The Boulton & Watt Case: The Crux of Alternative Approaches to Accounting History?

In accounting history, authors who have adopted a ‘Foucauldian’ approach have recently debated with those representing the ‘Neoclassical’ school of thought the relative sophistication and significance of cost accounting developments in the UK and US respectively during the late 18th and early 19th centuries. This paper argues that the differences between the two schools' understandings are important for comprehending the genesis and scope of modern cost and management accounting systems. It re-examines the historical case of Boulton & Watt, an engineering firm believed to have been in the vanguard of British Industrial Revolution accounting practice (Roll, 1930; Pollard, 1965 and 1990; Fleischman and Parker, 1991), in an attempt to clarify some of the key points of difference in the debate. It proposes that the historical crux for deciding where a modern managerial approach to accounting began lies in distinguishing between the development of engineering standards for materials and machine efficiency and the transfer of such performance measurements to human behaviour. A pressing task for historians is to establish when, where, how and why ‘labour standards’ were first articulated on the grounds that such forms of human accounting, by constructing norms of managerial performance, form the basis for modern management control. The paper reviews the primary sources on the history of cost accounting at Boulton & Watt, including the previously-acclaimed development of labour and engine standards. Its findings are that, while the latter were highly sophisticated as measures of engineering performance, they were less so on the economic dimension of cost measurement. Meanwhile, the evidence for labour standards is unconvincing; there was, around 1800, an intense period of investigating labour time and cost, but no subsequent long-term systematic control exercised over them analogous to the modern managerial approach found slightly later in US contexts. The paper suggests that one priority for further research is the detailed examination of early industrial enterprises on both sides of the Atlantic, in order to establish more definitively when, where, how and why this crucial development occurred.     

Economic and Accounting (Book) Rates of Return: Application of a Statistical Model

Harcourt's (1965) classic paper has spawned a considerable literature dealing with the relationship between economic and accounting rates of return. Kay (1976), Ijiri (1979), Salamon (1982) and Kelly and Tippett (1991), for example, can be interpreted as extensions of Harcourt's seminal analysis, while Kay (1976), Salamon (1982, 1985) and Gordon and Hamer (1988) provide empirical evidence on the sustainability of basic propositions. The present paper's focus is on the latter area; we apply the statistical procedures laid down in Kelly and Tippett (1991) to about 200 British companies to assess the correspondence between the ex post accounting rate of return and the prospective economic return. The economic return is estimated using three cash flow definitions. For all three, the accounting rate of return is significantly lower than the economic return. Further tests show the economic return to be inversely related to the accounting rate of return, although the relationship is weak. In addition, ‘large’ firms tend to report lower accounting rates of return than ‘small’ firms, but again the relationship is weak.     

Efficiency audit: An assembly of rationalities and programmes

This paper focuses on the insertion of accounting and auditing knowledge into wider areas of practice, and examines the processes of auditing change through studying the development of “efficiency auditing” using events in one jurisdiction, the Province of Alberta, Canada, as an exemplar. These developments are interpreted through use of Miller and Rose's (1990; Rose & Miller, 1992) theoretical concerns with governmentality, and especially the links between generally stated political rationalities and more specific programmes for action. In studying the association of ideas of efficiency with auditing, and the developing belief that efficiency could be investigated or procured through audit scrutiny, it is argued that these events can be understood in terms of an intersection between wider discourse (concerning, for example, best management practice, appropriate auditing roles, etc.) and local circumstance. The specific interpretations that result are understood as providing one set of conditions by which auditing (and accounting are linked to the social (Burchell et al., 1985). Further research (Radcliffe, 1995) attends to the logistics of how one might audit for efficiency, using fieldwork to trace the technologies which provide practitioners with particular mechanisms for action (Miller & Rose, 1990). © 1998 Elsevier Science Ltd. All rights reserved.     

The Simultaneous Relation Between Auditor Switching and Audit Opinion: An Empirical Analysis

Previous studies examining the relation between the audit opinion and auditor switching assume a one-way causation, with the issuance of a qualified opinion triggering a switch. However, analytical studies dealing with auditor independence issues (e.g., Magee and Tseng, 1990; Dye, 1991; Teoh, 1992) suggest an opposite causation, in which the auditor is less likely to qualify the opinion for a client who may switch auditors. Some evidence of an opposite causation is provided by Krishnan (1994), who finds that auditors treat switchers more conservatively (relative to non-switchers) in issuing the audit opinion. The causation between switching and the audit opinion is clearly important for policy decisions regarding both opinion shopping and auditor independence. In this paper, we test the two-way causation hypothesis and find evidence in support of a two-way causation. Our simultaneity-adjusted estimates confirm previous findings of a positive effect of a qualified opinion on switching (Chow and Rice, 1982; Craswell, 1988; Citron and Taffler, 1992). However, we find in addition that auditors are more likely to issue qualified opinions to switchers. This finding does not support the analytical studies cited earlier.     

The measurement and management of human performance in seventeenth century English farming: The case of Henry Best

Agriculture is one of the oldest and most important forms of organised human activity Roberts [Roberts, J. M. (1988). The Pelican History of the World. London: Penguin, p. 49] but accounting historians have paid it relatively little attention when investigating the measurement and management of human performance. Undertaking a detailed analysis of the records of Henry Best, a seventeenth century English farmer, the current paper seeks to remedy this deficit. The current research finds that Best maintained financial records but notes that, in the absence of external accountability relationships and professional accounting, these records were not used for the calculation of financial performance or financial position but were employed simply to maintain track of transactions and to hold his workforce accountable for their performance. In drawing up a treatise on operational farm management for the benefit of his son and heir, who did subsequently employ this treatise, Best made extensive use of non-financial information. Best advocated that, when managing human performance, personal supervision should be guided by appropriate measurement systems: presaging later developments in scientific management, Best developed, inter alia, labour classifications, specified rates of pay, and required working methods and output levels. Like labour tasking on nineteenth century slave plantations, Best's methods may be perceived as “thematic precursor(s) to accounting-based disciplinary controls like standard costs and a transitory element from pre-modern to modern control systems” Tyson [Tyson, T., et al. (2004). Theoretical perspectives on accounting for labor on slave plantations of the USA and British West Indies. Accounting Auditing & Accountability Journal, 17(5), p. 758].     

Accounting student characteristics: Results of the 1992 federation of schools of accountancy (FSA) survey

This paper updates a special study on accounting student quality, including provenance (“Where do our accounting graduates come from?”) and scholastic rankings, initiated in 1991 by the Data Base Committee of the Federation of Schools of Accountancy (FSA). Initial findings, based on a survey of accounting majors at 29 FSA schools administered during spring semester 1991, appeared in the fall 1992 issue of the Journal of Accounting Education (Vol. 10, pp. 25–37). Findings of the 1992 survey, which involved responses from accounting majors at 26 FSA schools, appear in a comparative format below. In general, the 1992 data show only minor variations from the 1991 data.     

A reassessment of the role of the Learning Style Inventory (LSI-1985) in accounting education research

This paper reexamines the cautionary theme advanced recently in Stout and Ruble (1991a; 1991b) regarding the use of the LSI-1985 in accounting education research. We focus on evidence relevant to the construct validity of the LSI-1985 and identify a number of psychometric problems with the instrument. The evidence regarding the measurement properties of the LSI-1985 (in both its standard and scrambled versions) argues for suspension of its use in accounting education research. In short, the LSI-1985 does not provide meaningful measures of the learning style constructs posited by the Experiential Learning Model (ELM).     

Bank risk taking and changes in the financial condition of banks' small and midsized commercial customers, 1978–1988 and 1988–1991

This study examines the pattern of bank risk taking through the 1980s and early 1990s, as reflected in the reported financial condition of banks' small and midsized customer firms. Using industry data published in Robert Morris Associates'Annual Statement Studies, we examine the ten-year period 1978–1988 to ascertain changes in the financial condition of banks' commerical customers during the 1980s, and the following three-year period 1988–1991, to determine financial condition changes in customer firms during the early 1990s. Empirical results suggest banks' small and midsized commercial clientele shifted toward riskier organizations From 1988 to 1988, confirming the popularized notion of banks' increased tolerance for risk during the 1980s. From 1988 to 1991, however, banks' client firms evidenced a pattern of risk reduction, which is consistent with the argument that banks have retrenched in their risk taking in recent years, shifting back toward a more financially sound customer base.     

Industrial Cost Accounting Developments in Britain to 1830: A Review Article

Haydn Jones's Accounting, Costing and Cost Estimation (1985) uses the surviving records of numerous Welsh companies, engaged principally in metal manufacture between 1700 and 1830, to demonstrate the use made by managers of accounting data, as the basis for planning, decision making and control. This article relates the results of Jones's research to existing views regarding the development of industrial cost accounting, particularly because his findings call into question ‘single variable’ explanations for the development of management accounting, such as the level of industrialisation, the relative impact of fixed and variable costs, and the organisational structure of business activity. Jones's findings also require a reappraisal of established ideas concerning the relative sophistication of financial and management accounting procedures in use in earlier times, and our perception of the contributions of accountants and their techniques to business developments.     

The threat of litigation and voluntary partner/manager turnover in big six firms

In debates over tort reform, various sources (e.g., Berton 1991, p. A1, 1994, p. A1; Dalton et al. 1994, p. 56) have asserted that the threat of litigation contributes to the voluntary departure of partners and managers from the Big Six public accounting firms, possibly detracting from their auditing capabilities. Others have countered that increased legal liability would improve audit quality by encouraging greater care in the conduct of audits (e.g., Kothari et al. 1988, p. 322). Both arguments seem plausible, but there is little systematic evidence to support a link between litigation and turnover. Our study attempts to help fill this void. We report the results of an empirical analysis of unique questionnaire data obtained from former partners and managers who left Big Six firms during the period 1990–1992. A substantial portion of the respondents indicated that the threat of litigation influenced their turnover decisions. Having made personal payment because of litigation was significant in explaining the importance of the threat of litigation in turnover decisions. Further, path analysis revealed evidence of indirect effects of the threat of litigation on work/non-work commitments and control/supervision, which in turn affected turnover. Both the act of having made personal payment as a result of litigation and the prospect of doing so in the future were significant in explaining respondents' decisions to leave public accounting altogether. Our findings support the public accounting profession's arguments of linkages between turnover and the threat of litigation.     

Goodwill—an Example of Puzzle-Solving in Accounting—a Reply

Grinyer and Russell's (G&R, 1992) contention that Ma and Hopkins (1988) have imposed the mutually exclusive rules of the valuation-based paradigm on the matching-based paradigm that underlies accounting practice is overly defensive and misguided. Our 1988 paper was an attempt to throw light on why there was so little agreement on the rules governing the treatment of goodwill. G&R's comment does not change our view that the only answer to the 'puzzle' lies in the lack of a full understanding of the nature of goodwill.     

Parity conditions and the efficiency of the Australian 90- and 180-day forward markets

Covered Interest Parity (CIP) holds in the 90 and 180 forward market for the AUD/USD spot exchange rate provided fully modified least absolute deviation model (FM-LAD) procedures are applied to daily data for the period from December 2, 1985 to December 29, 2000. CIP fails if corrected ordinary least squares (OLS) and fully modified OLS (FM-OLS) procedures are applied. However, UIP fails in both markets on early data: December 2, 1985 to December 31, 1991, but holds in the 90-day market in a later subperiod: January 2, 1992 to December 29, 2000 FM. UIP is modified (M) to accommodate a potential risk premium. The MUIP model does not provide strong evidence suggesting the presence of a time-varying risk premium (TRP).     

Accounting student characteristics: Results of the 1993 and 1994 Federation of Schools of Accountancy (FSA) surveys

This article updates the results of an ongoing, longitudinal study on characteristics of accounting students, conducted by the Federation of Schools of Accountancy (FSA). The annual survey measures many attributes of accounting seniors and masters students, including student quality, provenance, future educational plans, career plans, plans for professional certification, extra-curricular involvement, attitude toward the accounting profession, attitude toward learning, attitude toward the 150-hour requirement, and various demographic dimensions. Subjects included 2,512 and 1,507 seniors, and 969 and 670 masters students, at 39 and 27 FSA schools, in the years 1993 and 1994, respectively. Results of these surveys, which appear in a comparative format below, have implications for many currently debated topics in accounting education. Results of the 1991 and 1992 surveys appearing in the spring 1992 and fall 1993 issues of the Journal of Accounting Education (Vol. 10, pp, 25–37 and Vol. 11, pp. 211–225), respectively.     

Genealogies of calculation

This paper calls firstly for genealogies of calculation, in contrast to traditional accounting history. The term genealogy conveys a focus on the outcomes of the past, rather than a quest for the origins of the present. It is intended to avoid an a priori limiting of the field of study to accounting as it currently exists, or to a particular accounting technique such as double-entry bookkeeping. And it entails an emphasis on the historical contingency of contemporary practices, a concern with the multiple and dispersed surfaces of emergence of disparate practices of economic calculation. Secondly, the paper emphasizes the discursive nature of calculation, the language and vocabularies in which a particular practice is articulated, the ideals attached to certain calculative technologies. Thirdly, the paper stresses the importance of attending to ensembles of practices and rationales that are assembled at various collective levels, rather than with isolated instances of this or that way of accounting. The delineation of the domain of traditional accounting history is illustrated by reference to three sets of issues: the links between double-entry bookkeeping and capitalism in the writings of Weber and Sombart; the links between bookkeeping practice and decision making in the writings of Yamey; and the quest for examples of “early management accounting” in the writings of those such as Edwards and Fleischman & Parker. In contrast to such concerns of accounting history, four genealogies are presented: the promotion of discounted cash-flow techniques for investment decisions in the U.K. in the 1960s; the emergence of costs in the late eighteenth century; the accounting for value added event in Britain in the late 1970s; and the construction of standard costing in the early decades of the twentieth century.     

The Equity Accounting Saga in Australia: Cyclical Standard Setting

Equity accounting in Australia has had a long, chequered history. This article examines that history by reference to a succession of six Exposure Drafts, one Statement of Accounting Practice and two Standards issued between 1968 and 1995. We adapt Nobes' (1991, 1992a. 1992b) cycle model of regulation to explain variation in 'standardization' across these documents. Nobes defined 'standardization' to mean the restriction of choice in accounting methods but we modify the concept to allow for measurement rule 'improvements' and changes in required disclosure levels. Nobes' cycle model has four stages: a starting point of varied practice: energy inputs, often crises, drawing attention to the issue at hand: forces opposing and forces in favour of standardization. A cycle- like pattern of variation in standardization emerges in the present context. Potential shortcomings of the cycle model are addressed, including Skerratt and Whittington's (1992) criticisms of Nobes' cycle model. The article extends the literature with respect to a cyclical explanation of the standard setting process. The cycle pattern evident here reflects a slow and incomplete resolution of various conceptual and legal difficulties in regulating equity accounting in Australia.     

Social disclosure, financial disclosure and the cost of equity capital

We test the relation between financial and social disclosure and the cost of equity capital for a sample of Canadian firms with year-ends in 1990, 1991 and 1992. We find that, consistent with prior research, the quantity and quality of financial disclosure is negatively related to the cost of equity capital for firms with low analyst following. Contrary to expectations, there is a significant positive relation between social disclosures and the cost of equity capital. This positive relationship is mitigated among firms with better financial performance. We consider some biases in social disclosures that may explain this result. We also note that social disclosures may benefit the firm through its effect on organizational stakeholders other than equity investors.     

The interplay between professional groups, the state and supranational agents: Pax Americana in the age of ‘globalisation'

In response to recent calls for systematic and in-depth studies of the impact of international forces on local accounting practices, discourses and institutions, this essay explores the interconnectedness of national politics with global forces and the ramifications of this interaction for the regulation of accounting and the state–profession relationship. The paper employs Held's (1991) framework [Held, D. (1991). Democracy, the nation-state and the global system. Economy and Society, 20(2), 138–172.] on the role of the nation state in the age of globalisation, extended to encompass insights from the realist paradigm on international politics, to examine the international aspects of an attempt by a group of indigenous auditors in Greece to recapture their monopoly status, following the ‘liberalisation' of the Greek auditing profession in 1992. The paper explores changes in the state–profession relationship in the era of ‘globalisation' and documents the catalystic role of major states (the USA), politico-economic blocks (the EU), and other powerful international actors. It is posited that the politics of international accounting professionalism in the ‘globalisation' era are becoming more polycentric with (lesser) nation-states as merely one level (of diminishing importance) in a complex system of superimposed, overlapping and often competing national and international agencies of governance. The lessons to be learned from the Greek experience seem to be relevant to a number of countries — weaker or more important players in the world economy and politics — as they realign the assemblage of government in accounting and in other domains, in response to the progressive internationalisation of the world economy.     

FROM THE UNION HALL: A LABOR CRITIQUE OF THE NEW MANUFACTURING AND ACCOUNTING REGIMES

This study presents the critique of new manufacturing regimes that is emerging out of debates within the U.S. labor movement over the merits of union/management cooperation as a strategy for revitalizing American manufacture. The research focuses on the labor histories of three union locals in Decatur, Illinois and their critique of new forms of factory governance such as teams, quality circles and employee participation programs. The paper examines the implications of the labor critique for management accounting's attempt to establish its relevance within contemporary manufacturing environments.Introduction A new conventional wisdom has found its way into management accounting theory and practice. Accounting academics, industry consultants, the media, trade journals and accounting textbooks now almost uniformly accept that traditional cost accounting, with its emphasis on controlling production workers, is no longer relevant to contemporary management and manufacturing strategies (Johnson @2e Kaplan, 1987). Consequently, traditional cost accounting is being re-thought, revised and revolutionized (Johnson, 1992; Shank @2e Govindarajan, 1993).     

Measuring moral judgement and the implications of cooperative education and rule-based learning

The Defining Issues Test (DIT), developed by Rest (1986) , measures a person's level of moral development using hypothetical social dilemmas. Although the DIT is useful for measuring moral development in social settings, it might not adequately capture an individual's moral judgement abilities in solving work‐related problems ( Weber, 1990 ; Trevino, 1992 ; Welton et al., 1994 ). In the present study, the moral judgement levels of 97 accounting students were measured over a 1 year period using two separate test instruments, the DIT and a context‐specific instrument developed by Welton et al. (1994) . The test scores are significantly higher on the DIT than the Welton instrument (between the instruments and over time), suggesting that accounting students use higher levels of moral reasoning in resolving hypothetical social dilemmas and lower levels of moral reasoning in resolving context‐specific dilemmas. The difference in test scores was highest during cooperative education (work placement programme), implying that the environment is a significant determinant on students’ test scores.     

Benefits Expected by Accounting Firm Partners Selling their Firms to Publicly Listed Companies

In the 1990s and 2000s publicly quoted companies acquired thousands of accounting partnerships in Australia, the United Kingdom (UK) and the United States (US). Little is known of why the partners sold. This study examines the benefits expected by partners who sold their practices to two Australian publicly listed accounting companies. The findings suggest that there were many reasons for selling and a range of expected benefits, with some partners seeing the sale as a ‘silver bullet’ solution to all of the challenges of operating a small to medium‐sized accounting practice.