The Construction of the Professional Accountant: The Case of the Incorporated Institute of Accountants, Victoria(1886)

The Construction of the Professional Accountant: The Case of the Incorporated Institute of Accountants, Victoria(1886) Garry D. Carnegie Deakin University, Australia and John Richard Edwards Cardiff Business
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The Construction of the Professional Accountant: The Case of the Incorporated Institute of Accountants, Victoria(1886) Garry D. Carnegie Deakin University, Australia and John Richard Edwards Cardiff Business School, UK Abstract This paper posits professionalisation as a gradual and continuing process that reveals a number of signals of progress towards occupational ascendancy, amongst which the emergence of an identifiable occupational group is an early and important stage in a dynamic process. Exploiting the available archival material within the framework provided by relevant sociological theory, this prosopographical study diagnoses the career paths pursued by the 45 founders of the Incorporated Institute of Accountants, Victoria, in the period prior to that body s formation in Melbourne in It elucidates the founders occupational and commercial backgrounds and attempts to establish when and where they began their involvement with accounting and to identify the extent and nature of their association with this emerging discipline around In doing so, the study endeavours to locate, in a colonial context, the domain of professional accounting and the interface between accountants and related occupations within the growing specialisation of labour in the period before organisational assembly took place. The case study draws on the critical-conflict based analytical framework to inform an understanding of the mobilisation of an occupational collective withincolonial society. A paper for presentation at the Second Asian Pacific Interdisciplinary Research in Accounting Conference, Osaka, Japan, 4-6 August 1998 Addresses for correspondence: Garry D. Carnegie John Richard Edwards School of Accounting and Finance Cardiff Business School Deakin University Colum Drive Geelong Victoria 3217 Cardiff CF1 3EU Australia United Kingdom Telephone: Telephone: Fax: Fax: Draft only (June 1998). Please do not cite or quote without authors permission Acknowledgements: The authors are grateful for the financial assistance provided for this project by the Scottish Committee on Accounting History of the Institute of Chartered Accountants of Scotland, the Australian Society of Certified Practising Accountants and the Faculty of Business and Law, Deakin University. The Construction of the Professional Accountant: The Case of the Incorporated Institute of Accountants, Victoria(1886) Garry D. Carnegie Deakin University, Australia John Richard Edwards Cardiff Business School, UK INTRODUCTION This study examines the people, events and key environmental factors associated with the creation of the Incorporated Institute of Accountants, Victoria (IIAV) in In particular, the prosographic method is adopted in studying the occupational and commercial backgrounds of the 45 founders of the IIAV in the pre-1887 period in an endeavour to augment our understanding of the professionalisation process. Contemporary studies of professionalisation were provided an impetus through Millerson's The Qualifying Associations (1964), with Elliott (1972, p. 5) judging the major contribution of that study to be its recognition of professionalisation as a dynamic process operating at three levels: first, the level of social change, with the emergence of occupational professions as a means of managing specialisation during periods of rapid commercial and industrial development a key element in this process; second, the level of occupational organisation, where we emphasise the variety of ways in which a set of workers aspire to achieve professional status; and third, at the level of the individual life-cycle, focusing on the way in which individuals become practising members of a particular profession. The remainder of the paper makes use of this structure to inform our own analysis. At the occupational organisation level, the study exploits the critical-conflict based analytical framework that was applied by Walker (1995) in examining the emergence of the earliest modern organisations of accountants; the Society of Accountants in Edinburgh (SAE) and the Institute of Accountants and Actuaries in Glasgow (IAAG) in Scotland in It will be shown that the notions of conflict emergence and resolution help to illuminate the timing of the advent of the IIAV in Victoria but do not, in themselves, adequately explain the full dimensions of the professional formation process in this colonial context. In essence, the study depicts the accounting professionalisation process as a dynamic set which, for completeness, should be examined in periods both before and after the formation of occupational associations. Our emphasis on examining the pre-1886 careers of the IIAV s founders places the focus on accounting as a human construction and its rise in the social 1 The SAE was initially called the Institute of Accountants in Edinburgh but changed its name at the time of obtaining its royal charter in 1854. milieu in a colonial setting. It also emphasis the need to examine professional formation within its local, time-specific contexts and to assess the portability of certain theoretical perspectives which appear to fit certain contexts. The paper is structured as follows. First, we consider the nature and explanatory potential of the prosopographical study within our research framework and then move on to theorise the role of occupational groups in the professionalisation project. We then describe the economic and social context within which this study of the accounting world of colonial Victoria in the period leading to the formation of the IIAV is placed. Next, we present the results of our empirical investigation into the career paths followed by the founders of the IIAV in order to understand their routes to public accountancy and the emergence of an occupational group capable of mounting a professionalisation project. The role of the mercantile counting house in the development of the distinctive knowledge base of accountants is then addressed, and the extent that this experience impinged upon the training of the founders is explored. The emergence of an embryonic accounting profession in Victoria between the 1850s and 1880s is examined, focusing on the rise of the public accountancy practice and the range of work undertaken by public accountants. The key events surrounding the creation of the IIAV are examined in two sections which explore the significance of a contemporary initiative to establish an association comprising both accountants and clerks, and the potential and conflict resulting from the attempt by a newly-established, London-based, professional accounting body to control the development of the profession in Victoria in particular, and Australia generally. Finally, we present our concluding remarks. A PROSOPOGRAPHICAL STUDY At a time when accounting is being seen increasingly as a social practice rather than a technical activity (Chua and Poullaos, 1993, p. 691), the study of key personalities in accounting and its past assumes greater significance. Prosopographic studies of those who were responsible for the development of accounting are in short supply (Carnegie and Napier, 1996, p. 23). Such studies have the potential to fill the void identified by Saks (1983, p. 17) who laments the lack of rigorous empirical examinations of the local, time-specific conditions under which professionalisation has occurred. According to Carnegie and Napier (1996, p. 22), prosopographic studies may enrich our understanding of the considerations which shaped the value systems of the historical actors under investigation. In the first prosopographical study of Australian-based pioneer accountants, Edwards et al (1997) found that most of the 45 founding members of the Melbourne-based IIAV were UK immigrants. 2 Of these, only two, Joseph Henry Flack and James Edwin Moir, were members of a UK accounting body on their arrival (Carnegie and Parker, 1998). Both were members of the Institute of Chartered Accountants in England and Wales (ICAEW). This finding has demonstrated to be inaccurate, in the IIAV s case, the assertion of Johnson and Caygill (1971) (see also Briston and Kedslie, 1997) that local bodies were primarily established by British-qualified accountants. Of the other 39 UK immigrants, most had been in Australia for 2 At the time of publication, Edwards et al (1997) had identified the birth places of all but one foundation member, namely Edward Nathan Brown. Subsequently, Brown was identified as having been born in Leeds on 12 February It is now confirmed that only four of the 45 founders were born in Australia. lengthy periods prior to the formation of the IIAV in April 1886, while the majority of those arriving in Australia with a known occupation were not accountants. The present prosopographical study examines the careers of the IIAV s founders in the period leading up to the association s formation in Melbourne in It traces the occupational backgrounds of these founders, and attempts to establish when they began their involvement with accounting and how they differentiated themselves as accountants from similarcallings or their earlier occupations. It seeks to elucidate the extent to which the founders were engaged in providing accounting services on the IIAV s formation and to gauge whether the also-accountants label, applied to Victorian accountants generally by Chua and Poullaos (1998), describes the founders of Victoria s first professional accounting association. In this way, we seek to locate the domain of professional accounting in colonial society and the interface with related occupations in the period before professional formation occurred in Victoria. In so doing, the study sheds light on the local, pre-1886 usage of, and the interrelationship between, the terms accountant, clerk and bookkeeper by those who engaged in the organisational project. THEORISING THE ROLE OF OCCUPATIONAL GROUPS The principal focus of the professionalisation literature on accounting is the study of professional formation and development from the time of the advent of professional associations. Indeed, Kirkham and Loft (1993, p. 519) argue that the process of professionalisation of accountants dates in England and Wales from 1870, in which year the accounting elite, in London, formed the Institute of Accountants. Typically, this literature contains the presumption thatthose who came together to form accounting associations were practising accountants or, at least, principally engaged in an accounting occupation. A counterpoint to the predominant theme is found in the study by Chua and Poullaos (1998, p. 165) which labeled accountants listed in business directories published in colonial Melbourne from the mid-1850s to the 1880s as also-accountants. The notion of an elite caucus of accountants assembling to form local associations is displayed in histories of the accounting profession (for example, [Howitt], 1966) and fueled, albeit indirectly, by biographical studies of founders of accounting bodies (for example, Lee 1996; Shackleton and Milner, 1996; Walker, 1996). Such studies almost always examine the lives and careers of prominent foundation members, thereby creating the impression that capable, senior and experienced accounting figures came together for a range of reasons to organise and advance their profession. 3 The last thirty years has witnessed the emergence of a critical perspective on the role of the professions within society. A key feature in the replacement of the functionalist interpretation, heavily influenced by the work of Emile Durkheim ( ) (for example, Carr-Saunders and Wilson, 1933) by the interactionist interpretation (for example, Hughes, 1958; Larson, 1977; Macdonald, 1984, 1995) of the nature of the professions has been the development of the concept of social closure. This concept, particularly as encapsulated in the professional project, has been developed to study how members of an interest group close off 3 These are, of course, the interesting and, in many respects, relevant careers on which to base biographical studies. However, the army of accountants whose individual careers are of little moment, had an impact possibly greater than that of the leading players. opportunities to others in order to monopolise social and economic opportunities (for example, Weber, 1968; Larson, 1977; Willmott, 1986; Murphy, 1988). Under this perspective, Larson (1977, p. xvii) graphically locates the professional project 4 as an attempt to translate one order of scarce resources - special knowledge and skills - into another - social and economic rewards. Efforts to achieve closure naturally exploit the potential provided by both demand side (for example, lobbying for State preferment) and supply side factors. In the latter context, the exclusion of outsiders is typically on the basis of credentials or, rather, the demonstrated lack of credentials, although other factors such as class, race, religion and gender have been proposed as determinants of professionalisation (for example, Richardson, 1989; Chua and Clegg, 1990; Kirkham and Loft, 1993; Hammond and Streeter, 1994; Hammond, 1996, 1997). In their enlightening article, Kirkham and Loft (1993) examined, via an analysis of British censuses records dating from 1870 to 1930, how, as part of the professionalisation project, the professional accountant came to be constituted as neither a bookkeeper nor a clerk. Their study was concerned with the discursive creation of boundaries around accounting which also led to the widespread acceptance of the notion of professional accounting as something not done by women. Kirkham and Loft (1993, p. 552) therefore categorised the professionalisation project as fundamentally gendered , whose success was not simply a matter of establishing accountancy as a profession but involved creating and maintaining a masculine identity for the 'professional accountant' . Women were specifically excluded by the constitutions of all the early qualifying societies and, whilst a few women did practice accountancy, any applications for membership were rejected (Jones, 1981, p. 136). 5 Chua and Poullaos (1998, p. 157) have made the observation that outcome has received more attention than process in accounting s professionalisation literature. This insight may be seen as requiring consideration to be given to the question of when a professionalisation process begins to become apparent. Contributors of critical works on professionalisation in accounting have located the domain of professional accounting in the post-professional formation period, with the operationalisation of social closure certainly most apparent in the period when an element of exclusion is formally sanctioned. Professionalisation may more usefully be viewed as a gradual and continuing process, however, with the formation of an organisational body serving as a visible public signal from a collective among a series of events that operationalise the closure process. During the prior period there will arise signals of progress towards occupational ascendancy, such as the emergence of an occupational group, the holding of oneself out to the public as an expert provider of specialist services, the establishment in certain jurisdictions of formal links between groups of accountants and clerks, and the congregation of firms of accountants in certain precincts of a city. Following the formation of an organisational body, other signs of progress include the development of the role performed by a professional body, the acquisition of a royal charter, recognition in 4 The term professional project has been subsequently augmented in the literature with the phrase professionalisation project and these labels now appear to be used interchangeably in the literature. We use the term professionalisation project throughout the remainder of this paper and, as indicated, attribute to it a wider meaning than is usually attached to either label. 5 The process of exclusion in another of the new professions, surveying, is described by Greed (1991, pp ), while an assessment of the widespread prejudice against women in the endeavour to underpin the professionalisation process is provided by Witz (1992). legislation as the appropriate provider of expert services, and classification of the occupational group in government census data. 6 The potential that such events can have for enhancing the position of collaborating parties within society may be inferred from Adam Smith s (1776, p. 55) warning that people of the same trade seldom meet together, even for merriment or diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. While many, if not all, critical accounting scholars may be receptive to Smith s sentiments, their focus on closure nevertheless begins, in most cases, with the creation of professional bodies when, as noted above, Kirkham and Loft (1993, p. 519) believe the professionalization of accountants began. A richer understanding of accounting s progress to occupational ascendancy requires the adoption of a broad analytical framework in which the occupation rather than the profession is the key subject of the study (Turner and Hodge, 1970; Walker, 1995). Hereunder, the professionalisation process does not begin with the formation of an organisational body, though the organisational project is an undeniable link in the pathway towards State-recognised social closure, associated with the granting of occupational privileges such as a Royal Charter or through recognition and, sometimes, monopoly powers, bestowed by legislation. Failure to view the professionalisation process as a continuum from the earliest identified use of signals of progress towards occupational ascendancy has, however, the potential to delimit the development of broad multidimensional theories of professions (Walker, 1995, p. 287). Johnson has helpfully drawn attention to the fact that Attempts to develop the concepts of professionalisation and professionalism in order to account for observed differences between occupations which are conventionally regarded as professions have concentrated attention on the institutional orders which have grown up around occupational activities. (1972, p. 41) He then pinpoints a key omission associated with this orientation: In general, they have ignored the prior problem of distinguishing between occupational activities as such. (Johnson, 1972, p. 41) The findings elucidated in this paper support the case for widening the time horizon for studies of the development of professions. Growing industrialisation, of course, accelerated the division of labour and the emergence of specialised occupational skills. The institutionalisation of the workforce during the industrial revolution was seen by Marx (1844, , discussed in Howard and King, 1985, pp ) to have given rise to the alienation of labour, but the same condition of specialisation, whilst producing systematic relationships of interdependence, also introduced potentialities for autonomy (Johnson, 1972, p. 41). Indeed, Elliott s observation, that Within industry the growth of professional occupations can be seen as one aspect of the separation of ownership and control, (1972, p. 2), indicates the potential provided by the process of industrialisation for satisfying the aspirations of upwardly mobile occupational groups. More specifically, Parker (1986, p. 13) has pointed to the fact that the emergence of 6 In England, for example, signals of progress would encompass the following events and dates: listing of accountants in trade directories of the late-eighteenth century; recognition in legislation (Bankruptcy Act), 1831; formation of an organisational body, 1870; issue of a royal charter, 1880; and achieving professional classification in census lists, Argentina enacted legislation in 1836 regulating the practice of accountancy. While only eight acc
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