eight hours
a day, five days a week, although some organizations have a
five and a half day week. Also, In public accounting, one
may be called upon to work many hours of overtime every day
of the week during busy seasons, and in some organl7ations
private accountants may be called on to put in overtime at
the end of each month when they are preparing periodic reports.
However, this is usually on a time and a half basis.
In public accounting, especially in the larger firms,
the accountant Is called on to do quite a bit of traveling
with his work, whereas, the accountant In the private busi
ness ordinarily never has to travel, although those employed
66
67
in an internal audit staff mlp ht have to travel constantly
between branches.
In private accounting the accountant is usually
entitled to company Insurance, retirement plans, Paid vaca
tions and sick leaves. All public accounting firms proliably
have paid vacations and sick leave, but very few, if any,
have retirement plans or company insurance. The idea followed
by the public accounting firms is to offer less security and
more opportunity, and therefore they feel that if a person
Is well qualified, he will advance far enough and rapidly
enough to be either a partner or manager and will be practi
cally self-sufficient when the time for retirement comes.
Advancement in public accounting is nearly always
based on individual ability and for a person with that
ability, advancement will normally come much quicker for him
in public accounting than it will in private accounting,
where one is often lost in the multitudes and is never given
an opportunity to show his ability. However, there are very
few instances of seasonal layoff in private accounting during
slack periods as is sometimes the case in public accounting.
Due to the slov/er advancement in private accounting, start
ing salaries are often considerably higher In order to attract
better employees. However, semi-seniors and seniors, in
public accounting, will usually be drawing as large a salary
as those people in private industry with comparable experience.
Beginning salaries in public accounting are usually lower
68
than in private Industry because the training one receives
here is more like an apprenticeship and will be worth so
much more because of its diversified nature.
The following paragraph vras taken from a booklet
published by the American Institute of Accountants."^
Income levels in New York City and the surrounding area are not representative of incomes in all sections of the country, but some interesting data ^f^?m?^^S^°^5 ^y ^ survey made in 1949 amoung readers of "The New York Certified Public Accountant," official publication of the New York State Society of Certified Public Accountants. The survey indicated that the magazine's readers had an average annual Income of §9,863. While the readers include a few teachers, students, government workers and others, 87 per cent of the total are CPAs, and 75 per cent are in public practice. The salary ranges may therefore be considered fairly typical for practicing CPAs in New York. The breakdown: Under $5,000 12 per cent; from $5,000 to ^10,000—39 per cent; from ;>10,000 to ca5,000—25 per cent; from Sl5,000 to $25,000—16 per cent; over ^25,000—8 per cent.
It is always very difficult to ascertain v;hat the
chances for employment will be from time to time due to the
fairly unstable economic system. However, most graduating
seniors are having very little difficulty In finding a posi
tion. According: to a United Press release based on a spot
check of the placement offices of fifty colleges and univer
sities, "The Job-hunting senior never had it so good."
According to their sources the starting salaries averape
above $300 per month, an Increase of from 5 to 10 per cent
over last year's starting salaries, with engineers.
L Career ip Public Accounting. (American Institute publishing Co., New York7 1950), page 14.
69 aooountants, sales personnel and teachers the most sought
after people in that order.
There are six main services offered by a public
accountant. They are: (1) auditing, (2) system installation,
(3) special investigations, (4) tax reports, (5) cost account
ing, and (6) consultation.
There are three classifications of audits: (1) com
plete or detailed audit, (2) balance sheet audit, and (3)
special investigations. The complete or detailed audit
involves a review of all the transactions during the period
oovered by the audit. The balance sheet audit involves a
verification of all the accounts found on the balance sheets
that is, assets, liabilities, and net worth. This type of 1
audit will necessarily include a reasonable and proper detex -
mination of the income and expense accounts and the result
ing profit and loss. As the name implies, a special investi
gation is a limited engagement for a specific purpose and
should not be confused with either of the other two claeslfl-
cations of audits.
Part of the publio accountants time will be devoted
to systWB installation. This calls for an extensive analysis
of the organization. The accountant must formulate a system
of reeording the transactions that will include all the trans
actions, but will not create a duplication of recordings.
He must decide which books and forms are necessary to provide
the business with a4e^uate records and he must formulate
70
rules and regulations that will insure proper and consistent
stharges being made to the various accounts. The system must
include plans for ease and speed in the preparation of per
iodic reports that are so necessary to proper management*
Special investigations may be made by the public
aooountant in one particular department where the management
suspects fraud. He may be called upon by a creditor to inves
tigate the liabilities of a company which would include an
examination of the customer's accounts and notes, both as
to the amount and to the quality of the security. Special
investigations may be made in order to determine the amount
of a fire loss or to verify sales or production in calculat
ing royalties based on either of these.
Tax reports are often made by the public accountant
after he has completed an audit, or the accountant may be
called in for special problems. The latter may involve a
preparation and presentment of oases before the United States
Revenue Department and various Boards of Tax Appeals.
Although cost accounting is a distinct field in it
self, mai^ organizations, because of their size, are unable
to afford a staff of cost accountants and must depend upon
the publio accountant to render the needed services. Also,
in creating systems and auditing large manufacturing concerns,
the aooountant will usually find himself confronted with cost
systems, whiOh will call for considerable skill in cost work,
Oonstatation and interpretation are a very important
71
part of the accountant*s work. He may b« called uPon to
determine from the accounting records, the sales price of a
new product, whether to temporarily abandon production,
completely shutdown and sell out or to continue production
at a loss. An accountant, from his education and experience,
must be able to make decisions on particular problems and
present evidence to support these decisions.
In public accounting there are several distinct and
different levels. Although there are many oth rs, the five
main levels are listed here. There are the Junior, semi-
senior, senior, manager and partner.
A Junior is the beginner in the public accounting
field. He will work on only a small part of an audit, and
his work will be purely clerical. Experience In actual prac
tice trains the Junior to work efficiently and rapidly with
detail and he will gradually be given duties to perform which
will create a greater demand for the technical training
gained from previous education. A Junior is usually required
to have two—three years of experience before he is promoted.
A semi-senior Is one who has progressed enough that
he can work Independently on some major engagements, but
still needs supervision on many phases of his work. A
semi-senior will still usually be compelled to do much Junior
work. A person usually remains a semi-senior for one and a
half to three years before he is promoted, depending upon
his abilities, the policy of the company and vacancies in
72
in the company.
The senior accountant is one who has acquired the
necessary training and experience to enable him to carry
out Important and detailed assignments without Im-nedlate
supervision. He is usually in chart: of an entire audit or
assignment and supervises a few semi-seniors and Juniors.
He is in charge of allocating duties and tasl s to the Juniors
and semi-seniors under him and is responsible for discussing
problems with the client and preparing the audit report.
He must co-ordinate the activities of his assistants in order
to conduct the assignment in the shortest time possible, but
also In the most accurate and approprlfte manner.
Advancement from a senior to a supervisor or manager
usually takes a longer period of time. Most of the latter
usually have a minimum of from fifteen to twenty-five years
of experience. The manager, or supervisor, usually has many
seniors and their staffs under him. Most of the time it is
he that is responsible for making arrangements for audits
and he helps the senior when the latter has come upon some
complex and difficult point. Although his work is largely
administrative, he is still required to consult with the
client In respect to tax problems or gen'= ral financial and
business problems,
A partner is generally responsible for directing the
accounting staff and managing the regular business affairs
of the accounting firm. There are three ways one may become
73
a partner. They are: (1) he may, by himself or with others,
organize a new firm, (2) he may, providing he has the capital
and can find the opportunity, buy an Interest In a partner
ship, or (3) he may be promoted within the firm, because of
exceptional ability, to the position of partner.
At present, a college graduate receiving a Job as a
Junior accountant will be paid a beginning salrry of from
S250 to $310 per month, depending upon the hiring policy
of the company, the degree held and the individual's experience
in the accounting field. Also, occasionally firms will pay
somewhat more for persons a little older than the average
college graduate. Comparing this beginning salary with the
estimated beginning salary of a Junior accountant in 1948
and the salaries of the other levels of employment In public
accounting, it is found that a seml-senlor would probably be
earning about C!372 per month now and that a top salary for a
senior would be about #550 per month. Using this same
figure as a base, an average salary for a supervisor or
manager would be about $7800 per year.
The following public accounting firms conducted
interviews at Texas Technological College during the school
year 1952-1953 in search of accounting graduates desiring
work In public accounting:
^Career as. g Public Accountant (CPA). (The Institute for Research, Chicago, Illinois, 1948), page 24.
74
Arthur Anderson & Co Junior Accountants aarrett and Barrett, Public Accountants
Junior Accountants -3 ._. Senior Accountants B007,, Allen and Hamilton, Management Consultants.... T . , ^ , Accounting Consultants Llnder, Burk and Stephens, CPA... Junior Accountants Peat, Marwick, Mitchell and Co. . Junior Accountants ^rice, Waterhouse and Co Junior Accountants
In the private accounting field, more accoumtants
find employment in large scale business enterprises than any
where else. However, private accountants are needed every
where In more and more businesses.
Here, as in public accounting, those Just beginning,
perform tasks of a routine nature in order to gain the exper
ience and training needed to perform more important account
ing functions. This "on the Job training" often calls for
rotating trainees through the various departments, divisions
and branches, in order to give them an overall picture of
the accounting program of the company. \^en their train
ing is complete, they are placed in positions where they will
find use for their education and training.^
Some of the positions that training in accounting
is useful in are:^
Actuary Chief Accountant Purchasing Agent Auditor Comptroller Sales Analysis Bookkeeper ,Cost Accountant Statistician Budget Officer Credit Manager Tax Specialist Cashier Office Manager
CJay Carroll, "Some Challenges to Accounting," The h2^2imlll^ ^iS^ju^ii, XXVI, No. 1 (January, 1951)» 12.
15
It is easy to see that accounting training and educa
tion is a stepping stone and a great help to advancement in
industry as many of the presidents, vice-presidents, treas
urers and other officers of a great many of the large companies
began in an accounting position. Some of these people are:
PRESIDENTS Robert G. Dunlap, Hun Oil Company S. A. Swensrud, Gulf Oil Company Walter P. Marshall, Western Union Telegraph Co. J. J. Russell, Revere Copper and Brass, Inc. David H. Harshaw, John B. Stetson Co- pany Earl 0. May, McLellan Stores Company Henry Z. Walck, Oxford Unlv-rslty Press Lawrence Cowen, The Lionel Company Frank L. King, California Bank Granville H. Bourne, The Commonwealth and South
ern Corporation Wm. H. Garbade, Deep Rock Oil Company
EXECUTIVE VICE PRESIDENTS J. H. Wlmberly, Houston Natural Gas Company E. A. Klienschmidt, York Corporation H. A. Oidney, Gulf Oil Corporation 4 R. C. Gaugler, American Cyanamld Company
On the following page there is a table, based on
information obtained from the Placement Office at Texas
Technological College, for the school year 1952-53, pertain
ing to companies interviewing people with accounting degrees,
for employment in private accounting. The table contains the
names of the companies interviewing, the positions to be
filled and where possible, the salaries are given.
According to statistics compiled by the United States
Department of Labor, Bureau of Labor Statistics, enrollment
1L
76
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77
in high schools will increase sharply from 1953 through i960
and this will undoubtedly result in an Increase in the enroll
ment in colleges, universities and professional schools.
This will in turn create a demand for more and better quali
fied teachers.
A doctor's degree is generally required for the better
college teaching positions, although the type of Institution
and appointment will have an important effect on this require
ment. Those people with outstanding scholastic records may
be able to obtain a position Instructing undergraduates
while doing graduate work. In some cases it will be possible
to teach after receiving a master's degree. Extensive grad
uate training or experience as a collegre teacher are the
usual requirements for a position as assistants or associate
professors, whereas a professor has usually had ten to fif
teen years of teaching exp' rience or has been very outstand
ing.
There Is much to be said for the advantages of the
teaching profession. Many are employed on a nine month basis
thus allowing three months to be away from their regular
routine. Also, there are many holidays for people in the
teaching profession, that people the other professions
never receive, such as several days at Thanksgiving, Christ
mas, and Easter. Another advantage is the extensive knowl
edge of the theory of accounting one receives as he teaches.
78
The renumeratlon for teachers is comparable to the
salaries received in the other occupptions for people with
similar training and experience. Teachers' salaries have
been rising along with all the other salaries. In a compar
ison of the 19^9-1950 and 1951-1952 salaries, those based
on an eleven-twelve month basis from a group of fifty-one
land grant institutions Increased from 9.1 per cent for
professors to 12.7 per cent for Instructors, while the salaries
paid on a nine month basis show higher percentage gains,
ranging from 11.9 per cent to 14.2 per cent.-
The table on the following page shows the average
salaries for each Instructor In th^ various types of insti
tutions and for the two lengths of employment periods.
Recently there has been an Increasing tendency to
ward distinction between clerical or administrative T/ork and
professional accounting in the Federal Government. At r resent
there are approximately 20,000 employees engaped in profes
sional accounting positions in the government.
The largest number of accounting employees in one
department are found in the Bureau of Internal Revenue of the
Treasury Department, with the Defense Department havlnp' the
second largest number. Other agencies hiring many people
for accounting positions are: the General Accounting Office,
^Faculty Salaries in Lfind Grant Colleges and State Univerei^jiyg^ 19^1-52. (Federal Security Agency, Office of Education, Washington, D. C ) , Circular No. 358, page 3.
79
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80
the Civil Aeronautics Administration in the Department of
Commerce, the Federal Deposit Insurance Corporation, the
Housing and Home Finance Agency, the Federal ^OTer Commission,
the Interstate Commerce Commission, and the f ecurities and
Exchange Commission.
The duties of the accounting employees are as varied
as the many functions of the various branches of the govern
ment. Many are engaged in tax investigation involving an
analysis of the tax reports and accounting records of the
taxpayers; others audit the records of companies selling
to the government on a cost plus basis; still others work
for government controlled or owned corporations and other
enterprises such as those engaged In atomic research and
development, lending agencies and public utilities.
People employed In accounting positions in the fed
eral government have a normal five day, forty-hour work
week, and when overtime Is authorized the people are paid
at appropriate overtime rates. Thirteen days of annual leave
are given to government employees during their first three
years of service (since only those days on which you would
work are counted when you use this leave, these thirteen
days actually amount to nearly three full weeks), and those
who have worked more than three years receive twenty days
each year and after fifteen or more years of service they
receive twenty-six days each year. Every person is entitled
to thirteen days sick leave each year and any that Is not
81
Used up may be carried over to any future year. The United
States Employee's Compensation Act provides compensation
benefits, including medical care for personal injuries in
the performance of official duties.
Eaoh position has a GS (General Service) number des
ignating the level or classification of that particular Job.
this is used to designate the educational and experience
requirements and the salary that Is paid. For example, the
positions at grade GS-5, the applicant must have:^
(1) Four years of appropriate experience, or, (2) Successfully completed four years course in an
accredited college or university leading to a bachelor's degree in the appropriate field, or,
(3) A suitable combination of 1 and 2.
For any position above the grade GS-5, one must have addi
tional years of progressive experience as follows:
Grade Years Grade Years
GS 6 GS 7 GS 8 GS 9
There 1
1/2 1/2 1 1-1/2
s recognition of
GS 10 GS 11 GS 12 GS 13 & above
satisfactory
2 2-1/2 3-1/2 4
service in a
continuing assignment in classification act positions at the
same grade by regular salary rate Increases within the range
for that grade, as shown on the pay scale on the following
page. These Increases are earned after each twelve months
in grades below GS-11, and after each eighteen months in
Careers For Civilians, (united ^tates Printing Service, Washington, D. C ) , page 52.
82
grades above GS-11 and higher.7
TABLE 7
SALARY RATES WITHIN GRADES SHOWING PERIODIC INCREASES
Grade
GB 5 GS 6 GS 7 GS 8 GS 9 GS 10 GS 11 GS 12 GS 13 GS 14 GS 15 GS 16 GS 17
$ 3.^10 3.795 4,205 4,620 5,060 5,500 5,940 7,040 8,360 9,600 10,800 12,000 13,000
$ 3,535 3,920 4,330 4,745 5,185 5,625 6,l4o 7,240 8,560 9,800 11,050 12,200 13,200
3,660 4,045 4,455 4,870 5,310 5,750 6,340 7,440 8,760 10,000 11,300 12,400 13,400
3,785 4,170 4,580 4,995 5, 35 5,875 6,54o 7,640 8,960 10,200 11,550 12,600 13,600
^ 3.910 ^295 4,705 5,120 5,560 6,000 6,740 7,840 9,160 10,400 11,800 12,800 13,800
^,035 4,420 4,830 5,245 5,685 6,125 6,940 8,040 9,360 10,600 .. • •.
. • • . .
• . . •.
4,160 ^,545 ^,955 5,370 5,810 6,250
As one can see from the foregoing information, people
who receive their training and education in accounting will
have, if the employment outlook remains as good as it is
right now, ample opportunities to prove themselves In Just
about any branch of accounting they choose. Also, the work
ing conditions and renumeratlon are comparable to any other
profession.
However, to those who do engage in this profession,
a word of warning should be given. Accounting is hard work
and accountants will have to learn to slow down and find ways
of releasing their minds from the worries of the company and
the troubles of the client. In a survey of the obituary
IM^., page 53.
83
columns of The Cortlfied Publio Accountant. Raymond Horn
found that the average age of the CPA*s listed therein was Q
fifty-seven. This in Itself shows that accountants work
under a great deal of strain and pressure and tho&e who do
not realize the danger of it all, find out too late. How
ever, something else to be considered in regard to the average
age of the people listed In the obituary columns is that when
these men were born, life expectancy was somewhat shorter
than it is today. o Raymond Horn, "A Survey—How Long Do CPA*s Live?"
The Texas Accountant. (The Texas Society of Certified Public Accountants, College station, Texas, March, 1952), page 1.
BIBLIOGRAPHY
Articles
Brazee, Howard, "History of Accountancy," The Accountants y ggft > American Accounting Association, XV (September,
^Carrol, Gay, "Some Challenges To Accounting," The Accounting Review. XXVI, No. 1 (January, 1951), 12.
Gruenberg, Dr. Curt, "Early History of the Accountinp; Profession, " 1^ Accountants Digest. American Accounting Association, XV (June, 1950), 221.
^ Horn, Rasrmond, "A Survey—How Long Do CPA's Live?" The Texas Accountant. The Texas Society of Certified Publio Accountants, College Station, Texas, March, 1952, P. 1.
Littleton, A, C , "The Meaning of Accounting Education," The Accounting Review. XVII (July, 1942), 215.
Moludle, Ernest J., "Education for Public Accounting," Jotirna:|. of Accountancy. LXXVIII (September, 1944), 215.
Oehler, Christian, "Theory and Practice," The Accounting Review. XVII (July, 1942), 277.
Rounsaville, Arch, "Some Little Known Facts About How Accounting Got To Be What It Is Today," Journal of Accountancy. American Institute Publishing Company, (September, 1949), 232.
Zlatkovich, Charles T., "University of Texas Offers A Graduate Degree in Professional Accounting," The Accountants Digest. (March, 1949), 175.
B22M
VBacas, Paul E., C.P.A., The Successful Practice Of Accounting. Prentice-Hall Inc., New York. P. 390.
Buss, Lydus Henry, C.g.A. Examination Reaulreinents. American Accounting Association. Urbana, Illinois, (1951).
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85
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Hfflortp
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