The Sixth International Congress on Accounting 1952

Various

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000167870
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Negocios en general

This book, first published in 1954, collects together the papers presented to the Sixth International Congress on Accounting. They focus on the problems of the post-war changes in the value of money, and how to deal with this in accounting statements; taxation, and the role of accountants in Government; raising and retaining capital for development; and the role of the professional accountant in the commercial field.

Wednesday, 18th June, 1952

THIRD SESSION

THE ACCOUNTANT IN INDUSTRY

Chairman

PATRICK BUTLER, F.C.A.

Vice-President of The Institute of Chartered Accountants in Ireland

Deputy Chairmen

CONRAD F. HORLEY, F.A.A.(AUST.)

Association of Accountants of Australia

L. VAN ESSEN

Nederlands Instituut van Accountants

__________

Papers

were presented by the following:

CLINTON W. BENNETT, C.P.A.

National Association of Cost Accountants United States of America

F. R. M. DE PAULA, C.B.E., F.C.A.

Institute of Chartered Accountants in England and Wales

A. A. FITZGERALD, B.COM., F.I.C.A., F.C.A.A.

Commonwealth Institute of Accountants, Australia

H. HJERNØ JEPPESEN

Foreningen af Statsautoriserede Revisoren Denmark

GEORGE MOLLER, DJUR., C.A.(CANADA)

Society of Industrial and Cost Accountants of Canada

A. PAYRAU

Compagnie Nationale des Experts Comptables, France

W. S. RISK, B.COM., C.A., F.C.W.A.

Institute of Cost and Works Accountants

__________

RAPPORTEUR

N. R. MODY, B.COM., F.C.A.

Institute of Chartered Accountants of India

The Accountant in Industry

by
F. R. M. de Paula, C.B.E., F.C.A.

Institute of Chartered Accountants in England and Wales

Introduction

In the industrial world of to-day, the accountant is playing an increasingly important part in the management field. In this country this significant development has been most marked during the past two or three decades, and is evidenced by the

‘considerable extent to which members of the Institute have taken wholetime appointments in industry and commerce after qualification, instead of practising as public accountants. The accountancy profession now embodies a much wider field than that of public accountants...’¹

It is the purpose of this paper broadly to outline this development and attempt to make clear its main purposes and objectives. But before doing so, it may be helpful to trace briefly the growth of the accountancy profession in this country ; as to this, the writer can speak only from his own limited experience and as a member of the Institute of Chartered Accountants in England and Wales.

The art of book-keeping can be traced back to medieval times, but accountancy, as an organised profession, is very young and emerged here during the second half of the nineteenth century. Thus the birth of our profession took place during the prosperous Victorian era, when England was the richest and most powerful country in the world. Her industries were expanding rapidly, serious competition from abroad was not yet felt, for she was first in the field of industry, and thus had a flying start. The Royal Navy controlled the Seven Seas, and our commerce was backed by our vast mercantile marine ; thus, in that age of great progress, our trade followed our flag to all parts of the globe. The pulse of industry was running fast and a period of great expansion lay ahead.

During that period, the individual business concerns were growing in size and private partnerships were being converted into private companies under the Companies Acts. Thus the opportunities for accountants were opening out.

¹ Members’ Handbook, August, 1950. The Institute of Chartered Accountants in England and Wales, page 13.

The Institute of Chartered Accountants in England and Wales was incorporated by Royal Charter on the 11th May, 1880. Its objects were modest and were described in the original petition as follows :

The profession of public accountants in England and Wales is a numerous one and their functions are of great and increasing importance in respect of their employment in the capacities of liquidators acting in the winding-up of companies and of receivers under decrees and of trustees in bankruptcies or arrangements with creditors and in various positions of trust under Courts of Justice as also in the auditing of the accounts of public companies, of partnerships, and otherwise.’

It will be noted that the main emphasis is upon liquidation and receivership work and that auditing is the last item upon the list. It is significant also that accounting is not even mentioned.

Looking backwards, it is clear that the Institute has developed in many directions never contemplated by its founders.

During the Victorian age, the rapid and extensive expansion of industry and commerce and particularly the growing size of the individual business unit, created the need for accurate and improved records. The old-fashioned methods were very slow and cumbersome and commonly the books of account were written up by the proprietor of the concern himself. But as the business grew this became impossible and part, at least, of the book-keeping had to be delegated, and when private firms were converted into companies under the Companies Acts, accounting assumed an added importance.

In this way the need arose for skilled accountants to help business men to organise their book-keeping records and the practice grew rapidly for public accountants to prepare and audit the annual accounts of industrial and commercial concerns.

During this stage in the development of the profession the emphasis was, to a large degree, upon recording. The practitioners of those days were extensively engaged in introducing sound systems of doubleentry book-keeping into industry and commerce, and the auditor generally balanced the books and himself prepared the annual balance sheet and profit and loss account. So much time and energy were devoted, by the auditor and his staff, to the actual preparation of the accounts, that this accounting work, some may think, was carried out at the expense of the true audit work.

During this period, the profession undoubtedly rendered valuable service in raising the general standard of recording and accounting in this country.

The profession developed, at this time, upon an individualistic basis, that is to say, that each accountant decided for himself his basic accounting and auditing principles and procedures. The Council of the English Institute did not commence to issue recommendations on accounting principles for the guidance of its members until 1942.

During the second half of the nineteenth century, the profession grew very rapidly and extensively, audit practices expanded and many other fields of opportunity were opening out. Succeeding generations of accountants were building up upon the firm and sound foundations laid by their predecessors. It was a period of consolidation, and thus confidently the profession moved forward into the fateful twentieth century.

The Important Effects of the Companies Act, 1900

Upon the turn of the century, this country was involved in the South African War, Germany and America were becoming serious trade competitors in both our home and foreign markets, and the ominous clouds of war had commenced to form in the skies over Europe. But the most important landmark at that time for the profession, in this country, was the coming into force of the Companies Act, 1900, which for the first time provided for the compulsory audit of the accounts of all companies, both public and private. Prior to this the field of opportunity for the public accountant was limited, but the passing of the Act of 1900 immediately expanded audit practices enormously, as auditors had to be appointed by countless numbers of companies that had never employed professional auditors before.

The coming of the auditor to every company had several important effects, e.g. many strange and inadequate accounting systems came under the review of the skilled accountant ; and thus a large section of industry and commerce was persuaded to improve and modernise its system of records. The professional auditor rapidly proved his usefulness to his clients and became, in most cases, the financial adviser to the boards of the companies, and to the partners of the firms of which he was auditor.

Thus the coming into force of the Companies Act, 1900, was responsible for the first great step forward of the accountancy profession in this country.

The Effects of World War I

The World War of 1914-18 had profound effects upon the profession, as new fields of activity developed, which vastly widened the whole scope of the profession’s activities.

Prior to the outbreak of the South African War in 1899, the rates of income-tax were very low; from 1879-80 to the year 1899-1900, the rates had varied between a minimum of Sd. and a maximum of 8d. in the £. During the South African War the rate rose to Is. 3d. in the £ and after the war fell to lid. in the £.

Sur-tax, profits tax, and excess profits duties and taxes had not been born. As, therefore, the direct tax burden was very light, the individual taxpayer was not greatly concerned regarding his tax assessments; consequently taxation work represented a negligible proportion of the earnings of public accountants in those days. But when during the 1914-18 War, the rate of income-tax rose to 6s. in the £ plus a heavy excess profits duty, a vast change came about and the individual taxpayer and the management of all companies and partnerships became acutely concerned with their tax assessments.

Public accountants undertook this work for their clients and thus an enormous field of activity developed. This work, which is highly specialised, must to-day represent a considerable proportion of the earnings of the profession in this country.

During the 1914-18 War many members of the accountancy profession served in various of the government departments and services and thus, in many cases, for the first time, became concerned with the problem of administration upon a very big scale. In this way, the outlook of many accountants was broadened greatly.

The vast armament programme raised the problem of the costing of government contracts both for the accountants serving within the government departments concerned, and for the public accountants outside, acting for their clients. In this way many professional accountants, for the first time, had to consider seriously the whole problem of costing, which up to that time had received little attention from the profession.

Thus a further new field of activity was developed and one which has since been greatly expanded. This also is a highly specialised subject, in which many accountants have now become expert.

Starting with costing only, this technique has since been expanded into what is now known in industry as management accounting. It is this field within industry and commerce that has attracted the interest of increasing numbers of professional accountants ; and many of them have become specialists in the modern methods and practice of management accounting.

The Period between the Two World Wars

The period between the two world wars was one of great activity in the profession; audit practices grew rapidly and extensively, taxation work became evermore important and specialised. Professional accountants, in increasing numbers, were appointed to the boards of companies, on government committees and as advisers to trade associations and other bodies. At the same time great numbers of professional accountants took up full-time appointments in industry and commerce and thus were forced to study closely the whole field of management accounting. Thus accountants found themselves playing an increasingly important part throughout the economic life of the nation.

After World War I management consultants commenced to practise in this country ; their techniques and procedures were obviously founded upon the teachings of the late F. W. Taylor, and as subsequently developed in the U.S.A. during the past fifty years.

Their object was to help industry to improve its whole organisational methods with a view to raising efficiency and consequently productivity, in the interests of all concerned, including, of course, the whole of the personnel employed. Thus, when engaged upon the reorganisation of an industrial concern, their report covered all of the functions of the business, e.g. production, technical, engineering, sales, personnel, finance, accounting, organisation and methods, etc. Management consultants are generally engineers and they employ skilled accountants to help with the financial and accounting parts of their investigations. Thus some accountants became interested in the financial and accounting parts of these new techniques.

These management consultants gain great experience as the result of investigating numbers of business concerns, and the successful practitioners undoubtedly render very valuable services to industry and commerce.

But the most significant landmark in the life of the profession during this period was the Kylsant case, which fell like an atomic bomb, and changed the face of the world of accounting.

Up to that time, both business leaders and the majority of accountants held the view that secret reserves were justified, upon the grounds of prudent financial policy, but this case gravely challenged the practice of drawing upon secret reserves for the purpose of bolstering up current earnings without revealing these facts. The public conscience was gravely shocked by the disclosures in this case, as also were many accountants. In consequence, a careful reconsideration of basic accounting principles commenced in the 1930s, in the first place by individuals and subsequently in 1942 the English Institute commenced to issue recommendations on accounting principles for the guidance of its members. This was an event of deep significance and many of these recommendations found their way into the Companies Act, 1948.

The Effects of World War II

The profession had grown to maturity and, strangely enough, in the midst of World War II had paused to take stock of its position and to think out its basic principles. The Council of the English Institute thus gave an invaluable lead and one which has had profound effects.

In the aftermath of World War II, this country found herself in extremely difficult circumstances; her vast overseas investments had, to a great extent, been liquidated to pay for the costs of the two World Wars, she was unable to balance her international accounts, her industrial equipment was run down and badly needed replacement and reconditioning, her citizens were fatigued and were staggering under a stupendous burden of taxation, together with a rapidly rising cost of living. However, her industries have made a supreme effort in turning over from war to peacetime production and have succeeded in vastly increasing the country’s export trade. Now she is involved in a huge rearmament programme.

In these acutely complex times, the overall burdens of the accountancy profession have risen greatly and naturally its staff requirements increased proportionately. But, at this same time, an insatiable demand has arisen, from industry and commerce, for skilled accountants to help to ...

Table of contents

• Cover
• Half Title
• Original Title Page
• Original Copyright Page
• Title Page
• Copyright Page
• Foreword
• Table of Contents
• Sponsors of the Congress
• Officers
• Members of Council and Committees
• Accountancy organisations represented
• Time-table of events
• Monday, 16th June, 1952
• Tuesday, 17th June, 1952
• Wednesday, 18th June, 1952
• Friday, 20th June, 1952
• Other Events of the Congress
• Closing of the Congress
• Visits to Scotland and Ireland
• Appendices
• Index