The Contributions of John Lansing Carey to the Profession of Accountancy, Volume 10 (Studies in the Development of Accounting Thought)

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THE CONTRIBUTIONS OF JOHN LANSING CAREY TO THE PROFESSION OF ACCOUNTANCY

STUDIES IN THE DEVELOPMENT OF ACCOUNTING THOUGHT Series Editor: Robert J. Bricker and Gary Previts Volume 1: Henry Rand Hatﬁeld: Humanist, Scholar, and Accounting Educator, 2000 Volume 2: Foundations for the Future: The AICPA from 1980–1995, 2000 Volume 3: The Story of a Fortunate Man: Reminiscences and Recollections of Fifty-Three Years of Professional Accounting, 2000 Volume 4: Development of the Income Smoothing Literature 1893–1998: A Focus on the United States, 2001 Volume 5: The Murphy-Kirk-Beresford Correspondence, 1982–1996: Commentary on the Development of Financial Accounting Standards Volume 6: Doing Accounting History: Contributions to the Development of Accounting Thought Volume 7: Accounting: How to Meet the Challenges of Relevance and Regulation Volume 8: The Life and Writings of Stuart Chase (1888–1985): From an Accountant’s Perspective Volume 9: Seekers of Truth: The Scottish Founders of Modern Public Accountancy

STUDIES IN THE DEVELOPMENT OF ACCOUNTING THOUGHT VOLUME 10

THE CONTRIBUTIONS OF JOHN LANSING CAREY TO THE PROFESSION OF ACCOUNTANCY BY

LAURIE A. BARFITT Delta State University, USA

Amsterdam – Boston – Heidelberg – London – New York – Oxford Paris – San Diego – San Francisco – Singapore – Sydney – Tokyo JAI Press is an imprint of Elsevier

JAI Press is an imprint of Elsevier Linacre House, Jordan Hill, Oxford OX2 8DP, UK Radarweg 29, PO Box 211, 1000 AE Amsterdam, The Netherlands 525 B Street, Suite 1900, San Diego, CA 92101-4495, USA First edition 2007 Copyright r 2007 Elsevier Ltd. All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone (+44) (0) 1865 843830; fax (+44) (0) 1865 853333; email: [email protected]. Alternatively you can submit your request online by visiting the Elsevier web site at http://elsevier.com/locate/permissions, and selecting Obtaining permission to use Elsevier material Notice No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein. Because of rapid advances in the medical sciences, in particular, independent veriﬁcation of diagnoses and drug dosages should be made British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 978-0-7623-1394-5 ISSN: 1479-3504 (Series) For information on all JAI Press publications visit our website at books.elsevier.com

Printed and bound in the United Kingdom 07 08 09 10 11 10 9 8 7 6 5 4 3 2 1

CONTENTS DEDICATION

vii

ACKNOWLEDGEMENTS

ix

LIST OF ABBREVIATIONS

xi

CHAPTER 1

INTRODUCTION

CHAPTER 2

BIOGRAPHY

1 17

CHAPTER 3 HISTORY, ENVIRONMENT, AND BACKGROUND OF THE ACCOUNTING PROFESSION

35

CHAPTER 4 HISTORY OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS, ITS PREDECESSORS, AND CONTEMPORARY ORGANIZATIONS

51

CHAPTER 5 ANALYSIS OF PUBLISHED WORKS AND SPEECHES

75

CHAPTER 6

BUILDING A PROFESSION

91

CHAPTER 7

ETHICS

113

CHAPTER 8 THE PAST AND THE FUTURE OF ACCOUNTING

145

CHAPTER 9

175

SUMMARY AND CONCLUSIONS v

vi

CONTENTS

BIOGRAPHICAL SKETCH OF AUTHOR

183

BIBLIOGRAPHY

185

APPENDICES

197

INDEX

225

DEDICATION This book is dedicated to my parents, Arlene and David Cowden, who have instilled in me a life-long interest in learning and teaching. Growing up, it was understood that all their children would attend college and acquire a degree; it didn’t matter to them what area in which we majored. And, to date, all of my siblings have bachelor’s degrees; all have taken classes beyond their bachelor’s degree. My sister, Holly, has taken classes toward a second bachelor’s degree. My brother, Bill, my sister, Carol and I all have master’s degrees; my sister, Barbara is currently working on hers. I attribute my success to the encouragement of my parents throughout my educational formative years. Grades were important to them, but learning and understanding the material was much more important. I can remember many dinner hours spent at the kitchen table, learning our ‘times tables’ and ‘states and capitals’. Family trips were spent visiting historical sites and learning about the geology, geography, and importance of the places in which we stopped. The learning process has never ended, but continues today. My parents watch the Discovery and PBS channels. They are avid readers, which is another quality handed down to all their children. They continue to be an inspiration to me. This work is a culmination of my educational and research abilities, to date, inherited and infused in me by them. For their love and encouragement, I dedicate this work to them.

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ACKNOWLEDGEMENTS There are many people who have made contributions to the successful completion of this research project. I am deeply grateful for the assistance and feedback given by my dissertation committee. First, I would like to thank Dr. Dale L. Flesher, chairman of my committee, who helped me ﬁnd the topic, made suggestions on the organization and substance of the project, and directed the writing. I would also like to thank the other members of my committee: Dr. Rick Elam, for his insightful suggestions for narrowing the scope of the research project and for his knowledge of the American Institute of Certiﬁed Public Accountants (AICPA); Dr. Tonya Flesher, for reﬁning and improving my writing and wording; Dr. Royce Kurtz, for ﬁnding ‘elusive’ articles and government documents in the library. Many others contributed to the furtherance of this project: Bea Sanders, Vice President of AICPA Academic & Career Development and Don Schneeman, retired General Council and Director of Ethics, who agreed to talk about their memories of Carey; Shannon Williams, who transcribed the interviews; the research, Interlibrary loan, and archival librarians at The University of Mississippi who found information, articles, and pictures; and Leticia B. Romeo and Marlene Gallagher, assistants to Bea Sanders at the AICPA, who helped ﬁnd information on the Carey Scholarships. I thank the Patterson School of Accountancy of The University of Mississippi for ﬁnancial assistance provided through graduate assistantships and the AICPA library for providing part-time employment while pursuing my degree. I appreciate Delta State University for their support in class scheduling and release time, which enabled me to ﬁnish my coursework. I am also grateful to my colleagues in the School of Business at Delta State University and especially in the accountancy department, for inquiring about my study without pushing, and for their encouragement and support, and for allowing me to ‘monopolize’ the graduate assistants and work study students to free up my time for research and writing. My family and friends have endured much while this process has been ongoing. I am grateful for their patience and understanding, for their encouragement and willingness to listen, for their suggestions and eagerness to ix

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THE CONTRIBUTIONS OF JOHN L. CAREY

help. I would specifically like to thank Sharon Ford, for proofing my ﬁnal document, and Jennifer Ziegelmayer, for ﬁxing my computer problems and setting deadlines, then resetting them and sending me reminders when I missed them. This study would not have been ﬁnished without the support and encouragement of my family and friends.

LIST OF ABBREVIATIONS AAA AAPA ABV AIA AICPA C.A. CFM CITP CIA CMA CPA F.I.A. NSCPA PFS SEC SSCI

American Accounting Association American Association of Public Accountants Accredited in Business Valuation American Institute of Accountants American Institute of Certiﬁed Public Accountants Certiﬁed Accountant (of the Institute of Accounts) Certiﬁed Financial Manager Certiﬁed Information Technology Professional Certiﬁed Internal Auditor Certiﬁed Management Accountant Certiﬁed Public Accountant Fellow of the Institute of Accounts National Society of Certiﬁed Public Accountants Personal Financial Specialist Securities and Exchange Commission Social Sciences Citation Index

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CHAPTER 1 INTRODUCTION John (Jack) Lansing Carey spent his entire career in the service of the accounting profession, promoting the advantages and abilities of the accountant. If there was one overriding theme in the life and career of John L. Carey, it was his ability to guide and channel the direction of his employer. Carey served the American Institute of Certiﬁed Public Accountants (AICPA), which operated under the name American Institute of Accountants (AIA) prior to 1957, through 44 years of changes in administration, guiding the Presidents, Vice Presidents, and Treasurers until they were comfortable in their newly elected positions. This role included the aspects of writing and speaking, in addition to his organizational skills and his ability to act as a mediator among opposing factions. John Lawler (1988), in his tribute to Carey, remarked, The Institute, of course, is in many ways Jack’s monument. It was a relatively obscure organization when he joined its small staff in 1925. When he retired nearly a half-century later, it had become one of the country’s preeminent professional societies. (p. 27)

John Lansing Carey was born on March 30, 1904, to Harry Lansing and Elizabeth Cameron Carey, in Brooklyn, New York. The family lived in Brooklyn until John was 4 years old, and then moved to Long Island, where he grew up. While attending Richmond Hill High School, he was elected secretary of his senior class and belonged to Arista, a scholastic fraternity. He graduated from Richmond Hill in 1921 (Accounting Hall of Fame, 2004). After high school John Carey attended Yale University. He graduated from Yale in 1925 with a degree in English. Four days after his graduation, he joined what would become the AICPA and he would spend his entire career with the organization. John Carey began his illustrious career with the Institute as Assistant Secretary to A. P. Richardson. John Carey took over from Richardson and remained Secretary of the AIA (forerunner of the AICPA) until he was promoted to Executive Director in 1948 (Agami, 1989). His title was changed to Administrative Vice President of the AICPA in 1967, the position he held until his retirement in 1969. John Lansing Carey died at the age of 83 in Taconic, Connecticut on October 25, 1987. 1

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THE CONTRIBUTIONS OF JOHN L. CAREY

John Carey also had a long-standing association with the Journal of Accountancy. He became the managing editor for the Journal of Accountancy, succeeding A. P. Richardson in that role. Carey served as managing editor between 1937 and 1949, then became editor until 1954, and ﬁnally held the position of publisher until 1966. Under his guidance, The Journal of Accountancy significantly increased in circulation, from approximately 11,000 subscribers in the 1930s to over 100,000 in the 1960s. The format, content, and style of the journal went through several changes, including its size. John Lansing Carey has been called Mr. Accounting Profession (Michigan State University, ca. 1965). He has been the certiﬁed public accountants’ (CPAs’) spokesman, promoting and advancing the profession by delivering hundreds of speeches across the country. He has also been labeled ‘‘the architect of the accounting profession’s code of ethics’’ (Michigan State University, ca. 1965). In addition, after his retirement from the AICPA, John Carey continued to promote the accounting profession by teaching classes at several universities (Agami, 1989). John L. Carey was elected to the ofﬁce of Vice President of the American Accounting Association (AAA) in 1968. He was the only ofﬁcer of the AAA at that time that was neither an accounting academic nor an accounting professional (Accounting Hall of Fame, 2004). John L. Carey was probably best known for his proliﬁc writing. In the Distinguished Accountants Lecture Series (Michigan State University, ca. 1965), Herbert Miller, a professor at Michigan State University and host of the series, introduced Jack Carey as, among other things, a ‘‘widely read’’ author. Carey published eight books (see List of Books Written by John L. Carey in Appendix A) and over 200 articles (see List of Articles Written by John L. Carey in Appendix B). John Lawler (1988) said in his tribute upon Carey’s death: ‘‘y he had a facility with words that was the envy of his staff and colleagues’’ (p. 27). Carey tackled many controversial issues of the times. He addressed subjects such as advertising by CPAs, solicitation of colleagues’ clients and employees, conﬂicts involving independence, and other actions considered unbecoming to the profession. Furthermore, Carey was an advocate of continuing education, long before it became a requirement for CPAs. Carey continually focused on accounting ethics and ethical quandaries in his works. One of the ﬁrst books on accounting ethics, Professional Ethics of Public Accounting was written by John Carey in 1946. This book covered three areas of emphasis: the public, the client, and the profession. Many of the topics addressed – independence, contingency fees, advertising, and conﬁdentiality – are still important issues today. Carey believed that ethics

Introduction

3

was so essential to accounting being perceived as a profession that he authored two additional books on this topic, Professional Ethics of Certified Public Accountants in 1956 and Ethical Standards of the Accounting Profession (1966) in conjunction with William O. Doherty, editor of The Journal of Accountancy. As John Carey (1966b) stated in the preface of his second book on ethics, ‘‘There now seems need for a book which does more than to restate and explain the existing rules of professional conduct and the ofﬁcial decisions that have been made under them. There is need for emphasis on general principles which the practitioner may apply for himself to difﬁcult situations’’ (p. vii). In addition to his own works, several books by other authors also included ethics chapters written by John Carey (see List of Book Chapters Written by John L. Carey in Appendix C). John Carey wrote a body of works on accounting as a profession. The book, The Accounting Profession–Where is it Headed? edited by John L. Carey, was commissioned by the Committee on Long-Range Objectives, a committee appointed by the AICPA to study the problems and the future of the profession. In 1965, John Carey was charged by the commission to publish another book outlining the direction of the profession, The CPA Plans for the Future (1965). He wrote over 60 articles about accounting as a profession. He also authored a chapter in The CPA and His Profession. Toward the end of his career, he authored two volumes concerning the history of the accounting profession, The Rise of the Accounting Profession: From Technician to Professional, 1896–1936 and The Rise of the Accounting Profession: To Responsibility and Authority, 1937–1969. The writing of these histories came easily to Carey, since he lived through most of those years and had a significant inﬂuence and role in many of the events in which the AICPA participated. He wrote a series of staff bulletins published by the AICPA on management services by CPAs. He also penned many articles about management services and stirred up some heated discussions in the letters to the editor of The CPA, the bulletin (newsletter) of the AIA. Some of these topics continue to create disagreements among CPAs. In 1961, John Lansing Carey was awarded the AICPA Gold Medal Award (see List of AICPA Gold Medal Winners in Appendix D) for meritorious service to the accounting profession (Accounting Hall of Fame, 2004). A testament to his hard work is the fact that he was the ﬁrst non-CPA to ever receive this award. Because of all of the above accomplishments, John L. Carey was inducted into the Accounting Hall of Fame in 1968. This is a distinctive honor for him as there are fewer than 100 members of the Accounting Hall of Fame (see List of Accounting Hall of Fame Winners in

4

THE CONTRIBUTIONS OF JOHN L. CAREY

Appendix E). Moreover, he is one of only four non-CPAs to be inducted into the Accounting Hall of Fame. The creation of the Carey scholarship was another honor bestowed upon John Carey. This scholarship is an award granted annually to an undergraduate liberal arts student who plans to pursue graduate accounting studies (Agami, 1989). The scholarship was originally limited to graduates of Yale University, Carey’s alma mater, but the eligible population was later expanded to several other schools with which Carey was associated. Currently the scholarship is available to those applicants with liberal arts backgrounds who have been accepted at any accredited accounting program. Moreover, up to seven $5,000 scholarships can be awarded each year. Perhaps more important than the awards that John Carey received were the qualities that made him stand out above his colleagues. Herbert Miller (Michigan State University, ca. 1965), when he interviewed Jack Carey in the Distinguished Accountants Lecture Series, introduced Carey as ‘‘the acknowledged long-range planner for the fastest growing profession, and as the CPA’s spokesman and counselor’’. John Lawler (1988), who succeeded Carey as editor of The Journal of Accountancy, said, ‘‘Jack had another quality of inestimable value: the willingness to listen sympathetically to the views of others, even when he did not share those views. Because of that rare talent, he was often able to reconcile conﬂicting opinions and to restore a measure of harmony between differing segments of the profession’’ (p. 27). John Carey’s life and works deserved to be studied. The inﬂuence that he exerted in the development of the AICPA and the profession has been recognized as an important piece of accounting history.

NEED FOR HISTORICAL ACCOUNTING RESEARCH To explain the significance and importance of historical accounting research, a definition of historical research is in order. Owen B. Mosely and Milton F. Usry (1981) deﬁned history as follows: History involves the selection of facts about the past. The selection process is tempered by the judgment of the researcher as to what he thinks is fact and significant. Facts are often seen as causes and the researcher again exercises his judgment in interpreting the causes and determining how the causes relate to the present. (Moseley & Usry, 1981, p. 157)

Considering the age of the accounting profession, there has been a dearth of accounting articles written from an historical perspective. In 1969,

Introduction

5

John Carey (1969b) wrote: The dramatic rise of the accounting profession in the United States has only recently come to public notice. Even now, a mere fragment of the public is aware of what has happened, or how great is the inﬂuence of this profession on society. (p. 1)

This is not so different from Hugh O’Reilly’s (1939) comments many years ago: Other disciplines are studied from the historical point of view. The student of philosophy hardly would be considered a ﬁnished product without an understanding of the development of thought throughout the ages in his ﬁeld y The budding economists must know the story of economic thought as it has evolved from the days of the Greeks and before, and must be able to trace economic institutions, both extant and long since dead, from the mists surrounding their beginnings, and be able to account for their continuance or decay. As for accounting, one might be led to believe that it has no history: that it just is. (p. 16)

Many authors, including John Carey, have repeated George Santayana’s (1905) statement about those who ignore history being doomed to repeat it. Wallace E. Olson (1999) related that quote to the study of accounting history: It has long been held a truism that those who ignore history are doomed to repeat the mistakes of the past. With this in mind, it would seem appropriate at the end of the 20th century to retrace the development of the public accounting profession in the U.S. to see what guidance the past may offer to the future. (p. 29)

Carey (1969b) also said, ‘‘There are striking parallels between problems confronting accountants many years ago and those facing them today. Lessons can be learned from the failures as well as the successes of the past’’ (p. xv). Accounting historical research serves several purposes. The ﬁrst two reasons for studying accounting history are actually related to each other: ﬁrst, to look at the past to understand the events of our predecessors, in and of themselves; and, second, to help us comprehend the current conﬂicts and experiences of today. Carr (1967) stated, ‘‘to enable man to understand the society of the past and to increase his mastery over the society of the present is the dual function of history’’ (p. 69). Tyson (1996) reiterates the above two purposes while broaching a third: ‘‘In general, scholars undertake historical inquiries to understand the past for its own sake, to explain modern developments, and/or to precipitate social change’’ (p. 87). A. C. Littleton (1966) added: But history is useful as well as inspiring. In meeting conditions as they arise it is distinctly helpful to start with a consciousness of the fact that change is a permanent element.

6

THE CONTRIBUTIONS OF JOHN L. CAREY There is always need for constant, even if cautious, revision of ideas and patient adaptation or renovation of methods. Whence better than from history could that consciousness come? (p. xii)

Previts and Merino (1998) add a cultural aspect to the purpose of accounting history: The story of accountants and accountancy in the context of this nation, its culture and geography, as well as its economic and political activities is a story of the ‘cultural significance of accounts’. (p. xv)

Finally, A. C. Littleton (1966) further solidiﬁes the above reasons for accounting research: Although the historical development of accountancy began centuries ago, that history is still prelude to the present, and the present is prelude to the future. Accountancy is, in part, what it now is because of what it had once been. It has also, in part, been inﬂuenced by the fact that generations of men have been willing and able to build upward upon preexisting foundations y The thought is also worth repeating that the most effective elements of history are effects rather than events. It will be obvious that the interdependence of these effects will be highly significant. (p. xii)

While, there continues to be a need for additional insights and perspectives provided by accounting historians, over the last thirty years, the venues for historical accounting research have expanded. There is a small group of journals dedicated to the accounting history research area. In addition, many mainstream accounting journals, which at one time shunned accounting history, have included historical pieces from time to time. The Accounting History International Conference, the World Congress of Accounting Historians, and the Accounting, Business and Financial History Conference are just three examples of conferences dedicated to accounting historical research (Parker, 1999). While the outlets for historical research in accounting are expanding, there is a need for additional avenues for publishing historical works, especially biographical research.

NEED FOR BIOGRAPHICAL RESEARCH There is one common thread among the formal definitions of history: the inclusion of the human aspect. Hexter (1971) stated that history ‘‘means any patterned, coherent account, intended to be true, of any past happenings involving human intention or doing or suffering’’ (p. 237). Gary J. Previts (1973) adds, about accountants’ inﬂuence on the profession,

Introduction

7

Historical investigation should also include attention to the contributions of accounting personages. ‘History is the essence of innumerable biographies,’ said Carlyle. This reﬂects the belief that there is a need to recognize and identify the role of key individuals in the transformation of the accounting function. Such an emphasis on individual activity assists in the study of the relationships, reasons and circumstances which create events. (p. 38)

Surely it is the people who make history. ‘‘Our understanding of what was accomplished must be in terms of the choices and deeds, even if largely conjectured, of individual men, even if their names have usually been forgotten’’ (Gallie, 1968, p. 87). It is those individuals who have made difﬁcult choices and worked under intense pressure and circumstances that have made the accounting ﬁeld what it is today. Historical accounting studies have, in the past, been divided into different areas of research. Previts, Parker, and Coffman (1990) parcel the historical research into seven topical categories: (1) biographical studies, (2) institutional histories, (3) development of accounting thought, (4) general history, (5) critical history, (6) historical databases, and (7) historiographic studies. Biographical studies as a category of research is deﬁned by Previts and Bricker (1994) in Contemporary Accounting Research: ‘‘Biographical studies explore the personalities and lives of important individuals with respect to the development of the profession or institutions such as the SEC’’ (p. 627). In addition, biographical research can provide insights into the analysis of a company (Fillis, 2003). A description of the need for biographical research by Tom Lee (2002) in his article about the biography of Henry Rand Hatﬁeld, follows: Biographical histories not only provide insight, context, and explanation for broader historical issues. They are also popular with readers of history. A biography is a window into a past life and, depending on the depth of research, helps to satisfy our curiosity about fellow human beings. (p. 124)

Dale and Tonya Flesher (2003) comment further about the need for biographical research in accounting: The history of any ﬁeld, including accounting, is dependent upon the contributions of the practitioners and theoreticians in the ﬁeld. As a profession, such as accountancy, reaches a level of maturity, that maturity is supported by recognizing the contributions of the pioneers who laid the foundation on which the profession is based. (p. 97)

Tyson (1996) also discusses the human element of history by saying: ‘‘Adding a human perspective to past events seems especially ﬁtting to the ﬁeld of accounting, a ﬁeld often portrayed as comprising a set of mundane,

8

THE CONTRIBUTIONS OF JOHN L. CAREY

impersonal procedures devoid of expression and judgment’’ (p. 91). Lee (2002) expounds further, ‘‘In order to explain and understand accounting practices, developments, failures, and successes, we need to know more about the accounting actors who were present’’ (p. 125). Roberts (1971), in his dissertation on Montgomery, asked, Should not accountants be familiar with the contributions of Pacioli, Manzoni, Hugh Oldcastle, George Watson, John Heins, Charles E. Sprague, Arthur Lowes Dickinson, Henry Rand Hatﬁeld, William A. Paton, George O. May, Robert H. Montgomery and others who have helped to shape the profession in which they are interested? (p. 5)

Richard Vangermeersch (2004), in his paper presented to the 10th World Congress of Accounting Historians, addressed the need for accounting biographical research, naming John Carey specifically: There is a great need for some biographical data on key players who probably do not have backgrounds well known by accounting history researchers. Here are just some of the names: van Dien; Limperg; Forbes; Schybergson; Carey; Andrews; Mueller; Wyatt; Sterrett; Kraayenhoff; Goudeket; Trueblood; Plender; Klijnveld; Madden; Schmidt; and so on. Accounting has become a ﬁeld without names. Let’s make a start on changing this (emphasis added). (p. 26)

John Lawler (1988) said about The Rise of the Accounting Profession, the 2-volume set of accounting histories written by Carey, ‘‘y an imposing record that he produced with awesome speed shortly before his retirement. It is inaccurate in only one respect: It ignores his own crucial role in many of the impressive achievements set forth in its pages’’ (p. 27). This study seeks to ﬁll that void in accounting biographical research. The inﬂuence and significance of the effect that John Lansing Carey had on the accounting profession through his writings and his work will serve to answer that call for more historical and biographical research.

PURPOSE OF THE STUDY The main purpose of this study is to organize, examine, and analyze the works of John Lansing Carey. Through his position with the Institute, he sat as secretary in many committee meetings and, therefore, had intimate knowledge of details and discussions concerning current and critical issues of the times. He used his editorials in The CPA and The Journal of Accounting as a forum for soliciting discussion and feedback about those issues. Some of these were controversial and thought provoking, as evidenced by many members’ letters to the editor. Carey posed questions in his articles

Introduction

9

that caused the readers to react and respond to his editorials, such as ‘‘What is the ethics of publicity?’’ and ‘‘When is a CPA independent?’’ Through his many articles, books, pamphlets, and editorials, he inﬂuenced and directed the thoughts of the practitioners of the time. The second purpose of this study is to demonstrate the role of John Lansing Carey to act as a quiet leader among the accounting professionals. He was the glue that held the Institute together through the numerous and varied administrations. He aided in molding the direction of the organization by providing consistency throughout the years. He discussed the future of the Institute and the profession at civic organizations, state societies, and chapter meetings (Carey, 1957c). Carey (1970a, 1971) talked to college students and practitioners about the direction of the accounting profession and controversial issues being argued by academics, legislators, and the accounting organizational leaders. He acted as mediator between factions of accounting groups, bringing reason and cooperation to the table. For instance, Robert Morris Associates recognized Carey for ‘‘his many contributions to a better understanding between bankers and certiﬁed public accountants, brought about by his leadership in developing programs of co-operation between certiﬁed public accountants and the banking industry, and specifically and particularly, the members of Robert Morris Associates’’ (Robert Morris Associates Honors John L. Carey, 1969, p. 15). A third purpose of this study concerns the lasting impression that Carey’s writing has made. Through the use of citation analysis, an examination of those authors who cite John L. Carey was conducted. Chuang (2004), in his assessment of the health insurance literature noted, ‘‘y citation analysis is a useful tool in identifying important contributions to the interrelated literature and detecting longitudinal trends of topics present in a body of science or social science literature’’ (p. 464). John Carey’s continued inﬂuence to the accounting profession through his timeless and proliﬁc writings will be analyzed and documented. The remaining purpose of this study is to expand the body of accounting history. A biography of John Lansing Carey represents an important chapter in the history of the accounting profession. A. C. Littleton (1966) said, y accountancy is still in evolution – it may be even now in the midst of its greatest movement – and we are poorly equipped to understand its trend if our historical perspective is weak; we are badly poised to assist the wiser movements of the development if the trend is too dimly perceived. Even in the busy present, therefore, we need some knowledge of the interesting past of bookkeeping and accounting. (p. xv)

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THE CONTRIBUTIONS OF JOHN L. CAREY

Flowers (1974), also voiced his opinion of the value of accounting history and the ultimate purpose of the biographer, stating: It may be a distinct failing of accountancy to be rather unconcerned about its history, and perhaps more so about attempting to preserve the essential records about the human beings who created our present condition. It is the purpose of the biographer to forge these ‘‘living links’’ – to capture the personality, habits, and the role of a person in the interacting environment of an age so that we can trace the events, ideas and institutions of the period to the important human elements. (p. 21)

As Carey (1969b) said in the ﬁrst chapter of his book about the accounting profession’s history, the purpose of this study is to examine ‘‘what has happened, and why, and how, in the hope that it may facilitate the determination of what yet needs to be done’’ (p. 12).

METHODOLOGY The primary objective of this study was to examine the works of John Lansing Carey and his contributions to the profession of accountancy. All of his available speeches and publications were examined. First, the Accountant’s Index listed approximately 230 entries either written by John L. Carey or about him (American Institute of Accountants & American Institute of Certiﬁed Public Accountants (1923 and subsequent years through 2004)). These comprised over 150 journal articles, including his columns in The CPA, 17 speeches, eight books, several booklets, pamphlets, and book chapters. These publications were cataloged, organized, indexed, and analyzed as to content of those publications. Secondly, as not all news items were cataloged in the Accountant’s Index, a review of every page of every edition of The CPA was conducted to search for serendipitous discoveries of information by or about Carey. Lastly, unpublished materials that have become available to the researcher were examined. Numerous ﬁles of personal papers of John Carey had become the property of the E. H. Patterson School of Accountancy at The University of Mississippi. These included copies of his handwritten and typed speeches presented to various organizations around the country (See List of Speeches Presented by John L. Carey in Appendix F). Also available were materials, additional speeches, and committee reports, archived at the AICPA Library at The University of Mississippi. A citation analysis was performed to examine the extent to which Carey’s works have had an inﬂuence on other authors and accountants. ‘‘A citationbased approach gathers data on what is being most commonly cited by

Introduction

11

researchers. Specifically, citation analysis measures the inﬂuence of particular articles, authors, or journals by evaluating the frequency of citations made to those articles, authors, or journals appearing in various other journals’’ (Guidry, Hollier, Johnson, Tanner, & Veltsos, 2004, pp. 45–46). Chuang (2004) used citation analysis to identify major themes and contributors to a speciﬁc body of research. ‘‘Citation analyses serve to complement subjective research by providing a different perspective of the author’s relative importance’’ (Guidry et al., 2004, p. 46). John Carey’s career with the AICPA and its predecessors has also been studied. John Lawler (1988) stated, y surely the Institute’s progress would have been different without the many qualities which Jack brought to it: his incisive mind, his congenial personality, his remarkable ability to focus on current issues and to anticipate future ones, his seemingly tireless energy, his wholehearted commitment to the profession, his graceful wit that relieved moments of tension. (p. 27)

Carey reported on the events of the Institute, its achievements, and its problems. He sat in on many of the committee meetings and saw the turmoil caused by various factions within and outside of the Institute. An analysis of the materials and minutes of the Institute has been examined and scrutinized. Interviews have been conducted with contemporaries and colleagues. Interview subjects included the secretary to John L. Carey, Bea Sanders, and the legal representative for the AICPA, John Schneeman, who worked closely with John Carey. An attempt was made to trace and locate the two sons, John L. Carey, Jr. and Newton Cameron Carey. Also, visits were arranged to John Carey’s former home and gravesite, and to other pertinent locations as deemed necessary to obtain a feeling for the life of John Carey.

SCOPE AND LIMITATIONS Within the study of the history of any particular subject, certain sacriﬁces and decisions must be made. One cannot research and expound upon the whole of a subject. Edward Carr (1967) explains in his book What is History? the reasons a researcher must limit the amount of material in a study. He says: y no sane historian pretends to do anything so fantastic as to embrace the ‘whole of experience’; he cannot embrace more than a minute fraction of the facts even of his chosen sector or aspect of history y The historian distils (sic) from the experience of the past, or from so much of the experience of the past as is accessible to him, that part which he recognizes as amenable to rational explanation or interpretation, and from it draws conclusions which may serve as a guide to action. (p. 136)

12

THE CONTRIBUTIONS OF JOHN L. CAREY

This study concerns the contributions of John Lansing Carey to the profession of accountancy. The works of John Carey, his speeches and writings, were examined. Carey’s works, as reported in the Accountant’s Index were studied. Every page of The CPA journal was inspected. The unpublished works at the University of Mississippi were explored. The minutes and secretary’s reports of the AIA and its successors have also been scrutinized. And as his entire career encompassed 44 years spent in the employment of the AICPA and its predecessors, an in-depth analysis of his career was not feasible. Therefore, while his works and actions to promote the accounting profession as part of his position in the AICPA were analyzed, other dayto-day activities and duties as Secretary and Executive Director of the AICPA were beyond the scope of this study. Moseley and Usry (1981) stated, ‘‘If the historian fails to be selective in his definition of the problem for study, he may assemble too much detailed data and be unable to perform a proper analysis and arrive at meaningful conclusions’’ (p. 158). Hence, the scope of this study was limited to the available works and minutes listed above. John Carey’s death in 1987 also limits the scope of this project to the archival materials that are accessible. Carey’s opinions and feelings cannot be determined except through his writings. The assessments and views of others, where available, were utilized to provide additional insight. A secondary limitation existed as to the archival materials that were available. John Carey was employed in the Institute for 44 years and during that time period gave hundreds of speeches across the United States and in many other parts of the world. However, a limited number of written copies of those speeches exist. The personal papers archived at the E. H. Patterson School of Accountancy at The University of Mississippi contain lists of speeches given and copies of some of those speeches. A comparison of the lists with said speeches indicated that several of the speeches are missing or incomplete. It may also be possible that speeches were given that do not appear in either the list or the ﬁle. Therefore, an analysis of the existing speeches may be skewed in its conclusions. While this prospect is possible, the large number of speeches that were contained within the ﬁles minimized this limitation.

CONTRIBUTIONS OF THE STUDY One of the contributions of this study was to organize, index, and document the tremendous amount of material and publications written by John Lansing Carey. He authored books, articles, pamphlets, chapters of books,

Introduction

13

and a semi-monthly column in The CPA, the newsletter of the AIA. He made presentations to accounting societies, civic organizations, high school and college classes, and other organizations interested in the accounting profession. Another, perhaps more important, contribution was to document and analyze the inﬂuence John Carey made to the accounting vocation as a profession. Carey aided in changing the perceptions of the public toward CPAs from ‘‘bean counters’’ and ‘‘number crunchers’’ to respected members of an elite group of highly educated experts in the ﬁeld of accounting. Gary Previts and Robert Bricker (1994) expounded further on this: One beneﬁt of conducting historical research is the development of perspectives about current problems; that is, simply, to learn about the past as background to present-day issues. (p. 626)

In addition to his inﬂuence on the profession as a whole, his role in and contribution to the growth and authority of the AICPA and its predecessors was documented. The Institute had a membership of 1,500 in 1925 and grew to over 100,000 members when Carey retired in 1969. A more generalized purpose and contribution of this study was to help ﬁll the void of biographical and historical accounting research. Barbara Merino (1975) wrote: Many accountants remain unaware of the profession’s early leaders and their conceptions of the role that the profession ought to have in society. Individuals who helped to establish the profession cannot be ignored by future generations. Their ideas may give added insight to the solution of current problems. (p. 11)

This study also considered whether the condition and development of the Institute and the profession would be different if A. P. Richardson had hired someone else to assist him and follow his lead (Cowton, 1985).

DESCRIPTION AND PLAN OF THE STUDY The organization of the work is as follows. Chapter 1 consists of the Introduction. The introduction contains an overview of John Carey’s accomplishments, his writings, speeches and ofﬁces held, both within and outside of the AICPA. The need for accounting historical research, and biographical research specifically, is discussed. The purpose and method of the study is next, followed by the scope and limitations, the contributions and the plan of the research project.

14

THE CONTRIBUTIONS OF JOHN L. CAREY

The next three chapters contain background and historical information. Chapter 2 contains a biographical sketch of John Lansing Carey including his background and youth, education, family, career, and retirement activities. This chapter also includes a recitation of Carey’s awards, recognitions, and accomplishments. An overview of the results of the content and citation analysis is discussed with details in the appropriate successive chapters. The third chapter reviews the social, political, and economic environment that shaped Carey and that Carey helped to shape. Included in this chapter is a timeline of events significant to the accounting profession. Also included are synopses of speciﬁc events that were turning points for the profession and/or the Institute. The stock market crash in 1929 is discussed, along with the role of the AIA in the negotiations with the newly formed Securities and Exchange Commission (SEC) over the standard setting process. Also included in Chapter 3 are the effects of the Great Depression and WWII on the accounting profession. The gradual admittance of women and minorities into this primarily white male-dominated profession is also addressed. Without a picture of the turbulent events and conﬂicts of the time, the contributions John Carey made to the accounting profession cannot be understood. The fourth chapter contains more speciﬁc background information about the AICPA and its forerunners, the American Association of Public Accountants (AAPA) formed in 1886, and reorganized in 1916 as the Institute of Accountants in the United States of America. The next year, 1917, it was renamed the AIA and ﬁnally became the AICPA in 1957. This chapter also includes other accounting organizations such as the Institute of Accountants and Book-keepers of the City of New York, the Institute of Accounts, and the National Society of Certiﬁed Public Accountants (NSCPA). This chapter also incorporates how John Carey ﬁts in the organization, including his duties and accomplishments. Chapter 5 is the ﬁrst of the analysis chapters. It is an analysis which covers Carey’s known works. Included are a content analysis section and a citation analysis. The content analysis includes a discussion of the most proliﬁc topics of Carey’s writings and considers important subtopics as well. The next three chapters detail the contributions of John L. Carey to speciﬁc areas of the profession. Chapter 6 discusses Carey’s role in the development of the accounting professions’ standards of ethics. This includes information from his three books and numerous articles and speeches. Also included is the eventual integration of his writings into the AICPA’s Professional Code of Conduct. Chapter 7 reviews Carey’s many contributions to the development of the ﬁeld of accounting into a true profession. This will entail his seven key

Introduction

15

characteristics of a profession and his views on what constitutes a profession (Carey, 1968b). Consideration will be given to the transition of his opinions of the profession of accounting over the length of his career. The next chapter discusses the past, present, and future of accounting and, specifically, John Lansing Carey’s writings concerning those topics. His two-volume edition of The Rise of the Accounting Profession is the main focus of this chapter. Also included are the historical articles written and several speeches regarding this subject. One of the main factors in his inﬂuence of accounting history is the number of times his works have been quoted. A discussion of the future of accounting is presented within this chapter. Carey’s books, The Accounting Profession–Where is it Headed? and The CPA Plans for the Future are examined, along with articles and speeches related to Carey’s concept of preparing for the future. The present context in which Carey’s views were expounded are utilized in considering the plan for the future as described in Carey’s works. The ﬁnal chapter in this study is the conclusions and review of the importance and inﬂuence of John Lansing Carey to the accounting profession. His accomplishments and successes are highlighted. His many contributions to the advancement and development of the profession are discussed.

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CHAPTER 2 BIOGRAPHY FAMILY AND UPBRINGING John Lansing Carey was born on March 30, 1904, in Brooklyn, New York. His parents were Harry Lansing and Elizabeth Cameron Carey. The family remained in Brooklyn until John was 4 years old, and then moved to Long Island, where he grew up. While attending Richmond Hill High School, he was elected secretary of his senior class and belonged to Arista, a scholastic fraternity which is afﬁliated with the National Honor Society (Burns & Coffman, 1976). The Arista Honor Society admits only those students who hold an 85 grade average or higher (Tiwari & Morancheh, 2005). After graduating from Richmond Hill in 1921 (Burns & Coffman, 1991), John Carey attended Yale University. While there he was elected to the Phi Beta Kappa National Honorary fraternity (Burns & Coffman, 1976). He graduated from Yale in 1925 with a Bachelor of Arts degree in English. Four days after his graduation, he joined the American Institute of Accountants (AIA), which would eventually become the American Institute of Certiﬁed Public Accountants (AICPA) and he would spend his entire career with the organization. John Carey lived with his parents on 110th Street in the Richmond Hill area of New York City during his years employed as an assistant secretary (Ancestry.com, 1930). On January 27, 1933, John Carey married Joyce Newman. They had two children, John Lansing, Jr. and Newton Cameron. Carey’s leisure interests included golf, gardening, bridge, stereo music, and reading (Accounting Hall of Fame, 2004). John Carey was a member of several professional organizations. He was a member of the American Trade Association Executives and the American Management Association, as well as the American Accounting Association (AAA). Carey also was very active in service outside of the accounting profession. While living in Roslyn, Long Island, during the years 1936–1951, John served as both secretary and president of the Roslyn Estates Association. He was a trustee of the Village of Roslyn Estates. He was also the president of 17

18

THE CONTRIBUTIONS OF JOHN L. CAREY

the Board of Trustees of the Buckley Country Day School. At the time of his nomination to the Accounting Hall of Fame, he was serving a term as president of the Salisbury Taxpayers Association and a member of the Annual Giving Committee of Sharon Hospital. He was a Republican and a Protestant, and belonged to the Union League, the Yale Club, and the Huntington Country Club (Marquis Who’s Who Inc., 1956). He served his country as a private of the 7th Regiment New York State National Guard from 1942 to 1944 (Burns & Coffman, 1976).

CAREER WITH THE AIA Assistant Secretary John Carey began his illustrious career with the Institute as assistant secretary to A. P. Richardson. Richardson had been the secretary of the American Association of Public Accountants (AAPA) from 1911, through its incorporation into the AIA, until he became the publication director in 1930. Carey (1974a) related the story of his own entrance into the world of accounting this way: y in 1925, I was about to receive my B.A. degree at Yale, having majored heavily in English. I knew absolutely nothing about accounting or accountants. But I had applied for a job through the University’s placement bureau. One day in May I was summoned to that ofﬁce and informed by a puzzled ofﬁcial that an organization called the American Institute of Accountants, about which he knew nothing, was seeking an assistant who had majored in English and wanted to do editorial work. This was the kind of work I was seeking, so the placement ofﬁcial said I could go to New York for an interview if I wanted to. I did want to – I wanted a job very much. Soon after, by appointment, I managed to ﬁnd the Institute’s ofﬁces at 135 Cedar Street, way downtown on the west side, in a rather seedy neighborhood only a block or so from the ferry slips on the Hudson River. I entered the small, ﬁve-story loft building and was sent to the ﬁfth ﬂoor. Leaving the tiny elevator, I stepped into a vast, nearly empty room which was almost the entire ﬂoor of the building. At the far end of the room near the windows facing Cedar Street was a man writing at his desk. (p. 1)

That man was A. P. Richardson. Alphyon Perry Richardson was the secretary of the AIA, and the AAPA before it, from 1911 until Carey took over in 1930. He simultaneously edited The Journal of Accountancy during that same time period until his retirement in 1936 (Richardson & Carey, 1949). For several years after his retirement he continued to contribute a monthly column in the journal called ‘‘This Blessed Language’’. Before coming to the

Biography

19

AIA, Richardson was a bond editor and writer for the Wall Street Journal (O’Neill, 1980). Carey (1974a) continued the story of his interview for the assistant secretary position with a description of the man with whom he would work so closely: As I walked toward him the distance seemed interminable. I was startled to see that he wore a moustache and beard, in the style of King George V of England which in those days was quite unusual in the United States (small boys used to shout ‘‘Beaver’’ at bearded men). As I approached, he did not look up for a long moment, which added to my nervousness. When he did, I saw Mr. A. P. Richardson, secretary of the Institute and editor of the Journal of Accountancy – the boss of the shop. He quickly put me to ease by asking questions about my studies and extracurricular activities. He then explained what the Institute was, and the kind of help he needed – aid in editing the Journal, proofreading to start with, and later, relief from some of his administrative duties. For this work, he said, knowledge of accounting was not required, and in this respect I was fully eligible. A week or so later I reported for a second interview, at which I met the then president of the Institute, Mr. John B. Niven, a most kindly Scotsman. He was the head of Touche, Niven & Co. From what he told me about the ‘‘work’’ of the Institute, I decided that the new position would be fascinating. Soon after my return to New Haven I received a letter saying that the job was mine. (p. 1)

John Carey’s duties as assistant to the secretary were many. He read and proofed the article submissions for the Journal of Accountancy, wrote news items to be included in the monthly Bulletin, and after a short while, began handling some of the routine correspondence. Also included were clerical duties in relation with the annual meetings. Carey worked hard at his job and A. P. Richardson was a very demanding supervisor. John Carey (1976) said about his position at the Institute and Richardson: In my ﬁrst few years as his assistant, he had been a hard taskmaster, rebuking me sharply for mistakes – sometimes I thought unfairly. On a few occasions, after being humiliated in the presence of others, I let him know that I didn’t like it. For example, when the annual meeting in 1927 was held in Buffalo, the Canadian chartered accountants invited our group to a banquet in Toronto, at which I sat at a table with several new friends among the Institute members and their wives. I was happily smoking cigarettes, as were some of the others. Mr. Richardson descended from his seat of honor on the dais, marched across the room, glared at me and said, ‘‘There’s no smoking before the King – you’re under the British ﬂag now’’. I didn’t even know what he meant at ﬁrst, but I was much embarrassed by this public scolding. The next day I told him that no one had ever instructed me in the etiquette of

20

THE CONTRIBUTIONS OF JOHN L. CAREY refraining from smoking until the toast to the monarch had been offered at the end of the meal. However, I never forgot it when I visited England in later years. (p. 217)

Promotion to Secretary A. P. Richardson remained secretary until John Carey took over in 1930. Carey (1969b) discussed his own promotion to secretary in The Rise of the Accounting Profession: From Technician to Professional, 1896–1936: The new secretary was 26 years old. He had been graduated from Yale in 1925, with a major in English, a Phi Beta Kappa key, and some minor evidences of indifferent athletic ability. Four days after graduation he went to work for the Institute, with a vast enthusiasm and equally vast ignorance of what it was all about. But in ﬁve years as assistant secretary, under A. P. Richardson’s effective tutelage, he had learned a lot. With some trepidation, but with an outward expression of calm conﬁdence, he donned the mantle of the secretary, which Mr. Richardson was glad to doff. (p. 348)

One of the immediate differences between Richardson and Carey in the accomplishment of the duties of secretary was in the amount of travel. A. P. Richardson was an accomplished author and editor, an efﬁcient manager of the Institute, outspoken in his opinions, at least on paper, but disliked public speaking. He attended the necessary meetings, but did not mingle or socialize with the members (Carey, 1974a). When Richardson gave up his administrative duties to run the newly formed publishing branch of the Institute and continue as editor of The Journal, Carey took over all of the administration aspects of managing the Institute. In addition, Frederick H. Hurdman, the president of the Institute, expanded Carey’s duties to include traveling, socializing, and meeting with the state societies and recruiting new members (Carey, 1974b). John Carey took to the socializing and promoting of the profession and the Institute right from the beginning of his career. Carey was teased quite a bit about his youthfulness during those early years. Carey (1974b) recalled: The accountants we met were naturally curious about this new 26-year-old secretary of the Institute, and I was the object of some good-natured banter. At Dallas the chairman introduced me by saying that every organization had a goat, in the person of the fulltime secretary; the Institute had just acquired a new goat, whom he took pleasure in presenting. For once in my life I had an inspiration: I rose to face the chuckling audience and thanked the chairman for referring to me as a goat when he might easily have said ‘‘kid’’. There was a roar of laughter, and that group was on my side for the rest of the talk. (p. 56)

John Carey remained Secretary of the AIA (forerunner of the AICPA) until he was promoted to Executive Director in 1948 (Agami, 1989). He became

Biography

21

the Administrative Vice President of the AICPA in 1967 until his retirement in 1969. Duties as Secretary of the Institute The duties of the secretary of the AIA were varied and plentiful. Many of the members inquired as to the specifics of the secretary’s duties. In response, Carey (1945–46) wrote a separate section of his annual report of the secretary in the 1945–46 Yearbook to address this issue: Some members have shown curiosity about the personal activities of the secretary, and it may be appropriate to refer to them in this report. The secretary supervises all the staff activities except research. This supervision requires frequent personal contact with nine staff department heads or assistants. The secretary also performs the duties of managing editor of The Journal of Accountancy. Various members of the staff assist various committees in their work. The secretary of the Institute has attended thirty-two committee meetings since the meeting of council last October, and in addition the meeting of the National Conference of Lawyers and Certiﬁed Public Accountants, of which he is secretary, at Cincinnati last December. During the current ﬁscal year he has attended meetings of state societies at Madison, Baltimore, Tulsa, Albuquerque, Phoenix, and El Paso (the latter four in company with the president of the Institute), Philadelphia, and Providence. He was a guest at the organization meeting of the New York Conference of Lawyers and Certiﬁed Public Accountants. This spring he will attend accounting conferences at Columbus, Hartford, Jacksonville, and Salt Lake City; a meeting of the Kentucky Society; and, with the president, state society meetings in Texas, California, Oregon, and Washington. Since the October council meeting, the secretary has spent seven days in Washington conferring with representatives of various government organizations and others interested in accounting, such as the General Accounting Ofﬁce, Ofﬁce of Price Administration, Department of Commerce, CIO, Bureau of the Budget, United States Chamber of Commerce, Treasury Department, and members of Congress. Authorization by the executive committee of publication this spring by the Institute of a book on professional ethics of public accounting, written by the secretary of the Institute, has been extremely gratifying to the author. (p. 10)

Journal of Accountancy John Carey became the managing editor for The Journal of Accountancy, following A. P. Richardson in that role in addition to having succeeded him as secretary of the Institute. Robert H. Montgomery (1939), in his Fifty Years of Accountancy, talked about Carey: ‘‘In 1937 John L. Carey succeeded Mr. Richardson as editor. During his incumbency, the Journal has improved in interest and increased its prestige’’ (p. 69). Carey served as managing editor from 1937 to 1949, then became editor until 1954, and

22

THE CONTRIBUTIONS OF JOHN L. CAREY

ﬁnally held the position of publisher until 1966. The Journal of Accountancy grew in circulation during his tenure from less than 8,500 subscribers in 1936 to 125,000 issues in the 1960s (Agami, 1989). There were some changes and improvements made to The Journal during the period when Carey was in charge of it. The most notable change had to do with the size of the magazine itself, which changed in 1955. One change involved the increase in its size from the compact 6’’ x 9’’ dictated by the scarcity of paper during WWII to 8 1/4’’ x 11 1/4’’. One interesting story Mr. Carey told about the reaction to this change is that one reader wrote, angrily, that he could no longer put the magazine in his bookcase. ‘‘What,’’ he asked, ‘‘am I to do with it?’’ To this the editor responded, ‘‘Why don’t you try reading it?’’ (Agami, 1989, p. 11)

Other physical changes occurred over the years. One of the ﬁrst changes John Carey made was to change the style of the section headings, making them bolder and outlining the section titles in double borders, and increasing the use of script writing for subheadings. This increased the readability of the journal. In January 1941, a summary paragraph of the article was included after the heading to entice the reader with interesting points from the text of the articles. This was discontinued after 1954 when the use of color printing became more prevalent. In July 1943, the regular monthly column headings included sketches to catch the reader’s eye and break up the print. By the late 1940s, The Journal began printing photographs with the news articles. Within the next decade, photographs of the authors accompanied many of the articles. Color printing appeared in the advertising, and soon after that, within the main sections of The Journal itself. The cover of The Journal changed to a glossy look in the mid-1950s and within a year all the pages were glossy. All of these improvements were designed to enhance the look and to modernize The Journal. Some of the content improvements made over the years include the addition of regular departments on accounting, auditing, taxes, management services, and education. The Student Department, which was started in 1914, to further the education of those individuals who were attempting to pass the Certiﬁed Public Accountant (CPA) exam, published possible solutions to exam problems. The column encouraged all readers to work the solutions and provide input to The Journal. The name of the column changed from the Student Department to Accounting Education in 1957. The section titled Current Literature, which served as an unofﬁcial supplement to the Accountants’ Index, was incorporated with the Book Review section, in 1943, to become Current Books and Articles, and then revised in 1954 to Books and Articles. A new section was then added, called What To

Biography

23

Read, which became Current Readings in 1958, and attempted to identify the best and most important subject matter. Another title change occurred when the Findings and Opinions section became Ofﬁcial Decisions and Releases, where standards and pronouncements are reported. The Income Tax Department and Tax Clinic became Tax Matters and From the Tax Advisor. The editorial section was originally used to discuss any and all news items or viewpoints or letters written to The Journal from members. Eventually, Letters to the Editor would be included in its own section, along with Current Notes and a column called Journal Entries, which contained items related to the main articles. By 1950, the task of reviewing manuscripts and determining the content for The Journal was overwhelming for the editorial staff. So, an Editorial Advisory Board was established, consisting of nineteen individuals with one-year terms.

MEMBERSHIPS IN OTHER ORGANIZATIONS American Accounting Association John L. Carey was elected to the ofﬁce of Vice President of the AAA in 1968. Each year, four Vice Presidents are elected to ofﬁce. Of the Vice Presidents, two were past presidents, and one was drawn from academia. In the 1966–67 year, the fourth Vice President was called the Industrial Vice President (American Accounting Association, May 13–14, 1966). In the March 1967 meeting, the nomination slate included the three academics and the ‘‘non-academic Vice President,’’ Lawrence S. Dunham from Arthur Young & Co. (American Accounting Association, March 18–19, 1967). When John L. Carey was nominated, the suggestion was made and approved that the terms ‘‘academic and non-academic’’ be eliminated (American Accounting Association, March 29–30, 1968). Carey’s afﬁliation was listed in the nomination as the AICPA. John Carey was so well thought of, and associated so closely with accounting, that the fact that he was not an accountant held little significance. As Carey’s degree was in English, he was the only ofﬁcer of the AAA up until that time, who was neither an accounting academic nor an accounting professional (Accounting Hall of Fame, 2004). The ﬁrst meeting that John Carey attended as Vice President was the national meeting in San Diego, California. The Executive Committee

24

THE CONTRIBUTIONS OF JOHN L. CAREY

meeting lasted three days, August 24–26. During the ﬁrst two days, the 1967–68 committee presided, while the nominees were present as ‘‘observers with the privilege of discussion but without voting rights’’ (American Accounting Association, August 24–25, 1968). During the morning, discussion ensued about the National Association of Accountants’ sample membership mailing. While several members of the Executive Committee felt that it was successful and should be continued, John Carey suggested soliciting members of the AICPA. He also asked to review the material that was sent out in previous mailings. He offered to coordinate the mailing with an article in The Journal of Accountancy. Another member agreed, stating that all new CPAs should be solicited for membership in the AAA. The Financial Executives International group was also suggested for solicitation (American Accounting Association, August 24–25, 1968). On the last day of the Executive Committee meeting, only the new 1968– 69 members were present. The President, Sidney Davidson, reported assignments for the Vice Presidents on the Executive Committee. Carey was to ‘‘assist the president in external relations, particularly with other groups’’ (American Accounting Association, December 27–28, 1968, p. 6). In addition, Carey was assigned to the Professorial Development Publications Committee. The objective of the Professorial Development Program was to ‘‘bring teachers in accounting up to date in new areas and materials’’ (American Accounting Association, December 27–28, 1968, p. 6). Lawrence Vance was appointed Chairman of the committee. Frank Kaulback, Arthur Carlson, and Dennis Grawoig were also enlisted. Carlson and Grawoig were considered advisory members, not being members of the Executive Committee (American Accounting Association, August 26, 1968). John Carey’s ﬁnal meeting of the Executive Committee of the AAA was on August 23–24, 1969. The new nominees for the upcoming year were present as well. Carey suggested that the dues be raised in light of the 1968–69 deficit and the Association’s activities. After much discussion by the Committee, he made a motion that a committee be appointed by the president to study the possibility of a dues increase (American Accounting Association, August 23–24, 1969). Carey contributed to discussions on several other topics before his tenure as Vice President came to an end. He continued his membership in AAA even after his retirement. Dale L. Flesher (1991), author of The Third-Quarter Century of the American Accounting Association 1966–1991 said about the annual meeting, There is something emotional about coming in contact with many of the legends of the profession – to be able to rub shoulder to shoulder with famed authors, noted theoreticians, and partners from large accounting ﬁrms. This author remembers the

Biography

25

excitement of that ﬁrst meeting with William A. Paton, John Carey, Charles Horngren, even Richard D. Irwin. (p. 130)

Beta Alpha Psi Beta Alpha Psi (BAP) is a well-known business fraternity. Originally founded at the University of Illinois on February 12, 1919, its stated objectives were to be a professional organization with ‘‘the principles of scholarship, practicability, and sociability [to stimulate] cooperation and interest in accounting’’ (Sheldahl, 1982, p. 821). At that time, it was limited to accounting students. John Carey was inducted as an honorary member of the Delta chapter of BAP, at the University of Washington, in 1937. By that time, he was a wellknown ﬁgure in the AIA. It was said of the annual banquets of the Delta chapter, ‘‘The most renowned prewar guests, however, were John L. Carey and John F. Forbes. The secretary of the AIA addressed the banquet audience in 1937, and was inducted as an honorary member of the chapter while the former Institute president, who had been so recognized in 1922, spoke two years later’’ (Sheldahl, 1982, p. 375). Carey also interacted with the fraternity as a representative of the Institute. For many years there had been discussion of BAP becoming a student organization under the Institute. In 1921, there was correspondence between Robert H. Montgomery, chairman of the Institute’s Committee on Subsidiary Organizations, and Hiram T. Scovill, president of BAP regarding the formation of a student membership of the Institute (Sheldahl, 1982). A. P. Richardson (1922), secretary of the Institute visited Beta Chapter of BAP and wrote an editorial in The Journal of Accountancy. However, the formation of the American Society of CPAs, a direct and prominent rival to the Institute seems to have directed attention away from this plan and the idea was dropped. Discussions were renewed in the early 1930s between BAP and Carey, then secretary of the Institute, and continued throughout the decade. While no special membership status resulted from these talks, the ofﬁcers of the fraternity felt they had ‘‘gained prestige and position through the negotiation process’’ (Sheldahl, 1982, p. 799). Carey wrote to BAP chapters in 1938 to discuss ‘‘building a closer relationship with students of accounting, particularly those who intend to enter professional public practice’’ (Sheldahl, 1982, p. 801). He offered to send free copies of The Certified Public Accountant to the faculty advisors of each chapter for distribution to the members. Carey also asked for newsworthy items about the fraternity to

26

THE CONTRIBUTIONS OF JOHN L. CAREY

be published in The Bulletin. He also made available the Institute’s speakers’ bureau to aid the chapters in securing speakers for their meetings (Sheldahl, 1982). One particular anecdote concerning the above discussions appears in the monograph, Beta Alpha Psi, From Alpha to Omega: Pursuing a Vision of Professional Education for Accountants 1919–1945. In this chapter, stories were being related concerning the ofﬁcers of BAP. This particular incident occurred in December of 1932, when the Grand Council of BAP met with John Carey, as secretary of the Institute, to discuss the possible establishment of a formal relationship between the two organizations. With the eighteenth amendment still in force (though about to be repealed), C. Aubrey Smith had brought along a quart of corn and sugar whiskey made in Texas, wishing ‘‘to be sure that we were all in fairly friendly spirits’’. ‘‘Jack’’ Carey was gracious enough to ‘‘down y this Texas stuff as though it were as palatable as ﬁne French Champagne,’’ even though as a New Yorker he ‘‘was used to a more reﬁned quality of liquor, imported and/or smuggled, no doubt, from Canada or elsewhere’’. Professor Smith, incidentally, does not in any way attribute failure to establish formal fraternal linkage to the American Institute to the ‘‘Texas bootleg hooch’’ consumed in 1932. (Sheldahl, 1982, p. 815)

AWARDS AND RECOGNITIONS Who’s Who in America John Carey was listed in the Who’s Who in America in 1956 (Marquis Who’s Who Inc., 1956). The subtitle of the book is called A Biographical Dictionary of Notable Living Men and Women. The aim of the editors is ‘‘to include the names, not necessarily of the best, but rather of the best known, men and women in all lines of useful and reputable achievement – names much in the public eye, not locally, but generally’’ (p. 2). There are two classes of membership: (1) those who are included arbitrarily based on some class, such as members of Congress, Federal judges, and governors; and (2) those selected on account of ‘‘special prominence in creditable lines of effort, making them the subjects of extensive interest, inquiry or discussion’’ (p. 2). AICPA’s Gold Medal Award for Distinguished Service to the Profession In 1961, John Carey was awarded the AICPA’s Gold Medal Award (see List of AICPA Gold Medal Winners in Appendix D) for Distinguished Service

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to the accounting profession (Accounting Hall of Fame, 2004). The Gold Medal is the AICPA’s highest award bestowed upon an individual (AICPA Gold Medal Award Winners, 1987). The award is given to an individual who has made an inﬂuence on the accounting profession as a whole. The selection criteria include motivation, quality, and length of service and personal attributes (Williams Receives AICPA Award, 2003). A testament to his hard work is the fact that he is the ﬁrst non-CPA to ever receive this award. Election to the Accounting Hall of Fame Because of his many accomplishments and contributions to the accounting profession, John L. Carey was inducted into the Accounting Hall of Fame in 1968 (see List of Members of the Accounting Hall of Fame in Appendix E). The Accounting Hall of Fame was established in 1950 at The Ohio State University in conjunction with an annual international conference (Accounting Hall of Fame, 2004). While its intent was to proﬁle and applaud the works of the nominees, the purpose of the Hall of Fame was also to demonstrate the progress made in the various ﬁelds of accounting (Burns & Coffman, 1982). Consideration is given, during the selection process, of ‘‘contributions to accounting research and literature, significant service to professional accounting organizations, wide recognition as an authority in some ﬁeld of accounting, advancement of accounting education, and public service’’ (Burns & Coffman, 1991, p. 126). The process for electing an individual to the Hall of Fame was as follows. The Board of Nominations consisted of up to 45 prominent accountants from around the world, selected from the following different ﬁelds: public accounting, education, industrial, and governmental accounting (Burns & Coffman, 1976). Each of the members of the Board was asked to nominate accountants, either living or deceased, for possible selection. A ballot was then prepared containing the most nominated individuals and a vote was taken. The nominee with the most votes was then entered into the Hall of Fame (Burns & Coffman, 1976). The election of John Carey into the Accounting Hall of Fame was an especially significant honor for him as there were fewer than 35 members of the Accounting Hall of Fame at that time. Even today, there are fewer than 80 members of that elite club (see List of Members of the Accounting Hall of Fame in Appendix E). He was the second non-CPA to be elected, and the only one with no accounting background. Currently, he is one of only four non-CPAs to be inducted into the Accounting Hall of Fame.

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THE CONTRIBUTIONS OF JOHN L. CAREY

John Carey Scholarship Fund In the fall of 1968, when it became known that John Carey would retire the following year, a scholarship was established by the executive committee of the AICPA. The committee created a special fund within the AICPA Foundation to be used to provide annual scholarship grants to those seniors of Yale University, Carey’s alma mater, with the intention of pursuing a graduate degree in accounting (John L. Carey Scholarship Fund to be Awarded to Yale Seniors, 1969). Institute members were invited to contribute to the John L. Carey Scholarship Fund, starting in January 1969. The stated purpose of this scholarship was to ‘‘not only preserve Jack’s name at his old school, but also advance an objective which has always been close to his heart: the attraction of young people to the profession’’ (The John L. Carey Scholarship Fund, 1969). Beatrice Sanders (2005) recalled Carey’s opinion that a broad education was beneﬁcial to accountants: y the purpose of that fund was to provide grants for scholarships for students who came from a liberal arts undergraduate degree and pursue accounting at the graduate level y But the scholarship was kind of a tribute to his strong belief of accountants having a very broad education, not just accounting education or business, but a good strong liberal arts education. I know that was something he felt very strongly about. (p. 12)

By May 2, The CPA reported that it had already received $67,698 in contributions to the John L. Carey Scholarship Fund. A total of 115 ﬁrms donated $28,925 and there were 890 individuals who contributed the sum of $38,773. It was also reported that this total would very likely be able to support one individual scholarship (Contributions to Carey Scholarship Approach the $68,000 Mark, 1969). The method for choosing recipients for the scholarship was coordinated between Yale University and the AICPA. A committee of faculty members at the university nominated up to three students. These students were then interviewed by the Scholarship Fund’s selection committee at the AICPA (Kessler Announces Winner of Carey Scholarship, 1970). The ﬁrst scholarship award was presented in 1970 to Yale graduate, Alan J. Shaw of Mountain Lakes, New Jersey. Shaw planned to attend the University of Chicago Graduate School of Business. The amount of the scholarship was $3,000, and was eligible for renewal based on academic performance (Kessler Announces Winner of Carey Scholarship, 1970). John Carey, himself, made the presentation (John L. Carey Scholarship Award, 1970). The second recipient was Anthony J. Ruzicka, Jr. who received a Bachelor of Arts degree in economics. He also attended the

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University of Chicago Gradate School of Business with a concentration in accounting (AICPA, 1971). Today, the John L. Carey scholarship is open, not just to Yale graduates, but to all undergraduate liberal arts majors of a regionally accredited institution of the United States. Applicants must have been accepted into a graduate business program at a university accredited by the Association to Advance Collegiate Schools of Business (AACSB) that will prepare the student to sit for the CPA Examination. The scholarship recipients are selected by the John L. Carey Scholarship Task Force and decisions are based on future career interests, outstanding academic achievement, and leadership (American Institute of Certiﬁed Public Accountants, 2005). Other Awards, Accolades, and Accomplishments A resolution of the council of the AICPA, signed by Marvin Stone, President of the Institute during the 1967–1968 term, was published in the April issue of The CPA, and is included as Fig. 1. In that same issue of The CPA, there was an announcement that the Robert Morris Associates presented a resolution honoring Carey at their executive luncheon in March 1969. The resolution was drafted by one of the Robert Morris Associates’ past presidents, Arthur L. Nash, who was a longtime advocate of cooperation between accountants and bankers (Associates, 1969). The resolution was presented to Carey in New York on March 10, 1969 (Reed, 1969). The resolution is shown as Fig. 2.

HIS WRITINGS IN REVIEW John L. Carey was probably most known through his writing and his speeches. While later chapters will expound on this, through an analysis of his column in The CPA and his many other articles, books, and speeches, a brief discussion of his works is also ﬁttingly placed here, under his many activities. During his lifetime, Carey authored 6 books, 286 articles, including 61 as a column in The CPA, and at least 87 speeches. One of John Carey’s greatest legacies was his facility with words. John Lawler (1988) described his ability to write as being the envy of his staff colleagues. Bea Sanders (2005), former secretary to John Carey, called his writing style ‘‘straight forward. For a person of his stature and his education, he wasn’t a fancy word person’’ (p. 3). In addition to the above-mentioned publications, Carey also prepared

30

THE CONTRIBUTIONS OF JOHN L. CAREY

Fig. 1. Resolution of the American Association of Certiﬁed Public Accountants in Honor of John Carey’s Retirement. (Taken from April 1969 Issue of The CPA, p. 9.)

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RESOLUTION RELATIVE TO THE RETIREMENT OF JOHN L. CAREY WHEREAS: John L. Carey, who for almost 40 years has been chief executive officer of the American Institute of Certified Public Accountants, will be retiring May 1969, and

WHEREAS: this period of service by John L. Carey coincides in its entirety with efforts on the part of Robert Morris Associates to develop a better rapport with the accounting profession, and

WHEREAS: this Executive Committee, on behalf of Robert Morris Associates, wishes to take cognizance of Mr. Carey’s retirement. Therefore,

BE IT RESOLVED: that Robert Morris Associates does hereby recognize Mr. Carey’s long and valued service to the accounting profession as an executive with the American Institute of Certified Public Accountants and its predecessor organizations. In particular, we wish to recognize his many contributions to a better understanding between bankers and certified public accountants, brought about by his leadership in developing programs of cooperation between certified public accountants and the banking industry, and specifically and particularly, the members of Robert Morris Associates. In this activity, his clear insight, imagination, and vitality have been important factors in the successful development of many warm friendships and a true spirit of cooperation between members of the two groups, and

BE IT FURTHER RESOLVED: that this Executive Committee of Robert Morris Associates, on behalf of the entire organization, desires to express its appreciation for this service, and to extend to Mr. Carey and his wife every good wish for happiness and good health in his retirement, and

BE IT FURTHER RESOLVED: that a copy of Resolution shall be spread upon the Minutes of this meeting, with a copy sent to Mr. Carey, and be quoted in a forthcoming issue of THE JOURNAL OF COMMERCIAL BANK LENDING.

DATE: February 1, 1969

ROBERT MORRIS ASSOCIATES

Fig. 2. Resolution of the Robert Morris Associates in Honor of John Carey’s Retirement. (Taken from April 1969 Issue of Journal of Commercial Bank Lending, p. 57.)

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THE CONTRIBUTIONS OF JOHN L. CAREY

memoranda, drafts of committee reports, and correspondence. ‘‘All of these – even the most routine – were written in an apparently artless style that was, in fact, a triumph of art – the result not only of his writing skill but also of an orderly mind capable of dissecting complex issues with surgical precision’’ (Lawler, 1988, p. 27).

AFTER RETIREMENT FROM THE AICPA Carey continued to work in the accounting profession, even after his retirement from the AICPA, by teaching classes. He served as a visiting professor of accounting at the University of Illinois Graduate School of Business Administration for the winter term of 1970. The topics of his lectures included professional development, legal liability, state legislation, and professional ethics (Plans for the Future – John L. Carey as Accounting Professor and Historian, 1969). He was also asked to speak during that same semester as a lecturer at the University of Maryland. He was a visiting professor at the University of Georgia during the spring quarter of 1971 and lectured at Texas Christian University during the fall semester of 1971 (Accounting Hall of Fame, 2004). Carey continued to attend the annual meetings of the AICPA. In 1970, at the last session on Wednesday September 23, John Carey presented ‘‘College Students View the Profession’’. He introduced ﬁve graduate students from the University of Illinois to explore fresh viewpoints of perceptions of the accounting profession (Annual Meeting Program Shapes Up, 1970). John Lansing Carey never stopped writing. After his retirement he ﬁnished the two volume series on The Rise of the Accounting Profession, and wrote two editions of Getting Acquainted with Accounting, a book for students and those interested to learn what accounting is all about. The ﬁrst edition was written in 1972 and the second edition was co-authored with Fred Skousen in 1975. His last published work was an article in The Ohio CPA Journal titled ‘‘The Independence Concept Revisited’’ in 1985, two years before his death.

CONCLUSION John Carey had no idea, growing up or attending college, that he would spend his entire career associating with accountants. He devoted his life to

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building and improving the accounting profession during an era of immense turmoil in the business world. ‘‘You joined us at a time when the profession was divided, and you helped to reunite it’’ (Kent, 1969, p. 2). The many tributes and accolades extol the virtues of John Lansing Carey and his contributions to the profession.

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CHAPTER 3 HISTORY, ENVIRONMENT, AND BACKGROUND OF THE ACCOUNTING PROFESSION INTRODUCTION The contributions of John Lansing Carey would not be properly understood without some background knowledge of the events and history of the accounting ﬁeld. This includes its progression into a profession and the world events surrounding the time period in which he lived. This chapter discusses the growth of the accounting profession, the significant events, and background, which, in turn, aided or deterred the profession. While the American Institute of Certiﬁed Public Accountants (AICPA), its predecessors, and competitors, will be mentioned, a more thorough discussion of the Institute and Carey’s place within it is left for the next chapter. Not only did John Carey inﬂuence the direction of the Institute, but the profession of accountancy as well. Ralph E. Kent (1969) said of John L. Carey You grew as the profession grew. Or, more accurately, you forced those around you to respond creatively to a host of challenges and opportunities – and thus enabled the profession to emerge from the troubled days of the depression and to develop over a relatively short span of years to a position of prominence in the business community. (p. 2)

Carey, in his capacity of administrator of the Institute, had to work with many people, both in and out of the accounting profession. He communicated with ofﬁcials and ofﬁcers in government, industry, and banking, as well as accountants within those entities. John Carey (1969a) said, in his letter back to Kent, y I have had the rare privilege over the years of working with thousands of CPAs in a wide variety of problems. These men and women, in ﬁrms of all sizes, in universities, in industry, and in government, have been, as a group, highly intelligent, disciplined,

35

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THE CONTRIBUTIONS OF JOHN L. CAREY sincere and hard-working people, devoted to their profession. No wonder it has progressed so rapidly – and no wonder that I have been stimulated by association with them. (p. 3)

Because the history of accounting dates back many centuries, this chapter will, for the most part, be limited to the latter half of the 1800s through John Carey’s lifetime, until the time period of his death in 1987. In addition, a further disclaimer needs to be made, as there is not sufﬁcient opportunity to include all events concerning the profession. Entire books have been written concerning the history of the American accounting profession, including Carey’s two-volume editions, The Rise of the Accounting Profession. In addition to the time constraints, the history of accounting will also be, for the most part, limited to accounting in the United States.

EARLY TIMES IN AMERICA The history of accounting of the United States has its beginnings in Great Britain. Even after the American Revolution, large amounts of British capital continued to be invested in the United States (Carey, 1969b). To preserve and protect those investments, British accountants were sent to America. Many of those early accountants stayed and settled in America. But it was not just the British and Scottish who hung out their shingles as accountants. Anyone in those early times could call themselves an accountant, book-keeper, auditor, examining accountant, expert accountant, public accountant, practical bookkeeper and accountant, public auditor, and consulting accountant, to name a few (Littleton, 1988). For example, the ﬁrst New York Directory, published in 1786, contained three individuals whose occupations were listed as conveyancer, auctioneer, and accountant, and advertised in local newspapers as performing accounting work (Grant, 1995). As the country’s population evolved from farming activities to merchandizing and manufacturing activities, people also migrated from rural communities to the cities. There was a significant shift in the occupations other than agriculture. Specialization appeared among the general purpose merchants, the banking, and insurance industries (Pusateri, 1988). Manufacturing also increased as new and improved machine tools were developed with greater accuracy (Krooss & Gilbert, 1972). There was a huge increase in population during those times, and westward expansion grew as the railroads pushed further into the frontier (Pusateri, 1988). The railroads were considered one of the ﬁrst innovators of big

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business. They raised large amounts of capital, usually through the sale of stock. They employed large numbers of employees to build the rails over all conceivable types of terrain. There was tremendous competition among the railroads and other modes of transportation to be the ﬁrst and the fastest.

PUBLIC ACCOUNTING The public accountant came into his own during the last half of the 19th century (Green, 1986). However, there is evidence that public accounting activities have been performed prior to that time. Browne Tymms, in 1718, ran an advertisement in a Boston newspaper, stating ‘‘Mr. Browne Tymms Living at Mr. Edward Oakes, Shopkeeper in Newbury Street, at the South End of Boston, Keeps Merchants and Shopkeepers Books’’ (Previts & Merino, 1998, p. 25). This seems to be the ﬁrst example of a public accountant. Possibly the earliest known accountancy engagement occurred when Benjamin Franklin sold his interest in one of his printing businesses to David Hall in 1748. Franklin requested that James Parker act as his agent, by conducting an inventory of equipment and reporting an evaluation of the business (Edwards, 1960). This written report was entitled ‘‘State of your accounts with Mr. Hall’’ and was housed in the Columbia University Library. This may be the ﬁrst example of the practice of independent auditing in the American colonies (American Institute of Accountants, 1982). Possibly the earliest known public accounting ﬁrm was David Franks & Co., listed in the 1786 New York Directory, who ‘‘served a regular apprenticeship to his father’’ and was known to have ‘‘lately engaged a young man from Dublin of unexceptionable abilities’’ (Grant, 1995, pp. 29–30). An advertisement appeared in the New Jersey Journal on April 21, 1795, announcing the opening of ‘‘a conveyancing ofﬁce and ofﬁce of intelligence’’ by Benjamin Thomson, where ‘‘writings of every kind will be done on moderate terms; also farmers’ and tradesmen’s books posted with accuracy and dispatch, and those who do not understand the method of keeping their books, will be shown the form’’ (American Institute of Accountants, 1982, p. 105). Some indications exist that the growth of accounting failed to keep up with the growth of business and population during the last half of the 19th century and into the early 20th century. In addition, the transition of ownership from sole proprietorships to partnerships and from there to corporations led to the need for more advanced means of monitoring those enterprises. After

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THE CONTRIBUTIONS OF JOHN L. CAREY

the Civil War, the country moved away from its agricultural roots toward industrialization and a manufacturing-based economy (Carey, 1969b). The United States was growing, expanding, and exploring to the west. The demand for public accountants grew quickly but there was a dearth of trained, experienced accountants. Littleton surveyed the city directories of New York, Philadelphia, and Chicago as representative of large American cities, for listings of accountants in public practice. In 1850, for example, a total of ﬁfteen accountants were listed in the New York City directory. By 1900, that ﬁgure had grown to over 180 public accountants (Littleton, 1988).

THE FIRST CPA LAW Another effort in strengthening the quality of the membership was the idea of legislative recognition of the public accounting profession. As early as 1892, a suggestion was made during the meeting of the Trustees and Committee on Charter of the American Association of Public Accountants (AAPA) to investigate the possibility of legislation, causing a Committee on Legislation to be formed the following year (Webster, 1978). Different drafts of bills were introduced into the New York legislature, by the Institute of Accounts (previously called the Institute of Accountants and Book-keepers of New York and shortening its name in 1886) and the AAPA. Because of conﬂicting issues in these bills, a committee was formed to reconcile the rival organizations’ bills (Carey, 1969b). Called the ‘‘Committee of 14,’’ it was made up of representatives of the AAPA, the Institute of Accounts, and public accountants belonging to neither organization. After much discussion, the Institute’s bill was modiﬁed and resubmitted to the legislature. It was defeated by the Senate (Flesher, Miranti, & Previts, 1996). The AAPA reintroduced it the following year, with an amendment to allow non-citizens, who intended to become citizens, to become certiﬁed in New York. Many of the accountants in the United States at that time were of British nationality. On April 17, 1896, the bill passed the legislature, was approved by the governor and became law. The title ‘‘Certiﬁed Public Accountant (CPA)’’ was used to distinguish it from the British ‘‘Chartered Accountant’’ (Carey, 1969b). This act provided for a class of public accountants to be known as ‘certiﬁed public accountants’ who were to have the exclusive right to use the designation ‘C.P.A.’ after their names; and it authorized the Regents of the University of the State of New York (State Education Department) to establish examinations and to issue certificates of recognition to those who proved themselves capable and expert and fulﬁlled other requisites. (Grant, 1995, p. 8)

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Other states swiftly passed similar laws: Pennsylvania in 1899, Maryland in 1900, California (1901), Illinois and Washington in 1903 (Edwards, 1988). A list of the states and the year they granted the ﬁrst CPA certificate is shown in Table 1.

THE APPEARANCE OF BIG BUSINESS With the advent of the railroads, and the innovations in mass production, transitions in the business economy were taking place. The United States was becoming a richer country. Gross national product increased from an average of $12.8 billion during the period of 1869–1893 to $52.3 billion in 1897–1901 (Krooss & Gilbert, 1972). The textile industry was one of the largest producers of goods in America (Pusateri, 1988). It helped bring on the industrial revolution. The cotton gin, the power loom, invented in 1813, interchangeable parts, and the innovation of the assembly line production system helped to make the textile industry more profitable. Along with the complexities of big businesses, came additional problems to the accounting departments. The increasing complexity of the manufacturing process affected accounting more than any other ancillary. Routine administration, the pressures of competition, the need to depreciate a huge capital investment, and the more intricate processes of roundabout production necessitated more careful record keeping and made somewhat more advanced accounting an indispensable adjunct of efﬁcient business. The shrewdest businessmen understood this; it was one of the insights that made them shrewd. (Krooss & Gilbert, 1972, p. 157)

The railroads were deemed to be the ﬁrst big businesses in America (Pusateri, 1988). They brought far reaching economic changes just by the sheer volume of activity created by the building and running of the railroad line. Moreover, they created new patterns of economic and business administration. Because of the sheer size and magnitude of the railroads, new management techniques were developed to deal with unprecedented problems in ﬁnance, labor, and governmental relations. The railroads were the ﬁrst businesses to determine their prices based on a scientiﬁc cost analysis, instead of supply and demand (Krooss & Gilbert, 1972). The railroads also created new services for an emerging class of accountants and auditors (Previts & Merino, 1998). Due to the size and geographic dispersion of railroad operations the traveling auditor became a prominent ﬁgure in the accounting profession. His purpose was veriﬁcation of the mathematical accuracy of the

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Table 1. Year State Granted CPA Legislation. 1896 1899 1900 1901 1903 1904 1906

1907 1908

1909

1910

1911 1913

New York Pennsylvania Maryland California Illinois Washington New Jersey Florida Michigan Rhode Island Utah Colorado Connecticut Georgia Ohio Louisiana Missouri Montana Nebraska Massachusetts Minnesota Virginia West Virginia Wyoming Delaware Maine North Carolina Oregon Tennessee Vermont Wisconsin

1914 1915

1916

1917

1918 1919 1920 1921 1923 1927 1937 1942 1967

Nevada North Dakota Kansas South Carolina Texas Arkansas Indiana Iowa Kentucky Idaho New Hampshire Oklahoma South Dakota Alabama Arizona Mississippi New Mexico District of Columbia Hawaii Puerto Rico Alaska Virgin Islands Guam

books at many branch ofﬁces of the railroad (Previts & Merino, 1998). Some of the biggest problems that they had were keeping track of inventories, maintenance costs, obsolescence, and long-term construction contracts. Change in the Early 1900s During the 1910s, the United States economy was expanding at a rapid pace. It was signiﬁed by increased investment in corporate securities, widespread use of debt and ﬁnancial leverage, and a corresponding increase in regulation by the federal government (Carey, 1969b). All of these events led to an increased need for reliable ﬁnancial information.

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The United States government adopted an excise tax on corporate income in 1909. This created much work for the accounting profession as it required more diligent records for many companies (Edwards, 1988). In 1913, the government went a step further and added the 16th Amendment to the Constitution, allowing income taxation (Edwards, 1988). Within just a few years, the tax laws had grown numerous and complicated, further necessitating the need for accounting expertise. In addition, accountants were being appointed by attorneys as receivers (Edwards, 1988).

WORLD WAR I The growth and expansion of earlier years continued through the beginnings of what became known as World War I (WWI). The United States, while maintaining neutrality, developed an economic stake in the war, trading almost exclusively with Allied countries (Morison, Commager, & Leuchtenburg, 1983). The United States entered the war in April, 1917 (Carey, 1969b). Accountants were needed in many different departments and agencies of the Federal government. Many of the accountants went to the front as soldiers (Holoway, 1918). Most members of the accounting profession accepted positions with ﬁnancial and accounting requirements that could utilize their particular expertise. For example, cost accountants were needed in the equipment division of the Signal Corps, part of the War Department, for duty in Washington D.C. or in the ﬁeld (Anonymous, 1918). Another article in The Journal of Accountancy discussed the need for accountants in the United States Food Administration (Stockwell, 1918). They were also needed for cost-plus contracts, wartime taxes, construction records and accounts, and tax collections (Carey, 1969b). Accounting professionals, of course, took a significant pay cut to do their patriotic duty and those who remained behind had to take up the slack in industry and public practice (Richardson, 1918c). The need for accountants became so great that there was talk among the accounting profession about a deferment from the draft for accountants as a class. An editorial in The Journal of Accountancy referred to the need for accountants in the wartime program of tax collections. Richardson’s editorial (1918b) quoted the New York Tribune as stating: There are only about 2,500 certiﬁed public accountants and 5,000 junior accountants in the United States. Internal Revenue Commissioner Roper’s programme for collecting $8,000,000,000 of taxes next year calls for employing more than 1,000 of these in government service y The treasury has suggested to President Wilson that accountants be recognized as a class essential to the war, like physicians, dentists and chemists, and that

42

THE CONTRIBUTIONS OF JOHN L. CAREY they not only be exempt from draft, but that some plan be worked out to discourage their voluntary enlistment and to recognize their value in civilian service. (p. 212)

However, by the time the government considered such a deferment, the war was almost over and the deferment became unnecessary. Some prominent leaders of the accounting profession were indispensable in their service to the United States. Lieutenant Colonel Robert H. Montgomery was a member of the Price Fixing Committee of the War Industries Board. J. E. Sterrett was Vice Chairman of the Excess Profits Tax Review Board. Montgomery and Major J. Lee Nicholson both received their commissions for wartime service (Carey, 1969b). These agencies, critical to the war effort, could not have functioned without the expertise and leadership of many civilian groups (Miranti, 1990). The contribution of many accountants to the war effort significantly improved the general attitude of the government toward the accounting profession, which continued long after the end of the war (Edwards, 1988).

THE ROARING TWENTIES The 1920s were considered a time of transition and growth. Popularly called ‘‘the Roaring Twenties,’’ it was a time of increasing consumer demand and production (Dillon, 1984). The population was migrating from farms to the cities. Business ownership changed from small individually owned companies to large corporations, largely due to the advent of mass production. Mass production had a tremendous impact on the quality of life, and many technological innovations, such as the automobile, the radio, talking movies, air mail, and household appliances (Dillon, 1984). And with all this prosperity came the increased need for accountants. Accounting practices bloomed and prospered during this time (Carey, 1969b). There were 29 active stock exchanges in the United States; the largest by far was the New York Stock Exchange. Activity volume increased dramatically during the 1920s. Between 1900 and 1924 the level of activity was fairly constant, ﬂuctuating between 11 million and 21 million shares per month (Dillon, 1984). There was a dramatic increase in November, 1924, to 41 million shares, and the volume continued to increase until it peaked in October, 1929, with over 140 million shares being traded (Dillon, 1984). In 1929 the total annual stock activity exceeded 1.1 billion shares, a record that was not broken until 1963 (Krooss & Gilbert, 1972). Not only were new issues being added during these years of prosperity, but many ﬁrms increased their supply of stock shares. Stock values also rose during this time,

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with the average monthly highs of the Dow Jones Industrials Index more than tripled between 1922 and 1929 (Dillon, 1984). There were many factors that led to this tremendous increase in stock trading. One was the transition after WWI of the ﬁnancial center of the world from London to Wall Street. Many individuals purchased their ﬁrst securities ﬁnancing the war efforts (Dillon, 1984). Also, many companies changed the way they paid dividends. Before WWI, companies paid dividends, if paid at all, in proportion to and out of their profits with the amount ﬂuctuating from year to year. Investments in common stocks were considered much more speculative than bonds and preferred stock. After the war, companies paid lower dividends, but paid them more consistently. If they could not pay cash dividends, then they distributed stock dividends (Dillon, 1984). All of these factors were likely responsible for the development and growth of a new type of corporation, the investment trust, the forerunner of modern mutual funds. This corporation was designed for the acquiring and trading of other company’s securities, in order to diffuse the risks of stock ownership (Galbraith, 1972). These companies often purchased shares on margin. Other forms of trading vehicles included investment pools, syndicates, and joint accounts (Dillon, 1984). In addition, there were many activities on Wall Street that are now considered illegal and unethical, such as purchased publicity, insider trading, and pyramid holding companies (Galbraith, 1972).

STOCK MARKET CRASH OF 1929 During the 1920s, huge amounts of foreign government bonds were sold to investors. American investors purchased close to $6.3 billion of foreign bonds between 1923 and 1930 (Seligman, 1986). This amounted to approximately ten percent of new securities sales. By 1932, however, with the collapse of the world economy, the value of those bonds had substantially declined. European bonds were selling for less than 50 percent of par. The problem, at least in part, resulted from disclosure issues. Disclosure omissions included due dates and interest rates of the issuing company’s other debt, total receipts and expenditures for recent years, and income statement’s breakdown of speciﬁc items. American business ﬁnancial disclosures were little better. There was uneasiness about certain prevalent ﬁnancial practices as early as 1922 (Carey, 1969b). Many utility companies’ assets had been written up to ‘‘current value’’ without documentation of historical cost or the basis for the value.

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For example, Electric Bond & Share, one of the nation’s largest public utility holding companies, bought out several local companies and recorded their values at substantially above cost (Seligman, 1986). There were complaints that the stock exchanges and the accountants were lax in the requirements for ﬁnancial reporting to the public. According to Previts and Merino (1998), the independent auditor’s function had become less important than in earlier times. Corporations in the 1920s were not required to have independent audits (Carey, 1969b). Some of the larger companies on the stock exchanges voluntarily engaged independent auditors and many corporations on the New York State Stock Exchange were publishing audited ﬁnancial statements. Continuing the new era of business, accountants had a pro-business attitude and worked with companies and the federal regulatory agencies to collect and disseminate ﬁnancial information so that companies could earn a fair return for their stockholders (Previts & Merino, 1998). Advisory services were also beginning to grow in importance and were often conducted in conjunction with audits (Carey, 1969b). Cost accounting was also coming into its own. Even public accounting ﬁrms were hiring industrial engineers to assist in scientiﬁc management techniques such as time-and-motion studies and workﬂow studies. In just two months, between October 1 and December 1, 1929, the total market value of all of the securities that were being traded on the New York State Stock Exchange dropped by approximately 27 percent. This amount represented more than $23 billion (Dillon, 1984). The total loss in market value up until July 1932, when the market ﬁnally turn around was 82 percent of its 1929 high.

THE GREAT DEPRESSION AND THE NEW DEAL In the years following the height of the stock market of 1929, millions of investors lost their savings, banks closed, factories slashed production, and the United States of America found itself in the middle of what came to be called The Great Depression (Morison et al., 1983). Unemployment rose to staggering levels. By 1933, the number of unemployed was estimated from 12 to 15 million and factory worker levels dropped to less than half of its high in 1929 (Morison et al., 1983). The trust of previous years in American businesses was gone. In 1933, Franklin D. Roosevelt signed the Emergency Banking Act, the purpose of which was to restore the public’s conﬁdence in the banking industry (Morison et al., 1983). This was just the beginning of

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the many regulatory proposals that were enacted by Congress. The Federal Deposit Insurance Corporation was set up to insure bank deposits up to a set amount (Pusateri, 1988). The Robinson–Patman Act of 1936, which amended the Clayton Act of 1914, was anti-trust legislation designed to prevent monopolies (Bunn & Barﬁtt, 2005). Other regulations included the Agricultural Adjustment Act of 1933, the National Industrial Recovery Act of 1933, the National Labor Relations Act, better known as the Wagner act, and the Fair Labor Standards Act of 1938 (Morison et al., 1983). Among these regulations were the Securities and Exchange Acts of 1933 and 1934.

SEC ACTS OF 1933 AND 1934 The United States Senate Committee on Banking and Currency instituted an investigation into the disintegration of the stock exchanges (Carey, 1969b). The investigation intensiﬁed with the collapse of Krueger and Toll. Ivar Krueger, known as the Match King, committed suicide after it became known that he had falsiﬁed accounts, forged documents, and misappropriated funds using an intricate system of interrelated corporations (Carey, 1969b). Ivar Krueger was able to deceive the public for many years through his convictions that the best way to run a company was through secrecy (Flesher & Flesher, 1986). The various business organizations, including the American Institute of Accountants (AIA) and the New York State Stock Exchange took an active interest in the outcome of these investigations. Arthur Carter, president of the New York State Society of CPAs, testiﬁed before the Congressional Committee on Banking and Currency. When asked by Senator Barkley as to who audits the auditors, Carter replied, ‘‘Our conscience’’ (Carey, 1969b, p. 187). It was his testimony that convinced the committee to require annual ﬁnancial statement audits. The result of this congressional inquiry and investigation was the Securities Act of 1933, which stipulated that a new securities offering on the stock exchanges must be registered with a governmental agency (Morison et al., 1983). This governmental agency was originally to be the Federal Trade Commission (FTC) (Previts & Merino, 1998). The FTC was given the authority to prescribe the system to be used in preparation of ﬁnancial statements. Additionally, the registration statements were required to include ﬁnancial reports including income statements and balance sheets (Ingram, Albright, & Baldwin, 2004).

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In the following year, Congress enacted the Securities Exchange Act of 1934, which required annual ﬁnancial reports to stockholders. These annual ﬁnancial reports were required to be audited by independent accountants. This act also created the Securities and Exchange Commission (SEC), a federal agency to oversee ﬁnancial reporting by publicly traded corporations (Skousen, 1980). While these acts created increased demands for audit services of the accounting profession, there was a fear among accountants that the implied uniformity in disclosures actually meant a set of speciﬁc rules for accounts to follow (Previts & Merino, 1998). Accountants were relieved when, through negotiations and meetings, the standards-setting responsibility was left in the hands of the accounting profession. Instead of uniform rules, accountants advocated full disclosure, with emphasis on the auditors’ independence and judgment (Previts & Merino, 1998). Many concepts still in use today were established during these turbulent times. Generally accepted accounting principles (GAAP) were established based on two concepts, consistency and conservatism (Previts & Merino, 1998). The AIAs Committee on Accounting Procedure was established in 1938, to promulgate pronouncements, but the SEC questioned the accounting profession’s independence, inferring that auditors cannot be independent of the clients who pay them (Previts & Merino, 1998). The accounting profession also advocated income smoothing, since investors should look at the broad perspective.

Accountants versus Lawyers During the 1930s, another controversy in the accounting profession occurred in the area of taxation. While accountants have been preparing tax returns since the advent of the 16th Amendment, there came to be a dispute between lawyers and accountants as to who should represent the client in the tax court. The legal profession attempted on several occasions to limit CPAs from practice before the board of tax appeals (Carey, 1970b). A committee comprised of ﬁve members of each profession, lawyers and accountants, was organized. The National Conference Group of Lawyers and Accountants ﬁrst met on May 6, 1944, with John L. Carey appointed as secretary (Carey, 1944a). After 30 years of controversy the authority for CPAs to practice in the ﬁeld of taxation had been established (Carey, 1970b). Public Law 89–332 amended Treasury Circular 230 to allow CPAs to practice before the Tax Court (Fove & Carey, 1955).

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WORLD WAR II While Roosevelt was struggling to bring the country out of the depression, other parts of the world were dealing with their own problems. In the early 1930s, Japan invaded China, and Adolf Hitler came to power (Morison et al., 1983). Roosevelt established his ‘‘good neighbor policy’’ while trying to stay out of the conﬂicts. He also signed the neutrality act of 1937, which put a mandatory ban on the shipment of arms to any combatant nation (Morison et al., 1983). But the signs that the conﬂicts would continue to spread prompted him to ﬁnd ways to aid Britain and France (Carey, 1956b). In the meantime, the United States quietly prepared to support the war. On December 7, 1941, the Japanese attacked Pearl Harbor and the United States was ofﬁcially at war. As in WWI, many accountants were employed by the government in various capacities. A resolution was presented by T. Coleman Andrews during the annual meeting of the AIA in 1941. Knowing that the country was gearing up for war, Coleman urged the government to place public accountants and auditors ‘‘who have been, are being, and will be inducted into service under the selective service act to the positions in the defense agencies, civil as well as military, in which persons with accounting and auditing training are required’’ (‘‘Proceedings of the Annual Meeting Held at Detroit, Michigan September 16 and 18, 1941,’’ 1941). The motion was unanimously adopted. One of the impacts that the war had on the profession of accountancy was the application of a systematic approach to logistical problems that were faced by the military. The military hired scientists to develop methods to increase efﬁciency in their operations. This became known as operational research and scientiﬁc management (Carey, 1970b). This led to accountants offering management services to businesses after the war.

WOMEN IN ACCOUNTING Prior to WWII, there were very few women in the accounting profession (Carey, 1969b). While the number of women who were studying accounting was increasing, most of them found employment in industry rather than public accounting. The ﬁrst woman CPA was Christine Ross. She took the fourth CPA exam given since its inception in 1896 (Reid, Acken, & Jancura,

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1987). The exam was given in June 1898, and her score was the third highest of the 12 candidates who took the test (New York Society of Certiﬁed Public Accountants Committee on History, 1955). From then until 1909, nine other women passed the CPA exam. Women were discouraged from entering public accounting during this time (Carey, 1969b). An editorial in the December 1923, Journal of Accountancy said ‘‘women are not wanted as accountants on the staff of practicing public accountants. Their ability in accountancy is unquestioned. In many cases those who completed courses of instruction and have taken examinations have passed with distinction’’ (Richardson, 1923b, p. 443). The editorial cited the following arguments for banning women in public accounting: (1) the need to be ready to serve whenever and wherever called on to do so; (2) the requirement to travel with groups of staff members; (3) working at night in places of difﬁculty and inconvenience; and (4) embarrassment caused by working with heterogeneous personnel. There was also the assumption that women would quit work to have children (Hoskins, 1992). Against formidable odds, there were 54 women known to have received CPA certificates by the end of 1924 (Reid et al., 1987). In 1933, the American Women’s Society of CPAs was founded by Anna Grace Francis and Grace Schwartz Keat (Reid et al., 1987). Women in the 1930s had trouble ﬁnding employment beﬁtting their education. They were not accepted into what was still a traditionally male profession, and many felt that those jobs should be ﬁlled by the breadwinners of the family (Hoskins, 1992). The passage of the Securities Exchange Acts of 1933 and 1934 created a mountain of paperwork and reporting requirements for companies that fell under these Acts. Many women took jobs with the government even though the compensation was less than in industry or public accounting (Hoskins, 1992). During WWII, there was a serious shortage of manpower in every sector of the economy, including accounting. Women were accepted, even encouraged, to ﬁll traditional male roles in industry and the work force (Hoskins, 1992). Women went to work in laboratories, banks, and air terminals. They learned to read blueprints and use precision tools. They even became skilled in operating machinery such as welding torches and rivet guns, as gloriﬁed in Norman Rockwell’s Rosie the Riveter. There was also a shortage of accountants during that time, as by 1945, it was estimated that one-third of the public accountants had gone off to war (Carey, 1970b; Reid et al., 1987). Women were hired as staff assistants out of necessity and remained in the accounting profession after the war (Carey, 1970b). Women accountants ﬁlled the gap working long hours and generally performing all the required

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duties of their previous male counterparts. It is Carey’s opinion that it was the war that broke down the prejudice against women in the maledominated accounting industry (Carey, 1970b). After the war, the returning veterans came home expecting to return to their former jobs. Many of them entered college under the GI training programs. Women were expected to return to caring for the house. By the end of the 1940s, there was a surplus of accountants, with many women remaining in the workplace (Hoskins, 1992). By 1950, 55,660 women were holding accounting and auditing positions, as compared to 18,265 women in 1940, an increase of over 200%. The number of women holding CPA certificates rose even more dramatically during that time period, rising from 175 to 600 (Reid et al., 1987). During the 1950s and 1960s, women made small headway in the accounting profession. Salary discrimination became an issue in the 1960s. Working women earned approximately 60% of what their male counterparts did, according to the Bureau of Statistics. Women felt that they had to work twice as hard just to stay level (Reid et al., 1987). Finally the government passed the Equal Pay Act of 1963 and the Civil Rights Act of 1964 in an attempt to prohibit discrimination. Gradually, after lawsuits against hiring discrimination were brought against employers and were successful, discrimination declined, at least on the surface (Hoskins, 1992). More and more women are entering the accounting profession. By 1978, women represented 41% of American workers, and 28% of accountants (Women in Accounting, 1978). Today, while there may be a difference between women’s and men’s pay even in accounting, the number of women pursuing a career in accounting outnumber the men (Almer, 2005).

THE EXPANSION YEARS With the end of WWII the country, despite worries to the contrary, quickly converted wartime construction facilities back into producers of consumer goods. The GI Bill allowed servicemen to be trained for new jobs in the workplace, including the accounting profession (Carey, 1944c). Businesses expanded and the country prospered. With the expansion came problems for accountants. One of the controversies was uniformity of ﬁnancial information. For instance, there was a somewhat public debate in the determination of income between those supporting the all-inclusive method versus the earningcapacity approach (Carey, 1970b). Another subject of controversy was

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price-level accounting (Carey, 1970b). The GAAPs were criticized as antiquated, outdated, and widely differing sets of conventions. The SEC, analysts, academics, the general public, and even accountants within the profession criticized the Institute for being reactionary. Leonard Spacek, managing partner of Arthur Andersen and Company, said ‘‘we must wait for the catastrophe, because we do not have a sufﬁciently strong or selfappraising accounting profession to right this public wrong – before, not after, serious injury results’’ (Carey, 1970b, p. 75). The results of all this controversy was the formation of the Accounting Principles Board (APB).

CONCLUSION The accounting profession has grown from persons hanging their shingle out and calling themselves an accountant, to a nationally organized, educated, and certiﬁed group of experts. While the profession of accountancy is considered to be a relatively young profession, it has had some significant challenges since its beginnings in the early pioneer days of the United States. The accounting profession expanded as the business community expanded, and survived the stock market crash and the Great Depression. Because of the way that accounting was developed in the United States, certain idiosyncrasies of the American accounting profession are different from the rest of the world. For instance, the CPA exam, while considered a national exam, was administered by the state societies. And standard setting was, for the most part, kept out of the hands of the government, and remained within the accounting profession. The World Wars strengthened the role of accountants in all aspects of society. Partly because of WWII, women took their place as accountants. The accounting profession in the United States is a relatively young profession compared to others, such as doctors and lawyers. It has experienced tremendous growth and rapid change over its short life. As the economy and the status of the business world have been transformed, the accounting profession has had to adapt. From its British beginnings, the art of ‘‘keeping the books’’ has grown into a well-respected profession.

CHAPTER 4 HISTORY OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS, ITS PREDECESSORS, AND CONTEMPORARY ORGANIZATIONS This chapter discusses the American Institute of Certiﬁed Public Accountants (AICPA), its predecessors and competitors, and significant events that impacted the accounting profession as a whole and John L. Carey in his role within the Institute and in the world of accountants. John Carey worked tirelessly for the Institute, in the administrative duties, and in promoting both the Institute and the profession of accountancy. Ralph E. Kent (1969), President of the AICPA, stated in a farewell letter published in The CPA to John L. Carey, Possibly your greatest contribution, has been your ability to provide the enlightened leadership which has made the Institute the fully accepted hub for the profession. Through all these years, you worked unstintingly to ensure that the Institute was relevant to the needs of each of us – young and old, east and west, large and small. (p. 2)

John Lawler (1988) also said about John Carey after his death, ‘‘The Institute, of course, is in many ways Jack’s monument. It was a relatively obscure organization when he joined its small staff in 1925. When he retired nearly a half-century later, it had become one of the country’s preeminent professional societies’’ (p. 27). The AICPA had its beginnings with a group of men in 1886, who desired to meet on a regular basis to discuss accounting problems and ideas. It was called the American Association of Public Accountants (AAPA) and grew through the years into the organization we know today as the AICPA. Other organizations rose and fell during this time period. There were many 51

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bumps and potholes along this road for the AAPA, but the organization absorbed, learned, and grew from each one. This is the story of that organization and John Carey’s role within that organization. Because this background involves the last hundred years or so, there is not sufﬁcient opportunity to include certain events, which, while significant to accounting, may not be relevant to John Carey. Since John Carey is so closely tied to the Institute, a more complete description of the beginnings of the Institute is necessary.

EARLY ATTEMPTS AT ORGANIZATION During the time span between 1870 and 1900, numerous accounting organizations were started in the large cities throughout the country. Most of these were local societies, such as the Bookkeepers Beneﬁcial Association of Philadelphia, which grew to nearly 300 members (Previts & Merino, 1998). Another organization, The Institute of Accountants and Book-keepers of New York, formed in April 1882, is the earliest recognized national accounting organization in the United States. Its overall purpose was ‘‘the elevation of the profession, and the intellectual advancement and improvement of its members’’ (Loeb & Miranti, 2004). Members had to pass an oral examination to be admitted, but this could be waived or minimized for those with strong ethics and experience. In 1886, the name was shortened to Institute of Accounts and three classes of membership were instituted: Associates, Members, and Fellows. In 1895, the membership classiﬁcations were changed a second time. The Associates class stayed basically unchanged. Certiﬁed Accountants (C.A.) were bookkeepers, who had experience and had passed a technical exam. They were then allowed to use C.A. after their names, as long as they remained members of the Institute. Fellows with C.A. and who passed an additional examination can use the designation Fellow of the Institute of Accounts or F.I.A. after their name. The American Association of Public Accountants In the years preceding the formation of the AAPA, the growth of the number of public accountants was significant. While concrete statistics are not available, indications do exist as to the growth of business and population during the last half of the 19th century into the early 20th century. In addition, the transition of ownership from sole proprietorships to partnerships and from there to corporations led to the need for more advanced

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means of monitoring those enterprises. After the Civil War, the country moved away from its agricultural roots toward industrialization and a manufacturing-based economy (Carey, 1969b; Dennis, 2000). The United States was growing, expanding, and exploring to the west. Six or seven men met on December 22, 1886, in New York at the ofﬁces of Barrow, Wade, Guthrie & Co. for the purpose of forming a national public accounting organization (American Institute of Accountants, 1982). They patterned this professional organization after the Institute of Chartered Accountants in England and Wales. The certificate of incorporation for the group was ﬁled on September 20, 1887 (Previts & Merino, 1998). They called themselves the AAPA and met again on December 2, 1887, at the new ofﬁces of Barrow, Wade, Guthrie & Co. to approve the certificate of incorporation. At that time the bylaws were also adopted. They held a meeting of the council to elect the ﬁrst ofﬁcers: James Yalden John Heins William H. Veysey

President Vice President Treasurer

At the next meeting of the council, James T. Anyon was elected secretary of the Association (American Institute of Accountants, 1982). The certificate of incorporation listed the objectives with these words: The particular business and object of such society is to associate into a society or guild for their mutual beneﬁt and advantage the best and most capable public accountants practicing in the United States; and through such association to elevate the profession of public accountants as a whole, and to promote the efﬁciency and usefulness of members of such society, by compelling the observance of strict rules of conduct as a condition of membership, and by establishing a high standard of professional attainments through general education and knowledge and otherwise; and to transact such business as may be necessary and incident to the establishment and conduct of an association for the foregoing purposes. (American Institute of Accountants, 1982, p. 4)

The bylaws provided for two classes of memberships, fellows and associates (Edwards, 1988). Fellows were considered to be the original incorporators and those who agreed to abide by the constitution and bylaws. Associates included ‘‘all persons who have practiced as public accountants continuously for three years previous to membership in the Association’’ (Edwards, 1988, p. 57). Fellows had the right to use the F.A.A. designation after their names and Associates the designation A.A.A. (Loeb & Miranti, 2004). These designations, along with those of the Institute of Accountants and Book-keepers of New York and the British Chartered Accountants, led to a

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certain amount of confusion concerning the abilities of the accounting profession and this led to the eventual enactment of the Certiﬁed Public Accountant (CPA) legislation. By the end of the ﬁrst ﬁve years of the Association, their membership still numbered only 25 fellows and 6 associates (Webster, 1978). In an effort to increase membership in the organization and to promote accounting as a profession, the AAPA proposed many ideas. One was to open an accounting school. They obtained a charter for incorporation of the New York School of Accounts, but even after two years had only seven students, so they abandoned the project. However, Carey alludes to the AAPA’s efforts resulting in the establishment of other schools. The Wharton School of Commerce and Finance became a part of the University of Pennsylvania, the School of Commerce, Accounts and Finance of New York University was established in 1900, and the Pace Institute of Accountancy was founded in 1906 (Carey, 1969b). The Federation of Societies of Public Accountants As the legislation for certifying public accountants passed, the accountants in each of the states formed an association of accountants (Edwards, 1988). Each state association was developed with the idea of maintaining and upholding the principles and ethics associated with their newfound title, Certiﬁed Public Accountants (CPA). However, the legislation that ﬁnally passed in each state varied as to the speciﬁc details for becoming a CPA. George Wilkinson, then President of the Illinois Association, wrote a paper in which he proposed uniting the state associations. The paper was read before a meeting of the Illinois Association of Public Accountants on July 8, 1902 (Sterrett, August 6, 2003). The state associations were united in late 1902 into the Federation of Societies of Public Accountants in the United States of America (American Institute of Accountants, 1982). The objectives of the Federation were: to bring into communication with one another the several associations and societies of public accountants, organized or to be organized under the laws of the several states of the United States of America. to encourage the formation of state associations of public accountants in states where they do not exist. to encourage certiﬁed public accountant legislation on uniform lines. to secure federal recognition of the profession of the public accountant.

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to facilitate and assist the training of young members of the profession, and to establish a uniform standard of efﬁciency in Federated Societies. to disseminate throughout the United States a general knowledge of the objects of the federation, and of the utility of the public accountant in the industrial and ﬁnancial development of the country; and to further the interests of the profession of the public accountant generally. (Webster, 1978, pp. 293–294)

The Federation encouraged many of the same programs as the AAPA. It promoted two model professional laws for those states initiating legislation to ensure uniform national regulation that ‘‘did not discriminate against their interests’’ (Miranti, 1990, p. 49). By 1904, 11 states passed CPA legislation and formed state societies, which joined the federation (Sterrett, August 6, 2003). The federation encouraged education as a way of enhancing the training of young accountants (Webster, 1978). The Federation was also intended to be a unifying force by including all the state societies and other local accounting organizations, thereby becoming a truly national organization. The AAPA was invited to join the Federation in 1902, but respectfully declined, citing an unwillingness to modify its Constitution and bylaws (Webster, 1978). One of the limitations of the Federation was that it was only open to state societies, not individuals (Previts & Merino, 1998).

FIRST INTERNATIONAL CONGRESS OF ACCOUNTANTS While the AAPA was purported to be a national organization, in reality most of its members at that time were located in New York, where it was originally organized and based. In 1902, 60 percent of the membership resided in New York (Webster, 1978). The Federation, on the other hand, was a loosely based national organization connecting all of the state societies. One of the most important accomplishments in the Federation’s short existence was sponsorship of the First International Congress of Accountants in 1904 (Webster, 1978). In September of 1904, the First International Congress of Accountants was held in St. Louis, during the Louisiana Purchase Exposition (Dennis, 2004). In the welcoming speech by the Congress chairman, Joseph E. Sterrett, the idea of uniting the AAPA and the Federation was addressed (American Institute of Accountants, 1982). During the Congress, letters

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from the AAPA and the New York State Society were presented to the executive board, presenting opinions that there should be one national organization (American Institute of Accountants, 1982). Thereafter, a committee of nine was formed representing the AAPA, the Federation of Societies of Public Accountants, and the New York State Society. By 1905, an agreement was reached to merge the organizations under the AAPA name. The new constitution of the merged organizations provided individual membership and membership through the state societies. At its ﬁrst general meeting, the president, John Loomis, stated, ‘‘The American Association of Public Accountants stands at this time as the grand national body, representing practically all public accountants throughout the United States’’. He went on to state the objective of the organization as, ‘‘the elevation of the profession and the spreading of a knowledge and recognition of the utility and necessity for the public accountant in the industrial and ﬁnancial development of our country’’ (American Institute of Accountants, 1982, p. 10).

STANDARDS SETTING The AAPA also was one of the ﬁrst accounting organizations to develop a set of standards for accounting practice. The ﬁrst ‘‘standard’’ was a resolution adopted in 1894 concerning ﬁnancial statement presentation, specifically the balance sheet: Resolved, that the method of stating should be in the order of quickest realization, viz.: Assets: Cash, Bills Receivable, Book Accounts, Stock in Trade, Fixtures, Machinery and Plant, Rolling Stock, Real Estate and Buildings, Leases, etc. Liabilities: Direct liabilities, viz.: Bills Payable, Open Accounts, Loans, etc.

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Making total of same, and balance with the Surplus or Capital properly apportioned to the partners or stockholders as may be. (American Institute of Accountants, 1982, p. 7) Change in the Early 1900s As the country grew and expanded, the AAPA had problems of its own. The adoption of a franchise tax on corporate income in 1909, followed by income tax legislation in 1913 created much work for the accounting profession as it required more diligent record-keeping for many companies (Edwards, 1988). The need for experienced accountants was increasing. During this time period, the Association was attempting to build up the membership and maintain high standards of admittance within the conﬁnes of an outmoded organizational structure.

AAPA BECOMES THE INSTITUTE The AAPA had ﬁnally become a national organization. It was also growing at a substantial rate. But with the assimilation of the Federation and the Association, there emerged some irreconcilable problems. The membership consisted of both state society members and individual members. While the AAPA had a model bill for CPA legislation, it could not control the ﬁnal legislation enacted by each state. In the 1915 Report of the President, J. Porter Joplin announced that 39 out of the 48 states had enacted CPA laws (Joplin, 1915). However, nine of the 39 state CPA laws were considered unacceptable to the AAPA (Previts & Merino, 1998). The secretary’s report stated that there were two factors operating against the increase in membership. The two factors were ‘‘the lack of uniformity of state legislation governing the issuance of C. P. A. certificates and the difﬁculty which applicants for such certificates encounter in certain states’’ (Richardson, 1918f, p. 150). Inconsistent laws were only a part of the problems of the AAPA. The public was losing faith in the expertise of the accountant. An attempt to unify the profession through federal legislation was abandoned when accountants were confronted with the possibility of losing their autonomy (Carey, 1969b). There were public outcries of a monopoly and exclusive membership to the profession (Previts & Merino, 1998). There were claims that more accountants were admitted by waiver than had actually passed the CPA examinations. Also, the exam was considered too speciﬁc and difﬁcult, not representative of an accountant’s abilities. During 1916, for instance,

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only three certificates were issued by the state of New York, even though 156 candidates had taken the exam. Library of the Institute With the growth of the Institute and the profession, there arose a need for a center of information. The library of the Institute was formed through the suggestion of George O. May. It was announced in 1917, through the report of the president, W. Sanders Davies, that Mr. May proposed to raise the sum of $150,000 in the form of an endowment fund for the building of a library and repository of accounting information. May and his partners pledged $25,000 to seed the new Endowment fund (Davies, 1917). Elijah Watt Sells responded immediately with $15,000 (Carey, 1969b). Mr. May was elected chairman of the committee on endowment. The library was housed at the Institute headquarters, and a librarian was hired. In 1921, the librarians produced the Accountants’ Index, listing all of the known books and articles in accounting, published in English, up until that time (Carey, 1969b). It was indexed by author, subject, and titles. Supplements have been published every two to three years, thereafter, until 1991, when UMI took over the Index.

WORLD WAR I In 1916, references were made to the war raging in Europe at the American Institute of Accountants (AIA) annual meeting (Carey, 1969b). The Institute offered its services to the government of the United States. The Institute’s Committee on National Defense conferred with the Naval Consulting Board and the Council of National Defense. Once war was declared in April, 1917, the Institute polled its membership for their abilities and readiness for government work. Members of the AIA were serving in the front lines in France, behind the lines in Europe, in the army, navy, treasury, and other various government bureaus and war agencies, as well as the American Red Cross and the YMCA (Davies, 1918). The War Committee of the AIA, formerly the Accountancy Committee of the Council of National Defense, estimated that twelve to ﬁfteen percent of the membership of the Institute was engaged in ‘‘the uniformed or un-uniformed service of the government’’ (Report of the War Committee, 1918, p. 113). Records kept by the Institute reported that 40 members and two associates had joined the armed forces and were ﬁghting overseas. Another

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72 members and three associates were serving in various capacities within the government in the ‘war work’ (Richardson, 1918f). The Institute served as a liaison between accountants and the government agencies that needed their skills. The war committee, in its ﬁnal report to the Institute estimated that at least 200 members were engaged by the government through correspondence with the Institute (Report of the War Committee, 1919). When it was suggested that accountants should receive general exemption from the draft, the executive committee of the AIA chose not to take a stand on this issue (Report of the Executive Committee, 1918). Toward the end of the war, the Institute realized that adjustments would be necessary for the accounting profession, with the return of soldiers from overseas, the return of governmental accountants to their private practices, and the return of businesses to their pre-war activities. ‘‘Reconstruction periods are always ﬁnancially more difﬁcult than war times’’ (Richardson, 1918e, p. 450). But the reputation of both the Institute and the profession as a whole was much improved by accountants’ service during the war. Thank God, we have been victorious in war; and there seems to be a treaty of peace in the making. We are entering upon a period of readjustments and reorganizations. There never have been placed upon the public accountant greater responsibilities, nor so varied and in such numbers, as have been born of this war; and I believe our good reputation has been so advanced and so extensively recognized that we may consistently look forward to a period of even greater and more important work in the future (Rand, 1919, p. 80).

The accounting profession absorbed many returning soldiers into its ranks, including some who needed a new career (Richardson, 1919). The war, both during and after, created an opportunity for those individuals considered less than ethical to proﬁt at the expense of others. Agents, who represented themselves as having an ‘‘in’’ with governmental agencies, arranged contracts with guileless manufacturers, drawing commissions without performance (Richardson, 1918d). During the aftermath of the war, when CPAs were in great demand, another swindle arose – the National Association of Certiﬁed Public Accountants (NACPA).

NATIONAL ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANTS In 1920, a private organization was formed, calling itself the National Association of Certiﬁed Public Accountants (NACPA). It was organized in the District of Columbia because there was no CPA law in effect. All of the

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states by that time had enacted CPA laws, had state boards in place, and most were using the standardized AIA exam (Carey, 1969b). The National Association began issuing certificates which designated the recipient as ‘‘CPA-NA’’. These certificates were conferred to anyone who joined the Association, regardless of qualiﬁcations. The Institute, through legal council and the court system, recognized this threat to the CPA examination process, and quietly sought to stop the NACPA’s practice. It was announced by the President of the Institute at the annual meeting, The National Association of Certiﬁed Public Accountants was formed shortly prior to the last annual meeting. This organization caused considerable distress to a large number of our members and others. Its charter seemed to grant the right to bestow the C.P.A. designation upon all those who purchased its certificates. This attempt to commercialize the certificate threatened to destroy the value which the certificate had attained in many states of the union. The words ‘‘certiﬁed public accountant’’ seemed to be in great jeopardy of becoming entirely meaningless. Your executive committee, however, promptly planned to combat the threatened evil and in less than a year the legal steps initiated by the Institute have resulted in a permanent injunction which has forever allayed the groundless panic caused by this unsubstantial spectre of fear conjured up by a combination of those who do not love the Institute and those timid souls who are frightened every time the wind blows above a zephyr (Nau, 1922, pp. 206–207).

William Dolge submitted a membership application to the NACPA under a false name. He paid $25 and received a CPA certificate without supplying any further information or credentials (Previts & Merino, 1998). According to the court of appeals opinion, Persons residing in California, desiring to test the methods employed by the corporation, presented to it an application for a certificate as a certiﬁed public accountant in the name of one Duarfy. The certificate was issued on the recommendations alone of persons wholly unknown to the corporation. Later it developed that Duarfy existed only in the minds of those who had arranged the test. In other words, he was a ﬁctitious person. (National Association of Certiﬁed Public Accountants, A Corporation, Appellant v. The United States of America, 1922)

The Institute, in 1922, after thousands of the bogus certificates had been issued, ﬁnally obtained an injunction against the NACPA, prohibiting the issuance of CPA certificates (Carey, 1969b). The injunction was upheld by the Court of Appeals of the District of Columbia in 1923 (Richardson, 1923a). But the damage had been done. While the Institute tried to downplay the seriousness of this situation and, at the same time, initiated legal actions, many legitimate CPAs thought the Institute was simply ignoring the effects that these fake CPAs were having in the business community (Carey,

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1969b). The perception that the Institute did not care enough about the CPA certiﬁcation drove a group of accountants to form an organization exclusively of CPAs (Previts & Merino, 1998).

AMERICAN SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS In December, 1921, the American Society of Certiﬁed Public Accountants (ASCPA) was incorporated in Washington, D.C. by a group of practitioners, primarily from the Midwestern states (Previts & Merino, 1998). The leadership of the Society was reﬂective of their diverse national and ethnic backgrounds (Miranti, 1990). There were several reasons for the formation of the society. The ﬁrst and foremost reason was to have an organization exclusively for CPAs and the protection of the CPA certificate. Many society members felt the AIA did not support the CPA certiﬁcation, despite the work of the board of examiners committee to standardize the CPA exam (Carey, 1969b). They felt that the AIA did not react quickly enough to the NACPA certificate mill threat (Edwards, 1988). CPAs also did not want to take another exam for admittance into the AIA, nor did they appreciate the high practice requirement – ﬁve consecutive years as a partner or sole proprietor (Carey, 1969b). The organizers of the Society felt the Institute was comprised of an elite group of large, urban, well-established public accounting ﬁrm partners (Previts & Merino, 1998). The ASCPA was for the regional and rural sole practitioner, while the Institute was for the big-city CPA partnership. Originally, the Society had only one objective, the protection of the CPA certiﬁcation. Later additional objectives were added to its constitution and bylaws (Carey, 1969b). The stated purposes of the ASCPA were: (a) to protect and foster the certificate of Certiﬁed Public Accountant as granted by the States, and other political subdivisions, and the possessions of the United States of America, all of which hereinafter shall be denominated as States; (b) to assist Governmental authorities in regulating the public practice of accounting to the end that it may become a legalized profession; (c) to improve the standards of the accounting profession; and (d) to encourage and promote afﬁliation with this society by organizations of certiﬁed public accountants in the several states, all of which hereinafter shall be denominated as state organizations. (Green, 1986, p. 223).

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The only requirement to be admitted to the Society was possession of a current CPA certificate, and there was only one class of members, as opposed to the dual classes of the AIA (Carey, 1969b). The constitution of the Society declared that membership in the Society: shall be restricted to certiﬁed public accountants who hold valid certificates as such granted by the States. Any such certiﬁed public accountant may be admitted to membership in this society, provided his application is supported by evidence satisfactory to its board of directors. (Green, 1986, p. 244)

The Society did not have a code of ethics and felt that disciplinary problems should be handled at the state level. It also did not develop technical standards, leaving that to the AIA. However, by being based in Washington, D.C., the ASCPA worked hard to promote federal legislation that would enhance and further the accounting profession (Carey, 1969b). One of the society’s most adamant positions was that the practice of public accounting should be restricted to CPAs. The Institute, because its membership consisted of both CPAs and non-CPAs, opposed this. Another difference between the AIA and the Society was their attitude toward educators of the profession. The Society actively recruited educators into its membership (Miranti, 1990). Over the course of the next decade there were suggestions that the organizations work together and/or merge into one organization. In 1923, for instance, a motion was made to the Council of the AIA that a committee be formed to investigate the possibility of reinstating the members who formed the ASCPA. This motion, after much discussion, was defeated (Carey, 1969b). In 1924, informal discussions between representatives of the two organizations began. The ASCPA sent a resolution to the AIA as follows: The board of directors of the American Society of Certiﬁed Public Accountants, having had presented to it a report of an informal conference participated in by members of the American Society and members of the American Institute, record themselves as favoring the most cordial relations with all professional accounting organizations. The American Society is the younger of the two organizations and does not wish to appear as in any way inﬂuencing the action of the older organization. In view of the fact that the form of organization of the American Society places large responsibility in the hands of the individual member, we recommend that the annual meeting of the society authorize the president, in case the American Institute names a committee, as suggested by the report, to appoint a similar committee from the society and, in case the joint committee agrees upon a policy of cooperation which in its judgment and in the judgment of the board of directors of the American Society is feasible, the secretary of the society is directed to then present the same to the members

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by mail for their information and consideration. (‘‘Council Regular Meeting, Monday, September 15, 1924,’’ 1924, p. 114)

The Council of the AIA approved a recommendation for the incoming executive committee to form a special committee to consider the request of cooperation with the ASCPA. The president, John B. Niven, announced in his address the following year, that, while the subject of a merger was discussed, it was not considered feasible, but that a spirit of cooperation between the two groups shall be maintained (Niven, 1925). While the possibility of merger between the two groups was a distant possibility, the reason for the existence of the ASCPA drove the administration of the Institute to make changes. The Institute reinstated the practice of highlighting those members listed in the Year-Book who were CPA certificate holders (Carey, 1969b). In 1924, the Institute began admitting accounting educators to their membership. Regional chapters were also organized under the auspices of the AIA, with the idea that it would promote camaraderie and communication among the Institute members. The most important accomplishment of the year has been the actual organization of chapters of the Institute under the authority conferred at the last annual meeting y It is, and has been, the belief of the advocates of the organization of chapters that they would be the agency through which the sentiment of the members in the various localities would be crystallized and would afford a means for communication between members permitting discussion of policies and consequently the expression at annual meetings of the opinions of practically all the members of the Institute upon questions of importance to its welfare. (Gore, 1923, p. 109)

There was also a motion made during the annual meeting of the AIA in 1925 to restrict membership to CPAs. It was overwhelmingly defeated when put to vote (Edwards, 1988). While more discussion over the years followed, it took Walter A. Staub, president of the New York State Society to act as a mediator in unifying the profession (Carey, 1969b). Walter A. Staub proposed in April of 1933 that the AIA form a committee to consider a merger with the ASCPA (Miranti, 1990). Although his proposal was rejected by the AIA’s Council, Walter Staub did not give up. At the October 16, 1933, meeting of the Council of the AIA, Staub pointed out the disadvantages of having two competing organizations (‘‘Council Regular Meeting, Monday, October 16, 1933,’’ 1933). First, he mentioned that the profession’s response to important changes is hindered by having two national organizations (Miranti, 1990). He also discussed the various state professional societies and their decision to remain neutral to both parties. In addition, Federal agencies and ofﬁcials found the split confusing. As a matter of fact, the chairman of the Federal Trade Commission (FTC)

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had questioned the rationale for two competing professional organizations within the accounting profession (Carey, 1969b). Staub concluded with a call for a special committee to consider a merger. The council agreed and formed the Special Committee on Relations with Outside Organizations, whose initial responsibility was to consider the possibility of a merger. The groundwork for reuniﬁcation of the two organizations was laid through this committee (Miranti, 1990). One consideration not mentioned in Staub’s address was the AIA’s decline in membership over the last several years (Miranti, 1990). The leadership of the AIA took several steps to increase the number of members. President Forbes decreased the application fee from $50.00 to $25.00. He also established a committee of 50 members representing different areas of the country to campaign for new members (Forbes, 1933). Also, the American Association of University Instructors in Accounting began to challenge the AIA as a source of accounting principles (Miranti, 1990). In October, 1934, Robert H. Montgomery proposed a merger with the ASCPA. It also was defeated. But the chairman of the Committee on Relations with Outside Organizations, Frederick H. Hurdman, opened negotiations with the ASCPA. Six conditions that were acceptable by both organizations were presented to the AIA’s council in April, 1935 (Hurdman, 1935). These were: the AIA would be the surviving entity; all ASCPA members in good standing will automatically become members of the AIA; all future applicants for membership had to be CPAs; the practice experience of prospective associate members would be reduced to two years; an advisory council of state society representatives would be established to head off the possibility that yet another national organization would be formed; and all of the ASCPA’s assets would be transferred to the AIA. (Carey, 1969b, p. 361)

When Hurdman made his proposition to the Executive Committee of the AIA, there was bitter opposition among the members. Those opposed to Frederick Hurdman’s plan felt it was unfair to existing members. There was also a risk of losing control to ASCPA members. By admitting ASCPA members as full members, the Society could dominate the successor organization (Miranti, 1990). There were also some questions about the transfer of assets from the Association to the Institute. Supporters of the relations committee proposal argued that having the Association’s members apply for Institute membership would be insulting to

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them. Hurdman argued that the ASCPA members would ﬁnd it humiliating (Miranti, 1990). There was also a worry that the state societies and regional organizations would form their own association similar to the old AAPA, and possibly include the society members. This new organization, with the potential to be larger and more powerful than the AIA, could essentially put the Institute out of business (Miranti, 1990). In October, 1935, Robert Montgomery was elected president of the AIA. He worked hard to coordinate the merging of the two organizations. By the end of his term, the profession once again had one organization to guide it (Carey, 1969b). Early in 1936, the executive councils of both organizations had tentatively agreed upon a merger plan (Carey, 1969b). At the annual meeting of the AIA held in Dallas, Texas, on October 20–22, 1936, the bylaws of the Institute were amended to include the Society membership. During that meeting there was discussion about changing the name of the organization to American Institute of Certiﬁed Public Accountants (AICPA). However, there were still members of the Institute who were not CPAs. The name remained the AIA until June of 1957, when it was ﬁnally changed to the AICPA (What’s in a Name? 1957).

HIRING OF ASSISTANT SECRETARY In the middle of this controversy, and quite possibly because of it, an assistant to the secretary of the Institute was hired. During the meeting of the Council of the Institute on September 20, 1923, the secretary, A. P. Richardson, requested and received a leave of absence for health reasons (‘‘Council Regular Meeting, Thursday, September 20, 1923,’’ 1923). A four-month leave of absence was granted, and the executive committee was directed to ‘‘engage a suitable person as assistant secretary at a salary not to exceed $4,000 per annum and that the amount of $4,000 be appropriated therefore’’ (‘‘Council Regular Meeting, Thursday, September 20, 1923,’’ 1923). John L. Carey was hired to ﬁll that position. His duties included handling routine correspondence, proofing articles for The Journal of Accountancy, and writing news articles for The Bulletin (Carey, 1974a). In 1930, A. P. Richardson resigned his duties as Secretary of the Institute to ﬁll a newly created position, Editor of Publications (Report of the Executive Committee, 1930). John L. Carey was promoted to ﬁll the Secretary position. The Secretary’s duties included corresponding with members and

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other institutions and individuals, attending all committee meetings, Council meetings, organization meetings, and promoting the Institute and the profession through speaking engagements (Carey, 1930). Also, Carey was responsible for the day-to-day running of the Institute, which included ‘‘a thousand miscellaneous requests received at the ofﬁce of the organization every year’’ (Carey, 1930).

NATIONAL CONFERENCE OF LAWYERS AND CPAS In addition to his responsibilities for the Institute, Carey was to become Secretary for the National Conference of Lawyers and CPAs. This organization consisted of ﬁve members of the American Bar Association (ABA) and ﬁve members of the AIA (Carey, 1944b). In 1924, the tax law created the Board of Tax Appeals and gave both lawyers and CPAs the right to represent clients (Previts & Merino, 1998). The purpose of the Board of Tax Appeals was originally to have been an informal agency for settling tax controversies with minimal expense to the taxpayer. However, an amendment to the bill required formal rules of evidence, with the burden of proof on the taxpayer (Carey, 1949b). The ABA and the AIA met on several occasions in an attempt to work out suitable agreements on speciﬁc duties covered by accountants, lawyers, both, and neither (Carey, 1970b). The ABA, of course, attempted to limit the practice of the CPA, while the AIA attempted to expand its role (Carey, 1947b). No agreement could be reached between the two groups for many years. Local bar associations were putting pressure on the State societies to sign voluntary agreements to limit the scope of their practice, and CPAs often found themselves at a disadvantage when seeking relief in the court system (Carey, 1970b). Early in 1944, the AIA and the ABA formed the National Conference of Lawyers and CPAs, with two objectives: To encourage cooperation between the two professions for the beneﬁt of each and to the public. To consider misunderstandings involving fundamental issues between the two professions and recommend means of disposing of them. (Charles, 1947, p. 197)

The ﬁrst meeting was held in Philadelphia, May 6, 1944. This joint committee was ineffective for most of its life, mostly because the committee was bypassed and ignored. On several occasions the ABA issued statements implying CPAs were practicing law in the courts. There were attempts at legislation to limit the tax practice of CPAs (Carey, 1947f).

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The National Conference met sporadically through the 1940s and into the 1950s, and individual committees of each of the organizations met separately and together to try to resolve these issues. John Carey was secretary of the National Conference during those years and was instrumental in keeping the accounting public aware of the legislation before Congress, and the potential problems that would result (Carey, 1949a). Arthur B. Foye, president of the AIA and Carey (1955), wrote to George M. Humphrey, Secretary of the Treasury about revising certain sections of Treasury Circular 230 regarding accountants practicing before the Treasury. In the end it was the Treasury Department and Congress who ﬁnally settled the matter (Carey, 1970b). Public Law 89–332 contained the following amendment: Any person who is duly qualiﬁed to practice as a certiﬁed public accountant in any state, possession, territory, commonwealth, or the District of Columbia may represent others before the Internal Revenue Service of the treasury department on ﬁling with that agency a written declaration that he is currently qualiﬁed as provided by this subsection and is authorized to represent the party in whose behalf he acts. (Carey, 1970b, p. 257)

The end result of these 30 years of conﬂict and antagonism was that the authority of CPAs in the tax ﬁeld was permitted by the Treasury Department and Congress. It took many people in both organizations an exorbitant amount of time to settle this controversy.

COMMITTEE ON ACCOUNTING PROCEDURE The Institute knew that one of its duties to the accounting profession was to help establish a set of guidelines for practicing accountants to follow. In 1918, a motion was made, calling for ‘‘the appointment of a special committee on standardization of accounting procedure’’ (‘‘Proceedings of the Annual Meeting Held at Washington, D.C. and Atlantic City, New Jersey, September 17 and 18, 1918,’’ 1918). This committee consisted of ﬁve members of the Institute. The intended purpose of this committee was to answer questions from the membership and practicing accountants. The Special Committee on Procedure reported on such questions as certifying to the balance sheet of a holding company (Report of Special Committee on Procedure, 1919), balance sheets giving effect to proposed ﬁnancing, the form of the accountant’s certificate under certain circumstances, the statement of various classes of no-par stock (Report of Special Committee on Procedure, 1921), and procedures in an audit of certain trustees’ accounts (Report of Special Committee on Procedure, 1922).

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In 1928, after several years of inactivity, the Special Committee on Procedure was temporarily reactivated with a different agenda. Instead of answering questions from accountants, the Committee addressed a pamphlet issued by the Commissioner of Internal Revenue on depreciation. It invited comments and suggestions from the membership regarding the pamphlet and included the address of the Internal Revenue Service (IRS) commissioner to which the comments should be sent (Report of Special Committee on Procedure, 1928). Then, in 1930, it was announced in the Year-book that the Special Committee on Accounting Procedure was reappointed, with the ﬁrst order of business being to formulate standards concerning accounting for the issuance of stock dividends (Carey, 1930). However, the Committee was really not active until 1938–39, when they issued the ﬁrst three Accounting Research Bulletins (ARBs) (Carey, 1970b). ARB #1 laid out the committee’s rules that had been formally adopted and the general approach for creating pronouncements. By September 1941, the Committee had published 12 ARBs. The original idea was that the pronouncements of the Committee would be binding on the members of the Institute. However, all of the Bulletins included a disclaimer clause at the end of the pronouncement stating that authority of the Committee on Accounting Procedure rested upon the general acceptance of the members, and that any departure from the Bulletins was the responsibility of those who chose to use alternate approaches (Carey, 1970b). John Carey has been credited with writing the ARBs (Michigan State University, ca. 1965). He was secretary for the Committee on Accounting Procedure, and as such, was responsible for the wording and phrasing of the ﬁnal documentation (American Institute of Certiﬁed Public Accountants Committee on Accounting Procedure, 1939–48).

MCKESSON & ROBBINS In 1937, McKesson & Robbins, a wholesale drug company, was audited by Price, Waterhouse & Co. The company had over 70 branches, including some in Canada. However, much of the Canadian business turned out to be ﬁctitious. F. Donald Coster devised and invented source documents, customers, and suppliers to cover approximately $18 million in ﬁctitious sales (Baxter, 1999). There were non-existent accounts receivables of over $9 million and $10 million in inventories (Barr & Galpeer, 1987). Coster ran the Canadian operations personally, to cover up the fraud. However, the board

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of directors was pressuring the treasurer to pay off McKesson & Robbins’ substantial debt. Thompson, the treasurer, discovered the overstatement of assets and the company subsequently went in to receivership. Price Waterhouse, when accepting the audit of McKesson & Robbins, agreed not to take a physical examination of inventories (Baxter, 1999). John Carey called the McKesson & Robbins deception ‘‘a crisis in auditing’’ (Carey, 1970b). The discovered fraud helped to establish some basic procedures in auditing, including the valuation of inventories and the conﬁrmation of accounts receivable. Background in Audit Procedures In 1917, the Institute had prepared what was to become the ﬁrst authoritative directive of the scope of an audit. Upon receipt of a letter from Edwin Hurley, chairman of the FTC, in which he expressed dissatisfaction with the ﬁnancial statements certiﬁed by public accountants, there was heated debate among the membership concerning Hurley’s suggestion that there should be a national set of accounting standards (Carey, 1969b). After much discussion about the advisability of having a set of rules instead of guidelines, the Committee on Federal Legislation of the Institute conferred with the FTC and with the Federal Reserve Board, to reach a compromise satisfactory to all (Carey, 1939c). A pamphlet was prepared based on a paper by John C. Scobie of Price Waterhouse, entitled Uniform Accounting (May & Grady, 1962). This Federal Reserve Bulletin of 1917 was revised and reissued during the same year, under the title Approved Methods for the Preparation of Balance Sheet Statements (Carey, 1969b). The document was revised again in 1929 and retitled Verification of Financial Statements and was reissued with Federal Reserve Board approval (Carey, 1970b). The Federal Reserve Bulletin publication was revised a third time in 1936 under the title Examination of Financial Statements by Independent Public Accountants to include sections on limitations of ﬁnancial statements, responsibilities of auditors, and the reliance on systems of internal control. Because of differing opinions the publication and its many revisions were vague with regard to inventories and conﬁrmation of accounts receivable. McKesson & Robbins Investigation In 1938, an investigation into a complaint of fraud in regard to the inventories and accounts receivable of McKesson & Robbins was initiated. Trading of the stock of McKesson & Robbins was indefinitely suspended by

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the New York State Stock Exchange. Approximately $19 million in assets were found to be ﬁctitious. The investigation, conducted by the New York State Attorney General, focused on the extent to which the independent auditors of Price Waterhouse adhered to prevailing auditing standards and procedures and whether those standards and procedures were sufﬁcient to assure reliability of the ﬁnancial statements (Carey, 1970b). The Attorney General of the State of New York met with the AIA, the New York State Society of Certiﬁed Public Accountants, the president of the Council on Accountancy, and the chairman of the Grievance Committee (bodies created under the accountancy law of New York), and representatives of the New York State Stock Exchange and the New York Credit Men’s Association (Carey, 1939b). The ﬁnal report of the New York State Attorney General contained several suggestions for the accounting profession: the rotation of auditing staff, delineation of the responsibilities of partners and staff, and the possibility that only accountants examined by state boards should practice as auditors (Carey, 1970b). There was much publicity in the McKesson & Robbins investigation, and the accounting profession received unfavorable media attention. ‘‘Like a torrent of cold water the wave of publicity raised by the McKesson & Robbins case has shocked the accountancy profession into breathlessness’’ (Carey, 1939e, p. 65). Questions were raised regarding the responsibilities of the auditors and there was much criticism about how a prominent public accounting ﬁrm could fail to discover such a huge amount of missing assets. John Carey, as secretary of the Institute, did his part to contain the misinformation and discuss the changes that needed to be made (Carey, 1970b). He spoke at the meeting of the Pittsburgh chapter of the Pennsylvania Institute of Certiﬁed Public Accountants on January 27, 1937, and also published excerpts in The Certified Public Accountant. The Journal of Accountancy also contained editorial comments attributed to John Carey on the McKesson case. He did much to play down the turmoil in the accounting profession caused by the sensationalism in the newspapers. According to Carey (1939d), Newsweek magazine had printed a comment regarding a ‘‘hot internal ﬁght brewing within the American Institute of Accountants’’ (Carey, 1939d, p. 69). Carey squashed this notion rather condescendingly saying ‘‘the implications of this statement are so preposterous that they perhaps do not deserve denial. However, since the paragraph appeared in a magazine of wide circulation, we think it appropriate to break our rule against dignifying a canard by a rebuttal’’ (p. 69). The Institute created a standing committee on auditing procedure to deal with the criticisms of the current auditing process. The Special Committee

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on Auditing Procedure submitted a report to the Council of the Institute in May 1939, recommending examination of inventories, examination of receivables, the appointment of independent CPAs, and the format for the CPA’s report. The Institute hurried this process to demonstrate to the Securities and Exchange Commission (SEC) and the business community that improvements in auditing procedures were being made. This report became the ﬁrst Statement on Auditing Procedure titled Extensions of Auditing Procedure (Carey, 1970b). The Securities and Exchange Commission conducted its own hearings just months after McKesson & Robbins went into receivership. The SEC ﬁndings, published in December, 1940, almost two years after the start of the hearings, made several recommendations. Auditors should be elected by the stockholders, and arranged by the board of directors. The auditors’ certificate should be addressed to the stockholders and the members of the board. The report also advocated the adoption of a natural business year, to decrease the need for temporary employees during the busy season. The SEC approved the Statement on Auditing Procedures #1 as a step in the right direction (Carey, 1970b).

FORMATION OF THE APB The AIA, in the 1940s, had created over 40 different committees, including the Committee on Accounting Procedure and the Committee on Auditing Procedure (List of Committees, 1945–46). Membership in the Institute was growing despite the war. The Committee on Accounting Procedure continued to publish ARBs, raising the number of Bulletins to 42 by 1953 (Carey, 1970b). While the Committee on Accounting Procedure provided necessary recommendations for improvements in accounting procedures, and kept standard setting out of the hands of the SEC, there were several problems with the Committee. Firstly, there were inadequate resources, both in terms of ﬁnances and expertise. Secondly, all members of the Committee were volunteers. These members were designated to serve on the Committee for a certain period of time. Any research projects that continued for more than a year had to transition through the new Committee. Also, many of the Bulletins were phrased to leave room for exceptions with justiﬁcation in the judgment of the accountants (Carey, 1970b). And ﬁnally, the ARBs had no enforceability other than the general acceptance of the accounting profession and the business world.

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In 1952, the CAP restated the ﬁrst 42 ARBs as ARB # 43. It then went on to publish eight more Bulletins over the next six years. Because of the innate problems, as stated above, a new policymaking body was developed. The Accounting Principles Board (APB) was created and issued its ﬁrst opinion in 1962 (Carey, 1970b). However, the APB caused turmoil in the accounting profession when its second opinion was ‘‘corrected’’ by the SEC to allow an alternate method. To the business world, the new accounting standards setting board was off to a rocky start. After amending Opinion #2 with Opinion #4, the APB went on to issue a total of 31 opinions, until in 1973, it was replaced by the Financial Accounting Standards Board, an organization independent of the AICPA.

ADMINISTRATION OF THE INSTITUTE One of the Secretary’s duties was the day-to-day administration of the AIA. As the Institute grew in size, the position that John Carey held also grew, becoming the Executive Director in 1948, and Administrative Vice President in 1967. During an interview in the early 1960s, Herbert Miller said of Carey: As the Executive Director of the American Institute of Certiﬁed Public Accountants, Mr. Carey is the administrative head of an organization whose membership now numbers 59,000 and which employs over 200 full time, permanent employees. We gain some impression of the challenges he has faced in the dynamic environment in which he has worked by noting that membership in the Institute numbered only 1,500 when he began working there in 1925. (Michigan State University, ca. 1965)

John Carey was thought to have been the glue that held the Institute together over the years. John Lawler (1988) said that Carey was the Institute. Donald Schneeman (2005), the in-house legal council hired by John Carey, discussed Carey’s position in the Institute and the profession. He was a great visionary, and there was no question about it, he was the single most important person in the profession. He was more important than any one of the heads of the big eight ﬁrms. And he was probably more important than all eight of them because there were times when he would get into a hassle with them, and sit down and they’d work things out, and he usually got his own way with them. (p. 2)

One of the achievements with which Carey is credited is the recruitment of ofﬁcers and leaders in the Institute. As Secretary, then as Executive Director and Administrative Vice-President, the highest-ranking non-elected positions within the Institute, Carey wielded considerable inﬂuence over the

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decisions that were made in the Institute. Donald Schneeman related how John Carey would recruit the top partners of the big eight accounting ﬁrms. Carey would convince them to give their time and energy to the betterment of the Institute. ‘‘y there was nobody during his years that had the same impact as [Carey] did on the profession. And one reason why that was so, was that he ran for the top people at any ﬁrm’’ (Schneeman, 2005, p. 5). Carey signed up individuals that he could work with, who would advance the status of the Institute and the profession. In his ofﬁcial capacity John Carey has had the opportunity to work closely with 34 institute presidents and I’m quite certain was, in each instance, actively involved helping each president make his turn in ofﬁce more successful than that of the preceding president. Such a continuing assignment must have required great energy, patience and a genuine interest in the profession of accountancy. Only a person with superior resourcefulness could have been as effective in his role as I know John Carey has been. (Michigan State University, ca. 1965)

By the time John L. Carey retired, the administrative positions of the Institute had been divided into the Administrative Vice President and the Executive Vice President. This structure did not last very long, as the authority was split also. Bea Sanders (2005) recalled, At the time that Jack Carey retired, the decision was made that there should be a head of the organization that’s a CPA. But I think it was more of an appearance thing rather than the need from some kind of deﬁciency. Because during Jack Carey’s tenure, you know, he was not a CPA. And then there were two positions, John Lawler, and Leonard Savoie, I think [Savoie] was executive vice-president and John Lawler was administrative vice-president. That didn’t last for very long, it was like a ‘‘two-headed monster’’. So after a couple of years, that structure went by the wayside, and I think that Leonard Savoie, being the technical person and the CPA, became the head of the organization. And ever since then, the President of the Institute has always been a CPA. (p. 7)

After several years, the permanent position became the President of the AICPA.

CONCLUSIONS John L. Carey and the AIA were very inﬂuential in the direction and advancement of the accounting profession. The AIA began as the AAPA, absorbed the Federation of Societies of Public Accountants, the Institute of Accounts, the ASCPA and eventually became the AICPA. It has survived public criticism during the stock market crash of 1929, the National Society of CPAs’ sale of certiﬁcations, the McKesson & Robbins fraud case, and

74

THE CONTRIBUTIONS OF JOHN L. CAREY

many other incidents that brought the accounting profession into the public eye. The Institute and the profession not only survived, but were made the better for it. One of the individuals who held the Institute together through troubled times was John Carey. John Carey devoted his career to the Institute and the accounting profession. ‘‘y he was the right man at the right time, and I think the problems that the profession are now going through, might have happened sooner if we hadn’t had a John L. Carey then’’ (Schneeman, 2005, p. 3).

CHAPTER 5 ANALYSIS OF PUBLISHED WORKS AND SPEECHES INTRODUCTION John Lansing Carey was a proliﬁc writer and speaker. During his career with the American Institute of Certiﬁed Public Accountants (AICPA), he authored or co-authored eight books, at least 193 articles, six chapters in books, and 86 speeches. The Accountants’ Index credits him with 252 citations, including 33 by other authors concerning Carey or his works. However, there are at least 26 known articles that are not cited in the Accountants’ Index that were written by him (see Appendix G). In addition, he had a regular column in The CPA, some of which were not recorded in the Accountants’ Index. Hundreds of editorials in The Journal of Accountancy have been attributed to him during the time he was editor from 1937 to 1954 and publisher until 1966. Furthermore, while employed by the AICPA, he gave hundreds of speeches around the country and throughout the world.

ACCOUNTANTS’ INDEX The Accountants’ Index lists John L. Carey a total of 252 times. However, a number of speeches and articles were published in more than one journal, bringing the total number of individual works cited in the Accountants’ Index to 285. The data extracted from the Accountants’ Index have been analyzed for content and sorted into categories based on major topics. Table 2 contains Carey’s works, separated by decade and classiﬁed by the types of works. Carey wrote most of his works during the 1960s in the last years of his service to the AICPA. Of the 285 citations, 210 were articles in journals, mostly accounting journals. In the early part of Carey’s career, his speeches were written and kept on ﬁle with the American Institute of Accountants (AIA), in order to be recorded in the Accountants’ Index by the AIA 75

76

THE CONTRIBUTIONS OF JOHN L. CAREY

Table 2.

Works Listed in Accountants’ Index by Type and Decade.

Decade

Journal

About

Articles

Speeches

Books

Proceedings

Carey

Other

Total

1930s 1940s 1950s 1960s 1970s 1980s

3 53 55 89 9 1

3 8 5 0 0 0

0 1 2 4 3 0

1 2 3 0 0 0

0 1 0 23 7 2

0 1 7 2 0 0

7 66 72 118 19 3

Total

210

16

10

6

33

10

285

librarians. Many of those were transcribed into journal articles, as well. The Index lists ten books with which Carey was associated. He edited one book and authored eight others; one of these was revised and released in a second edition. Carey also wrote book chapters, booklets for the AICPA, and several letters to the editor. In addition, the Index lists many authors who wrote about Carey, especially when he was close to retirement.

TYPE OF WORK Books John Carey authored eight books throughout his lifetime (See List of Books Written by John L. Carey in Appendix A). Three of his books concerned ethics of the accounting profession. As the accounting profession grew and matured, the complexity of the profession’s code of ethics also grew. Accordingly, each of the books on ethics grew more detailed, and included more specifics as to an accountant’s professional conduct. His ethics books were published ten years apart, starting in 1946. The ﬁrst book was Professional Ethics of Public Accounting. The next one was published in 1956, Professional Ethics of Certified Public Accountants. The last one was coauthored with William O. Doherty in 1966. Zeff (1987) called Carey’s work, ‘‘an important contribution to the literature on professional ethics’’ (p. 59). Carey also wrote a two-book series on the history of the accounting profession. The history of the accounting profession in the United States necessarily involved knowledge of the people and the organizations that worked diligently to lift accounting and auditing into a respected profession.

Analysis of Published Works and Speeches

77

Carey had an inside track with his position at the AICPA to be able to describe the politics, the arguments, and the machinations of the ofﬁcers and members of the Institute, both good and bad. Andrew Barr (1971), chief accountant for the Securities and Exchange Commission (SEC), stated in a review of the second volume, To Responsibility and Authority, 1937–1970, ‘‘This is history written by a recorder who, if not part of the action, was at least close to it’’ (p. 417). Zeff (1987) acknowledges this advantage: One can judge from his exceptional two-volume history of the Institute, The Rise of the Accounting Profession, that he not only understood the many and diverse technical issues that occupied the Institute’s attention but also possessed a formidable insight into the personalities of its diverse leaders, the undulating political currents within the organization and the implications for the profession of ongoing external changes. (p. 59)

Carey edited The Accounting Profession–Where Is It Headed? in 1962, and wrote The CPA Plans for the Future, three years later, both concerned with the future direction of the accounting profession. The ﬁrst book was based on position papers, reports, and documents of the Committee on LongRange Objectives of the AICPA, ‘‘cemented together and a few chinks are ﬁlled with comments of my own which the committee members have reviewed y’’ (Carey, 1962b, p. xi). Carey called this book a ‘‘planning document,’’ subject to revision and reﬂecting tentative positions based on work to date. It was published, in part, to elicit a response from the accounting public. The second book is a more ﬁnished analysis of the obstacles facing the accounting profession. Clifford V. Heimbucher, President of the AICPA, said in the Note to Readers: This book, written by Executive Director John L. Carey, has been published in the belief that a candid discussion of the problems which confront the accounting profession and of alternative paths for development in the future will assist in early and sound solutions and decisions y The principal purpose of the book is to provoke thought and debate while peering into the future. Even if some of the problems the author has conceived turn out to be imaginary, it will do no harm to consider and dispose of them and, in the process, hopefully to develop other constructive ideas (Carey, 1965, p. vi).

Three of Carey’s books were completed after his retirement from the AICPA in 1969. The second part of The Rise of the Accounting Profession was published the year after he retired. Getting Acquainted with Accounting was published in 1972 and was revised with the help of K. Fred Skousen in 1977. The latter two were written to educate and encourage students into the accounting profession. They did not teach accounting; they merely provided the reader with a broad overview of the profession, its products and opportunities (Cassel, 1973). The second edition was geared toward the college

78

THE CONTRIBUTIONS OF JOHN L. CAREY

student, to be used as a supplemental text to an introductory accounting course (Carey & Skousen, 1977). Articles John Carey wrote many articles in many different journals during his career with the AICPA (see List of Articles Written by John L. Carey in Appendix B). Over ﬁfty different journals have carried articles by Carey. Table 3 contains an alphabetical listing of the journals in which he published. His ﬁrst known article was ‘‘Things to Come,’’ published in both The Certified Public Accountant and the Bulletin of the American Institute of Accountants, in 1936. That article was the ﬁrst of many articles John Carey penned concerning the future of the accounting profession.

TOPICS Carey wrote on many different topics concerning the accounting profession. See Table 4 for a list of topics and the medium in which Carey wrote. Many of Carey’s articles were not conﬁned to one single topic and so, were sorted by the main theme of each work. The Practice category includes current events and news of the business world and the Institute; changes in laws, practices, and rules; controversies and crises that occurred both in the Institute and in practice; and many topics that did not ﬁt anywhere else. Also included in practice are the bimonthly columns in The CPA, where Carey discussed aspects of an accounting practice, such as write-up work, personnel problems, client relations, and tax practice. Profession Carey wrote most of his works on the growth and value of the accounting profession. Carey’s works on the accounting profession comprised 40 articles, eight speeches, four proceedings, and a booklet. He discussed what deﬁnes a profession, the characteristics of a profession, and why accountants should promote accounting as a profession. Carey was ‘‘Mr. Accounting Profession’’ (Michigan State University, ca. 1965), promoting and urging others to follow and improve the qualities of the accounting profession. As can be seen in Fig. 3, Carey’s works on the accounting profession spanned his entire career with the AICPA. The series of articles written in 1948 was in response to the McKesson & Robbins investigations and some criticism directed toward the

Analysis of Published Works and Speeches

Table 3.

Journals in which John Carey Was Published.

Accountancy Accountant (England) Accountants’ Journal Accountant’s Magazine (Scotland) Accounting Forum Accounting Review Accounting Historians Journal Annals of the American Academy of Political and Social Science Association Management Banking Bulletin (Georgia Society of CPAs) Bulletin of the American Institute of Accountants Business Horizons (Indiana University) California Certiﬁed Public Accountant Canadian Chartered Accountant Certiﬁed Accountants Journal Certiﬁed Public Accountant Controller CPA (American Institute of CPAs) CPA in Tax Practice Credit and Financial Management Direction Federal Accountant Financial Analysts Journal Financial Analysts Record Financial Executive Here’s How (American Trade Association Executives) Hospital Management Illinois Certiﬁed Public Accountant International Journal of Accounting Education and Research Irish Accountant and Secretary Journal of Accountancy Journal of Taxation Ladies Home Journal Massachusetts Society of Certiﬁed Public Accountants Mississippi Certiﬁed Public Accountant New York Certiﬁed Public Accountant News Bulletin of the Massachusetts Society of Certiﬁed Public Accountants Ohio Certiﬁed Public Accountant Ohio CPA Ohio CPA Journal Oklahoma CPA Pakistan Accountant Papers on Accounting Procedure and Related Matters Public Relations Journal

79

80

THE CONTRIBUTIONS OF JOHN L. CAREY

Table 3. (Continued ) Rocky Mountain Law Review South Carolina Certiﬁed Public Accountant State Government Tax Topics Texas Accountant Touche Ross Tempo Trusts and Estates Virginia Accountant Woman C.P.A.

Table 4.

Carey’s Works in Accountant’s Index by Subject and Type of Work.

Type of Work

Profession

Ethics

Future

History

Practice

About Carey

Total

Journal Articles Books Proceedings Speeches Miscellaneous

40 0 4 8 1

41 3 1 0 3

33 2 0 0 0

13 2 0 0 0

85 3 1 8 4

33 0 0 0 0

245 10 6 16 8

Total

53

48

35

15

101

33

285

9 8

6 5 4 3 2

Year

Fig. 3.

Profession Works by Year.

1968

1967

1966

1963

1962

1960

1959

1958

1957

1956

1955

1953

1950

1948

1947

1946

1945

1944

1941

1940

1939

1938

1937

0

1936

1

1934

Number of Works

7

Analysis of Published Works and Speeches

81

accounting profession in several newspapers and magazines. Further discussion of Carey’s position and his works appear in Chapter 6. Ethics Carey’s works on ethics included 41 articles, three books, three chapters, and one proceeding. As can be seen in Fig. 4, Carey began publishing articles on ethics in 1946, and wrote the last article two years before he died. The three peak years, 1947, 1956, and 1966, coincided with the publication of his three books on ethics of the accounting profession. Included in any discussion of ethics or the history of ethics would be one or more of Carey’s three books. Carey took up where his predecessor in the AIA ended. A. P. Richardson wrote one of the ﬁrst books on accounting ethics in 1931, and Carey followed in successive decades with his books. These books discussed the Code of Professional Conduct and the interpretations of the Committee of Professional Ethics, as well as some controversial ethical topics on which the Committee had not expressed an opinion. 9 8 7

5 4 3 2 1

Year

Fig. 4.

Ethics Works by Year.

1985

1967

1966

1965

1963

1961

1959

1957

1956

1955

1954

1953

1952

1951

1950

1948

1947

1946

0 1943

Number of Works

6

82

THE CONTRIBUTIONS OF JOHN L. CAREY Many of those controversial topics also appeared in articles written by Carey. For example, he discussed competitive bidding even after it became a topic of one of the Rules of Conduct, because the wording still left accountants in many states with the option to use it (Carey, 1963). Carey discussed problems with fraud as early as 1947. Independence and advertising were recurring themes in many of his articles, and were included in many of his speeches as well.

One of the characteristics of a profession is to have an enforceable code of ethics (Carey, 1958c). Carey championed the improvements to the Code of Professional Ethics, not only in his three books but also in many articles and speeches. A narration of the accounting profession’s code of ethics, and Carey’s role in molding it, are discussed in Chapter 7. The Future of the Accounting Profession Carey authored 33 articles regarding the future of the accounting profession. Carey edited a book on the future of the accounting profession, The Accounting Profession–Where is it Headed? in 1962, based on years of work by the Committee on Long-Range Objectives. He also authored The CPA Plans for the Future, in 1965, a continuation and revision of the Committee’s work. Carey also encouraged the accounting profession to direct its own future, instead of reacting to crises and public opinion. Fig. 5 shows the extent of Carey’s writings concerning the future of the accounting profession. Except for a small group of articles in the late 1940s, most of John Carey’s writings were related to the Committee on Long-Range Objectives, which was formed in 1956. History Carey wrote most of his works on the history of the accounting profession in the latter part of his life, as seen in Fig. 6. The two articles in the 1940s concerned the history of the AIA, and the two articles in the 1950s described two International Accounting Congresses. Having directed the national organization of accounting for over 40 years, Carey wrote intimately about the history of the AICPA and the accounting profession in the latter years of his career. His two-volume series, The Rise of the Accounting Profession, explored the history of the accounting profession in the United States, from before the ﬁrst CPA law, to the time of his retirement from the Institute. Carey’s works concerning the history and the future of accounting are discussed in detail in Chapter 8.

Analysis of Published Works and Speeches

83

4

Number of Works

3

2

1

0 1946 1947 1948 1955 1956 1957 1958 1959 1960 1961 1962 1963 1965 1966 1967 1968 Year

Fig. 5.

Future Works by Year.

4

Number of Works

3

2

1

0 1944

1946

1952

1957

Fig. 6.

1962

1969 Year

1970

1974

History Works by Year.

1976

1977

1979

84

THE CONTRIBUTIONS OF JOHN L. CAREY

CITATION ANALYSIS An examination of the Social Sciences Citation Index (SSCI) was performed, using the books and computer disks that were available in the J.D. Williams Library at The University of Mississippi. An inspection of every year of the Index since its inception until the latest available volume was completed. The SSCI provides an index to the current literature by providing a listing of all works cited during a given year. It is arranged alphabetically by cited author and for each cited author chronologically by cited year. After the cited publication, information about the author who cited the work is given, including the journal, volume number, and page number. The SSCI was ﬁrst published in 1973 by the Institute of Scientiﬁc Information. The Index has been published every year since 1973, and has been extended earlier to include years since 1966 (Garﬁeld, 1984). Also available were ﬁve-year volumes to save library shelf space. In 1996, the Index was changed to electronic format, with quarterly updates on a computer compact disk. The Index is currently accessible online through libraries that have purchased the rights to use it. Available in the J. D. Williams Library at The University of Mississippi are ﬁve-year volumes from 1966 through 1985. From 1986 through 1995, the SSCI was accessed in the annual indices, and from 1996, the SSCI was contained in computer compact disk format through the ﬁrst half of 2005. The SSCI provides an index for two million journal articles, books, and book chapters, and includes 20 million references that were cited (Garﬁeld, 1984). One of the advantages of the SSCI over conventional scholarly indexes is that it is multi-disciplinary. The Index embraces more than 25 major ﬁelds of the social and behavioral sciences, including business, economics, psychology, history, and political science. It also contains an indexing of citations from about 1,400 journals. Value of Citation Analysis Citation analysis has been employed as a means of examining the exchange of knowledge. There are several uses of citation analysis, including measurement of the impact of journals, individuals, faculties, and graduate programs (Guidry et al., 2004). The impact of journals and articles on accounting research has been assessed using citation analysis (Brown &

Analysis of Published Works and Speeches

85

Gardner, 1985b). Brown and Gardner (1985a) also studied, in 1985, the impact of accounting faculties and graduate programs on contemporary accounting research. They cite the following advantages compared to the use of publication counts and expert opinions: The procedure is objective in that it is independent of the perceptions, recollections, or personal biases of respondents. It measures research impact upon the profession in a timely fashion. Citations have been shown to be a better indicator of prestige than number of publications. It allows inﬂuential articles to come from journals not included in publication count samples. Citation analysis includes articles published prior to the start of the publication count sample that remain inﬂuential during the publication count period. (p. 263)

Analysis of John L. Carey’s Works John L. Carey was cited in the SSCI a total of 244 times. See Table 5 for a list of Carey’s works in descending order by number of citations. A vast majority of the citations, 218, were of his books. The Rise of the Accounting Table 5.

Citation Frequency of Works by Carey.

Publication The Rise of the Accounting Profession: From Technician to Professional The CPA Plans for the Future The Rise of the Accounting Profession: To Responsibility and Authority Ethical Standards of the Accounting Profession Professional Ethics of Certiﬁed Public Accountants The Journal of Accountancy Getting Acquainted with Accounting The Accounting Profession: Where is it Headed? Professional Ethics of Public Accounting The Accounting Review Accounting Historians Journal The CPA Financial Analyst Journal Report of the Executive Committee (AICPA) Working Paper Series Publication List Total Number of Times Carey was Cited

Times Cited 65 57 40 32 12 16 5 4 3 3 2 1 1 1 1 1 244

86

THE CONTRIBUTIONS OF JOHN L. CAREY

Profession, both volumes, garnered over 100 citations alone. His three books on ethics netted another 47 citations. The remainder of the citations was of Carey’s journal articles. His works in The Journal of Accountancy were the most frequently cited of the articles, at 16. The two other venues with multiple citations were The Accounting Review and the Accounting Historian’s Journal. Carey’s articles in one nonaccounting journal, the Financial Analyst’s Journal, and two non-journals were also cited. Of the two non-journal citations, one was the Report of the Executive Committee of the AICPA and the other was a list of accounting articles and journals, both of which were distributed to the membership. Fig. 7 shows the number of times that Carey’s work has been cited by year and by topic, since the SSCI began in 1966. His works on ethics and the future were cited heavily during the 1960s and 1970s, but have dropped off since then. The other topics – the profession, practice, and other works – have decreased also. However, Carey’s works on history have been cited the most consistently since his books were published in 1969–70, right up until the present time. 20 Profession Practice Other History Future Ethics

18

14 12 10 8 6 4 2 0 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1986 1987 1988 1989 1990 1991 1992 1994 1995 1996 1997 1998 1999 2000 2001 2003 2004 2005

Number of Citations

16

Year

Fig. 7.

Citations by Topics and Year

Analysis of Published Works and Speeches

87

Carey has been referenced by 150 different authors, since 1966, when the citation index was ﬁrst maintained. Several articles have been referenced by more than one author. John Carey’s 1966 article in The Journal of Accountancy titled ‘‘The Concept of Independence–Review and Restatement’’ was referenced six times, all by different authors. That article was so well received that it was also reprinted in The Pakistan Accountant several months after it was released in The Journal of Accountancy. A year later, in January 1967, The Journal of Accountancy ran another article by Carey entitled, ‘‘Accounting Legislation of the Future,’’ which was cited by three different authors. Fourteen other articles by Carey, in various journals, were cited by various authors. According to the SSCI, Stephen A. Zeff has referenced Carey the most often. One of Zeff’s articles in The Journal of Accountancy’s Centennial Issue was ‘‘Leaders of the Accounting Profession: 14 Who Made a Difference,’’ in which he not only discusses Carey as one of the 14 leaders, but also quotes Carey in a comment about Robert Montgomery (Zeff, 1987). See Table 6 for a list of the top citatory authors and the number of citations attributed to each. Fifteen authors have cited Carey more than twice. Forty-six authors have cited Carey more than once, or cited more than one of Carey’s works. Carey was also cited in many different journals, many of which were law reviews. Authors in The Journal of Accountancy cited Carey most, with

Table 6. Author citor Zeff, S. A. Loeb, S. E. Reiter, S. A. Bourn, A. M. Buckley, J. W. Kell Montagna, P. D. Aranya, N. Bannon Barr, A. Goldman, A. Miranti, P. J. Sorensen, J. E. Troger, J. R. Watts, R. L.

Total Citations 11 7 5 4 4 4 4 3 3 3 3 3 3 3 3

Authors Who Cited Carey. Profession

Ethics

History

3 5 3

8

3 1

Practice

2 2 4 2

1

Future

1

1

1 1 2 3 2

3 1

2 3 3 2 3

1

88

THE CONTRIBUTIONS OF JOHN L. CAREY

Table 7.

List of Journals in which Carey Has Been Cited.

Journal Cited in Journal of Accountancy Accounting Review Accounting Organizations and Society Business History Review Abacus Journal of Accounting and Public Policy Business Ethics Quarterly Journal of Business Ethics Taxes Vanderbilt Law American Business Law Journal Boston University Law Review Fordham Law Journal of Business American Behavioral Scientist American Journal of Sociology Annals of the American Academy Cost Management Evaluation Practice Governance- An International Journal of Policy & Administration Harvard Journal on Legislation Law Library Journal Northwestern University Law Review Stanford Law Review Texas Law Review Administrative Law Review Administrative Science Quarterly American Bar Association Journal American Real Estate and Urban Economics Journal Banking Law Journal Bureaucrat Business Horizon Business Lawyer California Management Review Cornell Law Review Duke Law Journal Emory Law Journal Human Relations Journal of Accounting and Economics Journal of Accounting Research Journal of Business Ethics Journal of Business Finance Journal of Contemporary Business

No. of Times Cited 55 52 13 11 6 6 5 4 4 4 3 3 3 3 2 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Analysis of Published Works and Speeches

89

Table 7. (Continued ) Journal Cited in

No. of Times Cited

Journal of Law and Economics Journal of Management Studies Journal of Accounting Research Journal of Policy Analysis and Management Journal of Taxation Kentucky Law Journal Library Trends Management Science Notre Dame Law Review Omega- International Journal of Management Science Organizational Dynamics Psychological Reports Relations Industrielles-Industrial Relations Review of Black Political Economy Review of Educational Research Southern California Law Review Social Science Quarterly Yale Law Journal Total

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 1 232

55 citations, followed by The Accounting Review, with 52. See Table 7 for a list of all of the journals in which Carey has been cited. A surprising number, 17, of the journals were law journals.

CONCLUSIONS John L. Carey was a proliﬁc writer with a wide and varied audience. The data suggest that he is most known for his accounting history and ethics books. The two books on the future of the accounting profession are also much read and referenced. One source of information for determining how well known Carey’s works are is the SSCI. The SSCI is a multi-disciplinary index, published since 1966, and contains millions of journals, books, and book chapters that have been cited by other authors. Carey has been cited at least 244 times by 150 different authors. His accounting history books were most cited, followed by the future and ethics books. All of those books are still being read and quoted. For instance, all three of Carey’s ethics books, and both volumes of The Rise of the

90

THE CONTRIBUTIONS OF JOHN L. CAREY

Accounting Profession, were referred to in an article published in 2004, in the Business Ethics Quarterly (Reuter & Williams, 2004). However, this analysis may significantly understate the impact of John L. Carey’s writings. The SSCI is not a comprehensive index. It has only been in existence since 1966, and contains a limited number of journals. For instance, The Accounting Historians Journal is not indexed by the SSCI. Consequently, accounting historians who cite Carey in The Accounting Historians Journal would not appear in the SSCI. There may be many other instances where John L. Carey has been cited, but has not been listed in the SSCI. For instance, in the current edition of the auditing textbook, Auditing and Assurance Services, by Louwers, Ramsey, and Sinason (2005), there is a quotation from Carey’s book, Professional Ethics of Public Accounting. Textbooks are not covered in the SSCI. Nevertheless, it is certain that many more people are reading and quoting Carey than are indicated by the SSCI. Therefore, Carey’s inﬂuence on successive generations of accountants cannot be adequately measured by this method.

CHAPTER 6 BUILDING A PROFESSION INTRODUCTION Carey (1957a) stated that there were four traditional professions which have been recognized for over 100 years – clergy, teachers, physicians, and lawyers. ‘‘However,’’ he continued in his 1957 article, ‘‘for ﬁfty years or more, there have been four additional organized professions which have attained at least a considerable degree of public recognition, the engineers, the architects, the actuaries, and the certiﬁed public accountants’’ (Carey, 1957a, p. 3). This chapter discusses how John Carey promoted accountancy as a profession. Some background information is provided about accounting and Carey’s role with the Institute and the profession. Then an overall analysis of Carey’s works promoting the profession is discussed next. Last, descriptions of the most important themes of Carey’s articles are provided, within the context of promoting the profession.

BACKGROUND When John Carey ﬁrst joined the American Institute of Accountants (AIA) in 1925, accounting as a career choice was relatively young. There were many who called themselves accountants, who were little more than bookkeepers (Littleton, 1988). There were very few requirements to be considered an accountant. The AIA was little more than a quarter century old, and its stated purpose was to organize and encourage accounting practitioners into becoming a profession. Article I of the Constitution of the AIA states that its objectives are: to unite the accountancy profession of the United States; to promote and maintain high professional and moral standards; to safeguard the interests of public accountants; to advance the science of accountancy;

91

92

THE CONTRIBUTIONS OF JOHN L. CAREY to develop and improve accountancy education; to provide for the examination of candidates for membership; and to encourage cordial intercourse among accountants practicing in the United States of America. (American Institute of Accountants, 1925, p. 209)

One element of John Carey’s position within the Institute was to promote the accounting profession through The Bulletin and, in later years, through The Journal of Accountancy. When he was promoted to Secretary, he advanced the profession by addressing state societies, rotary clubs, and other organizations, both accounting related and others. Over the years, Carey became known as a spokesman for the accounting profession (Schneeman, 2005). A resolution of the Council of the American Institute of Certiﬁed Public Accountants (AICPA), signed by its president, Marvin L. Stone, which appears as Fig. 1 in Chapter 2, was presented to Carey on his retirement. It stated, in part: Its Council gratefully salutes John L. Carey for his many notable contributions, not only to the Institute but to the entire accounting profession. We honor him: y For his determined efforts to increase public understanding of the profession, through his extensive writings and his many platform appearances y (AICPA, 1969, p. 9)

GENERAL ANALYSIS Most of Carey’s articles and books mention accounting as a profession. Of the eight books Carey authored or coauthored, ﬁve of them have ‘‘profession’’ in the title (see List of Books Written by John L. Carey in Appendix A). Over 40 of Carey’s articles have ‘‘profession’’ in their title, and 15 of those were considered important enough to be published in two or more journals. See Table 8 for a list of the article titles and the journals in which they were published. Furthermore, ten of the articles contained the phrase ‘‘professional ethics’’ in the title. Hence, one of the qualities of a profession is having a code of conduct. John Carey wrote about many topics within the scope of promoting the profession. One of the most frequently recurring topics was deﬁning a profession and demonstrating how accounting met that definition. Don Schneeman (2005), council for the Institute, emphasized how inﬂuential Carey was: I think that his greatest interest, his main interest, was in promoting the profession – getting greater acceptance for the CPA as a profession. He did a lot of writing on what a profession is and what the profession does, including the different characteristics of the profession. He was always trying to raise the level, the educational level, the bar level,

Building a Profession

Table 8.

93

Articles with ‘‘Profession’’ in the Title.

Title Accounting and Analysis: Building a Profession Accounting Profession’s New Opportunity Advantages of Professional Organization Aggressive Professional Ethics Aggressive Professional Ethics Big Problems of Profession, and the Role of the Young CPA Building a Profession Building a Profession Current Problems of the Accounting Profession in the U.S. Fastest Growing Profession Forward Planning for the Accounting Profession Forward Planning for the Accounting Profession How Can the Profession Plan for the Future? Improving the Professional Product Inﬂuence of Public Attitudes on the Accounting Profession Inﬂuence of Public Attitudes on the Accounting Profession Organisation Activities of the Accounting Profession in the U.S. Organisation Activities of the Accounting Profession in the U.S. Organizing the Public Accounting Profession for the Future Practical Applications of Professional Ethics Practical Applications of Professional Ethics Problems of the Profession in the United States Profession of Accounting Professional Ethics Professional Ethics and the Public Interest Professional Ethics and the Public Interest Professional Ethics are a Helpful Tool Professional Ethics in Accounting Professional Ethics in the United States Professionalism is Good for the Public Public Opinion and the Accounting Profession

Journal Title Financial Analysts Record Journal of Accountancy New York Certiﬁed Public Accountant The Virginia Accountant Accountants’ Journal (P.I.) New York Certiﬁed Public Accountant Massachusetts Society of CPA News Bulletin Accounting Problems of Business: Wartime Accounting Conference Accountant’s Magazine (Scot.) Guide to Career Opportunities The Virginia Accountant Illinois Certiﬁed Public Accountant The Journal of Accountancy California Certiﬁed Public Accountant The Mississippi Certiﬁed Public Accountant The Texas Accountant Summer Course 1953 Accountant (Eng.) California Certiﬁed Public Accountant CPA Handbook CPA and his Profession Accountancy Hospital Management Contemporary Accounting The Journal of Accountancy Catholic Thought in Business and Economics Public Relations Journal Handbook of Modern Accounting Theory Certiﬁed Accountants Journal Public Relations Journal Accounting Institute at Notre Dame University

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Table 8. (Continued ) Title Public Opinion and the Accounting Profession Public Opinion of the Accounting Profession Public Opinion of the Accounting Profession Realities of Professional Ethics Relations of the Professions to Each Other and to the Public Should Professional Firms Incorporate? State of the Profession Status of the Profession (From the Executive Director) The Accounting Profession in War The Accounting Profession in War The CPA’s Professional Heritage The CPA’s Professional Heritage, Part II The CPA’s Professional Heritage, Part III The CPA’s Professional Heritage, Part IV (Birth of the SEC) The Relations of the Professions to Each Other and to the Public What is the Professional Practice of Accounting? What Research Does the CPA Profession Need? What the Accounting Profession Offers the Staff Accountant What’s Happening to the Accounting Profession? What’s Right With the Profession? (From the Executive Director) Write-Up Work and Professional Prestige Write-Up Work and Professional Standing

Journal Title Ohio Society Annual Fall Meeting Papers of the 22nd Annual Michigan Accounting Conference The Journal of Accountancy The Accounting Review Interprofessional Meeting CPA (American Institute of CPAs) CPA (American Institute of CPAs) CPA (American Institute of CPAs) The Journal of Accountancy New York Certiﬁed Public Accountant Working Paper Series Working Paper Series Working Paper Series Working Paper Series The Ohio Certiﬁed Public Accountant The Accounting Review CPA (American Institute of CPAs) New York Certiﬁed Public Accountant The Certiﬁed Public Accountant CPA (American Institute of CPAs) CPA (American Institute of CPAs) CPA (American Institute of CPAs)

and the ethical level for all the members. He was very big in promoting that. You couldn’t go to an annual meeting without hearing his speeches on ethics or professionalism. (p. 1)

Other characteristics of the accounting profession advanced by Carey were promoting public relations for the profession as a whole, defending the profession from critics and scandalous events, and establishing minimum educational requirements needed to obtain and maintain the professional status for accounting.

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He was very interested in education and promoting careers in the profession y The (John L. Carey) scholarship was kind of a tribute to his strong belief of accountants having a very broad education, not just accounting education or business, but a good strong liberal arts education. I know that was something he felt very strongly about. (Sanders, 2005, p. 4)

There were 57 citations of Carey’s works listed in the Accountant’s Index related to the profession of accounting. Out of those, 43 were articles and six were speeches. Books While none of Carey’s books were devoted exclusively to the profession, all of them had sections devoted to the topic. Getting Acquainted with Accounting, a text to introduce students to the accounting profession included a chapter titled ‘‘Attaining Professional Status’’. In this chapter Carey and Skousen (1977) discuss topics such as the evolution of the accounting profession, in which he gives some history beginning in the early 1800s. He also discusses the requirements for the Certiﬁed Public Accountant (CPA) examination, ethics, social obligations, and continuing education. In The Accounting Profession–Where Is It Headed?, Carey mentioned many aspects of professionalism, including the seven characteristics of a profession, certiﬁcation, the structure of the accounting profession, and a program for the future. The characteristics of a profession are discussed in greater detail later in the chapter. Carey suggested that the formal process of granting the CPA certificate is an act that inspires trust and conﬁdence in the professional capability of the CPA. While the certificate does not guarantee competency, there is a basic minimum knowledge that is being tested. Carey equated the CPA certificate to a license to practice medicine or admission to the bar. He also advocated continuing education as a means of solidifying recognition as a learned profession.

THEMES Definition of a Profession Through the years, Carey’s characteristics of a profession were redeﬁned and became more speciﬁc. Along with the characteristics, Carey also discussed the beneﬁts and responsibilities that came with becoming a profession.

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Carey asks the question: What is a profession? He answered in part by stating: The Commission on Standards of Education and Experience for CPAs analyzed the essential characteristics of a profession. One of the major ingredients, this report found, was ‘an acceptance of the social responsibility inherent in an occupation endowed with public interest’. (Carey, 1957–58, p. 8)

Carey further deﬁned a profession using an article by Morris L. Cogan (Cogan, 1955), ‘‘The Problem of Deﬁning a Profession,’’ in The Annals of the American Academy of Political and Social Science for January 1955. Cogan suggested a generic definition of a profession: A profession is a vocation whose practice is founded upon an understanding of the theoretical structure of some department of learning or science, and upon the abilities accompanying such understanding. This understanding and these abilities are applied to the vital practical affairs of man. The practices of the profession are modiﬁed by knowledge of a generalized nature and by the accumulated wisdom and experience of mankind, which serve to correct the errors of specialism. The profession, serving the vital needs of man, considers its ﬁrst ethical imperative to be altruistic service to the client. (Cogan, 1955)

Carey (1958d) discussed two aspects of a profession – arduous intellectual training and a commitment to an exacting ethical code. In Getting Acquainted with Accounting, Carey and Skousen (1977) provided ﬁve speciﬁc criteria for a profession: It renders essential services to society and recognizes a social obligation. It is governed by a code of ethical conduct, which is enforced by disciplinary machinery. It has formal requirements for admission of new members and an identifying title that only members are permitted to use. Its members have acquired a body of specialized knowledge, through some system of formal education or training. It is recognized by law. (p. 101)

In 1956, the Commission on Standards of Education and Experience for Certiﬁed Public Accountants issued what became known as the Perry Report. This 176-page report described the ‘‘desirable prerequisites for state certiﬁcation as a CPA’’ (The Committee on Education and Personnel, 1956, p. 657). In The Accounting Profession–Where is it Headed?, Carey (1962b) refers to the Standards of Education and Experience for Certiﬁed Public Accountants Report, in order to deﬁne and characterize the criteria of a profession, as listed in Table 9.

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Table 9. 1. 2. 3. 4. 5. 6. 7.

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They possess a body of specialized knowledge. They undergo a recognized, formal educational process. They conform to a standard of professional qualiﬁcations governing admission. They maintain certain standards of conduct. They have a recognized status. The work they perform is endowed with a public interest. They belong to an organization devoted to the advancement of the social obligations of the profession.

Carey also lists these qualities of a profession in ‘‘Building a Profession’’ and in ‘‘The Place of the CPA in Contemporary Society’’. He notes that there are other requirements for being recognized as a profession. The public must recognize the group as a profession and both understand and respect it (Carey, 1968a). This is a necessity created out of the purpose of the profession to serve the public. It is ironic that one of Carey’s (1944b) earliest works on the accounting profession and one of his more recent (1968a), both have the title, ‘‘Building a Profession’’. In his 1944 speech at the Wartime Conferences, Carey (1944a) stated, ‘‘The building of the accounting profession in the United States has not been completed. A solid foundation is there, but no one can tell yet what the size or appearance of the ﬁnished structure will be’’ (p. 41). Carey (1957a) described professionalism as: the tendency of groups of specialists to band together to identify themselves by some title or degree, to cooperate in the development of an organized body of communicable knowledge and skills, to qualify new members by examinations and, most important of all, to accept informally or formally, through codes of ethics, a responsibility to the public for competent, fair and ethical conduct by their members. (p. 2)

He then discussed the need for encouraging the best-qualiﬁed men to enter the accounting profession. Carey (1944a) also added, ‘‘Research, discussion, and writing for publication are indispensable in the development of any profession’’ (p. 41). Public Acceptance Carey (1940a) mentioned that the standards of any professional group must be acceptable to the public. The ﬁrst, he said, was to maintain discipline among its members. A profession should enforce its rules of conduct and punish violations of those rules. The practice of competitive bidding for professional engagements was a practice that lowers professional standards.

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Carey also mentioned independence, CPA certiﬁcation requirements, accountancy education standards, and the merger of the Institute and the American Society of Certiﬁed Public Accountants (ASCPA), as contributing toward the advancement of accountancy as a profession, by instilling conﬁdence by the public. Carey (1940b) stated that the accounting profession needed the public to understand their actions, for the following reasons: Certiﬁed public accountants can prove beyond any doubt that they render a useful social service. Certiﬁed public accountants have accepted and do accept reasonable and proper responsibility. The profession has developed adequate standards of technical performance, as outlined, for example, in the bulletins Examination of Financial Statements and Extensions of Auditing Procedure. Creditable standards of professional and ethical conduct have been developed and enforced. Rules of the Institute and the state societies and the activities of their respective ethics committees will readily support that assertion. Satisfactory standards for admission to the profession have been created under the several state C.P.A. laws. The uniform C.P.A. examination, prepared by the Institute and adopted by forty-four states and territories, shows the sincere desire of the profession to uphold the standard. A respectable professional literature has been developed. The Journal of Accountancy has been published regularly since 1905. The librarian of the Institute reports that the library owns some 15,000 items, of which thousands are circulated among the membership every year. Other accounting periodicals are developing. The numbers of books increase annually at a rapid rate. The profession seeks improvement of its methods through research. The recently created research department of the Institute, through which four technical bulletins have appeared in recent months, and the research activities of the American Accounting Association, bear witness to this fact. Accounting education has reached impressive levels. With the encouragement, and often the active assistance, of practicing accountants, a large number of the great universities of the country have introduced and expanded courses in various branches of accounting. The Institute’s committee on education is now attempting to develop standards by which the profession can determine which institutions may be recognized as providing adequate instruction for aspiring accountants. (pp. 6–7)

Carey discussed, in several articles, how accounting has contributed to ﬁnancial progress of businesses. ‘‘Business is accountable to the public. It must produce more and better goods at lower prices with higher wages and adequate proﬁt’’ (Carey, 1956b, p. 54). Later in the article, ‘‘How Can the Profession Plan for the Future,’’ he added, ‘‘Accounting is an indispensable

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instrument – in control of costs, in ﬁnancial planning and in reporting business results – to investors, creditors, workers, government’’ (Carey, 1956b, p. 54). Carey also discussed other programs that the Institute had been implementing to improve the quality of the profession, such as newspaper publicity, including releases to the press of committee reports and material reprinted out of The Journal of Accountancy. He also mentions A Plan Book for Public Relations for a State Society, regional conferences, the speakers’ bureau, a special advisory committee on public information, and the mass printing and distribution of pamphlets for the public (Carey, 1940b). Carey also encouraged members to defend their reputation and public conﬁdence in CPAs. ‘‘No other profession depends on public conﬁdence to the extent and in the same way as does accounting. The reputation of CPAs generally is the most valuable thing each of them has to offer his client’’ (Carey, 1956a, p. 91). Carey’s (1948c) premise in ‘‘Inﬂuence of Public Attitudes on the Accounting Profession’’ is that we don’t always see ourselves as others see us. He applied this to the accounting profession and compared how accountants view the profession and the opinion of the public. Carey (1948d) reminded the readers how far the profession had come from its beginnings, but stated that the profession cannot sit on its laurels. ‘‘Unhappily, the fact that certiﬁed public accountants have made a world’s record in building a profession and winning a place in the sun does not assure them security in the years ahead’’ (p. 1). The latter half of John Carey’s career was spent in promoting the accounting profession. Many of his articles have recurring themes, developed and re-emphasized over the years. In a speech delivered to the Institute of Chartered Accountants in England and Wales, Carey (1953d) discussed the activities and organization of the accounting profession in the United States. After relating the history of the AIA and the profession, Carey (1953e) described how certiﬁcation through the state boards had prevented federal regulation of the profession. Carey also mentioned other characteristics such as education, organizational membership, taxation legislation, and public relations. Professional ethics, broken down into the three areas of professional attitude, conﬁdence of clients, and conﬁdence of third parties, was described. ‘‘Yet public opinion is of vital importance in many decisions affecting the interests of certiﬁed public accountants. Members of state legislatures, of Congress – even the courts – are inﬂuenced to some extent, consciously or subconsciously, by public attitudes on various questions’’ (Carey, 1953e, p. 34).

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‘‘The CPA in a Changing World’’ published in The Illinois Certified Public Accountant, was taken from a speech given at the Awards Dinner of the Illinois Society of Certiﬁed Public Accountants in Chicago, and was addressed to the new CPA candidates (Carey, 1957–58). Carey stated that those CPA candidates should be proud to be admitted to the accounting profession. He continued by admitting that the demands are rigorous, and requires intelligence, self-discipline, determination, and a life-long devotion to learning. Carey then further discussed the qualities of individuals who make up the accounting profession. They have superior knowledge, skill, and high standards of conduct. The profession brings prestige to those who are dedicated to it. In what was one of Carey’s most recent articles on the accounting profession, written just before he retired, he discussed the characteristics of a profession and the accounting profession in particular (Carey, 1968a). He reﬂected on the beginnings of accounting and how it grew into a profession. In a departure from most of Carey’s writings, he also considered some technical problems under consideration of the Accounting Principles Board (APB). He mentioned business combinations, the pooling-of-interest method, and accounting for goodwill. The Committee on Accounting Procedure was succeeded by the APB in 1959. The APB, supported by a larger research department, was created to tackle more difﬁcult problems, such as increased comparability among companies and industries. Carey applauded the achievements of the APB to date, while advising that more unpopular opinions would be forthcoming. Public Relations Carey was very conscious of how the public viewed accounting and auditing. While advertising was prohibited for accountants and accounting ﬁrms, he felt that one of the responsibilities of the Institute was to promote the accounting profession. He discussed how the profession should deal with public relations and how accountants could do their part to enhance the public’s view of the profession. He argued that a public relations campaign is vitally important to the accounting profession. ‘‘Public good will can contribute greatly to progress toward the legitimate objectives of the accounting profession – public ill will could seriously interfere with that progress. Public opinion is reﬂected in legislation, in the rules of government regulatory bodies, in decisions of juries, in newspaper and magazine publicity which may inﬂuence clients and potential clients’’ (Carey, 1940a, p. 7).

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Carey (1948e) claimed that the accounting profession could not avoid public relations issues. No one can escape relations with other people, and the quality of those relations – whether they are good, bad, or indifferent – will largely determine success or failure in this world. The same thing is true of groups – racial, political, social, vocational groups. They too have relations, as groups, with other people. Negroes, as a group; Russians, as a group; capitalists as a group; certiﬁed public accountants as a group – have relations with other people. Other people, in the context, we call the public. So every group has public relations, whether it wants them or not. (p. 59)

Carey (1948c) acknowledged that, even though CPAs must have been trusted and respected by the business community for the profession to have gained such a status, the profession had come more into the general public’s eye, and had attracted much criticism. As CPAs became involved in matters of vital importance such as auditing, measurement of proﬁt, cost determination, and tax problems, many groups, beyond management and bankers, began examining the tenets of the accounting profession. These groups included investors, labor unions, consumers, economists, analysts, statisticians, lawyers, government ofﬁcials, and lawmakers. This intensiﬁed the need for effective public relations. While acknowledging the importance and need for accountants, Carey often stated that the public is not as aware of the accounting profession as it should be. And to educate the public requires a public relations program. ‘‘The real question is not whether we are going to have public relations, but rather what kind of public relations they will be’’ (Carey, 1948e, p. 61). So then the question becomes how to educate the public. Carey (1948e) stated that there are two viewpoints: conservative and radical. The conservative viewpoint says that if an accountant does a good job and acts in a professional manner, then he will be recognized as such, and that should be enough. The radical viewpoint states that the accounting profession should make every effort to promote its functions and its beneﬁts through all forms of the media – press, magazines, radio, television, and movies, no matter the cost. Carey admitted that the proper attitude should be a compromise of the two positions. Carey had some speciﬁc public relation suggestions to strengthen the profession. He said, ‘‘the two most direct channels of communication are closed to the accountancy profession because of the prohibitive cost: radio and national advertising’’ (Carey, 1940a, p. 12). Carey went on to mention newspaper publicity, meetings, and printed matter. The Institute had just prepared a pamphlet for the public entitled ‘‘Accounting and Your

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Pocketbook’’. He added, ‘‘One of the most effective means of communication is readily available, however: talk’’ (Carey, 1940a, p. 12). Carey (1948e) described the public relations program that had been approved by the Council of the AIA, as containing ﬁve aspects: Since the public information program must be integrated with all other activities of the Institute, it should be directed from headquarters under the immediate supervision of the secretary, and under the general direction of a public information committee, which should be composed of members of the council familiar with the policies and varied activities of the Institute as a whole. The present public information staff should continue the publicity and public relations work which has been carried on so successfully for the past ten years. An additional full-time member of the staff has been retained to undertake the new work involved in supervising and expanding the public information program: to develop a work program of wider scope than now exists; to prepare materials for distribution through the various mediums of communication (i.e., draft articles, speeches, releases, pamphlets, etc.); to create situations which will present opportunities for communication to the public. An independent public relations counsel has been retained to assist in planning, formulation, and execution of the new progam (sic), to provide special skills, facilities, diversiﬁed experience, and a broad critical outlook, as a supplement to the abilities of the full-time staff, and to guide and assist the full-time staff in the actual operations to whatever extent may be necessary, including the production of informational materials. The committee has approved a memorandum which outlines the objectives of the program, the scope of activity, procedures to be followed, and the general policy under which the program will be conducted. In general, there are to be two main divisions of work: In every way possible to assist the members of the Institute themselves to be their own public relations ambassadors, to take advantage of their own wide acquaintance in business and other circles so that they may serve as a principal medium of communication to the public of the ideas which the profession as a whole is eager to have the public understand; By communication with the national groups and molders of opinion, to provide from Institute headquarters direct information which the profession desires the public to receive. (p. 63)

Relations with Other Organizations Many of Carey’s articles and addresses were presented to groups and associations outside the accounting profession. He utilized those opportunities

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to compare and contrast the accounting profession to others. He also promoted different aspects of the accounting profession to various other professions. National Society of Public Accountants In the latter half of the 1940s, Carey wrote regularly about public relations and organizational relationships. ‘‘Public Accountants and Accounting Legislation’’ is a news article reporting a meeting between the Institute and the National Society of Public Accountants, with the purpose of a cooperative approach regarding accounting legislation (Carey, 1946a). Carey was one of the members of this committee representing the AIA. ‘‘Relationships of accountants with other groups and individuals cannot be avoided; it is imperative that these relationships be good, not bad; future growth of the profession requires that the public know and understand what accountants do, what service they render the public’’ (Carey, 1948e, p. 59). Carey had sent out a memorandum to both organizations outlining a purpose and possible agenda for the meeting. He said, ‘‘The accounting profession is in the process of evolution, and the pattern of its organization is not yet complete. There is inconsistency among the existing state laws concerned with the practice of public accounting and the issuance of the CPA certificate’’ (Carey, 1946a, p. 1). After citing the need to maintain high public conﬁdence, Carey added that any new legislation should be justiﬁed by protecting the public interest. The need for cooperation and advice from other organizations was also a concern. Carey claimed that it was agreed during that meeting that the National Society members would take suggestions back to their membership and that cooperation among the organizations was necessary. Public Accounting Legislation Carey also mentioned public accounting legislation. Because of the opportunities in public accounting, many were employed in accounting and bookkeeping work who were not CPAs. They used many titles including public bookkeeper, tax consultant, management consultant, public accountant, and accountant (Carey, 1948d). Many of these accountants implied that they met the same educational standards as CPAs, and that CPAs held a monopoly on certain accounting work. There were organizations, for example, for public accountants, who were encouraging legislation for their own status. Carey addressed this issue by cautioning the profession to prevent public accountants from gaining a professional status equal to the CPA.

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Engineers John Carey (1937) also compared the accounting profession to the engineering profession. He acknowledged, I ﬁnd you have struggled with this same problems exactly that the accountancy profession has struggled with in ﬁghting for legislation providing proper credentials for our group – C.P.A.’s. I ﬁnd that you have struggled with the difﬁculty of practice, with the constitutionality, with enforcement problems, with that problem of practice by corporations and with reciprocal relationships, of which have occasioned kindred action to many members of the accountancy profession as well. (p. 5)

Public Relations Consultants Carey (1960) discussed the qualities of a profession, by comparing CPAs to public relations consultants. If public relations consultants wanted to be considered a profession, they would have to do what the accounting profession has done – be motivated to serve the public, have a common body of knowledge, obtain formal accreditation requirements, and establish a code of conduct. He further states that professionals must have morals and ethics and must be disciplined when they fail to adhere to their code of conduct. Lawyers Many of Carey’s articles about the accounting profession discussed news items of the day. For example, in 1948, Carey (1948c) denounced the legal profession for attempting to remove the accounting profession from tax practice. He said that since the legal profession was overcrowded, and accounting was not, many lawyers felt that tax practice should become the exclusive right of lawyers, including tax return preparation. Carey (1948c) stated that the battle between the two groups was still ongoing. ‘‘Attempts to resolve the problem by negotiation between the two professions have not been notably successful, and at this time open warfare wages on many fronts’’ (p. 2). He added that the feud may take a long time to settle, but ‘‘in the long run public opinion will probably settle the question on its merits’’ (Carey, 1948c). He advised each accountant to look at himself to defend against attacks on the accounting profession. He emphasized that maintaining and improving our code of ethics is vitally important. And members of the accounting profession should take every opportunity to stress that tax work deals with accounting and keeping records. He talked about the medical profession, the American Bar Association (ABA), and the accounting profession, which have similar problems in public relations. Carey (1937) stated,

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I wonder why the sudden interest in public relations and public good will; it must be because we all sense, in the shifting economic sense, a kind of danger; we have an uneasy feeling that we may be exposed to attacks – that we are not as ﬁrmly established as we once thought we were, that from any quarter there may come a crushing blow, without any warning. (p. 5)

Life Underwriters Carey (1957–58) compares the professions of CPAs and life underwriters. ‘‘Both life underwriters and certiﬁed public accountants have to make their livings in the dynamic economy of the United States y’’ (p. 1). He then discussed the overlap of accounting and underwriting, for example, estate planning, reviewing insurance needs, wills, and trusts. Then he mentioned ‘‘the unauthorized practice of law’’ and the committee to resolve this issue. He also related this to a similar situation between the lawyers and the underwriters. ‘‘Both the American Institute of Accountants and the National Association of Life Underwriters have entered into joint statements of principles with the American Bar Association’’ (Carey, 1957–1958, p. 1). A similar description of professions was used in ‘‘Relations of the Professions to Each Other and to the Public’’ (Carey, 1958e). This was a speech to the Interprofessional Meeting in Columbus, Ohio on March 12, 1958. The Interprofessional Council ‘‘embraces members from the professions of Law, Bank Trust Ofﬁcers, Life Underwriters, as well as CPAs’’ (p. 49). Rebuttals and Problems of the Profession There was a ﬂurry of news reports and newspaper articles written about accountants and the profession during the late 1930s, mostly critical of the ﬁeld. These were, in part, due to the very public scandal of the McKesson & Robbins Company, audited by Price Waterhouse. Throughout his career with the Institute, Carey had to defend the Institute and the accounting profession during scandalous periods in history. He often quoted comments and news articles defaming the accounting profession for their lack of morals and judgments, usually after a particularly public audit ﬁasco. Carey tactfully refuted their arguments of a need for government regulation, and their cries of better member monitoring with explanations of the actions and measures taken by the Institute, the Securities and Exchange Commission (SEC) and the profession. In ‘‘Accountancy and the Public,’’ Carey (1940b) addressed the need for more understanding by the public concerning the problems and duties of the profession. Carey quoted from several articles’ comments regarding the lack of understanding of the profession, including editorials in the New York

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Journal of Commerce and Credit Executive. There was quite a bit of criticism in the newspapers and magazines of the accounting profession after the McKesson & Robbins audit problems came to light. Carey stated that what the accounting profession needed was a public relations program, including state societies and individual members. Carey (1940a) said, in 1940, ‘‘it was something of a shock to ﬁnd last winter, how much the public expects of accountants. In the lengthy and often heated discussion of accounting and auditing, which occupied miles of newspaper columns last winter and spring, there was no hint of toleration for possible shortcomings of a profession which had not yet come of age’’ (p. 3). Carey (1960) described a joke from Eric Sevareid about having to cover the dull and uninspiring events at the nation’s capital, comparing it to a convention of CPAs. Carey found exception to the comment, stating that ‘‘just when we begin assuming that our aspirations have been fulﬁlled – that certiﬁed public accountants have been widely recognized as a mature and disciplined profession, making a significant contribution to the progress of our society – someone like Mr. Sevareid reminds us that our recognition is something less than universal’’ (p. 20). Carey (1967b) cited a Wall Street Journal article and articles in The New York Times and Forbes magazine. Carey defended the CPAs against accusations of negligence and being ‘‘rubber-stamps for management’’ by discussing the accounting principles, comparability of ﬁnancial statements, integrity and independence of auditors. Out of the hundreds of thousands of audited ﬁnancial statements submitted to investors, banks, and governmental agencies, the few which have problems make the headlines and its auditors are tried, convicted, and sentenced by the public before all the details are known. The public assumes, in Carey’s (1967b) words, ‘‘that auditors have some sort of extra-sensory perception which makes it impossible to deceive them y’’ (p. 35). Carey continued, ‘‘Alas, CPAs are only human. They are highly trained, they are skilled in the techniques of their profession, they are alert and highly conscious of their responsibilities, but they are not infallible’’ (p. 35). Many of Carey’s articles in the later part of the 1950s and the 1960s pertained to problems and possible solutions related to the accounting profession. Carey (1958b) emphasized education by talking about the ‘‘accounting product’’ that CPAs provide. The product can only be improved by ‘‘increasing the knowledge and skill of the practitioner’’ (p. 21). He further stated that there are three ways in which to improve the product: experience and observation, reading and conversation, and organized,

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methodical instruction. Carey (1958b) extols the third option as being ‘‘the quickest way to acquire knowledge’’ (p. 21). Carey (1968c) was not afraid to discuss the problems of the accounting profession in the United States to foreign groups. Perhaps what has happened in the US is a precursor of what may occur in other countries also. If the profession abroad can proﬁt from the experiences, sometimes painful, of their American colleagues, the latter may take comfort from the thought that their tribulations have not been in vain. (p. 80)

While giving a speech to a group of Scottish chartered accountants, Carey (1961a) reported, ‘‘The current problems of the accounting profession in the United States, which I have been asked to discuss tonight, may provide some clues to what lies ahead. Most of these problems are those that result from growth and progress, which have been very rapid’’ (p. 723). He discussed the 53 jurisdictions and societies of CPAs and their differing educational requirements, non-certiﬁed practitioners, ethical standards, and accounting principles. Carey (1962a) also mentions the scope of a CPA’s required knowledge, governmental independent audits, ethics in tax practice, and the impact of technology on accounting services. While many of Carey’s articles illustrate the problems of the profession, occasionally he reﬂected on ‘‘What’s Right with the Profession?’’ ‘‘y it is not too extravagant to say that if the CPA profession did not exist, it would have to be invented’’ (Carey, 1966, p. 6). Carey continued by listing some of the profession’s achievements – a prominent position in the curriculum of all schools of business, a higher percentage of college graduates, improved auditing standards, a system of continuing education, a uniform CPA examination, and a centralized grading service adopted by all the states. Carey has expounded on the accomplishments of the accounting profession during various time periods. It was important to inform the public that CPAs have come a long way and have struggled to achieve their status as a profession. Certiﬁed public accountants deserve the tributes they have received for doing the job as well as they have done it. They have strained every nerve to meet emergency after emergency. In 30 years they have increased their numbers 600 per cent; they have developed a technical literature; created an educational system, a code of ethics, standards of accounting and auditing procedure, strong professional societies. It has been a truly magnificent achievement, and certiﬁed public accountants may be excused if they pause to take breath and listen for applause. (Carey, 1948e, p. 60)

‘‘Actually, little is known of the CPA’s struggles to preserve and maintain integrity in ﬁnancial reporting – or of the many almost heroic instances of moral courage they involve. The CPA is confronted with more and tougher

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moral and ethical decisions in a month – than the average person encounters in a lifetime’’ (Carey, 1967b, p. 38). Continuing Professional Education Carey campaigned for a continuing education program. This would improve the competency of CPAs, especially those who have achieved their CPA license years earlier and might not have kept as current on the changes happening in the profession (Carey, 1962b). Carey (1958b) stated that, based on a study conducted by the AICPA of the various professions, accounting fell behind the others due to a lack of continuing education requirement. In other professions, such as law and medicine, and in vocational ﬁelds such as banking, credit, insurance underwriting, this type of post-college instruction has not been left to individual practicing units to provide for their own employees. It has been developed on a cooperative basis through the professional societies, or in conjunction with them (p. 21). Therefore, the Council of the Institute appropriated $50,000 to develop and test such a program. The program was geared toward small ﬁrms and practitioners, because many large ﬁrms had training programs already. Carey discussed the educational needs of junior and staff accountants, managers, and partners. One of the problems of the growing profession was the inconsistencies that grew among the state boards when setting standards for their candidates to become members of the accounting profession. CPA examination requirements and education requirements had become a concern for the accounting profession, the Institute, and the state boards. Carey took an active role in mediating the various factions regarding those requirements and became an advocate for a broad education. Later, he became the promoter of continuing education for the profession. Carey (1958b) emphasized the need for education as part of the qualiﬁcations of a profession. He also demonstrated the need for individuals to maintain their education to improve their ‘‘product’’ and earning power. Articles Based on Speeches Much of Carey’s works in the 1930s, cited in the Accountants’ Index, were based upon speeches given to various organizations around the country. An address delivered to the National Society of Professional Engineers was one of Carey’s earliest citations in the Accountant’s Index. In the article John Carey compared the accounting profession to the engineering profession.

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Carey had seven citations in the Accountants’ Index under the title ‘‘Accountancy and the Public,’’ all in 1939 and 1940. There were actually three different speeches presented by Carey, which were then converted into articles for publication. His address (Carey, 1939a) to the Texas Society of CPAs was published in February 1940, in The Texas Accountant (Carey, 1940a). This article was an address presented at the meeting of the Texas Society of Certiﬁed Public Accountants held on the previous October 6th and 7th in San Antonio, Texas. He also gave a speech at the Southern States Accountants’ Conference in 1940, which was published in the conference proceedings. The theme of the Southern States Accountants’ Conference was ‘‘Accounting in the Public Interest’’. Many of the presentations, due to the McKesson & Robbins scandal, concerned the veriﬁcation of inventories and accounts receivables. Other presenters, like Carey, discussed public reporting and public practice. Most of the Southern States presentation by Carey was taken from his February speech to the Texas Society, mentioned above. The beginning and ending are original. The Second Southern States Accountants’ Conference, held in New Orleans in April 1940, was, according to Carey, ‘‘the largest regional conference of state societies on record’’ (Carey, 1940a, p. 7). In both speeches, Carey discussed the need for public relations in the accounting profession. The third version of ‘‘Accountancy and the Public’’ was taken from an address before the Massachusetts Society of Certiﬁed Public Accountants in Boston. In this speech, also printed in the Certified Public Accountant (Carey, 1940d, p. 3) and the Accounting Forum (Carey, 1940e, p. 7), Carey asks the question, ‘‘What are the factors which can contribute to progress toward the objectives of the accountancy profession or can seriously interfere with their attainment?’’ (Carey, 1940c, p. 3). The War Articles Carey wrote about the accounting profession’s duty during the war effort. In 1942, ‘‘The Accounting Profession in War’’ was published in both the New York Certified Public Accountant and The Journal of Accountancy. Carey (1942) stated that the accounting profession should convert for war in three ways: It must release its younger members and students for service in the armed forces, just as other vocational groups must do. It must make available some of its more experienced members for service to government war agencies, in which their special technical ability is needed.

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It must then, despite great gaps in its ranks, render necessary professional services which will facilitate production and efﬁcient operation in war industries and in businesses essential to wartime civilian economy. (p. 470)

Carey (1944a) had another wartime professional publication, in Accounting Problems of Business. This was a pamphlet composed of a group of six addresses presented at a series of seven wartime accounting conferences held by the state societies of CPAs or their chapters. These speeches were presented in April 1944, in agreement with the AIA. See Fig. 8 for a picture of the speakers at the Wartime Conference. This publication discussed how accounting work had become a profession and not a business or a mechanical bookkeeping service. Carey mentioned several aspects of a profession, the obligation of service to society as a whole, the need for knowledge and judgment, and the certiﬁcation process. In ‘‘The Development of Aptitude Tests for Accountants,’’ Carey (1945) raised a rather controversial subject by discussing the development of aptitude tests for use in encouraging and discouraging students to become accounting majors. Because of the war, many men and women who were employed to perform accounting duties were not as qualiﬁed as those who had left to ﬁght the war. Carey and the Institute were concerned about the decline of professionalism and strived to maintain high standards. ‘‘A profession can be no stronger than its personnel. The accountants in public practice frankly recognize that in order to keep pace with the demands, which seem certain to be made upon the profession, the coming generation of accountants will have to be better than the present one’’ (Carey, 1945, p. 1). To this end, Carey discussed a project to attract the best students for the profession. The Council of the Institute formed a committee to ‘‘investigate the possibility of developing objective standards by which an individual’s qualiﬁcations for public accounting could be measured’’ (p. 1). Carey (1945) then explained the tasks of the committee. The ﬁrst job of the Institute’s committee must be to appraise the aptitudes, interests, and personal characteristics of successful public accountants in an effort to determine at least those qualities and capacities which are common to a majority of successful public accountants. The next step would be to establish, through selection of existing tests which seem appropriate, and construction of new ones, a battery of tests to measure the extent to which a given individual possesses those qualities and capacities. Next, the test battery must be validated through testing hundreds of member of the Institute and a thousand or more students in college accountancy classes, over a period of years, in order to observe whether or not the indications afforded by the tests are proved by experience – in other words, to test the tests. (p. 5)

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Fig. 8. Photo of the American Institute of Accountants’ Speakers Party, 1944 Wartime Accounting Conferences. Standing(l to r), John L. Carey, Victor H. Stempf, J. A. Phillips. Seated (l to r), George D. Bailey, George P. Ellis, Samuel J. Broad.

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Carey thereafter mentioned other advantages that would be gained through the process. In addition to providing measures of a capacity for public accounting, the study would provide: (a) information on qualities desired by public accountants in their staff assistants, (b) a basis for educating vocational counselors, (c) a better-organized procedure for recruiting into the accounting profession, and (d) knowledge of how to improve and reﬁne the CPA examinations.

CONCLUSIONS Carey discussed the profession from many different aspects. He described the need for public relations to promote the accounting profession. Also discussed were relationships with other organizations such as the National Society of Public Accountants, engineers, public relations consultants, and life underwriters. The lengthy battle with the legal profession over the right to practice before the tax court had been a constant source of material for Carey’s writings. He argued for accountants to promote their code of ethics, to promote their profession, and to defend their tax practice in spite of the efforts of the ABA to exclude accountants in any areas of tax. Carey was a defender of the profession in times of turmoil. He responded to criticisms of public accounting with a calm demeanor, citing positive strides that have been made throughout the history of accounting and revealing proposed steps toward continuous improvement. While admitting that the profession is far from perfect, and much more needed to be done, Carey stressed the importance of the accountant’s role during the contemporary times. ‘‘I think it also fair to say that, today, we know that accounting as a profession, and as an art, stands in a position of great strategic importance in the economic battles of the world’’ (Carey, 1948e, p. 61). Carey emphasized the role of accounting in the business, government, non-proﬁt, and economic communities. ‘‘Without accounting, the world’s work would not get done’’ (Carey, 1948e, p. 61).

CHAPTER 7 ETHICS INTRODUCTION Modern regulatory accountancy legislation has two principal purposes y ﬁrst, to close the profession to all except certiﬁed public accountants and registered non-certiﬁed public accountants, and then to control the activities of the members of the profession by the enforcement of a strict code of professional ethics. (Edwards, 1988, p. 176)

John Carey has been called ‘‘the Architect of the Code of Professional Ethics’’ (Michigan State University, ca. 1965). When Carey became involved with the AIA, the code of ethics was a list of 11 rules printed on two pages in the back of the Year-book of the Institute (Rules of Professional Conduct, 1925). By the time Carey retired, the Code of Professional Ethics consisted of four tiers of standards: The ﬁrst, Concepts of Professional Ethics, is a philosophical essay approved by the professional ethics division. The essay suggests behavior which CPAs should strive for beyond the minimum level of acceptable conduct set forth in the Rules of Conduct and is not intended to establish enforceable standards. The second category, Rules of Conduct, consists of enforceable ethical standards and required the approval of the membership before the Rules became effective. The third category, Interpretations of Rules of Conduct, consists of interpretations which have been adopted, after exposure to state societies and state boards, by the professional ethics division’s executive committee to provide guidelines as to the scope and application of the Rules but are not intended to limit such scope or application. The fourth category, Ethics Rulings, consists of formal rulings made by the professional ethics division’s executive committee after exposure to state societies and state boards. These rulings summarize the application of Rules of Conduct and Interpretations to a particular set of factual circumstances. Members who depart from such rulings in similar circumstances will be requested to justify such departures. (American Institute of Certiﬁed Public Accountants, 1977, p. 4)

The American Institute of Accountants (AIA) and Carey, as secretary of the Committee of Professional Ethics and administrator of the Institute, worked hard to build a code of conduct and through it, to build accounting into a profession. 113

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A history of the evolution of the Code of Professional Conduct follows to provide insight into the frustration and controversy involved in building a set of standards to which all accountants must consent. This will necessarily include John Carey’s role in the development of these rules. After that, an analysis of his many works concerning ethics will follow.

HISTORY OF ETHICS Section 2 of the American Association of Public Accountant’s (AAPAs) Certificate of Incorporation, in 1887, included as a portion of its purposes ‘‘compelling the observance of strict rules of conduct as a condition of membership’’ (Webster, 1978, p. 141). As there were no written rules or code of conduct in the 1880s and 1890s, by which to judge its members, little was done to enforce or deﬁne the conduct of its members. During this period of slow membership growth, the Board of Trustees was loath to place limitations on the activities of the Fellows and Associates, the two classes of membership in the AAPA. However, there are several instances mentioned in Webster’s recap of the ﬁrst 20 years of the organization concerning ethical situations. They include the refusal of the application of membership, voluntary separation of a member, and several false claims of membership in the AAPA (Webster, 1978). When the AAPA began, many of the members held several vocations, including accounting or bookkeeping type work. It may have been thought difﬁcult to establish rules of conduct that only apply when one was doing accounting work on a part-time basis. As the AAPA became established, discussions arose as to the need for a minimum set of standards for the membership to follow. At the 1906 banquet of the annual meeting of the AAPA, John A. Wright gave a reply to the ritual toast to the legal profession, in part comparing the legal profession to the accounting profession, calling it their ‘‘sister profession’’ (Davies et al., 1906). He also had this suggestion, We have an offense known as barratry, for which a member of the legal profession may be thrown over the bar. Barratry, as you all know, is simply the fostering of litigation for personal proﬁt, and you, by some system of laws or code of rules, ought, I think, to pass a law, a by-law, to the effect that anybody who attempts to foster the employment of public accountancy, who advertises, in other words, since you have no bar to throw him over, should be thrown out of the window (laughter and applause). (Davies et al., 1906, p. 86)

While Mr. Wright was making light of the problems of discipline within the organization, it is possible his suggestion was taken to heart. The next day,

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the board of trustees voted to establish three additional special committees: a committee on press and publicity, a committee on conciliation, and a committee on professional ethics. In 1906, there were only three provisions in the bylaws regarding discipline of members. Under Article VII of the Bylaws, a member could be expelled or suspended if he (1) violated any of the bylaws, (2) was convicted of a felony or misdemeanor, or (3) ‘‘is held by the board of trustees on the complaint of any person aggrieved y to have been guilty of any act or default discreditable to a public accountant’’ (Carey, 1969b, p. 85). During 1907, the ﬁrst set of rules regarding a professional code of ethics was adopted (American Association of Public Accountants, 1907). It stirred up a rather heated discussion among the members at the Board of Trustees meeting, held October 15, 1907, in St. Paul, Minnesota. The editor of the 1907 Year-book included a note to the minutes which read, ‘‘In view of the discussion which took place respecting the Report of the Committee on ByLaws and in view of the important changes effected (sic) therein the entire proceedings respecting that matter are here reproduced from the stenographic report, for the information of members’’ (American Association of Public Accountants, 1907, p. 45). While most of the discussion pertained to the legality of changing the bylaws without proper advance notiﬁcation of the members, there was also debate over the content of the changes. Also in 1907, at that historical annual meeting, J. E. Sterrett gave an address, which he acknowledged was ‘‘probably the ﬁrst time that the attention of a representative body of American accountants has been directed to the consideration of professional ethics’’ (American Association of Public Accountants, 1907, p. 108). He discussed ethics in an abstract sense, stating that it was not just admitting that ‘‘stealing is wrong’’ but that ‘‘all men be good’’ (American Association of Public Accountants, 1907, p. 108). Sterrett argued that a set of ethical standards might actually be harmful to the profession by setting a minimum that accountants feel to be enough. Despite the youth of the accounting profession, compared to the legal and medical professions, in regards to codiﬁcation of ethics they are very close. For example, the American Bar Association (ABA) appointed a committee to prepare a code of ethics in August of 1907, and the ‘‘Principles of Medical Ethics’’ was adopted May 7, 1903 by the American Medical Association (American Association of Public Accountants, 1907). Sterrett also discussed duties to the client, to the public, and to ‘‘his professional brethren’’ (American Association of Public Accountants, 1907). John Alexander Cooper opened the discussion after Sterrett’s speech by taking a hard line about setting limits on the actions of the accountant.

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He stated that there were no conditions under which contingent fees would be justiﬁed, and that accountants should not consider their peers as competition. Cooper declared that one of his objectives in his discussion was to ‘‘lay down a few classiﬁed and tersely expressed rules that may form a proper basis for the incorporation of some such precepts into our YearBook’’ (American Association of Public Accountants, 1907, p. 134). He listed 33 rules grouped under the headings of Service, Clients, Inter-Professional, Publicity, and Corporations. While the profession was not ready to act on all of his rules, many of his suggestions were adopted in some form much later, such as his prohibition of advertising and serving on a client’s board of directors. Franklin Allen and Robert Montgomery also discussed Sterrett’s speech, disagreeing in some instances, but in milder terms than Cooper. It was a difﬁcult transition period in the formation of the profession. There were originally six rules presented to the Board of Trustees for consideration. Two rules prohibiting commissions and contingency fees were dropped due to differences of opinions over their meanings. The last rule that was added concerned the unauthorized use of any initials after an accountant’s name. See Fig. 9 for the addition to the bylaws as accepted. In addition, a trial board was created, as Article VIII of the Bylaws, to hear complaints and charges against members of the Association. The trial board, which consisted of the Board of Trustees, was used for cases that could not be resolved by correspondence between the member and the Special Committee on Professional Ethics (American Association of Public Accountants, 1907). In 1910, the ethics section of the bylaws was rewritten, as shown in Fig. 10. Article VII, originally had two subheadings, Professional Ethics and Rules. In the 1910 version, it was divided into two separate Articles, titled Rules of Conduct, and Suspension and Expulsion. The order was reversed from the previous, also, which makes more sense. The rules come ﬁrst and the punishments for violations later. Article VIII, concerning the trial board, remained intact from its 1907 version. The ﬁrst occurrence of the verbiage ‘‘acts discreditable to the profession’’ appear in the Suspension and Expulsion article (American Association of Public Accountants, 1910). When the Association was reorganized in 1916 to become the Institute of Accountants in the United States of America, the articles of the bylaws pertaining to the Rules of Conduct were omitted. While they may have intended to immediately form a separate code of ethics, this was not done until 1917. The bylaws as reported in the 1916 year-book state the Committee on Professional Ethics shall have the power to rule on a ‘‘violation of

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ARTICLE VII. PROFESSIONAL ETHICS. The following are declared to be the fundamental rules of the Association: for (a) the infraction of any part thereof, or if (b) convicted of felony or misdemeanor, or if (c) finally declared by a court of competent jurisdiction to have committed any fraud, or is (d) held by the Board of Trustees on the written complaint of any person aggrieved, whether a member or not, to have been guilty of any act or default discreditable to the profession, or is (e) declared by any competent court or commission to be insane or otherwise incompetent, or (f) fails to pay any subscription, dues, assessment, or other sum owed by him to the Association under its by-laws within three months after such debt has become due: A member renders himself liable to be expelled from the Association or to be suspended for a term not exceeding two years by resolution of the Board of Trustees sitting as a Trial Board. RULES. 1. No member shall allow any person not being either a member of the Association or in partnership with him as a public accountant, or in his employ on a salary, to practice in his name as a public accountant. 2. No member shall directly or indirectly allow or agree to allow a commission, brokerage, or other participation by the laity in the fees or profits of his (the member’s) professional work. 3. No member shall engage in any business or occupation conjointly with that of a public accountant, which in the opinion of the Board of Trustees is incompatible or inconsistent therewith. 4. No member shall certify to exhibits, statements, schedules, or other form of accountancy work, the preparation of which was not carried on entirely under the supervision of himself, a member of his firm, one of his staff, a member of this Association or of similar Association of good standing in foreign countries. 5. No member shall in his business advertisements use any initials as an affix to his name that is not either authorized by statutory enactment of this country or by the well-known associations established for a similar purpose in the British Empire, nor shall he affiliate or substantially recognize any society that is designated or in any way sets itself out to be a so-called Certified Public Accountant Society, without the State in which such Society is organized having the requisite statutory enactment in full force and effect. ARTICLE VIII. TRIAL BOARD. SECTION 1. For the purpose of adjudication upon complaints or charges against members of the Association as provided in Article VII the Board of Trustees shall convene as a Trial Board. SECTION 2. Due notice shall be mailed to the parties to the cause by the Secretary at least thirty days prior to the proposed session. SECTION 3. A three-fourths vote of those Trustees present shall be necessary to a decision. SECTION 4. The Board of Trustees (sitting as a Trial Board) may in the exercise of their discretion recall, rescind, or modify any resolution for expulsion or suspension at a meeting similarly called and convened by a like majority vote as required in Section 3 of this Article, provided that not less than three-fourths of the members constituting such Board shall have been of the Board that issued the decree then being reconsidered. SECTION 5. Written notice of any resolution for expulsion or suspension shall forthwith be sent to the member affected thereby and to the Secretary or Secretaries of the State or District Society or Societies with which such member is affiliated or in which State he has his domicile or place of business.

Fig. 9.

Excerpt from the 1907 Bylaws Concerning Professional Ethics. (Taken from the American Association Year-Book, pp. 238–239.)

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ARTICLE VI. RULES OF CONDUCT. 1. No member shall allow any person to practice in his name as a public accountant who is not a member of this association, in partnership with him or in his employ on a salary. 2. No member shall directly or indirectly allow or agree to allow a commission, brokerage, or other participation by the laity in the fees or profits of his professional work. 3. No member shall engage in any business or occupation conjointly with that of a public accountant, which in the opinion of the Board of Trustees is incompatible or inconsistent therewith. 4. No member shall certify to exhibits, statements, schedules, or other form of accountancy work which have not been verified entirely under the supervision of himself, a member of his firm, one of his staff, a member of this association or of a similar association of good standing in foreign countries. 5. No member shall in his business advertisements use any initials as an affix to his name that are not either authorized by statutory enactment of this country or by the well-known associations established for a similar purpose in the British Empire, nor shall he affiliate with or substantially recognize any society that is designated or in any way sets itself out to be a so-called certified public accountant society, unless the state in which such society is organized has the requisite statutory enactment in full force and effect. 6. No member shall take part in any effort to secure the enactment, alteration or amendment of any state or federal law affecting the profession without giving immediate notice thereof to the secretary of this association, who in turn shall at once advise the secretary of the state or district society concerned. ARTICLE VII. SUSPENSION AND EXPULSION. SECTION 1. A state or district society renders itself liable to be expelled from the association or to be suspended for a term not exceeding two years by resolution of the Board of Trustees sitting as a trial board, if, after election to membership, it (a) lowers its standards of admission to membership; or (b) fails to maintain its organization; (c) fails to pay its dues; (d) refuses or neglects to give effect to any decision of this association, of the Board of Trustees or of the Committee on Arbitration. SECTION 2. A member renders himself liable to be expelled from the association or to be suspended for a term not exceeding two years by resolution of the Board of Trustees sitting as a trial board, if (a) he infringes any part of the rules of conduct of the association, (b) is convicted of felony or misdemeanor, (c) is finally declared by a court of competent jurisdiction to have committed any fraud, (d ) is held by the Board of Trustees on the written complaint of any person aggrieved, whether a member or not, to have been guilty of any act or default discreditable to the profession, (e) is declared by any competent court or commission to be insane or otherwise incompetent , or if (f ) he fails to pay any subscription, dues, assessment or other sum owed by him to the association within three months after such debt has become due.

Fig. 10.

Excerpt from the 1910 Bylaws Concerning Professional Ethics. (Taken from the 1910 AAPA Year-Book, pp. 269–270.)

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any bylaw or rule of conduct of the Institute or conduct discreditable to a public accountant’’ (American Association of Public Accountants, 1916, p. 253). In 1917, the AIA ﬁrst established a code of professional ethics (American Institute of Accountants, 1982). The Report of the President, W. Sanders Davies states, ‘‘y there was special discussion of the report of the committee on professional ethics; and a standard of ethics was accepted and laid down, which has been printed as Rules of Professional Conduct and sent to all members’’ (Davies, 1917, p. 129). While admitting the necessity of a set of rules, he said members should have a ‘‘pride in the profession’’ that consisted of ethical standards much higher than those adopted (Davies, 1917, p. 129). Carey (1969b) lists the subject matter of the eight rules as follows: Use of the title ‘‘Members of the American Institute of Accountants’’ Certiﬁcation of statements containing essential misstatements of fact or omissions Practice by others in the name of a member Commissions or brokerages to or from the laity Occupations incompatible with the practice of public accounting Certiﬁcation of statements not prepared under satisfactory supervision Notice to the Institute of participation in efforts to secure legislation Solicitation of clients of other members (p. 229–230)

With it came a procedure by which members charged with violations of the code could be tried and disciplined. Originally offenders were tried by the Council of the Institute sitting as a Trial Board (American Institute of Accountants, 1982). The ﬁrst exercise of the power occurred against two partners who knowingly certiﬁed to a balance sheet where certain contingent liabilities were suppressed and assets were inﬂated (Carey, 1969b). In 1919, the Rules of Professional Conduct were printed in the Year-book after the Constitution and Bylaws (American Institute of Accountants, 1919). The number of rules had increased from the original eight to eleven. See Fig. 11. The last three rules involved circularizing, solicitation of employees, and contingent fees. The ninth rule concerned the prohibition of advertising, specifically circularizing, which is advertising through the mail. Advertising, through circulars, publications, directories, and even business cards, had been the subject of much dispute since the inception of the organization. A. P. Richardson

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RULES OF PROFESSIONAL CONDUCT Including amendment and additions prepared by the committee on professional ethics and approved by the council prior to September 30, 1919. (1) A firm or partnership, all the individual members of which are members of the institute (or in part members and in part associates, provided all the members of the firm are either members or associates) may describe itself as “Members of the American Institute of Accountants,” but a firm or partnership, all the individual members of which are not members of the institute (or in part members and in part associates), or an individual practising (sic) under a style denoting a partnership when in fact there be no partner or partners, or a corporation, or an individual or individuals practising (sic) under a style denoting a corporate organization shall not use the designation “Members (or Associates) of the American Institute of Accountants.” (2) The preparation and certification of exhibits, statements, schedules or other forms of accountancy work, containing an essential mis-statement of fact or omission therefrom of such a fact as would amount to an essential mis-statement, shall be ipso facto, cause for expulsion or for such other discipline as the council may impose upon proper presentation of proof that such misstatement was either wilful (sic) or was the result of such gross negligence as to be inexcusable. (3) No member shall allow any person to practise (sic) in his name as a public accountant who is not a member of the institute or in partnership with him or in his employ on a salary. (4) No member shall directly or indirectly allow or agree to allow a commission, brokerage or other participation by the laity in the fees or profits of his professional work; nor shall he accept directly or indirectly from the laity any commission, brokerage or other participation for professional or commercial business turned over to others as an incident of his services to clients. (5) No member shall engage in any business or occupation conjointly with that of a public accountant, which in the opinion of the executive committee or of the council is incompatible or inconsistent therewith. (6) No member shall certify to any accounts, exhibits, statements, schedules or other forms of accountancy work which have not been verified entirely under the supervision of himself , a member of his firm, one of his staff, a member of this institute or a member of a similar association of good standing in foreign countries which has been approved by the council. (7) No member shall take part in any effort to secure the enactment or amendment of any state or federal law or of any regulation of any government or civic body, affecting the practice of the profession, without giving immediate notice therof to the secretary of the institute, who in turn shall at once advise the executive committee or the council. (8) No member shall directly or indirectly solicit the clients or encroach upon the business of another member, but it is the right of any member to give proper service and advice to those asking such service or advice. (9) For a period not exceeding two years after notice by the committee on ethical publicity no member or associate shall be permitted to distribute circulars or other instruments of publicity without the consent and approval of said committee. (10) No member shall directly or indirectly offer employment to an employe (sic) of a fellow member without first informing said fellow member of his intent. This rule shall not be construed so as to inhibit negotiations with any one who of his own initiative or in response to public advertisement shall apply to a member for employment. (11) No member shall render professional service, the anticipated fee for which shall be contingent upon his findings and results thereof. This rule shall be construed as inhibiting only services in which the accountant’s findings or expert opinion might be influenced by considerations of personal financial interest.

Fig. 11.

Rules of Professional Conduct as listed in 1919 Yearbook of the AIA, page 139.

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(1918a) considered circularizing extremely dangerous, stating, ‘‘of all the instruments potentially evil which have been devised in the name of the advertisement, nothing is so notable as the circular letter’’ (p. 291). In 1921, the Institute added another rule concerning advertising. ‘‘No member or associate of the Institute shall advertise his or her professional attainments or service through the mails, in the public prints or by other written word; but any member or associate may cause to be published in the public prints or otherwise what is technically known as a card’’ (Rules of Professional Conduct, 1922, p. 195). The rule further deﬁned a card as including the name, title, and address of the advertiser without further qualifying words. It did, however, allow an announcement of a change of address or personnel. By 1938, only two additional rules had been added. One concerned members associating with a school and the other with a corporation. In 1939, the Committee on Professional Ethics, with John Carey as secretary, revised the Rules of Professional Conduct. They were then approved by the Council and the members by mail ballot. The wording was generally changed from ‘‘no member shall y’’ to a more positive form of rule. Several rules were added, including forbidding projections and competitive bidding. The rules concerning ﬁnancial statement opinions were expanded by adding: (1) the failure to disclose a material fact known to him, (2) failure to report material misstatements known to him, (3) gross negligence, (4) failure to acquire sufﬁcient information to warrant expression of an opinion, and (5) material departure from generally accepted accounting principles (‘‘Council Regular Meeting, Monday, October 14, 1940, Evening Session,’’ 1940). The Code was substantially revised again in the mid-1950s, giving consideration to other areas of an accounting practice than the audit function. These included management advisory services and tax practice (Lowe, 1987). By 1962, the Code of Conduct was organized into ﬁve separate areas: (1) Institute members’ relationships with clients and with the public, (2) technical standards, (3) promotional practices, (4) operational practices, and (5) relationships between fellow Institute members (Lowe, 1987). The Code of Professional Ethics was ﬁnally reorganized into a hierarchy of ethical standards (American Institute of Certiﬁed Public Accountants, 1977). The ﬁrst category, Concepts of Professional Ethics, is a set of principles to which all certiﬁed public accountants (CPAs) should aspire. They are a set of morals, and, because of their nature, unenforceable. The second category, Rules of Conduct, consists of a set of standards that were

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approved by the membership, and enforceable by the Institute, just as the bylaws of the Institute are. The third category, Interpretations of Rules of Conduct, consists of guidelines as to the scope and application of the rules. These interpretations have been adopted and codiﬁed, after exposure to State Societies and State Boards. They are more speciﬁc than the rules of conduct, but are just as enforceable. The fourth category, Ethics Rulings, consists of those rulings made by the Professional Ethics Division’s Executive Committee (American Institute of Certiﬁed Public Accountants, 1977). These consist of the application of the Rules of Conduct to a speciﬁc set of circumstances (Lowe, 1987). This major revision of the Rules of Conduct was the last one in which Carey was involved. Carey retired from the Institute in 1969, but continued to have an impact on ethical issues for many years. Carey wrote his last ethics article in 1985 in The Ohio CPA Journal.

ANALYSIS OF JOHN CAREY’S WRITINGS ON ETHICS Overview of Works John Carey authored three books on ethics. The ﬁrst book, Professional Ethics of Public Accounting, was published in 1946, the same year in which he initially authored ethics articles. Carey’s second book, Professional Ethics of Certified Public Accounting, came out ten years later. This was not just a revised edition, but completely reorganized and rewritten. The third book was published ten years after the second, in 1966, and was co-authored with William O. Doherty. It was titled Ethical Standards of the Accounting Profession. Carey also contributed three chapters on professional ethics in books that were edited by others. Carey’s work entitled ‘‘Practical Applications of Professional Ethics,’’ was included in the 1952 edition of the CPA Handbook. This handbook was originally designed to be published in a series of separate chapters and then assembled into a binder for easy removal when needed (Kane, 1952). Because the demand exceeded the expectations of the editors, it was reprinted in two bound volumes in 1956 with minor revisions to the chapter on tax practice (Kane, 1956). This same chapter was also published, along with two other chapters from the CPA Handbook, in a separate book titled The CPA and His Profession, in 1954. The ﬁrst section of the book was a treatise by Maurice H. Stans

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(1954) entitled, ‘‘The Profession of Accounting,’’ and the second was ‘‘Professional Organizations and Literature,’’ by Arthur B. Foye (1954). The book was intended to promote accounting as a profession. In addition, Carey wrote a chapter, ‘‘Professional Ethics in Accounting,’’ in The Handbook of Modern Accounting Theory. Carey’s chapter is one of 21 chapters in The Handbook of Modern Accounting Theory edited by Morton Backer, of West Virginia University. In the preface of the book, Backer states that the purpose of this book is to ‘‘familiarize its readers with the major areas of controversy in accounting and to evaluate the relative merits of related proposals that have received or deserve serious consideration’’ (Backer, 1955, p. v). This book was most likely used as a textbook in accounting theory courses. Backer says that ‘‘the major justiﬁcation for this book arises out of the shifting emphasis which appears to be taking place in the teaching of accounting’’ (p. v). Many of the chapters discussed relevant and significant developments in the accounting profession, such as corporate stock equities, cost, and valuation concepts, and trends in governmental accounting. Carey had a total of 30 ethics submissions in the Accountants’ Index (American Institute of Accountants & American Institute of Certiﬁed Public Accountants, (1923 and subsequent years through 2004)) attributed to him, in 17 different journals, as shown in Table 10. Of these 30 submissions, two were letters to the editor concerning an earlier article written by Carey and Doherty. One of the letters was a protest from an author whose work Carey and Doherty had criticized (Schulte, 1966). The other was a rebuttal by Carey and Doherty, defending their comments (Carey & Doherty, 1966c). Of the remaining articles, three were articles not written by Carey, but concerning him, and related to ethical situations. The ﬁrst was an article in the Journal of Taxation discussing Carey’s latest book, and its chapter related to tax practice, and included major excerpts from the tax chapter (Professional Responsibility, 1957). The other two articles were news reports in The Journal of Accountancy, involving letters written by Carey to members of Congress and agencies of the government concerning an auditing scandal (Freeman Quotes, AICPA Executive in Senate Testimony on Estes (News Report), 1962; Texas State Board Suspends Certificate of CPA in Estes Case: AICPA Position Stated (News report), 1962). Carey’s letters were extensively quoted in both articles. Several articles authored by Carey were considered so relevant to the audience of other journals that they were reprinted. For example, Carey’s (1953c) article titled ‘‘Ethics, ‘Unauthorized Practice,’ and Federal Income Taxation – An Accountant’s Viewpoint,’’ originally written for the Rocky

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Table 10.

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Number of Ethics Articles and the Name of Journals in which Published.

Number of Articles 1 1 1 1 1 2 1 1 1 1 3 1 3 1 9 1 1 1 1

Name of Journal Banking Certiﬁed Accountants Journal CPA in Tax Practice Credit and Financial Management Handbook of Modern Accounting Theory Journal of Taxation Proceedings of 8th Ann Institute on Accounting Public Relations Journal Rocky Mountain Law Review The Accounting Review The Certiﬁed Public Accountant The Controller The CPA The CPA and His Profession The Journal of Accountancy The New York Certiﬁed Public Accountant The Ohio CPA Journal The Pakistan Accountant The Virginia Accountant

Mountain Law Review in June 1953, was then reprinted in The New York Certified Public Accountant in February of 1954 (Carey, 1954a), and CPA in Tax Practice (Carey, 1954b). Two other articles were republished in a second journal. One of his early articles, ‘‘Defalcation in Relation to Audit, Internal Control, and Fidelity Bonds’’ (Carey, 1947c), originally published in The Controller, then reprinted in The Journal of Accountancy, was published with a collection of articles seven years later in Accountants’ Legal Responsibility. The other reprinted article was one of his most recent, ‘‘The Concept of Independence – Review and Restatement’’ (Carey & Doherty, 1966a). The article was based on the third chapter of Ethical Standards of the Accounting Profession on independence, and appeared ﬁrst in The Journal of Accountancy and then in The Pakistan Accountant. Background To analyze the significance of John L. Carey’s writings on ethics to the profession, it is important to understand where Carey ﬁrst learned about accounting ethics. As A. P. Richardson, secretary to the AAPA and then

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Table 11.

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Table of Contents of The Ethics of a Profession, by A. P. Richardson.

Chapter Going into Practice Ofﬁces Partners Branch Ofﬁces Incorporation The Accountant’s Place in the Community Soliciting Advertisement The First Client Fees Contingent Fees Commissions Bidding Secrecy Prophecy Name Clients Staff Language Conclusion Appendix

Page number 1 3 14 20 27 33 43 59 78 86 92 106 112 118 112 127 133 139 145 148 155

the AIA, served as a role model for Carey, so Richardson’s (1931) book, The Ethics of a Profession, served as a template for John Carey’s ﬁrst book on ethics. Carey’s edition, Professional Ethics of Public Accounting, was written 15 years after A. P. Richardson’s book. Carey dedicated the book to Richardson. Carey’s style of writing was similar to Richardson’s, possibly due to closely working together for a number of years as the AIA staff. Richardson’s book was organized to prepare a young accountant for the events in his accounting career that would require ethical decisions. The table of contents gives an idea of the subjects and the order that they were discussed. See Table 11. As shown by the table of contents, Richardson discussed subjects in the chronological order of the beginning accountant just entering the public accounting ﬁeld. Richardson’s book was awarded the Fifth Annual Beta Alpha Psi Literature (Book) Award. Out of a group of 12 nominees, the Ethics work beat out such notables as Eric L. Kohler’s textbook on auditing and William A. Paton’s Accountants’ Handbook (Sheldahl, 1982).

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Early Works Carey’s ﬁrst book, Professional Ethics of Public Accounting, contained much of the same information as Richardson’s text. However, Carey’s was organized into three sections, after the introduction, ‘‘The Interest of the Public’’, ‘‘The Interest of the Client,’’ and ‘‘The Interest of the Profession’’. Carey gave an explanation of why rules are needed for the accounting profession, and how those rules have developed and are enforced. He stated that a code of conduct might be more necessary to the accounting profession than others because accountants serve both their clients and the public, while doctors and lawyers provide services directly to their client. In the nine chapters concerning the public, Carey discussed the concepts of independence, contingent fees, and the accountant’s relationship with the client, commissions, and forecasts. Carey quoted the code of conduct, when necessary, gave background history and conﬂicting opinions to show how the rules have evolved. The chapters involving the interests of the client discussed conﬁdentiality, professional dignity, membership in an accountant’s practice, and the use of other auditors. He also discussed commissions and fee splitting in this section as well as the section involving the public. One additional topic that was mentioned under the interest of the client is the prohibition of the corporate form of accounting ﬁrm. The third section concerns protecting the status of the profession. This includes the controversial topics of advertising, solicitation of clients, competitive bidding, and the hiring away of other accounting ﬁrms’ employees. Carey gave examples of permitted announcements and notices to clients, including company newsletters and tax information. Carey included information from the AIA annual meeting minutes and also includes interpretations published by the Committee on Professional Ethics. The last chapter before the conclusion of his book describes miscellaneous questions such as the use of ‘‘we’’ by sole practitioners and rules that are no longer applicable. The book includes an index but does not have the complete listing of the rules of professional conduct. The year following the publication of his ﬁrst book, Carey wrote several articles on ethical topics, including competitive bidding and advertising. ‘‘Competitive Bidding,’’ appearing in The Certified Public Accountant in its February, 1947, issue, discussed the government’s approach to bidding out all contracts to the lowest bidder. Carey argued that competitive bidding is as inappropriate in governmental contracts as it is for businesses.

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The reasons, as stated by the executive committee of the AIA and quoted in Carey’s book are as follows: The reason for opposition to competitive bidding is a belief that competitive bidding for audit engagements is not in the best interest either of the public or of the accountancy profession: it is not inspired by a desire to restrict free and fair competition, nor an effort to monopolize accounting practice y y A comparison of fees or rates quoted by two or more accountants is worthless since there is no means of measuring the relative value of the services rendered. With price competition there is a strong temptation to the less scrupulous accountant to submit a lower bid than is justiﬁed by the requirements of adequate performance. When the work is awarded to him, he then ﬁnds himself in a position where, if he is to make a proﬁt, or avoid losing money, he must curtail the scope of the examination, or employ assistants at lower than customary salaries y y Experience has shown beyond any doubt, however, that selection of accountants on a competitive price basis leads to poor quality of work. Often audits undertaken on the basis of competitive bids are not worth even the relatively small amount paid for them. Competitive bidding is incompatible with service of a proper professional standard. (Carey, 1947a, pp. 103–105)

While a resolution by the Council of the AIAs critical of competitive bidding had appeared as part of the Rules of Professional Conduct since October 1934, the language had gotten stronger over the years. Adopted October 15, 1934, the Resolution read: Resolved, That the council of the American Institute of Accountants regards competitive bidding for professional accounting engagements as contrary to the best interest of members’ clients and of the public generally and urges members of the Institute to endeavor by all means at their disposal to eliminate the practice of competitive bidding. (Rules of Professional Conduct, 1934, p. 546)

On April 11, 1938, an addition was included, but still not as a rule of conduct: Resolved, That competitive bidding by a member or associate on work to be done in any state, territory or the District of Columbia where the governing body of certiﬁed public accountants has adopted a rule prohibiting competitive bidding may be considered an act discreditable to the profession. (Rules of Professional Conduct, 1939, p. 468)

By January 1941, the above resolution had become Rule 14 of the Code of Professional Ethics (Rules of Professional Conduct, 1941). As written, if competitive bidding was not specifically prohibited by the State Society, then, while it was discouraged by the Institute, bidding continued in certain cases, namely governmental audits. The Connecticut Society of Certiﬁed Public Accountants had prohibited competitive bidding years before Rule 14 was adopted. Yet, the city of Hartford ‘‘requested bids from all practicing

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certiﬁed public accountants in the City for an audit of the city’s accounts’’ (Carey, 1947a, p. 5). A meeting between State Society members and the Mayor of Hartford was held, and the need for the prohibition was discussed. Carey held the Connecticut case as an example reinforcing the need for the ban on bidding, and discussed an editorial in the Hartford Times to supplement his arguments. The editorial described the Connecticut State Society of CPA’s stand on competitive bidding for the city audit and their reasoning for encouraging the city of Hartford to discontinue that practice. Carey wrote several other articles during 1947. In March, The Controller printed ‘‘Defalcation in Relation to Audit, Internal Control and Fidelity Bonds,’’ discussing employee theft and three methods of preventing losses. It was reprinted in The Journal of Accountancy the following month. Carey described how employees came to steal from their employers, usually starting out by ‘‘borrowing company money to meet ﬁnancial emergencies’’ (Carey, 1947d, p. 353). He then puts part of the blame on the employer for ‘‘permitting strong temptation to dishonesty to confront their employees’’ (p. 353). The ﬁrst defense against employee theft is an adequate system of internal control, such as a division of duties. The author chides companies for not following suggestions of the auditor for improving the company’s internal control system. He encourages busy executives to implement such directives, advising that it is ‘‘the cheapest and most effective way of minimizing losses’’ (Carey, 1947d, p. 354). The second method is the annual audit by independent public accountants. However, he cautions that audits are not designed to prevent or discover employee theft. Most defalcations that are material with respect to the ﬁnancial statements will be discovered, unless collusion of several principal executives is involved. Carey admits that audits specifically designed to ﬁnd defalcations would be prohibitively expensive, unless some suspicions are already present, and may not be cost beneﬁcial. The last suggestion made in this article is for the company to take out ﬁdelity bonds on ‘‘all employees who have positions of any importance from the viewpoint of fraud prevention’’ (Carey, 1947d, p. 354). Just having ﬁdelity bonds on their employees may act as a deterrent. Carey also discusses the role of the auditor in relation to ﬁdelity bonds. Some companies may believe that they are paying for the same protection twice, through the bonds and the audit, but the article helps the reader discern the difference between the two types of preventative measures. Surety companies also aid the client in understanding the position of the auditor. Some surety companies have signed a letter to the AIA agreeing not to assert claims against

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the auditor, unless gross negligence or criminal acts are involved. Carey encourages other surety companies to participate in this agreement. In ‘‘The Realities of Professional Ethics’’ Carey discussed the lack of inclusion of professional ethics in the classroom as part of the curriculum of accounting. ‘‘There is a disposition to relegate ethics, as a subject for active study and discussion, to that pigeonhole reserved for the abstractions which it is diverting to talk about in leisure time, but which are of no immediate concern in the daily business of life’’ (Carey, 1947g, p. 119). He went on to discuss the need for recognition of the code of professional ethics and its enforcement to be an essential part of good public relations. Even though the public has never read the Hippocratic Oath or the canons of ethics of the Bar Association, it was common knowledge, even in the 1940s, that the medical and legal professions had written codes of ethics. But Carey stated that it is not well known that CPAs have a code of ethics that is just as rigorous as that of doctors and lawyers. The opinion of a certiﬁed public accountant on a ﬁnancial statement is of value only so long as those who read it believe that it is the opinion of an independent, disinterested, impartial expert who is uninﬂuenced by anything but a desire to tell the truth, the whole truth, and nothing but the truth. If a general doubt should arise as to the independence and impartiality of the accountant, the opinion would be of little value to those who read it. Thereupon, it would become also of little value to the client who retained the accountant to give it. (Carey, 1947g, p. 120)

Carey gives the example of the submission of ﬁnancial statements to labor unions in wage negotiations. What good are the audited ﬁnancial statements if the labor unions do not trust them? Carey’s remedy to the lack of public understanding of accounting’s code of ethics is twofold. ‘‘Practitioners should, I think, take every natural opportunity to inform their clients of the rules of conduct to which they have subscribed’’ (Carey, 1947g, p. 120). He goes on to say, But the real remedy lies in a deeper understanding among accountants themselves of the essential meaning of the rules, their background, and the purposes for which they were adopted yThis kind of public relations, the example of thousands of individuals in their daily lives, far surpasses in effectiveness all the speeches that could ever be made. (p. 121)

Carey says that the way to accomplish this objective begins in the classroom. No young man should enter public accounting practice without having a clear idea of just how far he is willing to go in satisfying each client, to just what extent he may subordinate his personal preference, just how much he can compromise, and exactly at what point he is determined to refuse to go further with a polite statement of the reasons. (p. 121)

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Carey concludes by saying that the record of the accounting profession in the United States has been excellent. Ignorance or error generally account for many of the infractions by accountants. Many of the complaints heard by the trial board of the AIA could have been avoided with proper training in the code of ethics. But, this is where the teachers of accounting can pick up the slack. 1950s, Revising the Code Carey wrote two book chapters on professional ethics, which ultimately ended up being included in three edited books. Both chapters contained the Rules of Professional Conduct as revised on December 19, 1950. These rules had evolved since the beginning of the organized accounting profession. They had come into being one at a time, over a period of nearly 40 years, usually as a consequence of some incident, involving the possibility of outside criticism, which seemed to require the establishment of a general rule to preclude future occurrences of the same kind. (Carey, 1955, pp. 121–122)

As a consequence of this evolution, Carey stated that ‘‘while the Rules of Professional Conduct of the AIA are ofﬁcially stated in chronological order of adoption, they may be grouped according to subject matter quite conveniently around the following three objectives’’ (Carey, 1952, p. 3). Those objectives are: 1. Professional Attitude Firm name, style, and descriptions must be appropriate. Practice as a corporation is forbidden. Occupations incompatible with public accounting are prohibited. Members in practice but also engaged in other related occupations must also observe rules of conduct in such occupations. Advertising is prohibited. Solicitation is prohibited. Institute members must observe state rules on competitive bidding. Offers of employment to employees of other accountants are prohibited. 2. Conﬁdence of Clients Conﬁdential relationship with client must not be violated. Splitting fees or paying commissions to laity is prohibited.

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131 Members may not permit another to use his name except his partners and employees. Member may not sign work prepared by others than his own associates or other accredited accountants. In certifying statements members must conform with generally accepted accounting and auditing standards.

3. Conﬁdence of Third Parties In certifying statements, accountants must conform with generally accepted accounting and auditing standards. Contingent fees in conjunction with audit work are prohibited. Members must not vouch for the accuracy of forecasts of earnings. Member may not express opinion on ﬁnancial statements of an enterprise ﬁnanced by public distribution of securities if he, or one of his immediate family, has a substantial ﬁnancial interest in the enterprise; if the enterprise is not publicly ﬁnanced but the statements are used as basis of credit, he may not express an opinion unless in his report he discloses any substantial ﬁnancial interest which he, or his family, may have in that enterprise. (Carey, 1952, p. 3)

The CPA Handbook was intended to be a reference work ‘‘designed for use by practitioners engaged in the public accounting profession, their staff and ofﬁce personnel and students who expect to engage in public accounting’’ (Carey, 1952, p. xii). After a general discussion about the rules and their organization, the remainder of Carey’s chapter provided a series of questions and answers grouped into the following categories within the above three objectives: 1. Professional Attitude Forms of organization and descriptions Announcements Advertising and solicitation 2. Conﬁdence of Clients Fees Relations with clients Relations with staff 3. Conﬁdence of Third Parties Independence Responsibilities of independent auditor Combining other occupations with public accounting General ethical requirements (Carey, 1952, p. xii)

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The table of contents listed these subheadings for easy reference by the practitioner. Included in the appendices were selected opinions of the Committee on Professional Ethics of the AIA, organized by the Rules of Professional Conduct, again for easy reference. An appendix includes excerpts from Bylaws of the Institute applicable to disciplinary actions and the Rules of Professional Conduct. Carey’s chapter in the Handbook of Modern Accounting Theory opens with a discussion of the word ‘ethics.’ He explains that the Rules of Professional Conduct of the AIA, ‘‘are intended to encourage a type of behavior by the individual member of the profession which will keep him out of trouble, redound to the credit of the group as a whole, strengthen public conﬁdence in the profession, and enlarge its opportunities for service’’ (Carey, 1955, p. 121). He stated in a footnote that because one of the purposes of the book was to stimulate reappraisal of basic concepts in accounting, the chapter concentrated on the controversial and unresolved issues in the ﬁeld of professional ethics. He also included a caveat that said the opinions were his and his alone. Carey then listed topics of the individual rules before discussing speciﬁc rules. The ﬁrst rule discussed was the concept of independence. Independence has always been assumed to be necessary for the auditor. The Institute and the SEC have differed as to the specifics for independence. For instance, the Institute has said that auditors could not have a significant ﬁnancial interest in the client. However, the SEC ruled that the auditor should have no ﬁnancial interest whatsoever in the client. Carey stated, ‘‘there gradually arose a distinction between being independent according to the lights of the profession itself and being considered independent under the SEC’s rules’’ (Carey, 1955, p. 126). Carey then mentioned other cases where the SEC had found accountants not independent. Carey implied that the SEC rules were too strict. He stated, Without knowing all the circumstances of each case, it would be futile and unjust to attempt to appraise the wisdom or fairness of the SEC’s judgments. The Commission has a statute to administer, it is the servant of the people, and it must do what it thinks is right. It is quite obvious, however, that its rulings on independence raise a number of interesting questions for the accounting profession. (Carey, 1955, p. 128)

In the interest of independence, Carey goes on to discuss speciﬁc rulings of the SEC, such as the auditor as bookkeeper, and the auditor as director. Following the speciﬁc rulings is a discussion of the income tax work and how that differs from auditing work. When doing tax work for a client, the

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CPA is ‘‘in a position resembling that of an advocate’’ (Carey, 1955, p. 138). Carey then discusses lawyers and the unauthorized practice of law in tax matters. He mentions the need for accountants and lawyers to work together and to recommend the other profession, when the work requires it. The next section discusses Rule Five of the Rules of Professional Conduct – acts discreditable to the profession. Further discussion involved the auditor’s report. In the 1950s, the auditor could express an opinion on the fairness of the ﬁnancial statements as a whole. He could also submit a ‘‘long form’’ report, discussing various items in the ﬁnancial statements that were considered negative to the expression of an opinion. Statement on Auditing Procedure 23 provides that if an auditor for any reason is unable to express an opinion on the ﬁnancial statements, he must specifically state so and explain why. The ﬁnancial statements must contain the notation ‘‘prepared from the books without audit’’ (Carey, 1955, p. 141). Carey states that even though this procedure is not part of the code of ethics, it is included in the auditing standards, and that as such the auditor is ethically bound to abide by the procedure. Carey discussed what he calls ‘‘the no man’s land between accounting and auditing’’ (Carey, 1955, p. 142) where the CPA acts as both accountant and auditor. He then considered other ethical problems such as competitive bidding, partnerships with an uncertiﬁed accountant, conﬁdentiality, and serving criminal clients. In his conclusion, he discussed the difﬁculty involved in developing precise rules that can be applied evenly and equitably in all varieties of circumstances which may arise. It is better, perhaps, to strive to make it clear to members of the profession what are the underlying objectives of the rules, and why it is in their own ultimate self interest to abide by them in the spirit as well as in the letter. (Carey, 1955, p. 145)

Carey’s second book, Professional Ethics of Certified Public Accountants, published in 1956, was begun as an updated edition of the previous book. However, even though there were still only 16 rules, they were much more detailed and speciﬁc in scope. There also existed many situations not covered by those rules that Carey deemed necessary to discuss. Carey felt there should be general principles which could be applied by the practitioner in whatever situation arose. He intended that the second book be not only a reference manual, but ‘‘a stimulus to creative thinking about questions which have not been fully answered’’ (Carey, 1956c, p. ix). Carey organized the second book somewhat differently from the ﬁrst. The ﬁrst section of the book covered the fundamental principles of professional

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ethics including conﬁdentiality, independence, integrity, and professional attitude. The second part concerned public accounting practice, including ﬁnancial statement opinions, tax practice, and management services. The third section discusses relationships with clients and fellow practitioners, and the different forms of practice, including corporations, sole proprietors, and buying another accountant’s practice. Carey included an index and the rules of professional conduct as revised December 19, 1950. The rules of professional conduct that were included as an appendix to Carey’s book were soon to become obsolete. At about the time the book was published, the Committee on Professional Ethics was expanded from ﬁve members to ﬁfteen due to the increased workload (Carey, 1956c). Soon afterwards, the committee revised and reorganized the code of professional ethics. Carey himself campaigned for the revision stating: ‘‘I believe the time has come to consider a complete re-statement of the rules of professional conduct applicable to the accounting profession y’’ (Carey, 1953a, p. 7). He then suggested a seven-point program: 1. To organize the subject matter more logically and to clarify the purposes of the present rules. 2. To include new statements of the CPA’s reasonable responsibilities in areas which the rules do not now cover, or where it may be necessary to clarify unavoidable limitations of responsibilities. 3. To express the ethical concept in terms the public as well as students and CPAs themselves can easily understand. 4. To devote regular meetings of state societies and chapters to the discussion of the background and implications of all rules of conduct. 5. To undertake an aggressive campaign of enforcement to ensure compliance with all the rules and standards at the local level. 6. To campaign for amendment of state laws, where necessary and at appropriate times, to make the rules of conduct applicable to all CPAs whether members of the professional societies or not. 7. To explore continuously all areas in which certiﬁed public accountants might reasonably and properly assume increased responsibilities or might improve their standards of performance to the advantage of the public. (Carey, 1953b, pp. 7–8)

Carey’s third book on ethics came, again, ten years after the previous edition. This book, titled Ethical Standards of the Accounting Profession, was co-authored with William O. Doherty, editor of The Journal of Accountancy. The Code at this time had been extensively revised and included ﬁve new rules. The rules were organized into ﬁve sections called articles: relations

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with clients and public, technical standards, promotional practices, operating practices, and relations with fellow members. In addition, the Institute’s ethics committee had issued interpretive opinions. They had been published in The CPA, and were incorporated as an appendix into the code of professional ethics. One of the most important of the new rules included in this book was the rule regarding independence. While independence had always been considered important, accountants disagreed as to the specifics when it came to independence. As early as 1915, criticisms were leveled at public accountants being employed as internal auditors (Carey, 1969b). Although much had been written in the accounting literature about the need for independence, it was not until the 1930s that something was done about it. At the 1931 annual meeting of the Institute, Frederick H. Hurdman, proposed a resolution: Whereas the relations between a client, in the form of a corporation, and the auditor for that corporation should be one of entire independence, and Whereas it does not appear to be practicable for the auditor consistently to hold a dual relationship, as an auditor and executive of the corporation, and Whereas the public interest and conﬁdence will best be preserved by a complete separation of these two functions, therefore be it Resolved, that the maintenance of a dual relationship, as director or ofﬁcer of a corporation, while acting as auditor of that corporation, is against the best interests of the public and the profession and tends to destroy that independence of action considered essential in the relationship between client and auditor. (‘‘Proceedings of the Annual Meeting Held at Philadelphia, Pennsylvania, September 15 and 16, 1931,’’ 1931, p. 174).

After much discussion, the membership voted to refer this resolution to the committee on professional ethics, to be decided the following year. In 1932, the revised resolution was voted down (‘‘Proceedings of the Annual Meeting Held at Kansas City, Missouri, October 18 and 19, 1932,’’ 1932). The Institute had the chance to set the policy concerning independence, but did not. The following year, the Securities Acts called for ﬁnancial statement audits of publicly traded corporations by independent public accountants. The Acts further deﬁned that an accountant would not be considered independent with respect to any person in whom he had any substantial interest, directly or indirectly, or with whom he was connected as an ofﬁcer, agent, employee, promoter, underwriter, trustee, partner, director, or person performing similar functions. It was not until 1962 that a speciﬁc rule concerning independence was added to the code of professional ethics of the American Institute of Certiﬁed Public Accountants (AICPA). Rule 1.01

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stated ‘‘neither a member or associate, nor a ﬁrm of which he is a partner, shall express an opinion on ﬁnancial statements of any enterprise unless he and his ﬁrm are in fact independent with respect to such enterprise y’’ (Carey & Doherty, 1966b, pp. 183–184). Several additional paragraphs further deﬁned instances where an accountant would not be independent.

THEMES Rules of Conduct Of the present [1947] sixteen rules of professional conduct of the Institute, ten are primarily intended to promote the conﬁdence of the public, including clients, and six are primarily intended to maintain orderly and cooperative relations among members of the Institute themselves. Seven of the rules, in whole or in part, support the concept of independence as it applies to the certiﬁed public accountant in his capacity as auditor. (Carey, 1947g, p. 122)

Advertising and Solicitation of Clients Advertising and the solicitation of clients have long been controversial issues for accountants, and are closely related to each other. Many times during the existence of the Institute, these issues have been considered to be one and the same. Advertising In the early years of the AAPA, there was a difference between the advertising by the AAPA, and advertising by the members. There was considerable advertising by the AAPA for the organization, especially in its infancy, as a means to recruit membership. On March 6, 1888, a Committee on Advertising was formed, consisting of M. C. Mirick, J. T. Anyon, and W. H. Veysey, to consider the extent and the means to promote the organization (Webster, 1978). In the Treasurer’s reports, ‘advertising’ was used to denote advertising in periodicals, and ‘printing’ was used in circulars and booklets. The Association also paid to have the members’ names published in the city directories, in 1887, along with their afﬁliation to the Association. But, since advertising in any form or fashion was discouraged, the Institute chose to print the member listing in the annual year-books instead. In 1947, the Council of the AIA prepared a series of ‘‘institutional advertisements’’ to be used by state societies to promote the accounting

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profession (Carey, 1947e). There had been confusion during the 1930s and 1940s over accounting standards, auditing procedures, and the consistency of the wording of audit reports, which had caused some negative publicity for the accounting profession. John Carey explained that, while many accountants would have mixed feelings about the promotional material – ‘‘an instinctive antipathy to paid advertising’’ – the Institute developed the following arguments to justify its adoption: CPAs are not widely recognized as members of a profession; accounting is not distinguished from bookkeeping. There is a need for public conﬁdence in the profession, to get legislative inﬂuence. The quickest medium to communicate to the public is through newspapers and magazines. Recent events promote the need to use the quickest medium. Tasteful and digniﬁed presentation is needed. There is nothing unethical in institutional advertising to inform the public. (Carey, 1947e, p. 3)

The texts of the ten messages were printed in full in Carey’s article. These messages were an attempt to eliminate misunderstanding and enhance the prestige of CPAs. The titles of each of the messages are given below, to show the variety of messages intended to enlighten the public: A Half Century of Service to American Business Why Professional Standards? Good Business Calls for Good Accounting Independence and Self-interest How Good Is an Opinion? All in the Day’s Work How Much Did You Make Last Year? Taxes: An Accounting Problem Government is Business, Too They Help Those Who Help the Public (Carey, 1947e, pp. 3–4)

While some of the state societies had already expressed an interest in using the prepared material, Carey feared that some of the state societies would hesitate, unsure of whether their members would approve. He encouraged those members to communicate their approval to their state societies.

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However, advertising by members in the course of their business was another matter entirely. In 1893, touting, the sending of letters and circulars by mail, had been brought to the attention of the Association. A motion was made and carried to limit this. ‘‘No member shall issue any circular soliciting business, but business cards may be inserted in current journals’’ (Webster, 1978, p. 121). However, there was rigorous argument as to whether the Bylaws should be changed and this was not resolved for several years. There was a Special Committee on Professional Ethics of the AAPA, formed in 1907. This committee, however, was limited in its ability to curtail and punish those who ignored the Bylaws. The attitude of the Committee on Professional Ethics during its early years can be summed up by a quote from their report dated October 10, 1910: One may sneer at the tradition that conﬁnes doctors, lawyers, musicians, civil engineers, and other professional people to plain cards, with name and ofﬁce address only, but a publicity expert will at once recognize the futility of any effort to coax or wheedle the public into patronizing a man who has to resort to self-laudation, fulsome expressions of his own talents – and so forth, as the very subtlety of such efforts instantly creates in the public mind a doubt as to whether he has strength, mental equipment, and experience enough to justify their patronage. (American Association of Public Accountants, 1910, p. 81)

This tirade was the result of the matter of ‘‘promiscuous and commercial advertising’’ by one calling himself a Public Accountant, who was promoting his practice by undercutting his former employers’ charges for services (American Association of Public Accountants, 1910). When the Rules of Conduct were rewritten under the new AIA, advertising was not one of the original eight rules. At that time, advertising was considered an activity different from solicitation of clients (Lowe, 1987). Solicitation of Clients Solicitation of clients was one of the eight original Rules of Conduct promulgated in 1917. ‘‘No member shall directly or indirectly solicit the clients nor encroach upon the business of another member, but it is the right of any member to give proper service and advice to those asking such service or advice’’ (Lowe, 1987, p. 82).

MORE RECENT ETHICAL ISSUES One of John Carey’s responsibilities as secretary of the Institute was to keep the membership and the accounting profession informed as to the events and

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changes that were occurring, not only in the Rules of Professional Conduct, but those upheld by the Securities and Exchange Commission also. In 1961, Carey discussed several new developments and amendments to the Rules of Professional Conduct. Independence. Carey (1961c) discussed the proposed amendment of Rule 13, changing ‘‘substantial ﬁnancial interest’’ to ‘‘no ﬁnancial interest’’. Carey stated that this was due to adverse public opinion. Even though no improper conduct happened, because the possibility existed, the accountant could still be held that he is not independent (in appearance). Competitive Bidding. In 1961, Carey discussed a proposed new rule by the Institute. Competitive bidding was a form of solicitation and, therefore, forbidden. The intent of the Institute was to prohibit price shopping by the client. Carey cited the Rural Electriﬁcation Administration claim that low fees would lead to an inadequate audit. The proposed rule is intended to prevent substandard work obtained on a low-price basis. It is not intended to prevent estimates in good faith for the beneﬁt of a client or prospective client who has already selected a CPA but wants to know what the job is likely to cost before he makes a commitment to pay for it. (Carey, 1961c, p. 56)

Advertising and Publicity. While advertising had been prohibited for a long time, there had been some controversy over publicity and articles written about CPAs and CPA ﬁrms. This type of exposure may give them an advantage over other CPAs. However, Carey was of the opinion that unsolicited magazine and newspaper articles about CPA ﬁrms are permitted. Carey cited an example of two Fortune articles and CPAs objecting to the publicity. However, Carey stated that the CPAs checked with the Institute before submitting to be interviewed. The Institute was of the opinion that the profession as a whole would beneﬁt from the publicity. He stated that the Institute wanted the public to know more about the CPA profession. So from the viewpoint of public relations, I think it is good to encourage our members to do things which attract favorable public attention, and to permit the press to report their activities if they are of public interest. Television, radio, and other media of communication are now considered part of the ‘public press’ y If we require our members to remain anonymous, for what we consider ethical reasons, it is unlikely that the public will learn what CPAs are doing, no matter how worthy and interesting their achievements may be. This may result in a mistaken belief that CPAs are a dull group of people who work in the shadows of our society at comparatively unimportant tasks, while other people are making decisions, giving advice, announcing their views, and contributing to the community life in a creative way. (Carey, 1961c, p. 57)

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Publications By CPAs. CPAs have always been able to communicate through pamphlets and bulletins to clients and friends. ‘‘But if publications, ﬁlms, and other matter initially distributed to staff, or to clients and friends, are passed on by the recipients to others, who may be clients of other CPAs, is there an ethical question involved?’’ (Carey, 1961c, p. 60). Carey believed that the answer depended on the motivation of those involved. CPA ﬁrms should inform their clients of new developments while refraining from promotional elements in their publications.

NEWS ISSUES Carey also kept the accounting world informed about the proper background and events involving accounting scandals. One of the ethical scandals involved Mr. Winn P. Jackson, CPA, who expressed an opinion on ﬁnancial statements without conducting an audit. The owner, Billy Sol Estes, prepared the ﬁnancial statements himself and the CPA simply copied the ﬁgures on his own stationery without making any tests as to their accuracy. However, in his report, Mr. Jackson, the CPA, stated in the scope paragraph that his examination had been made in accordance with generally accepted auditing standards. In the opinion paragraph he disclaimed an opinion due to a limitation of the observance of inventories. The Texas State Board suspended the certificate of Mr. Jackson for two years. The AICPA, according to John Carey (Texas State Board Suspends Certificate of CPA in Estes Case: AICPA Position Stated (News report), 1962), had already launched an investigation by the ethics committee. John Carey wrote letters to several congressmen and the Secretary of Agriculture deﬁning the responsibilities of CPAs acting as auditors. An excerpt of the letter was printed in this article. After deﬁning the responsibilities of the auditor and describing the auditor’s report, Carey commented about Mr. Jackson’s audit report, questioning the content of the audit report. Even though the audit report opinion was a disclaimer of opinion, there were inconsistencies in the report. However, this would not excuse an auditor from saying that he had made an examination in accordance with accepted auditing standards, if in fact he had not made such an examination, or for failing to state clearly his reasons for being unable to express an opinion on the statement as a whole, if in fact there were important reasons other than those mentioned. (Texas State Board Suspends Certificate of CPA in Estes Case: AICPA Position Stated (News report), 1962, p. 10)

John Carey’s letter to Secretary of Agriculture Orville L. Freeman, was then read to members of Congress, when Freeman testiﬁed before the Senate

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Permanent Subcommittee on Investigations (Freeman Quotes, AICPA Executive in Senate Testimony on Estes (News Report), 1962).

TAX PRACTICE Accountants have been preparing tax returns for as long as the tax laws have been in place. The ethical conﬂicts began when accountants performed audits and prepared tax returns for the same client. This situation brings into question the independence of the accountant. During the 1940s, the legal profession accused the accounting profession of ‘‘unauthorized practice of law,’’ when accountants, acting as enrolled agents, represented their tax clients before the Board of Tax Appeals. Carey (1961c) stated, ‘‘the ethical responsibilities of the CPA in tax practice are not at all clear, and in this lack of clarity there may be potential danger for the profession’’ (p. 60). In ‘‘Professional Ethics in Accounting,’’ Carey postulated that there were three viewpoints as to the status of a CPA’s ethical responsibilities in tax practice. In the ﬁrst case, the CPA was compared to an employee of the company, providing an accounting service to management, similar to ‘‘the preparation of ﬁnancial statements and reports without audit’’ (Carey, 1955, p. 138). Carey stated that this was complicated by the fact that the CPA who prepared the tax return was expected to sign an afﬁdavit stating that to the best of his/her knowledge, all significant information was included in the return. However, the Bureau of Internal Revenue did not distinguish between those signers who had audited the ﬁnancial information and those who had not. The second case presented the CPA as resembling that of an advocate. This assumes that the taxpayer and the IRS are in an adversarial relationship, and the CPA represents the taxpayer. The ABA’s contention was that this role of an advocate is in direct violation of the ethics rule on independence. The third position on the ethical status of the tax preparer was that the CPA could be just as independent of the tax client as the audit client. Independence is a state of mind, and the accountant could maintain his objectivity while still minimizing the client’s taxes to the extent allowed by law. Carey (1955) ended with this comment, Each of these viewpoints makes some sense, but in some way also each conﬂicts with the others, so that they cannot be combined into any meaningful theory. Sooner or later, it may be the profession and perhaps the government will have to decide which of these roles the certiﬁed public accountant actually occupies when he engages in tax practice. (p. 139)

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The government and the public may have expected that when a CPA signed a tax return as a preparer, that he had audited the ﬁnancial information, or at least satisﬁed himself as to the reliability of the numbers. ‘‘Already two high ofﬁcials of the government, on different occasions, have expressed surprise that a CPA would sign a return on the basis of ﬁgures supplied by the client without any independent investigation on the part of the CPA’’ (Carey, 1961c, p. 61).

THE UNAUTHORIZED PRACTICE OF LAW One of the issues in his many years with the AIA, which John Carey felt very strongly about, was the conﬂict between the legal and accounting professions regarding the unauthorized practice of law. The most vocal article was originally published in the Rocky Mountain Law Review, which was devoted to legal ethics and professional responsibility. This article addresses the issues between practicing lawyers and accountants regarding tax practice. It was reprinted in The New York Certified Public Accountant and the CPA in Tax Practice in the following year. Carey (1953c) began with a definition of ethics as ‘‘self-discipline in the public interest’’ (p. 435). Carey questioned the Bar’s position that ‘‘if the Bar should attempt to prevent a speciﬁc group of non-lawyers, whose selfdiscipline was comparable to that of members of the Bar, from doing things which these non-lawyers were well equipped to do, and were customarily employed by the public to do, would the Bar’s position be ethical?’’ (Carey, 1954b, p. 70). Carey argued that lawyers believed that CPAs should not practice in the tax court, even though the tax court was not a true court of law but an administrative agency. Carey (1954b) stated that there were several misconceptions about the accounting profession that had been frequently expressed by lawyers, in writing or in conversations. These were: 1. Since the federal income tax law is undeniably a law, and since all individual and corporate income taxes are paid pursuant to the requirements of that law, and since the determination of income taxes requires interpretation of that law or regulation issued thereunder or court decisions applying that law, federal income tax practice is ipso facto wholly and exclusively within the ﬁeld of the practice of law. 2. Accountants pre-empted the ﬁeld of federal income taxation by default of the lawyers – or, in other words, the legal profession was asleep, and the accountants took over. 3. Accounting is a mechanical, clerical process, largely consisting of computations.

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4. Lawyers are competent to deal with federal income tax matters, or can easily become so by quickly mastering the relatively simple accounting processes involved. 5. Accountants are laymen, indistinguishable from other non-lawyers so far as unauthorized practice concepts are concerned. Carey took each of these arguments and refuted them. (Carey, 1954b, pp 73–74)

Carey (1954b) then asked a question of his own. ‘‘How competent are lawyers in income tax matters?’’ (p. 73). Carey stated that passing the bar was not enough. Lawyers must know quite a bit about accounting to be competent in the ﬁeld of income taxation. Carey discussed an end to the controversy between lawyers and accountants by providing some history and background of the disagreements between them. He also discussed the National Conference of Lawyers and CPAs, of which he was the secretary. The Conference was formed in 1944, consisting of ﬁve members of each profession’s national organization, the ABA and the AIA. Only if the work of the Conference is known and supported by the state and local associations of the two professions, however, can the hope be realized – and this means only if individual members of the two professions understand and respect the other. It is in the hope of broadening such understanding and respect that this article has been written. Cooperation, not conﬂict, is the goal. (Carey, 1953c, p. 17)

CONCLUSIONS John Carey had assumed the role of promoting the need for ethics from A. P. Richardson when he assumed the position of secretary. Carey was devoted to enhancing accounting as a profession, and one of the attributes of a profession is having a code of ethics. He emphasized the importance of ethics throughout his entire career with the Institute, through both his writing and his speeches. Carey never hesitated to discuss the thorny topics of ethics. He reported and recommended changes to the Code of Professional Conduct. He discussed advertising, solicitation of clients, competitive bidding, and other rules that were in contention by the Institute membership and the accounting profession. Carey (1961c) made the suggestion that ‘‘ethical problems should be discussed and debated more widely and more freely than has been customary. Hasty solutions are to be avoided, but efforts to reach solutions should be persistent’’ (p. 66).

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Carey stressed the importance of the ethical foundation by the need for competence and integrity, to ensure trust on the part of the client and the public. ‘‘Ethics is the foundation of professional status. Without it, the practice of public accounting would speedily become just another business’’ (Carey, 1961c, p. 52).

CHAPTER 8 THE PAST AND THE FUTURE OF ACCOUNTING INTRODUCTION Carey is possibly best known for his two books on the history of the accounting profession, The Rise of the Accounting Profession: From Technician to Professional, 1896–1936, and The Rise of the Accounting Profession: To Responsibility and Authority, 1937–1969. Along with the two-volume series on the history of accounting, Carey wrote several articles solely devoted to accounting’s past. In addition, many of Carey’s articles contained paragraphs or sections that brieﬂy described some aspect of the history of accounting. Carey chronicled the past, and with this intimate knowledge was able to foresee the challenges of the future. He was able to provide advice and guidance to the Institute, its members, and the profession. Carey published two books on the future of the accounting profession. The ﬁrst was The Accounting Profession–Where is it Headed?, which was ‘‘a summary of views on the profession’s future developed by members of the American Institute of CPAs’ Committee on Long-Range Objectives, 1956–1962’’ (Carey, 1962b, cover). The second book was The CPA Plans for the Future, which was, also, a compilation of the views and proposals of the Committee on Long-Range Objectives, published in 1965. Carey also wrote articles concerning the future of the accounting profession. Many of his articles and speeches contained sections where he discussed the future direction of accounting. This chapter incorporates two somewhat different areas of writing for John L. Carey – the past and the future of accounting. These subjects are really two sides of the same coin. Carey even included a chapter concerning the future of accounting in the second volume of The Rise of the Accounting Profession, and discussed the history of accounting in both of the books concerning the future of the profession, The Accounting Profession–Where is it Headed? and The CPA Plans for the Future. 145

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Since Chapters 3 and 4 covered the history of accounting and the American Institute of Certiﬁed Public Accountants (AICPA), with extensive use of John Carey’s writings, a limited discussion of Carey’s historical works will follow. This discussion will include his two-volume history of the profession, as well as his journal articles concerning the history of accounting and the AICPA. Following the section on the past will be an analysis of Carey’s writings concerning the future of the accounting profession. In both sections, the books and articles will be scrutinized.

THE PAST Books The Rise of the Accounting Profession: From Technician to Professional, 1896–1936 was volume one of a two-part set. The book was intended to be a history of the AICPA and its predecessors. This history was to be ‘‘one of those institutional publications containing the dates, the names, and the principal achievements, viewed with pride’’ (Carey, 1969b, p. xv). However, when Carey began research into the Institute’s records, ‘‘it became increasingly clear that the rise of the accounting profession in the United States has been a significant and fascinating sociological phenomenon. To do it justice, it seemed necessary to expand the scope of the inquiry’’ (p. xv). Due to the overwhelming volume of material, Carey divided into two what he had originally intended to be one book. However, in reality, the books are primarily a history of the Institute with other national organizations and events included, rather than a general history of American accounting. The original subtitles may have been different than ‘‘From Technician to Professional, 1896–1936’’ and ‘‘To Responsibility and Authority, 1937– 1969’’. An article in The CPA conﬁrming John Carey’s retirement listed the ﬁrst volume as being tentatively titled ‘‘The First Fifty Years’’ and the second volume ‘‘The Modern Era’’ (Plans for the Future – John L. Carey as Accounting Professor and Historian, 1969). This may have been because it was a popular subtitle and a common time period to use when recounting the history of an ongoing organization. For example, there was a publication by the ﬁrm of Arthur Andersen (1963) by the title The First Fifty Years. Haskins and Sells (1947) also had a book using that phrase and Montgomery (1939) titled his ‘‘collection of rambling reminiscences’’ (p. 1) Fifty Years of Accountancy in 1939.

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Although the title of the ﬁrst volume states that it covers the time period from 1896 through 1936, the ﬁrst several chapters discuss material from earlier times. Carey brieﬂy mentioned the advent of double-entry bookkeeping, the industrial revolution, and European auditors coming to America. Carey used the year 1896 as a starting point because that coincided with the passage of the ﬁrst Certiﬁed Public Accountant (CPA) law. ‘‘The passage of this law marked the beginning of an accredited profession of accounting in the United States’’ (Carey, 1969b, p. 44). The ﬁrst volume concluded with what Carey called the end of ‘‘the Great Schism,’’ between two rival national accounting organizations. The accounting profession was reunited when the American Society of Certiﬁed Public Accountants (ASCPA) and the American Institute of Accountants (AIA) merged. Thus ended a turbulent period in the history of the accounting profession in the United States. In 50 years it had come from nowhere to carve out a secure place in the American economic system y The profession had learned many lessons. It had matured. It was united, stronger than it had ever been and ready to move forward (Carey, 1969b, p. 371).

The second volume resumes where the ﬁrst ended, beginning with the ﬁftieth anniversary meeting of the Institute, and covering the turbulent years after the stock market crash when the accounting profession was attempting to set standards for better ﬁnancial reporting. The McKesson & Robbins scandal and World War II (WWII) added further disruption with which the Institute had to contend. Much of Carey’s dialog, while covering the events, concerned the interaction of the key players in the history of the accounting profession. Carey discussed the social and economic impacts of events and decisions made by ofﬁcers and committees within the Institute. The governmental inﬂuences, such as the Internal Revenue Service and the Securities and Exchange Commission (SEC), were also included. While the books as a whole follow a chronological vein, the chapters are grouped together by subject matter. Thus, the point in time tends to jump forward and backward, as different subjects and side topics are interwoven into the main story. Many of the issues had no dates relating them to the main history. For instance, in Chapter 6, Carey discusses competitive bidding for audit engagements, referencing an advertisement in The New York Times and The Journal of Accountancy, but gives no dates or time periods. Previts (1974a; 1974b) published a chronological index to each of Carey’s two volumes, which does identify the dates and time periods. The indices also referenced the page numbers where the topic is discussed in Carey’s books.

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The second volume, like the ﬁrst, was arranged by topic in a general chronological order. There were chapters on ethics and the Accounting Principles Board, and the future of the accounting profession. Carey’s tone in describing the events of the past was generally positive. Even scandals and crises took on an optimistic quality. In all cases, Carey was ever the diplomat, describing an event as ‘‘a new challenge for the accounting profession’’ (Carey, 1970b, p. 8). Carey also looked to the future when he discussed the events that have shaped our history. For instance, in describing the outcome of the McKesson & Robbins hearings, Carey notes, ‘‘The profession had survived another crisis y However, the profession had again set its feet upon a new path which led to increased public conﬁdence’’ (Carey, 1970b, pp. 37–38). Despite the sheer volume of material and details that were presented in the history, there were few criticisms of the books. Andrew Barr (1971) said about the second volume of The Rise of the Accounting Profession, Since I have been closely associated with much of the activity described in this volume, I have watched for errors of fact as well as of bias – a little bias certainly can be excused! So far as I can tell without unwarranted meticulous checking, there are remarkably few errors of fact. (p. 416)

One of the few criticisms of the ﬁrst volume of The Rise of the Accounting Profession was that it was not annotated. Carey (1969b) justiﬁed his decision not to cite his sources by saying, ‘‘To make the book as readable as possible I have refrained from sprinkling its pages with distracting little numbers or asterisks referring to sources of information. The sources are listed in an appendix’’ (Carey, 1969b, p. xvi). Maurice Moonitz (1970) in his review of the ﬁrst volume said, ‘‘This practice does indeed make the book more readable, but it also lessens its value as a reference for those who might wish to pursue certain topics more fully’’ (p. 391). Another complaint about the ﬁrst volume was the lack of an index. In his review of the ﬁrst volume, Moonitz (1970) recommended, ‘‘Perhaps a comprehensive index will be included in the second volume. I fervently hope so. A book of this importance should not have its usefulness limited sharply either by the lack of precise references or of an index’’ (p. 391). Carey must have taken this advice to heart, because the second volume contained an extensive index covering both volumes. Andrew Barr (1971) wrote, in his review of the second volume, ‘‘Moonitz fervently hoped that the lack of an index to the ﬁrst volume would be corrected by the inclusion of a comprehensive index in the second. This has been done in a manner which readers of both volumes should ﬁnd helpful’’ (p. 415).

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Carey’s Rise of the Accounting Profession series is considered an important work of accounting history. Carey has chronicled the accounting profession in the United States from 1895 until 1969. Others have attempted to continue where Carey stopped. Wallace E. Olson (1999) wrote a book on the continuing history of the AICPA and the accounting profession, taking up where John Carey stopped. Olson’s book, The Accounting Profession, Years of Trial: 1969–1980, was written from the standpoint of the Institute’s Chief Staff Ofﬁcer during those years. Gary Previts (1985), in a review of Olson’s book, stated, ‘‘This volume is a sequel to the two volumes entitled The Rise of the Accounting Profession, written by John L. Carey and published by the American Institute in 1969 and 1970’’ (p. 335). However, Previts cautioned the reader to understand that the history was written by a participant and should consider the author’s objectivity. Articles Carey had maintained that to make decisions concerning the future of the accounting profession, it was necessary to understand how far we have come. Many of John Carey’s articles begin with a review of the past. In ‘‘The Place of the CPA in Contemporary Society,’’ Carey (1958c) ﬁrst examines the past, explaining that evidence of accounting goes back to the Sumerians, to 3000 B.C. This involved simple record keeping. With the industrial revolution in England in the 18th century, the need for capital led to the corporate form of ownership and the need for accountability to the owners. This was the advent of auditing. Carey followed the history of accounting and auditing through the industrialization of the United States, to the Institute’s Code of Ethics and the CPA exam. While ‘‘The Uncertain Future,’’ discussed the future of the profession, Carey (1946b) began by applauding the recent past. He afﬁrmed that the accounting profession served credibly during the war and gained prestige because of it. Business had looked on accountants in the early days as little more than bookkeepers. The early accountants formed a national organization, set rules of ethics, and standardized an exam for proﬁciency. The uniform CPA exam, prepared by the AIA, was being used by 44 states, DC, and 4 territories. Carey also discussed the history of accounting education. ‘‘Sixty-one years ago, when the ﬁrst professional society was established, there was no complete accounting course at the college level. Today the subject is taught in more than one hundred of the country’s leading colleges and universities’’ (Carey, 1948a, p. 8).

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Carey wrote several articles wholly devoted to accounting history after he ﬁnished the two-volume book. Carey had an ongoing series published in the working papers of the Academy of Accounting Historians, titled ‘‘The CPAs Professional Heritage, Parts I–IV’’. ‘‘The three working papers by John L. Carey are excellent examples of the literary approach to accounting history. Mr. Carey not only recreates the past in which he was personally involved, but he also helps explain the current CPA profession’’ (Brown, 1979, p. 843). Carey also wrote a piece in the Accounting Historians Journal on the conﬂict between the accounting profession and the SEC. Zimmerman (1973), in acknowledging Carey’s contribution to the portrayal of accounting history, declared, ‘‘We are indebted to Carey for his extremely valuable contribution in outlining and interpreting the development of the accounting profession in the United States. Our ability to plan effectively [for the future] is improved because of his work’’ (p. 468).

THE FUTURE Throughout his writing career, Carey had emphasized the need for the accounting profession to plan for the future. However, most of the works by John Carey that were wholly related to the future of the accounting profession, were based on the activities of the Committee on Long-Range Objectives. Through his work as secretary of the Committee, John Carey was instrumental in bringing the objectives and accomplishments of the Committee to the Institute’s Council and to the membership. Background of the Committee The Committee on Long-Range Objectives was the brainchild of Marquis G. Eaton, president of the Institute, in 1956. He saw that the accounting profession and the Institute in particular were reactionary in nature, creating principles and opinions only when there was enough of an outcry by the public. Eaton explained his reasoning: Professional accountancy has never deﬁned its course of direction. We have not decided whether the CPA certificate is minimum or maximum equipment – whether the professional accountant should be expected to reach much further with his abilities than is indicated by the CPA certificate. We have never decided whether management services should be the common practice of all accounting ofﬁces, or of only a few. We have never described the level at which we should discharge our public responsibilities – whether only at the technical level or whether also at the policy level. We have not taken formal action to decide, on reasoned grounds, whether the Institute itself is an organization of

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CPAs in public practice, or an organization of CPAs no matter how employed. A long list of such unsettled questions could be compiled. (Carey, 1970b, p. 485)

The original Committee was made up of three members plus the secretary of the Institute, John Carey. J. S. Seidman, chairman, was a senior partner of Seidman & Seidman. The second member of the Committee was Herman W. Bevis, who was a senior partner with Price Waterhouse & Co., and had served on many of the Institute’s committees. The third member of the original Committee was Robert E. Witschey, who owned his own ﬁrm and was well aware of the problems of individual practitioners. Other members, who were added later, were Robert M. Trueblood, Clifford V. Heimbucher, Norton M. Bedford, and Malcolm M. Devore (Carey, 1970b). From the beginning, the Committee was composed of thoughtful, studious, and articulate men who had occupied leading positions in the profession – men of broad experience and seasoned judgment, known to be objective and skeptical of their own preconceived opinions. (Carey, 1962b, p. xii)

The goal of the Committee was to redirect the attitudes of many in the profession from reactionary to visionary. This Committee is trying to envision where the profession should be ﬁve years hence – then ten and twenty years from now. We feel that by borrowing from modern planning methods and setting our goals as clearly as possible, we can organize the Institute to do the things that will help the profession get there with as few detours and delays as possible. (Carey, 1957b, p. 58)

However, when the group ﬁrst met, they could not agree on anything, even what to put on the agenda. As a starting point, they decided it was necessary to examine the place of accounting in contemporary society (Carey, 1958c). The Committee met several times each year for the ﬁrst couple of years, for two days at a time. The ﬁrst few meetings were entirely devoted to what topics should appear on the agenda and in what order. Carey (1970b) stated that, Even in this small group, differences of opinion developed. In its ﬁrst report to the Council, in 1957, the differing points of view were presented, together with an analysis of the Institute’s present policies, how these policies were arrived at, how the present membership was constituted, and how other organizations had dealt with the same question. (p. 487)

The Committee ﬁnally decided to assign topics for individual members to research and then draft a paper on the subject. After approval by the Committee, the paper was either submitted to The Journal of Accountancy to entice comments from the practitioners, or, if it was a position paper, it was submitted to the Council of the Institute for adoption of the objectives recommended by the Committee. Carey (1962b) stated, ‘‘With a few notable

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exceptions, the objectives proposed by the committee have been adopted. As a rule, in presenting an objective, the Committee also suggested means of implementing it, and for the most part the Council has adopted these suggestions also’’ (p. xiii). Eleven objectives were submitted to the Council, and ten were adopted (see the List of Objectives and Implementations in Appendix H). Books The book The Accounting Profession–Where is it Headed? is divided into nine chapters, loosely based on articles written by the members of the Committee on Long-Range Planning. See Table 12 for a list of the chapters and subtitles. Table 13 contains a list of the articles that were written by members of the Committee and published in The Journal of Accountancy. The book begins by covering some statistics about the accounting profession. There were approximately 75,000 CPAs in the United States in 1962. Carey stated that the number of CPAs had quadrupled since WWII. Because of this growth, the accounting profession needed a framework on which to build. The Committee identiﬁed 12 trends that the Committee felt would have a direct bearing on the development of the accounting profession. These trends were listed in the ﬁrst chapter: Technological improvement and automation result in increasing capital investment for each worker employed. The separation of ownership and management in large corporations is accentuated by the interposition of investment trusts and pension funds, which exercise little or no inﬂuence on the policies of the corporations in which they invest, but merely shift their investments as the tides of corporate fortunes ebb and ﬂow. Foreign investment and trade seem sure to expand steadily. The trend toward bigness in industrial corporations does not appear to have stiﬂed the growth of small business. There is no reason to doubt that government participation in the economy will continue to increase rapidly, as it has done throughout the past thirty years. Internal management of the affairs of the Federal government – the biggest business in the world – requires an increasing volume of quantitative data. Local government units, too, are encountering difﬁculties which can be solved only by improved ﬁnancial management. Economic planning on a national scale is not beyond the bounds of possibility.

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Table 12. Preface Chapter 1 Chapter 2

Chapter 3

Chapter 4

Chapter 5

Chapter 6

Chapter 7

153

Table of Contents for The Accounting Profession: Where is it Headed? The environment Some vital statistics, An analysis of the trends, The basic questions What is accounting and where is it going? The accounting function – an analysis, Importance of the accounting function Importance accorded the accounting function in an organization, Importance accorded the accounting function in an economy, Accounting and government policy, Elements of the accounting function, Role of the auditor, Public practice versus private employment, Services to the public, Attesting Conclusion What are CPAs and what is their Place in the accounting function? The origins in brief, Accounting written into the law, What is a profession? What is the CPA certificate? CPAs’ relations with others in the accounting function, The value of co-operation, The noncertified practitioner, Technical and professional activity, Making titles meaningful, Reasons for confusion, The matter of regulation, Standards and status for the non-CPA, The impact of technology, A tentative solution, Committee recommendations, What about the CPA not in practice?, Where is the CPA going? The attest function Fragmentation versus integration, Elements of the engagement, Acceptance of responsibility, Analysis of the attest function, Use of the attest function, Reasons for the uneven use of the function, Social purpose of the attest function, Keys to successful data communications, Agreement on accounting standards, Proper discharge of the attest function, Potential future of the attest function, Conclusions, Resolutions Tax Practice The background, Evolution of the tax laws, The stabilizing role of CPAs, Responsibilities of CPAs, The significance of independence, The CPA as advocate, Partisanship and professionalism, Relations with the legal profession, Law, accounting, and taxes, Communication and cooperation, Possible simplification of tax laws Management services by CPAs Problems of small business, Reasons for failures, Scope of management services by CPAs, The accounting function, What are the management services? Problems to be explored, Proposed definition of the function, Changing role of the controller, Business problems and choices, Competence, Independence, Rules of professional conduct, Some transition problems, The ultimate test, Plan of action Preparing the CPA for Expanding opportunities Public acceptance, The CPA’s education, Challenge to the training process, Nature of the educational gap, Developing the university curriculum, Solution to the educational gap, Areas of accounting

xi 1 11

24

43

63

72

94

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Table 12. (Continued )

Chapter 8

Chapter 9

study, Professional ethics, Cultural aspects, motivation, and social responsibilities, The AICPA’s role, On-the-job training, Need for continuing education, Combining the traditional and the new, Research, Action taken, The role of continuing education, The missing link: formal recognition, Precedents, Experience and on-the-job training, Broader definition of experience, The employer’s responsibility, The common body of knowledge The structure of the profession Looking back, Regulatory versus permissive statutes, Admission requirements, Ethics, Interstate practice, Use of CPA title, Need for uniformity, Future of the small firm, The public image of the CPA, Meeting the need, Shortcomings of current efforts, Need for AICPA action, Action taken, The state societies and the Institute, Action taken, Possible developments, The Institute itself, Orientation, Action Taken, Communication and participation, Unsolved problems A program for the profession The environment, The accounting function, The position of the CPA, The CPA’s practice, The attest function, Tax practice, Management services, A program for action

Appendix Objectives proposed by the LRO Committee

120

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165 165

The increasing trend toward systematic planning and control by business management has opened up vast new ﬁelds for accountants. These developments will also have an impact on labor relations. Nonprofit institutions are assuming greater importance in the economy. Changing social attitudes, rising ethical standards in business, and increasing disapproval of conﬂicts of interest on the part of persons in positions of trust, all suggest the likelihood of wider disclosure of ﬁnancial and economic information through annual reports, proxy statements, and other appropriate media. (Carey, 1962b, pp. 3–9)

The Committee also admitted that there were two negative threats: war and communism. Another world war could have a reversing effect on society. The Committee stated that communism, while it ‘‘would not destroy accounting, it would destroy its professional character’’ (Carey, 1962b, p. 9). Carey also discussed the accounting function in a changing environment. The importance of the accounting function varies according to the surroundings in which it is being examined. In an organization, ‘‘the more complex the management problem in a successful organization, the higher the degree of development of the accounting function’’ (Carey, 1962b,

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Table 13. List of Articles Written by Members and Secretary of the Long-Range Objectives Committee and Published in The Journal of Accountancy. Bevis, Herman W. ‘‘The Accounting Function in Economic Progress,’’ Journal of Accountancy, August 1958, pp. 27–34. Carey, John L., ‘‘The Place of the CPA in Contemporary Society,’’ Journal of Accountancy, September 1958, pp. 27–32. Witschey, Robert E., ‘‘The Accounting Function for Small Businesses,’’ Journal of Accountancy, December 1958, pp. 30–39. Seidman, J. S., ‘‘What Is the Future of the Accounting Profession?’’ Journal of Accountancy, March 1959, pp. 29–36. ‘‘Long-Range Objectives of the Accounting Profession – A Summary of Studies by the American Institute of Committee on Long-Range Objectives’’ (Ofﬁcial Releases), Journal of Accountancy, May 1959, pp. 71–73. Carey, John L., ‘‘Higher Accreditation for CPAs,’’ Journal of Accountancy, March 1961, pp. 47–53. Trueblood, Robert M., ‘‘The Management Service Function in Public Accounting,’’ Journal of Accountancy, July 1961, pp. 37–44. Heimbucher, Clifford V., ‘‘Fifty-three Jurisdictions,’’ Journal of Accountancy, November 1961, pp. 42–50. Bedford, Norton M., ‘‘Education for Accounting as a Learned Profession,’’ Journal of Accountancy, December 1961, pp. 33–41. Bevis, Herman W., ‘‘The CPA’s Attest Function in Modern Society,’’ Journal of Accountancy, February 1962, pp. 28–35.

p. 13). In an economy, it changes based on the extent of industrialization of the economy. There were separate chapters devoted to what Carey considered the three main roles of the CPA: auditing, tax practice, and management services. Additional chapters included opportunities for the CPA, the structure of the profession, and a program for the future. The program for the future included previously discussed topics, a recap of the current position of the accounting profession, and concluded with some suggestions for where it should be. The monograph, The Accounting Profession–Where is it Headed? was published in 1962, encompassing the views of the Committee’s ﬁrst six years of existence. Carey (1970b) recalled, ‘‘This publication had a visible inﬂuence on the thinking of the profession. State societies undertook similar

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planning activities. Some accounting ﬁrms began to consider formal planning procedures’’ (p. 492). A second book, The CPA Plans for the Future, was written by Carey, concerning the direction of the accounting profession. When Robert Trueblood became chairman of the Committee on Long-Range Objectives, the direction of the committee changed to focus more on the problems of the profession (Carey, 1970b). In the foreword of the book, Clifford V. Heimbucher, President of the Institute, commented that the book had been written ‘‘in the belief that a candid discussion of the problems which confront the accounting profession and of alternative paths for development in the future will assist in early and sound solutions and decisions’’ (Heimbucher, 1965, p. vi). Emanuel Saxe (1966), in a review of the book, called it ‘‘the recent and long-awaited major work by John L. Carey on the present position of the accounting profession and the problems it must overcome during the next decade or two in its forward movement to even greater eminence’’ (p. 17). Don Schneeman (2005), Director of Ethics at the Institute, claimed, ‘‘It was a road map of where the profession should go for the next 20, 30, 40 years’’ (p. 3). The principal purpose of the book was ‘‘to provoke thought and debate while peering into the future. Even if some of the problems the author has conceived turn out to be imaginary, it will do no harm to consider and dispose of them and, in the process, hopefully to develop other constructive ideas (Carey, AICPA, & COMMITTEE, 1965, p. vi). The book is divided into four sections. See Table 14 for a listing of the table of contents. The ﬁrst section covers the environment in which the accounting profession operates. This includes governmental regulations, economic trends, and the international outlook. The second section includes types of work that the CPA practiced at that time, such as auditing, tax, and management services. This is followed by a section on attaining and promoting the professional status of accounting, including ethics, education, and social obligation to the public. The last section involves the structure of the profession: state legislation and CPA laws, professional societies, and the concept of the ﬁrm. In all of these sections, Carey presents the situation at the time and possible problems that could arise in the future. Carey (1965) cautioned the reader that much of the material ‘‘is highly controversial’’ (p. x). He admitted that there were other opinions and possibilities other than those mentioned in the book. He pointed out that members of the Long-Range Objectives Committee and many other experts were consulted. A working paper entitled, ‘‘Proﬁle of the Profession: 1975’’ was distributed to state societies and members of the Institute for feedback (Carey, 1970b). Carey (1970b) noted, ‘‘Altogether, between 1961 and 1965

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Table 14.

157

Table of Contents for The CPA Plans for the Future.

Preface Introduction

ix xv

Section I The Environment Chapter 1 The Changing Social Scene Chapter 2 Economic Trends Chapter 3 Implications of Automation Chapter 4 Government and Business Chapter 5 The Movement to Internationalism

1 3 28 46 66 91

Section II Professional Accounting Services Chapter 6 What is the Practice of Accounting? Chapter 7 Financial Reporting to Investors Chapter 8 External Reports for Various Purposes Chapter 9 Tax Returns and Tax Practice Chapter 10 Auditing Chapter 11 Management Services

113 114 128 150 170 186 214

Section III Foundations of Professional Status Chapter 12 Education and Training Chapter 13 Personnel Chapter 14 Ethics Chapter 15 Research Chapter 16 Public Interest and Social Obligation Chapter 17 Legal Liability

257 258 284 309 346 376 408

Section IV The Structure of the Profession Chapter 18 The Concept of the Firm Chapter 19 Specialization Chapter 20 The State CPA Laws Chapter 21 Relations With Other Accounting Groups Chapter 22 Publications Chapter 23 Professional Societies

421 422 448 463 475 487 500

Epilogue

531

Appendix

535

formal consultations, of which a record was made, were held with 29 individuals, including a behavioral scientist, a sociologist, an economist y’’ (p. 494) and many others. In concluding his review of The CPA Plans for the Future, Emanuel Saxe (1966) observed: It is a thought-provoking presentation and while, as previously hereinabove noted, all of its elements may not be acceptable to all CPAs, it represents the thinking of a distinguished leader in our profession who has helped it grow and prosper during the past

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forty years. Our Society should readily accept his challenge to participate in charting the future by devoting a substantial part of its activities during the next few years to a careful study of the many speciﬁc and related problems which Mr. Carey has raised for consideration. He deserves our highest praise and sincere thanks for presenting them so lucidly. (p. 24)

Articles Carey stated that while the Institute is proud of the growth in numbers and prestige of CPAs, it had really just paralleled the growth of business and the economy over the previous 40 years. And since the economy was expected to continue to grow, the accounting profession had to anticipate and prepare for that growth. Carey (1957b) predicted, ‘‘The demand for accounting services is bound to expand, but not necessarily for the same accounting services, rendered at the same level of quality, as those of today. As the economy becomes more complex, accounting will have to devise new techniques to serve its needs’’ (p. 58). Carey (1948b) identiﬁed two conditions that were used to make predictions about the expansion of the accounting profession. First, there was a growing public interest in the business sector, including the ﬁnancial standing of organizations. Second, the key to any business’s efﬁciency is the ability to review its ﬁnancial position. Carey stated that for a company to improve and grow, the company had to know where it was. When discussing the future of accounting as a whole, Carey (1948a) noted, ‘‘Compared with other professions, public accounting is young and attractively remunerative’’ (p. 7). But at some point, he reasoned, because of the attractive qualities, the accounting profession might become overpopulated and the supply of CPAs might outgrow the demand. Carey (1948b) emphasized that, although the possibility existed, it would not happen to the present generation of new accountants. What public accounting does offer is youth. It is old enough to have achieved recognition, and, therefore, to have certainty of a successful future. But it is young enough not to have reached its full development, although it is stable and well organized and has obtained public acceptance as a profession. It offers great promise of future development. (p. 24)

Carey often quoted statistics about the accounting profession and the Institute in an effort to provide direction for the future. For instance, in ‘‘The Uncertain Future,’’ Carey (1946b) noted that the Institute had doubled its membership in the previous ten years and approached 10,000 members. The Journal of Accountancy had also more than doubled its subscriber count.

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And the uniform CPA exam, prepared by the Institute, was being utilized by all but four of the states in 1946. In 1957, Carey cited statistics about accounting and the economy. The gross national product (GNP) had doubled in the previous ten years, from 219 billion to 427 billion, and was predicted to climb to 560 billion by 1965. ‘‘Reasoning from these forecasts, we can project a very substantial increase in the volume of accounting practice within seven years’’ (Carey, 1957d, p. 6). The growth of the accounting profession and the GNP had kept pace with each other. My point is that there is already an unsatisﬁed potential demand for your services perhaps as great as the volume of services now being rendered; and in the expanding economy that confronts us in the next seven or eight years, even if no CPA gives service of greater scope or greater depth than he now does, there will be an enormous increase in the potential demand – perhaps as much as one-third. (p. 7)

Carey discussed the future of many aspects of accounting. He was most concerned with the direction the auditing function and the practice of public accounting were taking. During his tenure with the Institute, the majority of members were CPAs in public practice. Other topics discussed routinely in Carey’s articles concerning the future were tax practice, management services, opportunities of the future, and the changing structure of the profession. Carey also expounded on the need for adequate education, both for new accountants and those maintaining their knowledge. These topics will be discussed in greater detail. Auditing and Public Accounting Carey was constantly emphasizing the importance of the public trust in the audit function. Carey called independent auditing ‘‘the traditional basic function of the public accounting profession’’ (Carey, 1946b, p. 1). Carey stated that the foundation of auditing must lie in public conﬁdence. ‘‘If independent audits were universally recognized and accepted by all concerned, the certiﬁed public accountant would occupy the useful and powerful position of ﬁnal arbiter or umpire among conﬂicting interests demanding a share of business income’’ (p. 1). To improve the audit function, the policies governing audits had to progress. Since they have been derived from best practices, pronouncements, demands of regulatory agencies, and court decisions, they were, and still are, inconsistent and incomplete (Carey, 1946b). Carey continually discussed accounting and auditing principles, so the accounting profession would not stand still.

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Practice. While independent auditing of ﬁnancial statements can only be performed by a CPA, Carey contended there are endless opportunities to expand the responsibilities of the CPA. Carey stated that to perform the auditing function, a CPA must be familiar with bookkeeping, administrative accounting, budgeting, and management responsibilities. The scope of a CPA’s practice had expanded beyond making assertions of a company’s ﬁnancial statements. The professional practice of accounting was described at the meeting of the Institute’s Council as follows: Accounting is a discipline, which provides ﬁnancial and other information essential to the efﬁcient conduct and evaluation of the activities of an organization. The information which accounting provides is essential for (1) effective planning, control and decision-making by management, and (2) discharging the accountability of organizations to investors, creditors, government agencies, taxing authorities, association members, contributors to welfare institutions, and others. (‘‘Council Regular Meeting, Monday, October 14, 1940, Evening Session,’’ 1940, p. v)

Accounting includes the development and analysis of data, the testing of their validity and relevance, and the interpretation and communication of the resulting information to intended users. The data may be expressed in monetary or other quantitative terms, or in symbolic or verbal forms (Carey, 1967a). Carey (1967a) foresaw that the advent of the computer would encompass ‘‘an integrated information system, of which ﬁnancial information is only a part’’ (p. 47). He warned that unless accountants kept up with these developments and advancements in technology, they would be relegated to the traditional audit function and their reputation may suffer as well. Planning for CPA Practice. Carey (1957d) stated that the ofﬁcers of the General Electric Corporation were reputed to spend 75 percent of their time planning. Carey conceded that there is a problem with applying a business concept such as planning to a professional practice. Quite properly, we all have the conviction that while business is frankly conducted with proﬁt making as the principal objective, a profession’s main objective is service. A professional man by definition is more interested in rendering service than he is in making money. (Carey, 1957d, p. 4)

He continued by stating that, while all CPAs must make money to survive, the motivation is to provide a service to the public. Carey (1958a) pointed out that a CPA, especially during tax season, is so busy that he does not think about planning for his practice. However, time spent on planning would not be wasted.

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The Institute’s Executive Committee is giving much thought to improving the economic position of the CPA so that through more efﬁcient management of his practice he can invest more time in planning and self-improvement, study his client’s needs more closely, and participate in the affairs of his community and his professional societies, as professional men are expected to do. (Carey, 1957b, pp. 59–60)

Public Accountant. Carey had suggested that the problem of public accountants needed to be addressed in the near future. Carey (1958c) stated there were two significant problems with ‘‘public accountants’’. The ﬁrst was that the title ‘‘public accountant’’ is so similar to CPAs that it is confusing to the general population. Second, the ‘‘public accountant’’ is performing the ‘‘professional accounting function of adding credibility to ﬁnancial data without having demonstrated professional competence through education, experience, and the passage of technical examinations’’ (p. 31). In many states at that time, anyone, regardless of qualiﬁcations, could assume the title of ‘‘public accountant’’. While it was recognized that bookkeeping and tax work would undoubtedly continue to be performed by ‘‘public accountants,’’ Carey determined that the profession should consider the objective of limiting the auditing function leading to a professional opinion to CPAs. Tax Practice Carey discussed the increasing complexity of the tax code and the growing amount of a CPA’s practice that is devoted to it. Carey (1946b) described the problems with the American Bar Association over ‘‘the unauthorized practice of law’’. Carey extolled the need for future support of the National Conference of Lawyers and CPAs to mediate differences between the two professions. Future support would involve: 1. Organization of local conferences of lawyers and certiﬁed public accountants paralleling the National Conference. Local groups have already begun to organize in Wisconsin, Oklahoma, Texas, and New York. 2. Scrupulous observance by certiﬁed public accountants of the declarations of principle by the National Conference that certiﬁed public accountants should not prepare legal documents such as articles of incorporation, corporate by-laws, contracts, deeds, trust agreements, wills and similar documents. 3. Evidence of goodwill-accountants should not criticize lawyers to their mutual clients, and accountants should consult lawyers, for the client on legal questions. (p. 5)

Carey (1956d) said that tax work had been estimated to account for possibly one-third of a CPA’s practice and fees. When the tax laws were ﬁrst enacted, accountants had very little competition from the lawyers. However, Carey

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foresaw potential litigation problems, and warned the accounting profession that, even though many accountants had not encountered any problems to date, they should take this threat seriously, for the following reasons: If you disagree with your client about your fee, his lawyer may advise him not to pay, on the ground that you were practicing illegally. There have been many instances of this kind, including a number in New York. As word gets around, CPAs may encounter more and more resistance of this nature. According to bar association spokesmen, if your client suffers a loss on a tax matter due to your mistake, he may sue you for recovery of the loss on the ground that you engaged in illegal practice of the law. Businessmen don’t like to get involved in trouble and risk. The more lawyers talk about this subject the more businessmen hear of it. If they begin to doubt whether CPAs’ tax practice is strictly ‘‘legal’’, they may turn to lawyers, even though it costs more. More and more lawyers are now training for tax practice. More than 20 per cent of the present graduating class in the Harvard Law school plan to go into it. (Carey, 1956d, p. 19)

Carey (1956d) advised accountants to ‘‘organize, plan, work, and ﬁght, if necessary’’ (p. 19). Carey thought that the Treasury Department would clarify the right for CPAs to practice, but it might take an act of Congress to settle the matter. Until that time, in the 1960s, when Treasury Circular 230 and Public Law 89–332 allowed CPAs to practice before the Tax Court, Carey continued to admonish accountants to look toward the future. Meanwhile, the profession must work on two fronts: ﬁrst, to continue its constructive program for building public conﬁdence and prestige, through raising ethical and professional standards, continuing education, public service, and similar activities; and secondly, it must be continually in readiness to defend itself in the courts, before the Treasury, in Congress and before the bar of public opinion, if necessary. (Carey, 1956d, p. 20)

In discussing the future, Carey stated, I have a feeling that there will be more cooperation between lawyers and CPAs in actual tax practice at the local level than there has been in the past. There will be more referrals to CPAs and more referrals to lawyers by CPAs as time goes on, but no diminution in volume. Perhaps there will even be a greater volume. (Carey, 1957d, p. 9)

Management Services Carey has said that there was a growing need for management services. In April 1961, the Committee on Long-Range Objectives submitted the following objective to the Council of the Institute for approval (see Appendix H

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for a list of objectives and implementations of the Committee on LongRange Objectives): It is an objective of the Institute, recognizing that management service activities are a proper function of CPAs, to encourage all CPAs to perform the entire range of management services consistent with their professional competence, ethical standards and responsibility. (Carey, 1965)

Carey (1965) pointed out that this policy would require further implementation, and the starting point would be the development of a conceptual foundation. I think this is the key to our problem: That management, especially in the larger businesses, has found that decision-making, which is the big job, can’t be a matter of just subjective judgment, experience, know-how acquired years ago, or a ‘feeling for things.’ If decision-making is competitive, it has to be based on the selection, analysis and evaluation of data. Most of that data is of an accounting nature. (Carey, 1958a, p. 9)

Carey then described the American Management Associations’ (AMA) business war games, played by 20 company presidents in New York. The AMA based their game on the methods used at the War College and the Navy College, who train their ofﬁcers with it. Carey contended that the information used in the AMA business war games was accounting information. ‘‘The certiﬁed public accountant is the only person available who can produce this kind of data for small business men and show them how to use it in making their decisions from period to period’’ (Carey, 1958a, p. 10). While the management services function was growing, the possibility of an independence problem did not seem to concern many individuals. Carey was once asked if the concept of independence conﬂicts with management service. Carey replied: Well it seems to. But again I think it is a lack of definition of terms. What do you mean by management services? What does anybody mean, nobody’s ever deﬁned it. The partner in charge of the management services division, of one of the biggest ﬁrms in the country, said the other day that 85% of the work he does in his management services division, his ﬁrm did before they had a management services division. In other words, they’ve taken over the cost accounting, the systems, the procedures, the internal control, reviews, the mechanisms that all of them, almost all accounting and auditing ﬁrms used to do before they invented this somewhat glamorous and ill deﬁned term management services. I sort of wonder sometimes whether they didn’t invent that term, which only came into our vocabulary in about ’45, after the war, because they thought maybe accounting and auditing wasn’t very glamorous. And if they used these words, management services, they might get some of the status that at the time seemed to be attaching to the management consultants. But in my book, this description that I mentioned before embraces the conversion of data into information. And I venture that 90% of the management service, 95, 98% of the management services that these ﬁrms

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render, fall within that scope. Attention has been attracted to the peripheral services like executive recruiting. (Michigan State University, ca. 1965)

Carey (1948a) stated that business had a widespread need for advice on accounting systems, budgeting, cost systems, ﬁnancial controls, internal controls, and dividend policies. He also mentioned labor relations, pricing policies, public utility rate making and compliance with government regulations as areas with which accountants could assist management. A CPA might be the only one who could help small- and medium-sized companies who would not have a separate department for such matters. Carey (1948a) provided a laundry list of possible types of management service that he said would be wholly appropriate for CPAs to offer to their clients: Organization and coordination of ofﬁce procedure Clerical procedures and methods Job evaluation and personnel assignments Accounting and statistical records Inventory control Internal control and accounting for cash Cost control Ofﬁce lay-out and equipment Form design and control Employees and Ofﬁce Manuals Budgetary control Wage and salary stabilization (p. 8)

Carey (1946b) compared management services of CPAs to management engineers and professional directors, stating that they are young careers, but may compete with CPAs. Structure of the Profession Carey examined the CPA legislation currently in place and made recommendations for improving the requirements in the future. Carey (1967a) found that the principal objectives of the state legislation of the CPA profession were (1) to preserve the integrity of the CPA certiﬁcation as a level of competence, and (2) to distinguish between CPAs, who had achieved that level of competence, and those other accountants who had not. The purpose

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behind establishing this certiﬁcation of accountants is to protect the public interest. Carey (1957b) urged the state societies to work with the Institute to promote the profession. There are many ﬁlms and pamphlets of the Institute that should be utilized by guidance counselors and members to recruit students into accounting programs. This advice is as relevant today as it was then. Model CPA Law of the Future. Carey (1967a) recommended the following suggestions to create a model CPA law of the future: 1. In the ﬁrst place it should be uniform throughout the country. 2. The experience requirement should be eliminated, except as an interim substitute for advanced education. 3. The educational standard ultimately would be a broad education at the undergraduate level and a master’s degree in business administration with a concentration in accounting. 4. The content of the CPA examination would be based on the recommendations of the Common Body of Knowledge Study. 5. The CPA certificate would, therefore, be regarded as evidence of competence to enter the profession, not necessarily to practice it. 6. The ethical standards and disciplinary provisions of the law and board rules should be strengthened and actively enforced. 7. Out-of-state CPAs would be permitted to practice freely. 8. The CPA law of the future should not permit anyone except CPAs (and public accountants licensed as a transitional class) to offer services to the public under the title of public accountant, independent accountant, accountant or auditor. (pp. 49–50)

These suggestions, to date, have not been fully adopted, although efforts are continuously being made to strengthen the value and importance of the CPA certiﬁcation. In 1967, Carey (1967a) recommended a ‘‘Commission on State Accounting Legislation’’. He advised that it be composed of representatives of organizations with an interest in the competence of the accounting profession, such as the Institute, the SEC, the American Accounting Association (AAA), and several others. Robert Drakert (1967), a member of the AICPA, called Carey’s ideas, which were voiced in ‘‘Accounting Legislation of the Future,’’ ‘‘refreshingly provocative thoughts’’(p. 27) that all CPAs should consider. Drakert, a regional manager with the U.S. General Accounting Ofﬁce, stated that Carey’s proposed Commission on State Accounting

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Legislation should also include representatives of the federal government if it was to speak for all of the profession. AICPA Plans for the Future. Carey (1957d) stated that the AICPA should have a ten-year plan, with a broad general objective ‘‘to bring about full recognition of certiﬁed public accountants as a profession of the ﬁrst rank, with maximum opportunities for service of the highest caliber of which its members are capable’’ (p. 12). One step toward the goal of public understanding of the difference between CPAs, bookkeepers and clerical technicians was taken when the AIA decided to change its name to the AICPA (Carey, 1957b). Carey (1957d) charged that another goal for the Institute should be to recruit as many practicing CPAs as possible who are not currently members into the Institute. To do that, the Institute must provide a beneﬁt for them. Carey also acknowledged that a CPA who goes into private industry and chooses not to practice public accounting, does not surrender his professional qualiﬁcations. He is still recognized as a CPA. There had been considerable dissension over this because the Institute adopted the following statement, It is an objective of the Institute to serve as the national organization of certiﬁed public accountants in and out of public practice, and to develop and maintain the form of organization best adapted to the needs of all its members. (Carey, 1958c, p. 30)

Educational Requirements ‘‘To meet the public needs, CPA laws should provide assurance that the higher levels of competence, judgment and professional responsibility which the changing environment will require are possessed by the CPAs of the future’’ (Carey, 1967a, p. 48). Education for CPAs. Carey (1961b) claimed that, ‘‘Certiﬁed public accountants have become recognized as members of a true profession, but they have not yet quite achieved recognition as a great profession – a learned profession’’ (p. 47). This argument was used by Carey to encourage more stringent requirements for education and continuing education. Carey observed that learned professions have a ‘‘broad foundation of formal education, postgraduate academic training, and facilities for continuing education or refresher courses for practitioners’’ (p. 47). However, Carey cautioned that educational requirements should not be too rigid or too speciﬁc, or they may deter colleges from expanding the curriculum. This would discourage many from entering the profession. Carey (1967a) believed in a broad foundation in education and an advanced

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degree in accounting as the best preparation for becoming a CPA. ‘‘The man with a bachelor’s degree in liberal arts or science and a master’s degree in business administration is considered an excellent prospect for the accounting profession’’ (p. 48). While there are those individuals who choose that path, Carey’s recommendation has not been widely accepted as the best path to becoming a CPA. Nevertheless, the AICPA honored Carey at his retirement by establishing the John L. Carey Scholarship fund, for liberal arts majors to obtain a masters level degree with a concentration in accounting (John L. Carey Scholarship Fund to be Awarded to Yale Seniors, 1969). In addition, Carey promoted the aptitude test project to encourage students who show an interest in accounting. Carey (1948a) explained, ‘‘The ﬁrst two levels of achievement tests, along with both the aptitude and vocational interest tests, are now available to any college accepted as a cooperating institution by the Institute Committee’’ (p. 9). Because accounting is a young ﬁeld, there is a need to attract qualiﬁed persons into the profession. This program has aided in the early identiﬁcation of students with the ability to succeed in accounting. The program has not been continued. Higher Education. Carey (1961b) claimed, ‘‘The recognition of certiﬁed public accountants as members of a learned profession is also delayed by the fact that the profession as a whole is not required to meet a high standard of learning’’ (p. 47). There was no incentive for a person to achieve advanced study, beyond the passing of the CPA exam. And while Carey reported that 85 percent of successful CPA candidates have college degrees, most states, at that time, did not require a college degree. It was suggested by Carey (1961b) that business schools broaden their liberal arts curriculum to include mathematics, science and studies of human nature, economics, political science, and the social environment. With the rapid expansion of human knowledge in all ﬁelds, and the simultaneous increase in complexity of accounting practice, it seems clear that a four-year undergraduate course is no longer a sufﬁcient educational basis to command recognition of CPAs as a learned profession – or, indeed, to equip them to meet the demands of the immediate future. (p. 48)

Carey also mentioned the idea of a ﬁve-year curriculum. This would include a strong liberal arts base, and the necessary accounting and business courses. This idea has been adopted and promoted by the AICPA, and many colleges and universities throughout the country have ﬁve-year programs. Continuing Education. Carey also campaigned for a continuing education program. ‘‘The professions themselves have a responsibility for encouraging

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the continuing education of their members after qualiﬁcation’’ (Carey, 1961b, p. 49). To this end, the AICPA developed a comprehensive continuing education program. The organization began developing courses in 1956; and in 1959, devoted a full-time staff to the program. ‘‘But again, the question of incentive for continuing education arises. How many certiﬁed public accountants will study for the intangible, indirect beneﬁts of self-improvement? Would some formal credit or recognition that might enhance their prestige and increase their earning capacity be an added incentive?’’ (p. 49). Carey (1957b) suggested that practitioners must keep up with current techniques by the ‘‘life-long process of education’’ (p. 58). In the late 1950s, Carey’s exhortations led to continuing education courses becoming available from the Institute for use by state societies and groups of CPAs. These courses included report writing, administration of a tax practice, and accountant’s legal responsibility. Carey explained that there were other courses being developed. He foresaw a time when the course development and administration aspect would be spun off into its own separate entity, similar to the Practicing Law Institute for the legal profession. Carey (1957d) urged the profession to set up local continuing education facilities ‘‘for CPAs to go back to school again for a week or two weeks, maybe in the summertime, and learn about new developments. Learn about what other people are doing in the ﬁeld of management services, for example’’ (p. 13). While the administration of course development and continuing education requirements are not a separate entity from the AICPA, the acquisition of continuing profession education (CPE) is required for all CPAs. Many CPE requirements can be fulﬁlled at the local level, as suggested by Carey, provided they are approved courses. Higher Accreditation. The Institute’s Committee on Long-Range Objectives believes that a system of higher accreditation would supply the needed incentive for self-improvement and professional development on the part of large numbers of CPAs, which in turn would raise the general level of competence. (Carey, 1961b, p. 50)

The Committee deﬁned higher accreditation as some form of recognition within the profession of those individuals who demonstrate superior knowledge, ability and professional competence. Carey (1961b) revealed that the purpose of the accreditation would be ‘‘to provide an incentive for continued study, self-improvement, and professional development by certiﬁed public accountants’’ (p. 50).

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The Committee had proposed certain basic conditions for establishing a system of higher accreditation of CPAs: At the outset the accreditation would apply only to CPAs in practice, where the need is most evident, and to teachers, who have so large a part to play in the formulation and transmission of the body of knowledge with which practitioners deal. The system must apply to all CPA practitioners. It must not be designed to search out only a relatively few outstanding individuals. The recognition must be reasonably attainable. If it is so difﬁcult to attain as to be impracticable for the average practitioner with the will to improve himself, it will not serve as an incentive to study to a large proportion of the members of the profession. Though reasonably attainable, the accreditation must have significance. It must be conﬁned to certiﬁed public accountants who demonstrate the qualities of members of a learned profession, if the system is to serve its purpose. The higher accreditation must not be competitive with the CPA certificate. It is not intended as a ‘‘super degree,’’ but rather as a strictly intra-professional recognition of members who demonstrate the required qualities. The system of higher accreditation should be sponsored by the American Institute of Certiﬁed Public Accountants and administered within the Institute, since the system should be an integral part of the over-all professional structure. (Carey, 1961b, p. 51)

Carey argued that there were precedents in other professional ﬁelds. He cited the specialty boards of the medicine, of which there are more than 20. He also mentioned the American Society of Actuaries and the Institute of Cost and Works Accountants, in Great Britain, both of which have Fellow and Associate designations. Carey suggested the Institute organize an Academy of Certiﬁed Public Accountants, with three areas of emphasis – auditing, tax accounting, and management accounting services. While a system of accreditation has not been universally accepted, the AICPA does have several specializations for CPAs, including the Accredited in Business Valuation (ABV) program, the Personal Financial Specialist (PFS) credential, and the Certiﬁed Information Technology Professional (CITP) (AICPA Career Opportunities, 2006). Carey (1961b) promoted the minimum standards that were considered necessary for the higher accreditation: Accreditation should be open only to certiﬁed public accountants who are members of a state society of certiﬁed public accountants and of the American Institute of Certiﬁed Public Accountants. An educational standard of at least a bachelor’s degree from an accredited college or university should be required.

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At least ﬁve years satisfactory experience in public accounting or in the teaching of accounting at the college level should be required. Mastery of the ‘core’ subjects might best be demonstrated by a written examination, and the possession of some of the required professional qualities might best be demonstrated through oral examination. Competence in the ‘core’ areas as well as in one of the three broad ﬁelds of practice might be indicated by these publications, and in the practice ﬁeld by written reports of cases actually dealt with by the candidate. A point system of credits might be devised. Points could be given for advanced academic degrees, for completion of continuing-education courses, attendance at graduate study conferences, articles in professional journals, papers prepared for delivery at professional meetings, or other professional achievements. In any event there would be an investigation, through written communication with references, of the character and conduct of the candidate. A personal interview would be indispensable to determine the personal and professional qualities of the candidate. (pp. 52–53)

Carey admitted that this possible approach to higher accreditation should be altered in the future. But for the time being, what is immediately needed is the simplest, broadest program, and one which is the easiest to administer – a program which will stimulate the largest number of CPAs at the earliest possible time to undertake continuous advanced study and systematic self-improvement (Carey, 1961b, p. 53). The objective for a system of higher accreditation and the creation of an Academy was the only objective that was rejected by the Council of the AICPA. However, portions of the plan outlined by Carey have come to pass. For instance, the Business Valuation and Forensic & Litigation Services Center is a part of the AICPA devoted to specialty services in business valuation and the areas of forensic accounting and litigation. There is also the Personal Financial Planning Center, which provides resources for ﬁnancial planning. Carey advocated specializations, which are now available, such as the AICPA-credentialed PFS. Discipline of Members. Carey (1967a) stated that the CPA laws and the state board rules issued under them are ‘‘the foundation of professional discipline’’ (p. 48). For the laws to provide an assurance of competence, however, professional misconduct must result in disciplinary action. Carey (1967a) stated that simply expelling members from the Institute and state societies was not enough. ‘‘Once expelled, a member can continue to practice as a

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CPA unless and until his state board takes action against him’’ (p. 49). The Treasury Department had amended Circular 230 to provide for complaints of unethical conduct among those practicing before the Internal Revenue Service. Opportunities After discussing what possibilities for staff accountants existed at the time, Carey (1947h) provided some insight to the future of the accounting profession. ‘‘What the profession will offer tomorrow will depend in large measure on whether the staff man of today measures up to his responsibilities, retains the public conﬁdence which his predecessors have won, and solves the problems which still lie ahead. The future is in your hands’’ (p. 282). Carey (1957b) continued by extolling the accounting members, But eventually the problem is yours. To beneﬁt, each CPA must read what his state society sends him, attend meetings, study, think, plan, communicate – do his share of the organization work. Unless the individual CPA will do these things, no one can help him grow and develop with our expanding economy – get his share of the good things of life and the satisfaction of playing a creative part in the most exciting times in the world’s history. (p. 60)

CONCLUSIONS John Carey (1936) presented a speech in the morning session of the 1936 annual meeting on August 28, 1936. He reported on what the ‘‘state of the public accountancy profession’’ might be at a point in time 20 years in the future. Carey also talked about how many CPAs there would be, and how many would belong to the Institute and state societies. He predicted high standards of work ethics, the absence of bidding for professional accounting work, and uniformity among the CPA laws. In this somewhat utopian world, ‘‘the national organization maintains intimate relations with national associations of bankers, investment bankers and credit men, with the bar association and with stock exchanges, as well as with other business, professional and trade associations’’ (p. 23). The Institute would support the continuous program of public education, and the value of professional education would continue to rise. From that speech made early in his career, John Carey embarked on a life-long task of encouraging CPAs, practitioners, Institute members, and potential members to look to the future. In many of the articles and speeches that Carey penned, he extolled the reader or listener to progress toward the

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greater good for the accounting profession. Carey (1957b) cautioned against stagnation, saying, ‘‘CPAs who intend only to go on doing the things they have always done, in the way they have always done them, may ﬁnd themselves far behind the procession in the next 10 or 20 years’’ (p. 58). While some of Carey’s ideas have fallen on the ‘cutting room ﬂoor,’ many have been implemented and have had a significant impact on the accounting profession today. A model CPA law was discussed by Carey. He recommended that requirements for CPAs be uniform throughout the country. Because those requirements are established by the state boards, uniformity has not yet been achieved. Reciprocity, experience requirements, and a broader undergraduate education were other topics which Carey felt needed improvements, and where changes have been made since Carey’s writings. In the area of education, Carey advanced several new ideas. Carey promoted an aptitude test to target those students with an interest in accounting. While it was used to recruit accounting students when there was a shortage of qualiﬁed accountants after WWII, the program is no longer being used today. Carey promoted a ﬁve-year curriculum, which many colleges and universities have adopted, to meet the state board requirements of 150 hours of post-secondary education. For many years before it became a formal program, Carey had argued for continuing professional education for CPAs to maintain their skills and knowledge. Carey and the Committee on Long-Range Objectives favored additional accreditation and specializations for the accounting profession, beyond the CPA certiﬁcation. Not only does the AICPA have additional specializations, but there are also many other certiﬁcation programs, independent of the AICPA, such as the Certiﬁed Management Accountant (CMA) or Certiﬁed Financial Manager (CFM) credentials administered by the Institute of Management Accountants, Certiﬁed Internal Auditor (CIA) governed by the Institute of Internal Auditors, and many other specializations in accounting. Carey discussed the growing need for management accounting services, as an additional function of CPA ﬁrms. He argued that CPAs had been performing management services for their audit clients for many years, without labeling them as such. However, today, with the passing of the SarbanesOxley Act of 2002, many management services are prohibited for CPA ﬁrms’ audit clients. Carey felt that the title ‘‘public accountant’’ was misleading and confusing to the public, and wanted restrictions placed on its use, such as an examination and education requirements similar to CPAs. However, this never came to pass. There are many public accountants in private practice today.

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Carey (1947h) concluded many of his articles with the need to look to the future. ‘‘In examining his opportunities, a young man also has to think of what conditions may be like ten years or twenty years from now’’ (p. 281). By doing so himself, Carey was able to move the ﬁeld of accounting closer to that utopia he envisioned so many years ago.

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CHAPTER 9 SUMMARY AND CONCLUSIONS What implications do the history of the accounting profession and the biography of one of the most inﬂuential persons in the Institute have on today’s accounting profession? Consider the Sarbanes-Oxley Act of 2002. Most people would agree that the Act came about because of the publicity related to Enron, WorldCom, Tyco, and many other company scandals. These very public frauds, perpetrated on the public, and in part, aided by the accountants, both public and within the companies, have damaged the trust and conﬁdence placed in the accounting profession that had taken over 100 years to build. A significant portion of John Carey’s writings and speeches consisted of building and maintaining the reputation and accountability of the profession to the public. Carey was a defender of the accounting profession and an articulate spokesman for the American Institute of Certiﬁed Public Accountants (AICPA) Code of Professional Ethics and professionalism. The accounting profession could certainly use a man of Carey’s abilities today. This chapter summarizes the career of John Lansing Carey and his contributions to the profession of accountancy. First is a summary of his awards and honors. Second, a review of his service to the AICPA is conducted. Third, a discussion of the timelessness of Carey’s works is presented. Fourth, a discussion of the purposes of the study is examined. The chapter ends with some conclusions about the life and contributions of John Carey to the accounting profession.

SUMMARY OF AWARDS AND HONORS John Carey has been called Mr. Accounting Profession due to his many speeches and articles deﬁning, building, and reﬁning accounting into a profession. He has been the spokesman for the Institute and for certiﬁed public accountants around the world. Carey was awarded the AICPA Gold Medal Award for service to the accounting profession. He was the ﬁrst non-Certiﬁed Public Accountant (CPA) 175

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to receive the award (Accounting Hall of Fame, 2004). Carey was inducted into the Accounting Hall of Fame in 1968. This honor is especially remarkable, considering the fact that there have been only four non-CPAs, to date, to be so honored. Carey was the ﬁrst (Three Named to Accounting Hall of Fame, 1968). John Carey was listed in Who’s Who in America in 1956. This book is a listing of notable men and women who have come into the public eye. Carey was inducted as an honorary member of Beta Alpha Psi in 1937. Beta Alpha Psi, an accounting honor fraternity, was originally established in 1919. Carey was inducted by the Delta chapter at the University of Washington. Carey’s views concerning a well-rounded education for accountants was so well respected that, at Carey’s retirement, a scholarship was created in his honor. The John L. Carey Scholarship is awarded to undergraduate liberal arts students who wish to continue their education with a graduate degree in accounting. Up to seven $5,000 scholarships have been awarded each year. Both the AICPA and the Robert Morris Associates honored Carey with resolutions presented to him. The Institute’s resolution praised Carey for ‘‘his many notable contributions, not only to the Institute, but to the entire accounting profession’’ (AICPA, 1969, p. 9). Robert Morris Associates recognized Carey for ‘‘his many contributions to a better understanding between bankers and certiﬁed public accountants, brought about by his leadership y’’ (Robert Morris Associates Honors John L. Carey, 1969). A short synopsis of Carey’s life was published in the second edition of Biographies of Notable Accountants in 1989. The editor, Abdel M. Agami (1989), stated in the preface, ‘‘This volume contains biographies of eighteen notable accountants who have had a significant inﬂuence on accounting during the period from 1548 to the present, an important period in the life of our profession’’ (p. iii). In the Centennial Issue of The Journal of Accountancy, in May 1987, Carey was listed as one of the 14 leaders of the accounting profession. ‘‘Fourteen of them have made especially important contributions to the betterment of the profession. They have improved its organization, raised its standards, enriched its literature or campaigned for reform’’ (Zeff, 1987, p. 46).

SUMMARY OF SERVICE TO THE INSTITUTE AND THE PROFESSION The American Institute of Accountants (AIA) hired John Carey in 1925 as assistant secretary four days after his graduation from Yale with a bachelor’s degree in English. He was promoted to the position of secretary ﬁve years later. Due to the tremendous growth of the Institute, his job

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description was expanded to executive director in 1948. In 1967, the title of his position was changed to administrative vice president, in which capacity he served until his retirement in 1969. Carey’s duties as administrator were many and varied. One of those duties was to supervise the staff activities of the Institute. Stephen A. Zeff (1987) stated, ‘‘Carey was responsible for establishing continuity in the Institute’s operations because elected ofﬁcers typically held one-or two-year terms’’ (p. 59). In addition, he sat in as secretary of all of the committee meetings. Carey traveled around the country and the world in his capacity as the chief administrative ofﬁcer of the Institute. He delivered addresses and presentations at state society meetings, civic organizations, conferences, and the annual meetings of the Institute. Herbert Miller, when interviewing Carey for the Distinguished Accountants Lecture Series, said of Carey, ‘‘Because the Executive Director of the Institute is a popular and persuasive speaker, he has crossed and criss-crossed our nation in that role. Surely over 80% of our practicing CPAs have been in one of his audiences sometime, somewhere’’ (Michigan State University, ca. 1965). In addition, Carey conferred with governmental ofﬁcials and Congressmen and attended congressional hearings, at which important accounting issues were involved. Carey became the managing editor of The Journal of Accountancy, beginning in 1937. In 1949, he was promoted to editor, and then, in 1954, to publisher, a position he held until 1966. During his tenure, the content, size and number of subscribers of The Journal increased. In 1968, Carey was elected Vice President of the American Accounting Association (AAA). At that time, he was the only ofﬁcer of the AAA who was neither an accounting academic nor an accounting professional (Accounting Hall of Fame, 2004).

TIMELESSNESS OF CAREY’S WRITINGS Carey wrote eight books, six chapters in books, and at least 193 articles. He wrote three books on ethics of the accounting profession, two on accounting history, and two about the future of the profession. Carey wrote about many different topics. The three most prevalent themes in his writings are promoting accounting as a profession, instilling and improving the profession’s code of ethics, and accounting’s need for a plan for the future. Many of Carey’s articles defended the actions of the accounting profession and the Institute while attempting to improve the ethics and policies of the profession. One of the most important disputes,

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which Carey worked toward resolving, was the rights of CPAs in the practice of taxation. Carey was one of the accounting profession’s strongest voices in the ﬁght for CPAs to continue to do tax work. One of the most significant indications of the timelessness of Carey’s writings is the fact that he is still being cited today. The Social Science Citation Index (SSCI) has a listing of 244 citations in which authors have cited Carey. Most often cited are Carey’s two-book series on accounting history, The Rise of the Accounting Profession, followed by The CPA Plans for the Future and his books on ethics. The SSCI, while indicative of how often Carey was cited in professional and educational journals, explains only a portion of the significance of Carey’s writings. Other works, such as textbooks and popular press articles also cite Carey’s books and articles. In addition, many of Carey’s editorials, written while he was in charge of The Journal of Accountancy, have been cited without mentioning Carey’s name. Even Carey himself quoted several of his editorials without mentioning that he was the author of those editorials. One of the most well-known quotes about the McKesson & Robbins scandal was in the editorial by John L. Carey (1939e), Like a torrent of cold water, the wave of publicity raised by the McKesson & Robbins case has shocked the accountancy profession into breathlessness. (p. 65)

Despite his English degree from the prestigious Yale University, Carey was able to write in a manner that was plain-spoken and to the point. He described events and scandals of the accounting profession as opportunities and challenges to be overcome. He talked to the practitioner accountant, discussing everyday topics and concerns, in a language that encouraged the reader to ponder the subject and, perhaps, respond in a letter to the journal. John Carey did not train as an accountant. He did not practice accounting. He wrote very little on technical accounting topics. Yet, during his career he had a significant impact on the practice of accounting and especially the recognition of accounting as a profession. (Dillon, 1980, p. 17)

PURPOSE OF THIS STUDY In Chapter 1, four goals were deﬁned for this study. The ﬁrst was to demonstrate the role of John Lansing Carey as a leader among accounting professionals. Chapters 2–4 discussed the life of John L. Carey, together with a history of the accounting profession and the AICPA. Carey’s role in the management of publicity during times of crisis of the accounting profession

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was explored. This study demonstrated that Carey spun the publicity of the accounting profession during times of crises in such a way that the profession grew stronger still. For instance, he aided in the resolution of the rift between the legal and accounting professions regarding tax practice. Carey fought hard against government regulation, citing the problems of the minimums set by the government becoming the standard and accountants working no harder than those standards set by the government (Carey, 1940b, p. 4). As a permanent ofﬁcer of the AIA and its successor, the AICPA, he smoothed the annual transitions between the outgoing and incoming group of ofﬁcers. He acted as secretary for all committees of the Institute, thereby maintaining an avenue of information concerning the pulse of the organization and the accounting profession. He then relayed that information to the accounting practitioners and the public to emphasize the progress of improvements in the development of accounting into a learned profession. The second purpose of this study concerns the lasting impression that Carey’s writing has made on the accounting profession. One of the ways to understand the impact of Carey’s works is through citation analysis. Using citation analysis, an examination of those authors who have cited John L. Carey was conducted. As demonstrated in Chapter 5, John Carey’s works have been cited frequently and continue to be cited today, in accounting journals, in the journals of other professions, and even the popular press. A third purpose of this study was to expand the body of accounting history. This biography of John Lansing Carey represents an important addition to the body of historical literature of the accounting profession. Chapter 2 reviews Carey’s life and highlights the important events and his accomplishments. The ﬁnal purpose of this study was to organize, examine, and analyze the works of John Lansing Carey. He is most known through his writings and his speeches. Carey was a well-known ﬁgure at the annual conventions and traveled throughout the country promoting the accounting profession. The appendices to this study include a catalog of Carey’s books, chapters, articles and speeches. Chapters 5–8 provide an analysis of his important works that demonstrate the significant impact Carey had on the accounting profession and its practitioners.

CONCLUSIONS The accounting profession has implemented many ideas that were promoted by Carey. Carey advanced the concept of continuing education, stating that

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the CPA examination procedures were the minimum requirements necessary to enter the ﬁeld. Additional education was essential to maintain the skills and to remain current on the standards and expertise of the profession. Today, a continuing professional education requirement is required on an annual basis, for all CPAs. Carey also promoted a ﬁve-year curriculum, stating that a broader education was needed by accountants. He specifically argued for a liberal arts undergraduate degree with a graduate degree specializing in accounting. While very few CPAs seem to take that path, a 150-hour post-secondary educational requirement has been encouraged by the AICPA and adopted by a majority of the state boards and jurisdictions before a candidate can take the CPA examination. ‘‘Because accounting is a dynamic profession, statutes requiring 150 semester hours of education to become a Certiﬁed Public Accountant should be ﬂexible enough to allow diversity in the content of educational programs’’ (AICPA/NASBA Guide Implementing the 150-Hour Requirement, 2006). Many colleges and universities have instituted a ﬁve-year curriculum, to encourage their students to fulﬁll the 150-hour requirement. Carey had also recommended specialization of accountants, above and beyond the acquisition of the CPA certificate. Today there are many certiﬁcations and specializations within the accounting profession. Many CPAs hold multiple certiﬁcations, although the CPA certiﬁcation is still regarded as the most encompassing and prestigious among them. Some of Carey’s recommendations have not been implemented, to the detriment of the profession. The need for uniformity of the CPA examination requirements, nation-wide, was a concept that Carey pursued in his writing and speeches. Each state board sets their own requirements as far as education and experience is concerned. The AICPA, and its predecessors, the American Association of Public Accountants (AAPA) and the AIA, have always had, as one of its responsibilities, to assist in coordinating the actions of the many state boards and societies. But, not all jurisdictions have adopted the 150-hour requirement. Some have experience requirements to sit for the exam, to obtain a CPA license, or both. The National Association of State Boards of Accountancy (NASBA) ‘‘serves as a forum for the 55 U.S. boards of accountancy’’ (NASBA Welcome, 2006). NASBA conﬁrms the inconsistencies in the states’ requirements: ‘‘To obtain a license from a state board of accountancy, you must meet all of the state’s requirements for licensure. Licensure requirements vary from state to state. Most states have education, examination and experience requirements and some have ethics requirements’’ (AICPA/NASBA Guide Implementing the 150-Hour Requirement, 2006).

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Another problem identiﬁed by Carey and related to the aforementioned state boards, concerned the practice of CPAs outside the state of their certiﬁcation. Carey’s contention was that if state CPA requirements were uniform, a CPA should be able to practice ‘out-of-state’ freely. However, reciprocity is not available today in all states, due to unequal requirements for CPAs in the 55 jurisdictions. Carey also encouraged the elimination of the experience requirement, sometimes substituted for the educational prerequisites. All of these problems identiﬁed by Carey – lack of uniformity in educational, experience, and examination requirements, which has led to a problem with reciprocity – undermine the professional quality of the CPA certiﬁcation. Despite the fact that some of Carey’s suggestions were ignored, he had a tremendous effect on the accounting profession through his work at the Institute, through his writing, and through his speeches and public appearances. Perhaps another individual, in the same position, could have had a similar impact; that cannot be known. What is apparent is that the accounting profession was quite fortunate that John L. Carey joined the Institute staff in 1925 and remained there for 44 years. (Dillon, 1980, p. 16)

Some may ask whether Carey was just a mouthpiece for the Institute or whether he was the driving force behind it. Yet Bea Sanders (2005) has no doubts. She stated, ‘‘If a CPA had been in that role, during that time, I don’t think the profession would’ve developed the way it did, because he was a person with broad insights’’ (p. 7). Don Schneeman (2005), Director of Ethics at the Institute, concurred with the assessment of how important Carey was to the Institute and to the profession: He was the right man at the right time, and I think the problems that the profession is [sic] now going through, might have happened sooner if we didn’t have a John L. Carey then. People are human, they are not saints, and he was trying very hard to make these humans into saints. I talked to a guy that was on the committee that set up the FASB because the pressure was for Congress to come in and set up accounting standards. I said, ‘‘Will this work?’’ And he said, ‘‘for a period of time, but not forever. There is just too much pressure from people being human’’. And I think it is to Carey’s credit that he kept those wolves away from the door as long as he did. He was a great visionary; there was no question about it. He was the single most important person in the profession. He was more important than any one of the heads of the big eight ﬁrms. And he was probably more important than all eight of them because there were times when he would get into a hassle with them, and sit down and they’d work things out, and he usually got his own way with them. (p. 5)

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John L. Carey devoted his entire career to the accounting profession and became an advocate for ethical conduct of all accountants and practitioners. Marvin Stone said that Carey, ‘‘though not a CPA himself – has done more than any other person to further the cause of accountancy’’ (Kent, 1969, p. 2). He was respected by many for the work that he has done throughout his 44 years of service to the Institute and his life-long service to the accounting profession. This study demonstrates that Carey did have great insights and used his skill and inﬂuence to move the accountant from the role of technician to respected professional.

BIOGRAPHICAL SKETCH OF AUTHOR Dr. Laurie A. Barﬁtt, daughter of Arlene and David Cowden, was born in Geneva, New York, on October 1, 1957. She grew up in New England before moving to EL Paso, Texas in her junior year of high school. She graduated from Eastwood High School in 1975. She received her Bachelor’s of Business Administration with a major in accountancy from Texas Tech University in 1979. Dr. Barﬁtt’s ﬁrst job was with a public accounting ﬁrm in El Paso. She has held a variety of accounting positions in various companies throughout the United States, following her husband in his military career. She has worked as a staff accountant, ofﬁce manager, treasurer, and controller. During that time, she has been employed by two public accounting ﬁrms, a cemetery management company, a cosmetic manufacturer, and two real estate investment companies. Dr. Barﬁtt returned to the academic world, obtaining her Master of Professional Accountancy degree from Delta State University, in Cleveland, Mississippi, in 1998. She was awarded the Delta Chapter of CPAs Outstanding MPA Accounting Award and the John Quon Outstanding Master of Professional Accountancy Award. She was also elected a member of Delta Mu Delta, an honorary business organization. Immediately upon obtaining her Master’s degree she started teaching at Delta State University. While continuing to teach, she began working on her doctorate at The University of Mississippi in the summer of 2001. She ﬁnished her doctorate with the completion of her dissertation in June 2006. Dr. Barﬁtt, a certiﬁed public accountant and a certiﬁed management accountant, is a member of the following professional organizations: American Accounting Association, the American Institute of Certiﬁed Public Accountants, the Institute of Management Accountants, the Academy of Accounting Historians, the Mississippi Society of Certiﬁed Public Accountants, and the Association of Certiﬁed Fraud Examiners.

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Previts, G. J. (1985). Review of the accounting profession, years of trial: 1969–1980. The Accounting Review, 60(2), 335–336. Previts, G. J., & Bricker, R. (1994). Fact and theory in accounting history: Present mindedness and capital market research. Contemporary Accounting Research, 10(2), 625. Previts, G. J., & Merino, B. D. (1998). A history of accountancy in the United States: The cultural significance of accounting. Columbus: Ohio State University Press. Previts, G. J., Parker, L. D., & Coffman, E. N. (1990). An accounting historiography: Subject matter and methodology. Abacus, 26(2), 136. Proceedings of the Annual Meeting Held at Detroit, Michigan September 16 and 18, 1941. (1941). In: American Institute of Accountants (Ed.), Year-book of the American Institute of Accountants. New York: The Institute. Proceedings of the Annual Meeting Held at Kansas City, Missouri, October 18 and 19, 1932. (1932). In: American Institute of Accountants (Ed.), Year-book of the American Institute of Accountants (p. v). New York: The Institute. Proceedings of the Annual Meeting Held at Philadelphia, Pennsylvania, September 15 and 16, 1931. (1931). In: American Institute of Accountants (Ed.), Year-book of the American Institute of Accountants (p. v.). New York: The Institute. Proceedings of the Annual Meeting Held at Washington, D.C. and Atlantic City, New Jersey, September 17 and 18, 1918. (1918). In: American Institute of Accountants (Ed.), Yearbook of the American Institute of Accountants. New York: The Institute. Professional Responsibility of CPAs in Tax Practice Analyzed in Carey’s ‘Ethics’ (1957). The Journal of Taxation, 7, 56–61. Pusateri, C. J. (1988). A history of American business (2nd ed.). Arlington Heights, IL: Harlan Davidson. Rand, W. H. (1919). Report of the president of the American Institute of Accountants. In: American Institute of Accountants (Ed.), Year-book of the American Institute of Accountants. New York: The Institute. Reed, C. R. (1969). A friend of RMA retires. The Journal of Commercial Bank Lending, 51(8), 57. Reid, G. E., Acken, B. T., & Jancura, E. G. (1987). An historical perspective on women in accounting. The Journal of Accountancy, 163(5), 338–355. Report of Special Committee on Procedure. (1919). In: American Institute of Accountants (Ed.), Year-book of the American Institute of Accountants. New York: The Institute. Report of Special Committee on Procedure. (1921). In: American Institute of Accountants (Ed.), Year-book of the American Institute of Accountants. New York: The Institute. Report of Special Committee on Procedure. (1922). In: American Institute of Accountants (Ed.), Year-book of the American Institute of Accountants. New York: The Institute. Report of Special Committee on Procedure. (1928). In: American Institute of Accountants (Ed.), Year-book of the American Institute of Accountants. New York: The Institute. Report of the Executive Committee. (1918). In: American Institute of Accountants (Ed.), Yearbook of the American Institute of Accountants. New York: The Institute. Report of the Executive Committee. (1930). In: American Institute of Accountants (Ed.), Yearbook of the American Institute of Accountants. New York: The Institute. Report of the War Committee. (1918). In: American Institute of Accountants (Ed.), Year-book of the American Institute of Accountants. New York: The Institute. Report of the War Committee. (1919). In: American Institute of Accountants (Ed.), Year-book of the American Institute of Accountants. New York: The Institute.

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APPENDICES APPENDIX A. LIST OF BOOKS WRITTEN BY JOHN L. CAREY [IN CHRONOLOGICAL ORDER] With the American Institute of Certiﬁed Public Accountants. Professional Ethics of Public Accounting. New York, NY: American Institute of Accountants, 1946. Professional Ethics of Certified Public Accountants. New York: American Institute of Accountants, 1956. The Accounting Profession – Where Is It Headed? A Summary of Views on the Profession’s Future Developed by Members of the American Institute of CPAs’ Committee on Long-Range Objectives, 1956–1962. New York: American Institute of Certiﬁed Public Accountants, 1962. With the American Institute of Certiﬁed Public Accountants. Committee on Long-Range Objectives. The CPA Plans for the Future. New York: American Institute of Certiﬁed Public Accountants, 1965. With William O. Doherty. Ethical Standards of the Accounting Profession. New York: American Institute of Certiﬁed Public Accountants, 1966. The Rise of the Accounting Profession: From Technician to Professional, 1896–1936. New York: American Institute of Certiﬁed Public Accountants, 1969. The Rise of the Accounting Profession: To Responsibility and Authority, 1937–1969. New York: American Institute of Certiﬁed Public Accountants, 1970. Getting Acquainted with Accounting. Boston: Houghton Mifﬂin, 1972. With K. Fred Skousen. Getting Acquainted with Accounting. 2nd ed. Boston: Houghton Mifﬂin, 1977.

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APPENDIX B. LIST OF ARTICLES WRITTEN BY JOHN L. CAREY [IN CHRONOLOGICAL ORDER] ‘‘Moulding the Convention to Meet a Profession’s Requirements; Current Problems and Events Shape Accountants’ Programs.’’ World Convention dates (1934). ‘‘Things to Come.’’ Certified Public Accountant (1936): 520–521, 563. ‘‘Things to Come.’’ Bulletin of the American Institute of Accountants (1936): 21–23. ‘‘Address y Delivered at 3rd Annual Convention N.S.P.E.’’ American Engineer (1937): 5–6. ‘‘Professional Organization (in Michigan State College and the Michigan Association of Certiﬁed Public Accountants).’’ (Ed.) Fourteenth Annual Michigan Accounting Conference (1938): 1–7. ‘‘Accountancy and the Public.’’ The Accounting Forum (1940): 7–10. ‘‘Accountancy and the Public.’’ Certified Public Accountant (1940): 3–8. ‘‘Accountancy and the Public.’’ The Texas Accountant (1940): 1, 3–6. ‘‘Letter Sent to Institute of Chartered Accountants in England and Wales and Society of Incorporated Accountants and Auditors, on October 31, 1940, Regarding Children of English Accountants.’’ Accountant (Eng.) (1940): 441. ‘‘No Accounting for Taste.’’ (Ed.) Society of Louisiana Certified Public Accountants (1940). ‘‘No Accounting for Taste (in Quotes).’’ In: Members Council of New Orleans Association of Commerce (Ed.), Southern States Accountants’ Conference (1940). ‘‘Letter Sent to Institute of Chartered Accountants in England and Wales and Society of Incorporated Accountants and Auditors, on October 31, 1940, Regarding Children of English Accountants.’’ Certified Public Accountant (1941): 6–7. ‘‘The Accounting Profession in War.’’ The Journal of Accountancy (1942): 444–450. ‘‘The Accounting Profession in War.’’ New York Certified Public Accountant (1942): 470–476. ‘‘Contribution of Accountancy to the War Program.’’ The Texas Accountant (1942): 3–5. ‘‘Proﬁt in Wartime: What Is the Proper Basis for Renegotiation.’’ Credit and Financial Management (1942): 4–6. ‘‘Proﬁt in Wartime: What Is the Proper Basis for Renegotiation.’’ Trusts and Estates (1942): 276–277 (excerpts).

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‘‘Women Accountants.’’ Woman C.P.A. (1942): 67–68. ‘‘How to Secure Results in State Society Organization.’’ The Ohio Certified Public Accountant (1943): 10–12. ‘‘Independence (Correspondence between the Secretary of the American Institute of Accountants and Senator George D. Aiken) (Ofﬁcial Decisions and Releases).’’ The Journal of Accountancy (1943): 531–532. ‘‘Activities of the American Institute of Accountants.’’ In: Dominion Association of Chartered Accountants, 1944. ‘‘Activities of the American Institute of Accountants.’’ The Canadian Chartered Accountant 45 (1944): 212–219. ‘‘Brief History of the American Institute of Accountants.’’ North Carolina Association of Certified Public Accountants Souvenir Booklet of the 25th Anniversary Celebration (1944): np. ‘‘Building a Profession.’’ Massachusetts Society of Certified Public Accountants News Bulletin (1944): 9. ‘‘Building a Profession.’’ In: Accounting Problems of Business: Proceedings of Wartime Accounting Conference (Ed.), American Institute of Accountants, New Orleans (1944): 38–42. ‘‘Address before Annual Meeting of the Illinois Society of Certiﬁed Public Accountants.’’ Illinois Society of Certified Public Accountants Bulletin 8 (1945): 7–9. ‘‘Development of Aptitude Tests for Accountants.’’ The Accounting Review 20 (1945): 1–7. ‘‘Brief History of the American Institute of Accountants.’’ South Carolina Certified Public Accountant 4 (1946): 3–6. ‘‘Legislative Policy.’’ Certified Public Accountant (1946): 4–5. ‘‘Professional Ethics.’’ In: Contemporary Accounting (Ed.), American Institute of Accountants, chapter 23, (1946). ‘‘Public Accountants and Accounting Legislation.’’ Certified Public Accountant (1946): 1–2. ‘‘The Uncertain Future.’’ The Texas Accountant 18 (1946): 1, 3–6. ‘‘Competitive Bidding.’’ Certified Public Accountant (1947): 5. ‘‘Conﬂict between Accountants and Lawyers.’’ Certified Public Accountant (1947): 1–2. ‘‘Defalcation in Relation to Audit, Internal Control and Fidelity Bonds.’’ Controller 15 (1947): 127, 164. ‘‘Defalcation in Relation to Audit, Internal Control and Fidelity Bonds (Ofﬁcial Decisions and Releases).’’ The Journal of Accountancy 83 (1947): 353–355. ‘‘Institutional Advertising of Public Accounting.’’ Certified Public Accountant (1947): 4–5.

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‘‘National Organization after Sixty Years.’’ In: Fiftieth Anniversary y 1897–1947 (Ed.) New York State Society of Certiﬁed Public Accountants (1947): 67–71. ‘‘Productivity, Profits and Labor.’’ In: Reporting to Employees and the Public on Profits and Productivity (Ed.), American Management Association (1947): 3–17. ‘‘Proposed Legislation Affecting Tax Practice.’’ Certified Public Accountant (1947): 2–3. ‘‘Public Opinion of the Accounting Profession.’’ In: Technical Papers of the Twenty-second Annual Michigan Accounting Conference, Michigan (1947): 24–28. ‘‘Realities of Professional Ethics.’’ The Accounting Review 22 (1947): 119–123. ‘‘Tax Practice and the Practice of Law.’’ Certified Public Accountant (1947): 1–2. ‘‘What the Accounting Profession Offers the Staff Accountant.’’ New York Certified Public Accountant 17 (1947): 280–282. ‘‘Future for the Young Accountant.’’ The Accounting Forum 19 (1948): 7–9, 25. ‘‘The Future for the Young Accountant.’’ The Mississippi Certified Public Accountant 1 (1948): 24–27. ‘‘Inﬂuence of Public Attitudes on the Accounting Profession.’’ Mississippi Certified Public Accountant 2 (1948): 1–7. ‘‘Inﬂuence of Public Attitudes on the Accounting Profession.’’ Texas Accountant 21 (1948): 3–6. ‘‘Lawyers Attack Accountants’ Tax Practice.’’ Certified Public Accountant (1948): 3. ‘‘Public Opinion of the Accounting Profession.’’ The Journal of Accountancy 85 (1948): 59–64. ‘‘Responsibilities of Certiﬁed Public Accountants.’’ In: First Annual Louisiana Accounting Conference (Ed.), Louisiana Polytechnic Institute and Society of Louisiana Certiﬁed Public Accountants, Louisiana (1948): 35–45. ‘‘Responsibilities of Certiﬁed Public Accountants.’’ The Ohio Certified Public Accountant 7 (1948): 11–18. ‘‘Visit to Puerto Rico.’’ Certified Public Accountant (1948): 5. ‘‘What’s Happening to the Accounting Profession?’’ Certified Public Accountant (1948): 3. ‘‘Tax Practice Situation.’’ Certified Public Accountant (1949): 4. ‘‘Tax Settlement Board Bill.’’ The Accounting Review 24 (1949): 272. ‘‘Tax Settlement Board Bill.’’ Tax Topics 10 (1949): 1–2.

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‘‘The Local Practitioner Replies (from the Executive Director).’’ CPA (American Institute of CPAs) (1963): 6. ‘‘Should CPA Firms Be Accredited? The Members Respond (Letters).’’ CPA (American Institute of CPAs) 47 (1967): 8, 11–12. ‘‘The Auditor Now Judges His Audit.’’ Banking 43 (1950): 38, 98. ‘‘Business or Profession?’’ News Bulletin of the Massachusetts Society of Certified Public Accountants 23 (1950): 19–20. ‘‘Public Accounting Profession.’’ In: Third Annual Accounting Conference. Georgia: Georgia Society of Certiﬁed Public Accountants, et al. (1950): 49–56. ‘‘Professional Ethics of the Accounting Profession.’’ In: Memoria: Segunda Conferencia Interamericana de Contabilidad (1951): 295–303. ‘‘Relationship of Accountants and Lawyers in Tax Practice.’’ The Accounting Review 26 (1951): 449–455. ‘‘Shall Income Tax Returns Audited by Certiﬁed Public Accountants Be Accepted by the Government with Finality as to Facts?’’ In: Proceedings of the Forty-fourth Annual Conference on Taxation (Ed.) National Tax Association (1951): 43–54. ‘‘Accountants as Impartial Experts Hold Strategic Spot to Fight for American Way.’’ Credit and Financial Management 54 (1952): 20–21. ‘‘One Man’s View of the Sixth International Congress on Accounting.’’ The Journal of Accountancy 94 (1952): 306–310. ‘‘Practical Applications of Professional Ethics.’’ In: CPA Handbook (Ed.), American Institute of Accountants (1952): 1. ‘‘Practical Applications of Professional Ethics.’’ In: CPA and His Profession (Ed.), American Institute of Accountants (1952). ‘‘Aggressive Professional Ethics.’’ Virginia Accountant 6 (1953): 5–8. ‘‘Aggressive Professional Ethics.’’ Accountants’ Journal (P.I.) 3 (1953): 25–27. ‘‘Coordination of State and National Activities.’’ Illinois Certified Public Accountant 15 (1953): 62–65. ‘‘Ethics, ‘Unauthorized Practice’, and Federal Income Taxation – an Accountant’s Viewpoint (Reprinted).’’ Rocky Mountain Law Review 25 (1953): 435–453. ‘‘The Importance of Business Audits.’’ Banking 45 (1953): 114, 116–117. ‘‘Organisation and Activities of the Accounting Profession in the United States.’’ In: Summer Course 1953 (Ed.), Institute of Chartered Accountants in England and Wales (1953): 35. ‘‘Organisation and Activities of the Accounting Profession in the United States.’’ Accountant (Eng.) 129 (1953): 251–255.

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‘‘Preface to Bank Audit Study Conference.’’ In: Bank Audit Study Conference (Ed.), Iowa Society of Certiﬁed Public Accountants, Iowa (1953). ‘‘Defalcation in Relation to Audit, Internal Control and Fidelity Bonds.’’ In: Accountants’ Legal Responsibility (Ed.), Saul Levy (ca. 1954): 172–174. ‘‘Ethics, ‘Unauthorized Practice’, and Federal Income Taxation – an Accountant’s Viewpoint.’’ New York Certified Public Accountant 24 (1954): 112–125. ‘‘Ethics, ‘Unauthorized Practice’, and Federal Income Taxation – an Accountant’s Viewpoint.’’ CPA in Tax Practice 1 (1954): 70–88. ‘‘Should Your Child Be an Accountant?’’ Saturday Evening Post, June 12 (1954): 110–111. ‘‘Should Your Child Be an Accountant?’’ New York Life Insurance Co. folder (1954). ‘‘Should Your Child Be an Accountant?’’ Ladies’ Home Journal (1954): 80–81. ‘‘Address to the Georgia Society of CPA’s Convention, Rome.’’ Bulletin (Georgia Society of Certified Public Accountants) 23 (1955): 1, 3–9. ‘‘Ethics of Public Accounting.’’ Annuls of the American Academy of Political and Social Science 297 (1955): 1–8. ‘‘Organizing the Public Accounting Profession for the Future.’’ California Certified Public Accountant 23 (1955): 9–15. ‘‘Professional Ethics in Accounting.’’ In: Handbook of Modern Accounting Theory, Morton Backer (Ed.) (1955): 121–148. ‘‘Recruitment of a Profession.’’ Here’s How (American Trade Association Executives) 5 (1955): 4–6. ‘‘Selection and Training of Personnel.’’ The Ohio Certified Public Accountant 14 (Autumn, 1955): 151–157. ‘‘Some Notes on Public Relations.’’ In: CPA and His Clients (Ed.), American Institute of Accountants (1955): 23–30. ‘‘Accounting for Free Enterprise.’’ Illinois Certified Public Accountant 19 (1956): 2–7. ‘‘Advantages of Professional Organization.’’ New York Certified Public Accountant 26 (1956): 90–92. ‘‘AIA’s Carey Holds Treasury Interpretation Protects CPAs in Treasury Practice.’’ The Journal of Taxation 5 (1956): 42–43. ‘‘The CPA and His Client: A Study in Public Relations.’’ New York Certified Public Accountant 26 (1956): 641–645. ‘‘The CPA and His Client: A Study in Public Relations.’’ Irish Accountant and Secretary 21 (1956): 179–180, 186.

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‘‘Growth of Ethical Principles (Editorial).’’ The Journal of Accountancy 102 (1956): 37. ‘‘How Can the Profession Plan for the Future?’’ The Journal of Accountancy 101 (1956): 54–58. ‘‘Professional Ethics and the Public Interest.’’ The Journal of Accountancy 102 (1956): 38–41. ‘‘Will the CPA Hold His Tax Practice?’’ New York Certified Public Accountant 26 (1956): 19–20. ‘‘The Challenge to Every CPA.’’ The Ohio Certified Public Accountant 16 (1957): 57–60. ‘‘Ethical Responsibilities.’’ New York Certified Public Accountant 27 (1957): 527–532. ‘‘Forward Planning for the Accounting Profession.’’ Virginia Accountant 11 (1957): 4–13. ‘‘A General Report – the Seventh International Accounting Congress.’’ The Journal of Accountancy 104 (1957): 34–38. ‘‘Professional Ethics Are a Helpful Tool.’’ Public Relations Journal 13 (1957): 7, 14, 18. ‘‘The CPA in a Changing World.’’ Illinois Certified Public Accountant 20 (1957–58): 3–10. ‘‘Accounting – the Language of Business.’’ Direction 1 (1957–58): 3–6. ‘‘Are You a Salesman?’’ Bulletin (Georgia Society of Certified Public Accountants) 25 (1958): 1. ‘‘Expanding Role of the Accountant.’’ The Federal Accountant 8 (1958): 35–49. ‘‘The Expanding Role of the Accountant.’’ Business Horizons (Indiana University) 1 (1958): 69–74. ‘‘Fastest Growing Profession.’’ In Guide to Career Opportunities, George H. Watson and Leo A. Guthart (Eds) (1958): 21, 51. ‘‘Forward Planning for the Accounting Profession.’’ Illinois Certified Public Accountant 21 (1958): 2–11. ‘‘Improving the Professional Product.’’ California Certified Public Accountant 26 (1958): 21–24. ‘‘Letter Dated November 12, 1958 to Oren Harris, Chairman, Subcommittee on Legislative over-Sight Committee on Government Operations, House of Representatives.’’ United States: House of Representatives (1958): 93–94. ‘‘The Place of the CPA in Contemporary Society.’’ Journal of Accountancy 106 (1958): 27–32. ‘‘Relations of the Professions to Each Other and to the Public.’’ In: Interprofessional Meeting. Columbus, Ohio (1958): 21 typewritten pages.

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‘‘The Relations of the Professions to Each Other and to the Public.’’ The Ohio Certified Public Accountant 17 (1958): 49–57. ‘‘The Next Fifty Years.’’ The Ohio CPA 18 (1959): 7–14. ‘‘Profession of Accounting.’’ Hospital Management 88 (1959): 22, 28. ‘‘Professional Ethics and the Public Interest.’’ In: Catholic Thought in Business and Economics, La Salle (Brother) Woelfel (Ed.) (1959): 199–204. ‘‘Future of the Local CPA Firm.’’ CPA (American Institute of CPAs) (1960): 11. ‘‘Professionalism Is Good for the Public.’’ Public Relations Journal 16 (1960): 20, 22–23. ‘‘Relations with State Societies.’’ CPA (American Institute of CPAs) (1960): 7. ‘‘Who Recognizes the CPA?’’ CPA (American Institute of CPAs) (1960): 7. ‘‘Write-up Work and Professional Prestige.’’ CPA (American Institute of CPAs) (1960): 7. ‘‘Write-up Work and Professional Standing.’’ CPA (American Institute of CPAs) (1960): 7. ‘‘The Audit as a Management Aid.’’ CPA (American Institute of CPAs) (1961): 7. ‘‘Basic Principles of Institute Operations.’’ CPA (American Institute of CPAs) (1961): 5. ‘‘Conﬁdence without Conceit.’’ CPA (American Institute of CPAs) (1961): 7. ‘‘Current Problems of the Accounting Profession in the U.S.’’ Accountant’s Magazine (Scot.) 65 (1961): 722–743. ‘‘Current Revolution in Business Education.’’ CPA (American Institute of CPAs) (1961): 7. ‘‘Diverse State Laws Weaken CPA Position.’’ CPA (American Institute of CPAs) (1961): 7. ‘‘Higher Accreditation for CPAs.’’ Journal of Accountancy 111 (1961): 47–53. ‘‘How CPA and Credit Manager Can Better Help Each Other – Who Is Behind the Figures?’’ Credit and Financial Management 63 (1961): 8, 31. ‘‘How to Improve Your Hiring Practices.’’ CPA (American Institute of CPAs) (1961): 7. ‘‘Practical Ethical Problems of Accounting.’’ In: Proceedings of the Eighth Annual Institute on Accounting y 1961, University of Colorado, Boulder, CO (1961): 51–66. ‘‘What Is the Ethics of Publicity?’’ CPA (American Institute of CPAs) (1961): 7. ‘‘When Is a CPA Independent?’’ CPA (American Institute of CPAs) (1961): 7.

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‘‘The Big Problems of the Profession, and the Role of the Young CPA.’’ New York Certified Public Accountant 32 (1962): 38–41. ‘‘Look at the Next Seventy-Five Years.’’ CPA (American Institute of CPAs) (1962): 9. ‘‘Reply to a Local Practitioner.’’ CPA (American Institute of CPAs) (1962): 10. ‘‘Report on Seventy-Fifth Anniversary.’’ CPA (American Institute of CPAs) (1962): 10–12. ‘‘Revenue Commissioner Proposes Greater Reliance on CPAs.’’ Ohio CPA 21 (1962): 67–70. ‘‘Revenue Commissioner Proposes Greater Reliance on CPAs.’’ CPA (American Institute of CPAs) (1962): 1–2, 8. ‘‘Should Professional Firms Incorporate?’’ CPA (American Institute of CPAs) (1962): 6. ‘‘Should You Be an Accountant?’’ Career Opportunities (New York Life Insurance Company) 4 (1962): 7–13. ‘‘Golden Future of Accounting.’’ The Accounting Forum 34 (1963): 11–13, 41. ‘‘How to Avoid Competitive Bidding (from the Executive Director).’’ CPA (American Institute of CPAs) (1963): 6. ‘‘Independence: Appearances Matter Too (from the Executive Director).’’ CPA (American Institute of CPAs) 43 (1963): 6. ‘‘Initiative in Client Relations.’’ CPA (American Institute of CPAs) (1963): 6. ‘‘Public Relations: Images and Fallacies (from the Executive Director).’’ CPA (American Institute of CPAs) 43 (1963): 11. ‘‘Public School Costs – a Social Responsibility for the Profession (from the Executive Director).’’ CPA (American Institute of CPAs) (1963): 11. ‘‘Reading List for CPAs (from the Executive Director).’’ CPA (American Institute of CPAs) (1963): 7. ‘‘Status of the Profession (from the Executive Director).’’ CPA (American Institute of CPAs) (1963): 8. ‘‘What Do All Those People Do? (from the Executive Director).’’ CPA (American Institute of CPAs) 43 (1963): 8. ‘‘CPAs: Leaders or Losers in ADP?’’ CPA (American Institute of CPAs) 44 (1964): 4. ‘‘‘‘How Can He Expect to Compete?’’’’ CPA (American Institute of CPAs) 44 (1964): 2. ‘‘How Much Money Do You Make? (from the Executive Director).’’ CPA (American Institute of CPAs) 44 (1964): 6.

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‘‘How to Attract Young People (from the Executive Director).’’ CPA (American Institute of CPAs) 44 (1964): 4. ‘‘Management’s Stake in Accounting Principles.’’ Financial Executive 32 (1964): 24, 29. ‘‘The Problem with Problems (from the Executive Director).’’ CPA (American Institute of CPAs) 44 (1964): 8. ‘‘And Roundtable Explores Operational Implications of EDP.’’ CPA (American Institute of CPAs) 45 (1965): 5–6. ‘‘Competitive Computer: Its Effect on the CPA and Management Services.’’ Financial Executive 33 (1965): 66, 75. ‘‘CPAs and the Federal Government (from the Executive Director).’’ CPA (American Institute of CPAs) 45 (1965): 10. ‘‘The ‘‘Dirty Business’’ Attitude (from the Executive Director).’’ CPA (American Institute of CPAs) 45 (1965): 4. ‘‘‘‘Future Shock’’ (from the Executive Director).’’ CPA (American Institute of CPAs) 45 (1965): 4. ‘‘Getting – and Keeping – a Good Staff (from the Executive Director).’’ CPA (American Institute of CPAs) 45 (1965): 10. ‘‘The Impact of Computers on Practice (from the Executive Director).’’ CPA (American Institute of CPAs) 45 (1965): 3–4. ‘‘Integrated Accounting Service (Statements in Quotes).’’ Journal of Accountancy 120 (1965): 61–64. ‘‘Today’s Accounting Student – Tomorrow’s CPA.’’ The Accounting Forum 36 (1965): 4–7. ‘‘The Young CPA and the Future (from the Executive Director).’’ CPA (American Institute of CPAs) 45 (1965): 7. ‘‘Accounting for Medicare (from the Executive Director).’’ CPA (American Institute of CPAs) 46 (1966): 2–3. ‘‘AICPA Strengthening Authority of Opinions (Letters).’’ Financial Executive 34 (1966): 4. ‘‘Change and Impact (from the Executive Director).’’ CPA (American Institute of CPAs) 46 (1966): 8–9. Carey, J. L., & Doherty, W. O. ‘‘The Concept of Independence – Review and Restatement.’’ The Journal of Accountancy 121 (1966): 38–46. ‘‘Concept of Independence–Review and Restatement.’’ Pakistan Accountant 3 (1966): 17–30. ‘‘CPA and Computer (from the Executive Director).’’ CPA (American Institute of CPAs) 46 (1966): 2–3. ‘‘CPAs and Information Systems (from the Executive Director).’’ CPA (American Institute of CPAs) 46 (1966): 6.

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‘‘CPAs Indicted for Fraud.’’ CPA (American Institute of CPAs) 46 (1966): 2. ‘‘‘‘Dirty Business’’ Attitude.’’ Accountants’ Journal 44 (1966): 224. ‘‘Looking Ahead (from the Executive Director).’’ CPA (American Institute of CPAs) 46 (1966): 6. ‘‘Professional Ethics in the United States.’’ Certified Accountants Journal (1966): 410, 439. ‘‘Question: Does the Use of the Phrase ‘‘Management Consulting’’ Confuse the Issue in Discussing the Auditor’s Independence When Performing Management Services Work? Answer: Yes (Letters).’’ The Journal of Accountancy 121 (1966): 34. ‘‘The State Society Executives (from the Executive Director).’’ CPA (American Institute of CPAs) 46 (1966): 10. ‘‘What’s Right with the Profession? (from the Executive Director).’’ CPA (American Institute of CPAs) 46 (1966): 6–7. ‘‘Where Were the Auditors? (a Letter to a Bank President).’’ Banking 58 (1966): 39–42. ‘‘Who Suggested Repeal of the Competitive Bidding Rule? (from the Executive Director).’’ CPA (American Institute of CPAs) 46 (1966): 11–12. ‘‘Accounting Legislation of the Future.’’ Journal of Accountancy 123 (1967): 46–51. ‘‘CPAs under Fire? (Accounting and Analysis).’’ Financial Analysts Journal 23 (1967): 35–37. ‘‘New Accounting for Pension Costs Will Not Necessarily Reduce Profits (Accounting and Analysis).’’ Financial Analysts Journal 23 (1967): 48. ‘‘New Pressures on the CPA.’’ In: Ernst and Ernst Symposium for Educators, Cleveland, Ohio (1967): 11–27. ‘‘Public Opinion in 1967 (from the Executive Director).’’ CPA (American Institute of CPAs) 47 (1967): 2, 5. ‘‘Should CPA Firms Be Accredited? (from the Executive Director).’’ CPA (American Institute of CPAs) 47 (1967): 3, 6. ‘‘State of the Profession – Experts (Sic) from Three Reports to Council from the Executive Ofﬁce.’’ CPA (American Institute of CPAs) 47 (1967): 8–12. ‘‘State Regulation of Certiﬁed Public Accountants.’’ State Government 40 (1967): 39–42. ‘‘Accounting and Analysis: Building a Profession.’’ Financial Analysts Record Special Issue (1968): 20–21. ‘‘Accreditation and Other Matters (from the Administrative Vice President).’’ CPA (American Institute of CPAs) 48 (1968): 3.

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‘‘Problems of the Profession in the United States.’’ Accountancy 79 (1968): 77–80. ‘‘Reﬂections and Projections (Address before the 50th Annual Meeting of the Oklahoma Society of CPAs, June 5–8, 1968).’’ Oklahoma CPA 7 (1968): 7–11. ‘‘Upward and Onward! (from the Administrative Vice President).’’ CPA (American Institute of CPAs) 48 (1968): 9–10. ‘‘What Is the Professional Practice of Accounting?’’ The Accounting Review 43 (1968): 1–9. ‘‘What Research Does the CPA Profession Need? (from the Administrative Vice President).’’ CPA (American Institute of CPAs) 48 (1968): 5–6. ‘‘Ave Atque Vale.’’ Journal of Accountancy 127 (1969): 33. ‘‘How to Work Effectively with Association Committees.’’ Association Management 21 (1969): 18–20. ‘‘An Open Letter to President Kent (and 67,000 Institute Members).’’ CPA (American Institute of CPAs) 49 (1969): 3. ‘‘The Origins of Modern Financial Reporting.’’ Journal of Accountancy 128 (1969): 35–48. ‘‘Teachers and Practitioners.’’ The Accounting Review 44 (1969): 79–85. ‘‘Teachers and Practitioners.’’ CPA (American Institute of CPAs) 49 (1969): 7. ‘‘How Can Barriers against International Accounting Practice Be Eliminated.’’ Touche Ross Tempo 17 (1970): 4–8. ‘‘How Can Barriers against International Accounting Practice Be Eliminated?’’ The International Journal of Accounting Education and Research 6 (1970): 53–8. ‘‘The CPA’s Professional Heritage.’’ Academy of Accounting Historians, Working Paper Series (1974): 16pp. ‘‘The CPA’s Professional Heritage Part II.’’ Academy of Accounting Historians, Working Paper Series (1974): 16pp. ‘‘The CPA’s Professional Heritage, Part III.’’ Academy of Accounting Historians, Working Paper Series 14 (1976): 22pp. ‘‘The CPA’s Professional Heritage, Part IV (Birth of the SEC).’’ Academy of Accounting Historians, Working Paper Series, working paper #33 (1977): 8. ‘‘Early Encounters between the CPAs and the SEC.’’ Accounting Historians Journal 6 (1979): 29–37. ‘‘The Independence Concept Revisited.’’ The Ohio CPA Journal 44 (1985): 5–8.

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APPENDIX C. PARTIAL LIST OF BOOK CHAPTERS AUTHORED BY JOHN L. CAREY ‘‘Practical Applications of Professional Ethics.’’ In: CPA Handbook (Ed.) American Institute of Accountants, 1, 1952. ‘‘Practical Applications of Professional Ethics.’’ In: CPA and His Profession (Ed.) American Institute of Accountants, 1952. ‘‘Professional Ethics in Accounting.’’ In: Handbook of Modern Accounting Theory (Ed.) Morton Backer, pp. 121–148, 1955. ‘‘Some Notes on Public Relations.’’ In: CPA and His Clients (Ed.) American Institute of Accountants, pp. 23–30, 1955. ‘‘Ethical Responsibilities – Practical Aspects.’’ In: New York State Society of Certified Public Accountants, 14 typewritten pages. New York, 1957. ‘‘Fastest Growing Profession.’’ In: Guide to Career Opportunities (Ed.) George H. Watson and Leo A. Guthart, 21, 51, 1958.

APPENDIX D. LIST OF RECIPIENTS OF THE GOLD MEDAL FOR DISTINGUISHED SERVICE In 1944, the American Institute of Certiﬁed Public Accountants established the Gold Medal Award for meritorious service to the accounting profession. The AICPA Medal of Honor is awarded to a non-member for outstanding contributions to the profession. Below is a list of the names of the gold medal winners: 1944

1945

1946 1947 1948 1949 1950

George Oliver May William A. Paton J. Harold Stewart W. W. Cooper E. L. Kohler Victor H. Stempf Arthur H. Carter Maurice E. Peloubet T. Coleman Andrews Edward A. Kracke N. Loyall McLaren Robert H. Montgomery Hiram T. Scovill (no award)

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APPENDIX D. (Continued ) 1951 1952 1953 1954 1955 1956 1957

1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970

1971 1972 1973 1974 1975

(no award) Samuel J. Broad Percival F. Brundage Carman G. Blough Mark E. Richardson Maurice H. Stans Saul Levy Lloyd Morey J. S. Seidman William B. Franke Arthur B. Foye Donald P. Perry (Posthumously) Marquis G. Eaton (Posthumously) Paul Grady George D. Bailey John L. Carey J. A. Phillips Alvin R. Jennings (no award) Andrew Barr Thomas W. Leland (Posthumously) Thomas G. Higgins Louis H. Penney Clifford V. Heimbucher Robert E. Witschey (Posthumously) John W. Queenan Herman W. Bevis Elmer G. Beamer Thomas D. Flynn Weldon Powell (Posthumously) Robert M. Trueblood Philip L. Deﬂiese Ralph E. Kent Oscar S. Gellein Marvin L. Stone Louis M. Kessler LeRoy Layton

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APPENDIX D. (Continued ) 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

1998

John Lawler Louis H. Pilie Marshall S. Armstrong Samuel A. Derieux Robert K. Mautz Stanley J. Scott Wallace E. Olson Elmer Staats (Medal of Honor) Herbert E. Miller Walter J. Oliphant Michael N. Chetkovich Walter E. Hanson William R. Gregory (posthumously) John J. McCloy (Medal of Honor) Rholan E. Larson Donald J. Kirk Thomas Prior (Medal of Honor) Robert C. Ellyson John R. Meinert Robert A. Mellin George D. Anderson William S. Kanaga Bernard Z. Lee William H. Van Rensselaaer (Medal of Honor – Posthumously) Ray J. Groves Thomas L. Holton A. Marvin Strait James Don Edwards Herman J. Lowe Donald J. Schneeman (Medal of Honor) Philip B. Chenok Bert N. Mitchell Mahlon Rubin Robert K. Elliot Robert L. Israeloff Kathryn D. Wriston (Medal of Honor) Robert Mednick

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APPENDIX D. (Continued ) 1999 2000

2001 2002

2003 2004

Jake L. Netterville Paul Kolton (Medal of Honor) Richard E. Piluso Dominic A. Tarantino A. A. Sommers, Jr. (Medal of Honor) Thomas W. Rimerman Olivia Kirtley Doyle Z. Williams John E. Hunnicutt (Medal of Honor) Stuart Kessler Dennis R. Beresford

APPENDIX E. MEMBERS OF THE ACCOUNTING HALL OF FAME AND THE YEAR ELECTED 1950

1951 1952 1953

1954

1955 1956 1957

George Oliver May Robert Hiester Montgomery William A. Paton Sir Arthur Lowes Dickinson Henry Rand Hatﬁeld Elijah Watt Sells Victor Herman Stempf Arthur Edward Andersen Thomas Coleman Andrews Charles Ezra Sprague Joseph Edmund Sterrett Carman George Blough Samuel John Broad Thomas H. Sanders Hiram Thompson Scovill Percival Flack Brundage Ananias Charles Littleton Roy Bernard Kester Hermann Clinton Miller

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APPENDIX E. (Continued ) 1958

1959 1960 1961 1963 1964 1965 1968

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

Harry Anson Finney Arthur Bevins Foye Donald Putnam Perry Marquis George Eaton Maurice H. Stans Eric Louis Kohler Andrew Barr Lloyd Morey Paul Franklin Grady Perry Empey Mason James Loring Peirce George Davis Bailey John Lansing Carey William Welling Werntz Robert Martin Trueblood Leonard Paul Spacek John William Queenan Howard Irwin Ross Robert Kuhn Mautz Maurice Moonitz Marshall Smith Armstrong Elmer Boyd Staats Herbert Elmer Miller Sidney Davidson Lord Henry Alexander Benson Oscar Strand Gellein Robert Newton Anthony Philip Leroy Deﬂiese Norton Moore Bedford Yuji Ijiri Charles Thomas Horngren Raymond John Chambers David Solomons Richard Thomas Baker Robert Thomas Sprouse

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APPENDIX E. (Continued ) 1995 1996

1997 1998 1999 2000

2001 2002 2003

2004

2005

William Wager Cooper William Henry Beaver Charles A. Bowsher Donald James Kirk Thomas Junior Burns John C. Burton Arthur Ramer Wyatt Jay Michael Cook Ray John Groves Joel Stanley Demski Shaun Fenton O’Malley Ross Macgregor Skinner Charles Waldo Haskins Nicholas Dopuch James Don Edwards Stephen Addam Zeff Philip W. Bell Edgar O. Edwards James J. Leisenring Dennis R. Beresford Gerald A. Feltham William J. Vatter William T. Baxter Edmund L. Jenkins

APPENDIX F. PARTIAL LIST OF SPEECHES PRESENTED BY JOHN L. CAREY [IN CHRONOLOGICAL ORDER] Address before the West Virginia Society of Certiﬁed Public Accountants (1938): 9 mimeographed pages. Accountancy and the Public, Address to the Texas Society of Certiﬁed Public Accountants (1939): 9 mimeographed pages. Productivity, Profits, and Labor (1947): 25 typewritten pages. What the Accounting Profession Offers the Young Accountant (1948): 23 typewritten pages.

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Accounting for Free Enterprises, Address Before the Rotary Club of Miami, FL (1949): 13 typewritten pages. Address to Baltimore Estate Planning Council (February 7, 1957): 5 typed pages. Service of CPAs, Address to Cincinnati (February 13, 1957): 8 handwritten pages. Ethics, Address to Kentucky (February 22, 1957): 2 handwritten pages. Planning for Progress (February 22, 1957): 4 handwritten pages. Looking Ahead in Accounting, Address to Baltimore (March 5, 1957): 5 handwritten pages. Planning for the Future, Address to 60th Annual Dinner – Pennsylvania Institute (March 19, 1957): 4 handwritten pages. Ethical Responsibilities – Practical Aspects, Address to New York State Society (April 25, 1957): 14 typewritten pages. Outlook for CPAs (April 29, 1957): 4 handwritten pages. New Demands on the CPA (May 24, 1957): 11 typed pages. Forward Planning for the Accounting Profession, Address to Middle Atlantic States Accounting Conference, 20 typed pages. Looking Ahead in Accounting, Address to Paciﬁc Northwest (June 22, 1957): 9 handwritten pages. The CPA in a Changing World, Address to Illinois Society of Certiﬁed Public Accountants (October 15, 1957): 20 typed pages. The CPA of the Future, Address to New Jersey Society (November 19, 1957): 14 typed pages. Expanding Role of the Accountant, Address to District of Columbia Institute of CPAs and Federal Government Accountants Association (February 13, 1958): 23 typed pages. Springﬁeld Speech (February 26, 1958): 6 typewritten pages. The Relations of the Professions to Each Other and to the Public, Address to Interprofessional Meeting (March 12, 1958): 21 typewritten pages. Ethics and Survival, Address to Stamford Rotary Club (April 8, 1958): 14 pages. Research Project in Management Services by CPAs (April, 1958): 5 typewritten pages. Connecticut Society’s 50th Anniversary, Address to Connecticut Society (May 5, 1958): 8 typewritten pages. Address to Regional Meeting (June 1958): 4 handwritten pages. Address to Michigan Association (July 1958): 4 typed pages. Current Events of Interest to Local Practitioners – American Institute Night, Address to New Jersey Society (November 18, 1958): 12 typewritten pages.

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The Concept of Management Services by CPAs, Address to Massachusetts Society of Certiﬁed Public Accountants (November 22, 1958): 27 typed pages. Professional Ethics of Certiﬁed Public Accountants, Address to Rutgers and C.C.N.Y. (December 15, 1958): 34 typed pages. Professionalism and Ethics, Address to New York Chapter of Public Relations Society of America (February 9, 1959): 17 typed pages. Credit and the Certiﬁed Public Accountant, Address to Toledo CPAs, Bankers and Credit Men (February 10, 1959): 20 typed pages. Ethics and Survival, Address to Kiwanis Club (March 18, 1959): 13 typed pages. Ethics – Part of ‘‘Professionalism,’’ Address to Columbia University (May 6, 1959): 2 handwritten pages. Relations between Certiﬁed Public Accountants and Non-Certiﬁed Accountants, Address to Louisiana Society of CPAs (May 14, 1959): 27 typed pages. Next 20 Years, Address to Southern States (June 9, 1959): 5 handwritten pages. Building a Practice (June 15, 1959): 28 typewritten pages. What’s Ahead for the Accounting Profession? Address to New Jersey (November 17, 1959): 7 typed pages. Accounting – a Tool for Business Growth, Address to Pittsburgh Accounting Symposium (November 20, 1959): 12 typed pages. Welcome Speech, Address to State Society Executives (January 7, 1960): 4 typed pages. Practical Ethical Problems in Accounting, Address to Colorado (October 10, 1961): 21 typed pages. Address to Mid-Hudson Chapter (1962): 8 typed pages. Future of the Profession, Address to Bedford (1962): 24 typed pages. State Society Presidents Orientation Session, Address to State Society Presidents Orientation Session (April 21, 1962): 6 typed pages. Address to D. C. Institute (April 26, 1962): 19 typed pages. California Speech (June 20, 1962): 13 handwritten pages. Address to Cleveland Chapter, Ohio Society of CPAs (October 29, 1962): 5 typed pages. Ethics in Business and Accounting, Address to Wharton School (December 13, 1962): 15 typed pages. Address to Wilmington, Delaware (December, 1962): 16 typed pages. Address to State Society Executives (January 1963). Future (June 12, 1963): 7 typed pages.

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North Carolina Speech (November 4, 1963): 11 typed pages. Detroit (March 19, 1964): 6 typed pages. Panel Discussion on Long-Range Objectives, Address to Hawaii (June 5, 1964): 17 typed pages. The Future (June 1964): 14 typed pages. Address to New York State Meetings (November 30, 1964): 10 typed pages. Speech to Ernst & Ernst Partners’ Meeting, Address to Ernst & Ernst Partners’ Meeting (November 10, 1966): 11 typed pages. Louisville Dinner Honoring Samuel Eskew (November 22, 1966): 17 typed pages. The CPA Plans for the Future, Address to Texas (December 8, 1966): 18 typed pages. The CPA Plans for the Future, Address to Middle-Atlantic States Accounting Conference (June 1, 1967): 32 typed pages. Current Ethical Problems, Address to Virginia Society Annual Meeting (September 1, 1967): 19 typed pages. The CPA Plans for the Future, Address to Washington Society of CPAs (September 19, 1967): 33 typed pages. Building a Profession, Address to Institute of Chartered Financial Analysts (May 5, 1968): 24 typed pages. Reﬂections and Projections, Address to 50th Anniversary Meeting of Oklahoma Society (June 6, 1968): 14 typed pages. The Independence Concept Revisited, Address to Accounting Seminar (April 15, 1970): 10 typed pages. Evolution and Future of Management Services, Address to Beta Alpha Psi (April 23, 1970): 9 typed pages. How Should Accounting Principles Be Established? (December, 1970): 14 typed pages. A Profession Responding to Change, Address to Beta Alpha Psi (January 25, 1971): 9 handwritten pages. Professional Ethics and Social Responsibility, Address to Texas Christian University (November 19, 1971): 15 typed pages.

APPENDIX G. ARTICLES BY CAREY NOT CITED IN THE ACCOUNTANTS’ INDEX Carey, John L. ‘‘Secretary’s Notes.’’ CPA (American Institute of CPAs) (1945): 1.

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‘‘1946 Regional Conferences.’’ CPA (American Institute of CPAs) (1946): 1–2. ‘‘News of the Month.’’ CPA (American Institute of CPAs) (1946): 1–3. ‘‘Membership Participation in Institute Affairs.’’ CPA (American Institute of CPAs) (1948): 1. ‘‘Aids to Expanding a Practice (from the Executive Director).’’ CPA (American Institute of CPAs) (1960): 7. ‘‘Financial Management for the Average Man? (from the Executive Director).’’ CPA (American Institute of CPAs) (1960): 7. ‘‘A Problem of Relationships (from the Executive Director).’’ CPA (American Institute of CPAs) (1960): 7–8. ‘‘To the New CPAs.’’ CPA (American Institute of CPAs) (1960): 1–23. ‘‘Welcome to Beta Alpha Psi (from the Executive Director).’’ CPA (American Institute of CPAs) (1960): 7. ‘‘1962 International Accounting Meetings (from the Executive Director).’’ CPA (American Institute of CPAs) (1961): 7. ‘‘Reinvestment for Growth (from the Executive Director).’’ CPA (American Institute of CPAs) (1961): 7. ‘‘The CPA’s Contribution to National Excellence (from the Executive Director).’’ CPA (American Institute of CPAs) (1962): 8–9. ‘‘Executive Director Urges Early Senate Vote on HR 10.’’ CPA (American Institute of CPAs) (1962): 4. ‘‘How You Can Inﬂuence Institute Policy (from the Executive Director).’’ CPA (American Institute of CPAs) (1962): 8. ‘‘Increasing Your Billable Competence (from the Executive Director).’’ CPA (American Institute of CPAs) (1962): 13. ‘‘International Congress Not to Be Missed (from the Executive Director).’’ CPA (American Institute of CPAs) (1962): 13. ‘‘Success Story (from the Executive Director).’’ CPA (American Institute of CPAs) (1962): 6. ‘‘What Can the Institute Do for the Nonpracticing CPA? (from the Executive Director).’’ CPA (American Institute of CPAs) (1962): 12. ‘‘Independence: Appearances Matter Too (from the Executive Director).’’ CPA (American Institute of CPAs) 43 (1963): 6. ‘‘The Problem of Keeping the Members Informed (from the Executive Director).’’ CPA (American Institute of CPAs) (1963): 6. ‘‘CPAs: Leaders or Losers in ADP? (Executive Director).’’ CPA (American Institute of CPAs) (1964): 4.

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‘‘Democracy in Action (Executive Director).’’ CPA (American Institute of CPAs) (1964): 6. ‘‘How Can He Expect to Compete? (Executive Director).’’ CPA (American Institute of CPAs) (1964): 2. ‘‘A New Year: Preview and Promise (Executive Director).’’ CPA (American Institute of CPAs) (1964): 6.

APPENDIX H. OBJECTIVES PROPOSED BY THE LONG-RANGE OBJECTIVES COMMITTEE Following are the objectives and implementing resolutions submitted to the Council of the AICPA by its Committee on Long-Range Objectives from the time the committee was created in 1957 through May 1962. The action taken by the Council is indicated parenthetically in each instance. The objectives are set forth in the chronological order of their presentation.

APRIL 1958 Objective It is an objective of the Institute to serve as the national organization of certiﬁed public accountants (CPAs) in and out of public practice, and to develop and maintain the form of organization best adapted to the needs of all its members. (Adopted by Council on April 21, 1958)

OCTOBER 1958 Objective It is an objective of the Institute to encourage co-operation and consultation among national organizations of accountants to the end that the entire accounting function may make its great contribution to the public welfare.

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Implementing Resolution Resolved, that the matter of developing a speciﬁc program for carrying out the objective of encouraging co-operation and consultation among national organizations of accountants be referred to the Executive Committee with power to proceed. (Adopted by Council on October 11, 1958)

APRIL 1959 Objective Pending the time when public practitioners within the accounting function are either CPAs or those with a clearly differentiating title, there will be a group of non-CPAs who are presently permitted to practice as ‘‘public accountants’’ and whose right to continue to do so during their lifetime must be respected. It is an objective of the Institute that CPAs and their professional societies should develop and maintain friendly co-operative relations with this transitional group, with the purpose of improving educational, technical, and ethical standards, and providing aid in fulﬁlling the requirements for the CPA certificate. (Adopted by Council on April 23, 1959) Objective It is an objective of the Institute that non-CPAs who are permitted to offer bookkeeping and other technical services to the public be encouraged, with help from CPAs, to form a national association to develop appropriate standards and confer on its members an appropriate title clearly differentiating them from accountants or auditors. (Rejected by Council on April 23, 1959)

MAY 1960 Objective It is an objective of the Institute that by voluntary agreement the plans, programs, procedures, and activities of the state societies and the Institute be

Appendices

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co-ordinated to the full extent possible, and their respective areas of responsibility be clearly delineated; and in particular, that the state societies and the Institute adopt a uniform code of ethics and enforcement procedures. (Adopted by Council on May 3, 1960)

SEPTEMBER 1960 Objective It is an objective of the Institute that every eligible CPA, in furtherance of his own development and fulﬁllments of his professional responsibilities, be encouraged to become a member of a state society and of the AICPA, and that membership in both be required to be concurrent as soon as possible. (A motion to adopt this objective at the May 1960 meeting of Council failed of passage by a Council vote of 79 opposed to 74 in favor.) (The Executive Committee reported to Council on September 23, 1960, that it had reconsidered the proposal in light of the close vote, and recommended that any state society desiring to do so be permitted to enter into a voluntary agreement with the Institute to establish concurrent membership in both organizations as a future requirement for membership in either; and, if Council approved the recommendation, that the Bylaws Committee be instructed to prepare an appropriate amendment to the bylaws to ﬁve effect to the recommendation. Following extended discussion, it was moved that the recommendation of the Executive Committee be approved. The motion was seconded, put to a vote, and carried by a vote of 86 in favor and 57 against.)

APRIL 1961 Objective It is an objective of the Institute to provide encouragement to CPAs to continue study and self-improvement throughout their professional lives, by providing formal recognition of advanced study and superior attainment.

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Implementing Resolution Be it resolved, that Council approve in principle the creation of an Academy, which would provide higher accreditation for those who satisfy the requirements along the general lines recommended by the Committee on Long-Range Objectives in the paper released by it under the title ‘‘Higher Accreditation for CPAs’’ and published in the March 1961 issue of The Journal of Accountancy; and Be it further resolved, that the Executive Committee take such steps as are necessary to formulate and submit to Council recommendations for the establishment of the Academy. (Adopted by Council on April 18, 1961) (At the May 1962 Council meeting, a proposal for creation within the Institute of an Academy was rejected by a vote of 90 to 60.)

Objective It is an objective of the Institute, recognizing that management service activities are a proper function of CPAs, to encourage all CPAs to perform the entire range of management services consistent with their professional competence, ethical standards, and responsibility.

Implementing Resolution In furtherance of this objective, the Council requests the Executive Committee to take steps to the following ends: 1. To encourage educational institutions to broaden the curriculum for prospective CPAs to include subjects relating to management services developments affecting the accounting function. 2. To undertake and to encourage research in fundamental areas affecting the practice of management services by the CPA. 3. To provide machinery for referrals among CPAs of engagements requiring specialized knowledge in the ﬁeld of management services. 4. To clarify professional rules of conduct applicable to the management service practice of CPAs. (Adopted by Council on April 18, 1961)

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MAY 1962 Objective It is an objective of the Institute: 1. To encourage the description and continuous restating of those areas of knowledge and technical competence required by the CPA in his present and prospective professional practice; and 2. To bring about the clariﬁcation of the areas of responsibility of universities, practitioners, and professional societies in the education and training of CPAs. Implementing Resolution In furtherance of this objective, the Council requests the Executive Committee to assign a permanent committee with senior status, the responsibility for accomplishment of the above objective. (Adopted by Council in May 1962) Objective It is an objective of the Institute: 1. To identify those areas in society where the need for the CPA’s attest function exists, and to promulgate such information to its members and the interested public; and 2. To assist its members in equipping themselves to discharge the attest function wherever a useful social purpose is served. Implementing Resolution In furtherance of this objective, the Council requests the Executive Committee to take steps to the following ends: 1. To arrange for the development of a systematic plan whereby, over a period of years, issuers, users, potential issuers and users of economic data, and the interested public, may be informed of the purpose, nature, and value of the CPA’s attest function.

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2. To develop a plan for informing practicing CPAs of the areas in which the attest function is appropriate, and through the professional development program, the Institute’s publications, and such other media as may be available, to provide technical assistance in equipping them to discharge this function. (Adopted by Council in May 1962) Objective It is an objective of the Institute to bring about uniform national standards applicable to the requirements for issuance of CPA certificates and recognition of qualiﬁed accountants of other countries, freedom of movement in interstate and international accounting practice, and codes of ethics and enforcement procedures. Implementing Resolution In furtherance of this objective, the Council requests the Executive Committee to take steps to the following ends: 1. To develop and recommend to Council the revision or adoption of policies as deemed necessary or desirable. 2. To develop and publish comparative statements describing laws, regulations, rules, and practices in the 53 jurisdictions, inconsistent with Institute policies. 3. To take steps, in co-operation with state societies and state boards, to implement the adoption of uniform standards by changes in: (a). Institute bylaws, rules, policies, and the form bill. (b). Bylaws and rules of state societies. (c). State accountancy laws, regulations, and administrative practices. (Adopted by Council in May 1962)

INDEX accounting practices in the 1920s 43 accounting principles – conservatism and consistency 46 Accounting Principles Board (APB) 50–51, 72, 100, 148 Accounting Problems of Business, John Carey article 110 accounting profession 1930s dispute with lawyers regarding tax practice 46 6 AIA/ASCPA merger conditions 64 AIA/ASCPA agree to merge – 1936 65 AIA/ASCPA merger talks begin – 1924 62 AIA/ASCPA merger talks continue – 1933 63 beginnings in Great Britain 36 CPA legislation 38, 103 entry of women during WWII 47, 48 ﬁrst CPA law in New York 38 history of accounting 145 history of ethics 114 loss of public faith early in the 20th century 57 McKesson Robbins spurs audit standards 69 McKesson Robbins publicity 70 recommendations in the wake of McKesson Robbins 70 standards-setting resolution in 1934 46 surplus of accountants following WWII 49 women in the profession through the 1970s 49

150-Hour Requirement, 180 A Plan Book for Public Relations for a State Society, 99 Academy of Accounting Historians 150 Academy of Certiﬁed Public Accountants – an institution of specialization suggested by Carey 169 Accountancy and the Public – article by John Carey 105 Accountancy and the Public – John Carey speech to the Massachusetts Society of CPAs in 1940 109 Accountants’ Handbook 125 Accountants’ Index 10, 12, 22, 58, 108–109, 123 John Carey’s listings 75 Accountants’ Legal Responsibility 124 accounting and business development in the U.S. 39 accounting and business in the ‘Roaring 20s’ 42 accounting and railroads 39 Accounting Hall of Fame 1, 3–4, 23, 27, 176 selection criteria 27 John Carey inducted 27 Accounting Historians Journal 86, 90, 150 accounting history 4–10, 15, 89, 145, 149–150, 177–179 Accounting History International Conference 6 Accounting in the Public Interest – title of a 1940 conference 109 225

226 The Accounting Profession – Where is it Headed? 3, 15, 77, 82, 95–96, 145, 155 as a summary of Committee on LongRange Planning 152 The Accounting Profession in War – article by John Carey, 1942 109 The Accounting Profession, Years of Trial: 1969–1980 149 Accounting Research Bulletin 43 (ARB # 43 Restatement of ARBs #1 to #42), 1952 72 Accounting Research Bulletins (ARB) 68 The Accounting Review 86, 89 accounting systems 164 Accounting, Business and Financial History Conference 6 Accreditation in Business Valuation (ABV) program 169 advertising (see also solicitation and ethics) 2, 22, 82, 100–101, 116, 119, 121, 126, 130–131, 136, 143 versus publicity, 1961 139 not one of the AIA’s original ethics rules 138 formal prohibitions 1919 prohibition 119 1921 prohibition 121 advisory service in the 1920s (see also scope of services and management services) 44 American Accounting Association (AAA) 2, 17, 23–24, 165 Executive Committee 24 John Carey as Vice President, 1968 177 membership, Carey’s support in soliciting AICPA members 24 American Association of Public Accountants (AAPA) 14, 18, 38, 51, 55–56, 114–115, 124, 136, 180 formation in 1887 53

INDEX rapid growth and organization challenges, 1910–1920 57 standard setting 56 and Federation of Societies – proposal to unite 55 American Institute of Accountants (AIA) 1, 10, 12, 17, 20, 25, 45, 91, 113, 125–128, 147, 176, 179–180 Committee on Federal Legislation of the Institute 69 constitution 91 John Carey as Executive Director beginning in 1948 72 WWI and after 58–59 call for use of accountants during WWII 47 Committee on Subsidiary Organizations 25 Rules of Professional Conduct – restrictions on competitive bidding, 1934 127 relationship with NSCPA 103 AIA/AICPA Yearbook 20 American Institute of Certiﬁed Public Accountants (AICPA) 1, 4, 9–14, 17, 20, 28, 35, 51, 75, 77, 140,145,146, 165–168, 172–180 Commission on Standards of Education and Experience 96 Committee on Long-Range Objectives 77, 156 key Carey achievement is recruitment 72 resolution presented to John Carey upon his retirement 92 AICPA Library – The University of Mississippi 10 AICPA Vice President, John Carey as 23 Gold Medal Award for Distinguished Service to the Profession (Carey) 26, 175

Index American Association of University Instructors in Accounting 64 American Bar Association (ABA) 161 ethics committee, 1907 115 American Management Association (AMA) 17, 163 American Society of Actuaries 169 American Society of Certiﬁed Public Accountants 61, 147 American Trade Association Executive 17 American Women’s Society of CPAs (formed 1933) 48 Andrews, T. Coleman 47 The Annals of the American Academy of Political and Social Science 96 Anyon, James T. 53, 136 Approved Methods for the Preparation of Balance Sheet Statements 69 Arista Honor Society 17 Arthur Andersen & Co. 146 Auditing and Assurance Services 90 auditor(s) 133, 135–136, 140, 147, 153, 165 role in the early 20th century 44 auditor report(s) 133, 140 Barkley (Senator), Committee on Banking and Currency 45 Barr, Andrew 77, 148 Bedford, Norton M. 151 Beta Alpha Psi (BAP) 25, 176 Grand Council 26 Literature (Book) Award 125 Beta Alpha Psi, From Alpha to Omega 26 Bevis, Herman W. 151 biographical research 6 Biographies of Notable Accountants 176 biography, importance of 10 Board of Tax Appeals 141 attorney and CPAs practice before, 1924 66

227 Bookkeepers Beneﬁcial Association of Philadelphia 52 Bricker, Robert 6, 13 Brooklyn, New York 1, 17 Buckley Country Day School – Board of Trustees 18 Building Profession – article by John Carey 97 The Bulletin 92 Bulletin of the American Institute of Accountants 78 Business Ethics Quarterly 90 Business Valuation and Forensic & Litigation Services Center – AICPA 170 business war games 163 Carey, John accreditation levels for CPAs 168 against competitive bidding 126–127 architect of CPA ethics 113 book describing his views on ethics Professional Ethics of Public Accounting 126 champion of Code of Professional Ethics 82 characteristics of a profession 97 comparison of accounting and engineering 104 comparison of accounting and underwriting 105 comparison of accounting with public relations consulting 104 continuing education 108 CPA tax practice issues 161 CPA versus attorney tax practice 142–143 criticism of SEC independence rules, 1950s 132 defends profession from charges of unprofessional conduct 106 education for CPAs 166–168 ethics publications 81, 130

228 ﬁve-year curriculum 167 future role of the computer, 1967 160 growth and future of the profession (late 1950s) 159 importance of educating the public on accounting ethics 129 importance of rigor in the code of ethics 129 journals citing 88 law profession 104 list of publishing journals 79 independence, 1950s 132 professional beneﬁts and responsibilities 95 professionally oriented publications 93 promoting accounting as a profession 91 protecting against employee theft 128 protecting the profession 126 public accountants versus CPAs 161 public perceptions of the profession 97–100 public relations 101–102 publications related to history of the accounting profession 82 relationships between organizations 103 seven point program to revise accounting ethics, 1950s 134 SSCI citation statistics 85 specialization 97 summary of publication statistics 29 the history and development of accounting in the U.S. 146 the importance of public conﬁdence 99 three books on ethics 122 three objectives of professional conduct rules, 1955 130 writer and speaker 75 writers citing 87 Carey, John L., Jr (son) 11

INDEX Carey, Newton Cameron (son) 11 Carlson, Arthur 24 Carr, Edward 11 Carter, Arthur – ‘who audits the auditors’ 45 Certiﬁed Accountants (C.A.) – early professional designation 52 Certiﬁed Information Technology Professional (CITP) 169 The Certified Public Accountant 25, 78, 126 Certiﬁed Public Accountants (CPA) certiﬁcation as state-based 50 uniform exam, 22, 19, 47–48, 57, 60–61, 95, 107–108, 112, 149, 159, 165, 167, 180 characteristics as individuals 35 state legislation establishing the professional certiﬁcation 54 Circular 230 – IRS complaint vehicle as to practitioners 162, 171 citation analysis 9–11, 84–85, 179 Cogan, Morris L. 96 Columbia University 37 Commission on State Accounting Legislation – as recommended by Carey 165 Committee of 14, group of accountants involved with formulating recommendations for CPA laws 38 Committee of Professional Ethics 113 Committee on Accounting Procedure (CAP) see also Accounting Research Bulletins 46, 71 Accounting Research Bulletins 68 Criticized as reactionary 50 depreciation issue (1928) 68 John Carey as Secretary of 68 Report of Special Committee on Procedure, 1919 67 stock dividends, 1930 68 Committee on Advertising, AAPA, 1888 136

Index Committee on Long-Range Objectives 150, 156, 172 Committee on Professional Ethics 134 communism 154 competitive bidding – accounting (see also ethics) 82, 97, 121, 126–130, 143, 147 Hartford city call for competitive audit bids 127 competitive bidding, 1961 139 Connecticut Society of CPAs – prohibition against competitive bidding 127 Rule 14 of the Code of Professional Ethics – against competitive bidding 127 Competitive Bidding, John Carey article appearing in The Certified Public Accountant 126 The Concept of Independence – Review and Restatement article by Carey and Doherty 87, 124 contingent fees – accounting (see also ethics) 116, 119, 125–126, 131 continuing education 2, 95, 107–108, 154, 162, 166–168, 170, 179 The Controller, 1947 128 Cooper, John Alexander – regarding ethics (1907) 115 Coster, F. Donald (McKesson Robbins) 68 Council on Accountancy – State of New York (on McKesson Robbins) 70 The CPA 3, 10, 12, 13, 75, 146 The CPA and His Profession 3, 122 CPA Handbook – containing a Carey article on ethics 122, 131 The CPA in a Changing World – article by John Carey 100 The CPA in Tax Practice 142 The CPA Plans for the Future 15, 77, 82, 145, 156–157, 178

229 The CPAs Professional Heritage, Parts I–IV – working paper by John Carey 150 Davidson, Sidney 24 Defalcation in Relation to Audit, Internal Control & Fidelity Bonds – article by John Carey 124, 128 development of accounting thought (see also accounting history) 5 The Development of Aptitude Tests for Accountants – article by John Carey 110 Devore, Malcolm M. 151 Dickinson, Arthur Lowes 8 Director of Ethics, AICPA 156 dividends – changes during the early 20th century 43 Doherty, William O. 3 Dolge, William – demonstrated the NACPA’s lack of professional standards 60 double-entry bookkeeping 147 Dow Jones Industrials Index – the 1920s 43 Drakert, Robert 165 Dunham, Lawrence S. 23 E. H. Patterson School of Accountancy – The University of Mississippi 10, 12 earnings forecast accuracy, accountants’ association with 131 Eaton, Marquis G. 150 Electric Bond & Share 44 Emergency Banking Act, 1933 44 Enron 175 Ethical Standards of the Accounting Profession 122, 124, 134 ethics 1906 provisions 115 1907 professional code 115–116 1938–39 revisions 121 1970, trial board provisions 116

230 AIA professional code, 1917: Rules of Professional Conduct 119 AICPA Code of Conduct 14 code or rules of conduct generally 52, 82, 92, 97, 104, 113–114, 121–122, 126, 129–130, 134–138 Code of Conduct, 1962 121 code of ethics 2, 175, 177 Code of Professional Conduct 143 Code of Professional Ethics, 1977 113, 121 Concepts of Professional Ethics, 1977 113 Ethics Rulings, 1977 113 independence (see independence) Interpretations of Rules of Conduct 113 prohibition against advertising (see advertising and soliciting) prohibition against competitive bidding (see competitive bidding) prohibition against contingent fees (see also contingent fees) Rules of Conduct, 1977 113 rules rewritten in 1910 116 Texas State Board of CPAs – ethics violations discipline 140 The Ethics of a Profession, (A.P. Richardson book) 125 Examination of Financial Statements by Independent Public Accountants, 1936’s revision of ‘Uniform Accounting’ 69 Excess Proﬁts Tax Review Board 42 Extensions of Auditing Procedure (Statement on Auditing Procedure) after McKesson Robbins 71 Federal Reserve Board 69 Federal Trade Commission (FTC) 45, 69 questions AIA/ASCPA merger 63

INDEX Federation of Societies of Public Accountants 54–55 Fifty Years of Accountancy 20, 146 Financial Accounting Standards Board (FASB) replaces APB in 1973 72 Financial Analyst’s Journal 86 Financial Executives International 24 The First Fifty Years (history of Arthur Andersen) 146 ﬁve-year curriculum 180 Flesher, Dale 6, 24 Flesher, Tonya 6 Forbes, John F. 25, 106 Foye - Arthur B. (AIA president) 67 Francis, Anna Grace (AWCPA founder) 48 Franklin, Benjamin 37 General Electric Corporation 160 Generally Accepted Accounting Principles (GAAP) 20, 50 Getting Acquainted with Accounting 32, 77, 95–96 GI Bill 49 Grawoig, Dennis 24 Great Depression and New Deal 14, 44 ‘‘Great Schism’’ period Carey saw up to AIA and ASCPA merger 147 Greeks 5 Grievance Committee – State of New York (on McKesson Robbins) 70 Gross National Product (GNP) 159 The Handbook of Modern Accounting Theory (by Morton Backer with Carey chapter) 123 Handbook of Modern Accounting Theory, containing Carey’s discussion of the meaning of ethics 132 Haskins and Sells (history of the ﬁrm) 146 Hatﬁeld, Henry Rand 8

Index Heimbucher, Clifford V. (AICPA President) 77, 151, 156 Heins, John 53 Hippocratic Oath 129 historical research 6, 11 history (see also accounting history) 5, 6 Hitler, Adolf 47 Horngren, Charles 25 How Can the Profession Plan for the Future – article by John Carey 98 Huntington Country Club 18 Hurley, Edwin – FTC chairman, proposes national federal accounting standards in 1917 69 Illinois Association of Public Accountants 54 The Illinois Certiﬁed Public Accountant 100 income determination debate 49 income smoothing 46 independence 2, 9, 46, 82, 98, 106, 124, 126, 129, 131–136, 163 Hurdman, Frederick H. independence proposal 135 not addressed in profession’s 1932 code 135 proposed Rule 13 amendment, 1961 139 tax work 141 The Independence Concept Revisited 32 industrial revolution, 147 Institute Assistant Secretary – John Carey hired as, 1923 65 Institute of Accountants and Book– keepers of New York (later Institute of Accounts) 14, 52 Institute of Accounts 14, 52 Institute of Chartered Accountants in England and Wales 53 John Carey speech to, regarding the U.S. 99

231 Institute of Cost and Works Accountants 169 internal auditors 135, 172 Internal Revenue Service (IRS) 67–68, 147, 171 International Congress of Accountants (1st, St. Louis, 1904) 55 The Interprofessional Council (meeting, 1958) 105 investment trusts – the 1920s 43 Irwin, Richard D. 25 Jackson, Winn P. – ethics scandal 140 John L. Carey Scholarship fund 28, 167, 176 Joplin, J. Porter – ‘‘Report of the President’’ (of the AAPA), 1915 57 Journal of Accountancy 2–4, 18–22, 24–25, 41, 86–87, 92, 99, 123–124, 128, 134, 147,151–152, 158, 176–178 Centennial Issue – Carey as one of 14 key accounting leaders 87 changes in content and organization 22–23 changes over time 22 circulation, 1936 to the 1960s 22 Current Literature Section 22 Editorial Advisory Board 23 The Student Department 22 why women not desirable as accountants 48 Journal of Commercial Bank Lending 31 Journal of Taxation – containing a review of a Carey book 123 Kaulback, Frank 24 Keat, Grace Schwartz (AWCPA founder) 48 Kent, Ralph E. 35 farewell letter to John Carey 51 Kohler, Eric L. 125 Krueger and Toll 45 Krueger, Ivar 45

232 Lawler, John 4, 8, 11, 29, 72 comments as to John Carey’s professional contribution51 legislation 32, 38, 40, 54–57, 62, 67, 103–104, 113, 119, 156, 164, 166 Littleton, A. C. 5, 6, 9 management services (see also advisory services, scope of services) 22, 155, 162–163 May, George O. 8, 58 McKesson Robbins 69–70, 109, 147–148, 178 Canadian wholesale drug company fraud 68 Coster, F. Donald 68 Council on Accountancy – State of New York 70 Extensions of Auditing Procedure (Statement on Auditing Procedure) 71 Grievance Committee – State of New York 70 John Carey’s reaction 70 New York State Attorney General 70 New York Stock Exchange 70 news articles and the accounting response 105 Newsweek article 70 Price Waterhouse: audit procedures followed 70 Price Waterhouse: physically inspection of inventories 69 publicity 70 recommendations in the wake of 70 SEC hearings, 71 Special Committee on Auditing Procedure 71 spurs audit standards 69 mediator, John Carey as 9 Merino, Barbara 13 Michigan State University 4, 78 Miller, Herbert 4, 177

INDEX comments on John Carey as Executive Director 72 Mirick, M. C. 136 model CPA law 165 Montgomery, Robert H. 8, 20, 25 proposes AIA/ASCPA merger in 1934 64 Moonitz, Maurice 148 Mosely, Owen B. 4 Mr. Accounting Profession (John Carey) 2, 175 National Association of Certiﬁed Public Accountants (NACPA) 59–60 National Association of State Boards of Accountancy (NASBA) 180 National Conference Group of Lawyers and Accountants, CPA representation of tax clients 46 National Conference of Lawyers and Certiﬁed Public Accountants 20 John Carey as secretary of (1940s & 50s) 66–67 National Society of Certiﬁed Public Accountants (NSCPA) 14, 103 Navy College 163 Neutrality Act of 1937 47 New Jersey Journal... 37 New York Certified Public Accountant 109, 124, 142 New York Conference of Lawyers and Certiﬁed Public Accountants 20 New York Directory (of accountants) 36 New York Journal of Commerce and Credit Executive 106 New York School of Accounts 54 New York State Attorney General (on McKesson Robbins) 70 New York State National Guard 18

Index New York State Society of CPAs 45–46, 56 Committee on History 48 on McKesson Robbins 70 New York State Stock Exchange 44–45 on McKesson Robbins 70 New York Stock Exchange – the 1920s 42 The New York Times 106, 147 New York Tribune – editorial calling for more accountants in 1918 41 New York University – School of Commerce, Accounts and Finance 54 Newman, Joyce 17 Newsweek article following McKesson Robbins 70 Niven, John B. 19, 63 The Ohio CPA Journal 32 John Carey’s last ethics–related publication 122 The Ohio State University – Accounting Hall of Fame (see also Accounting Hall of Fame) 27 Olson, Wallace E. 5, 149 Orville L. Freeman, U.S. Secretary of Agriculture (recipient of Carey letter) 140 Pace Institute of Accountancy 54 Pacioli, F.L. 8 The Pakistan Accountant 87, 124 Parker, James – valuation agent for Benjamin Franklin 37 Paton, William A. 8, 25 Pearl Harbor 47 Perry Report 96 Personal Financial Specialist (PFS) 169 Phi Beta Kappa 20 ‘‘The Place of the CPA in Contemporary Society’’ – article by John Carey 97, 149

233 Plans for the Future 3 Practical Applications of Professional Ethics – article by John Carey (1952) in The CPA Handbook 122 Practicing Law Institute 168 Previts, Gary J. 6, 13 Price Fixing Committee of the War Industries Board 42 Price, Waterhouse Co 68, 151 Professional Ethics Division’s Executive Committee – AICPA 122 Professional Ethics in Accounting – article by John Carey on ethical responsibilities, 1955 141 Professional Ethics of Certified Public Accountants 3, 76, 122, 133 Professional Ethics of Public Accounting 76, 90, 122, 126 Professional Organizations and Literature – article by Arthur B. Foye 123 Professorial Development Program 24 Profile of the Profession: 1975 – working paper 156 Protestant – John Carey as 18 Public Accountants and Accounting Legislation – article by John Cary 103 public accounting profession 5, 20, 27, 37, 38–39, 44, 47–48, 53, 61–62, 70, 85, 131, 134, 144, 155, 158–159, 166, 170 development since the 1700s 37 development of the U.S. profession 35 public conﬁdence 99, 103, 132, 137, 148, 159, 162, 171 public interest 93, 96–97, 103, 135, 139, 142, 158, 165 Public Law 89–332, allows CPAs to practice before Tax Court 67

234 public relations – messages educating the public about accounting, late 1940s 137 The Realities of Professional Ethics – article by John Carey, including ethics in the curriculum 129 regulation 40, 55, 99, 105, 120, 142, 153, 156, 164 during the New Deal 45 Relations of the Professions to Each Other and to the Public – article by John Carey 105 Report of Special Committee on Procedure, 1919 67 Republican, John Carey as 18 Richardson, A. P. 1, 13, 18–20, 119, 124 Richmond Hill High School 1, 17 The Rise of the Accounting Profession 3, 8, 15, 20, 32, 36, 77, 82, 85, 90, 145–146, 148–149, 178 (including The Rise of the Accounting Profession: From Technician to Professional, 1896–1936, and The Rise of the Accounting Profession: To Responsibility and Authority, 1937–1969) Robert Morris Associates 9, 176 recognition of John Carey at his retirement 31 Rocky Mountain Law Review, containing a Carey article 124, 142 Roosevelt, Franklin D. 44 Ross, Christine – 1st woman CPA 47 Rosie the Riveter – the role of women in the wartime economy as illustrated by Rockwell 48 Roslyn Estates Association 17 Rule 14 of the Code of Professional Ethics – against competitive bidding 127 Salisbury Taxpayers Association 18 Sanders, Beatrice 28–29

INDEX Santayana, George 5 Sarbanes-Oxley Act 172, 175 Saxe, Emanuel 156–157 Schneeman, Donald – AICPA attorney 72, 92, 181 Scobie, John C. – of Price Waterhouse 69 scope of services (see also advisory services, management services) 22, 78, 99, 103, 107, 134, 141, 155–160, 162, 164, 178 Scovill, Hiram T. 25 Second Southern States Accountants’ Conference 109 Securities and Exchange Commission (SEC) 7, 14, 45–46, 50, 71, 77, 105, 147, 150, 165 differences with accounting on independence 132 standard setting left to the accounting profession 46 Securities Exchange Acts 45–48 Securities Act of 1933 45 Securities Act of 1934 46 Seidman, J. S. 151 Sevareid, Eric 106 Sharon Hospital – John Carey on the Annual Giving Committee 18 Skousen, Fred 32 Smith, C. Aubrey 26 Social Science Citation Index (SSCI) 84, 178 society, inﬂuence of accountancy 5 solicitation of clients (see also advertising and ethics) 2, 24, 119, 126, 130–131, 136, 138–139 Southern States Accountants’ Conference – John Carey speech, 1940 109 Special Committee on Auditing Procedure, established following McKesson Robbins 71

Index Special Committee on Professional Ethics of the AAPA, 1907 138 Special Committee on Relations with Outside Organizations 64 Sprague, Charles E. 8 staff bulletins 3 Stans, Maurice H. – an article entitled The Profession of Accounting 122 state boards of accounting 60, 70, 99, 108, 122–123, 140, 170–172, 180–181 state CPA societies 20, 165 Staub, Walter A. – president of the New York State Society of CPAs 63 Sterrett, Joseph E. 55, 115 stock market crash of 1929 14, 43 Stone, Marvin 182 Taconic, Connecticut 1 tax practice and the profession, 22, 78, 99, 103, 107, 134, 155, 178 accounting as affected by tax legislation, including 16th amendment 41 accounting versus law 46, 104, 112, 142–143, 161–162 Board of Tax Appeals 66–67 continuing education aspects 168 corporate income tax 41–42 demand for accountants increases in the early 1900s due to tax work 57 distinguished from auditing 132–133 independence issue 141 information about taxes as an exception to advertising/soliciting rule 126 Journal of Accountancy 23 Journal of Taxation 123 Public Law 89–332 regarding CPA representation 46 specialization credentialing in tax 169 Tax Court, CPA representation of clients before 46

235 Treasury Circular 230, CPA representation of clients before 162 The Texas Accountant 109 Texas Society of Certiﬁed Public Accountants – John Carey address in 1940 109 Texas State Board of CPAs – ethics violations discipline 140 Things to Come (article by John Carey) 78 The Third-Quarter Century of the American Accounting Association 1966–1991 24 This Blessed Language – Journal of Accountancy section 18 To Responsibility and Authority 77 Touche, Niven & Co. 19 Trueblood, Robert M. 151, 156 Tyco 175 Tymms, Browne – early American accountant 37 Tyson 5 The Uncertain Future – article by John Carey 149, 158 Uniform Accounting – Federal Reserve Bulletin of 1917 69 Union League 18 United State Constitution – eighteenth amendment 26 United States General Accounting Ofﬁce 165 United States Senate Committee on Banking and Currency – investigation of stock exchanges 45 United States Treasury Department 171 University of Chicago Graduate School of Business 28 University of Georgia – John Carey as lecturer 32 University of Illinois Graduate School of Business Administration – John Carey as adjunct faculty 32

236 University of Maryland – John Carey as speaker 32 University of Mississippi 12 University of Washington 25 Usry, Milton F. 4 Vanc, Lawrence 24 Vangermeersch, Richard 8 Verification of Financial Statements (revision of 1917’s Uniform Accounting) 69 Veysey, William H. 53, 136 Wall Street Journal 19, 106 War College 163 Wharton School of Commerce and Finance 54 What is History? 11 What’s Right with the Profession? – article by John Carey list profession’s achievement 107

INDEX Who’s Who in America (1956) – John Carey listed in 18, 26,176 Wilkinson, George (President of Illinois Society) 54 Witschey, Robert E. 151 Women in Accounting 49 World Congress of Accounting Historians 6, 8 World War I and need for accountants 41 World War II 14, 47, 147 WorldCom 175 Wright, John A. 114 Yalden, James 53 Yale Club 18 Yale University 1, 17–18, 28, 178 Zeff, Stephen (on John Carey) 77, 87, 177