Charles W. Wootton

The relationship between the smoothing of reported income and risk-adjusted returns

This paper uses risk-adjusted returns for the firms in the S&P 500 to test whether the stock market response to accounting performance measures is related to the smoothness of companies’ reported earnings. Three income models, increasing in their measure of smoothness, test the hypotheses using cumulative average abnormal returns. The results indicate that companies that report smooth income have significantly higher cumulative average abnormal returns than firms that do not. When size is considered, market returns are higher for small companies than for large companies. There is also a significant relationship between the type of industry and income smoothing.

Auditor concentration and competition among the large public accounting firms: Post-merger status and future implications

Abstract The staff of a United States Senate Sub-Committee concluded in The Accounting Establishment (U. S. Congress, Senate, Subcommittee on Reports, Accounting and Management. 1976. The Accounting Establishment . S. Study, 94th Congress, 2nd session, pp. 43–46) that there was a high concentration of power in the Big Eight firms in the auditing of major companies and that those firms concentrated their efforts on certain major industries. At the same time, there was a vigorous defense of the Big Eight and its accounting practices. The argument presented was that the audit market was a very competitive industry. Various studies supported this argument, and it was widely accepted that competition was greater in the 1980s than at anytime in the recent past. However, with the recent mergers of several Big Eight firms, the questions and concerns about their dominance have once again become relevant. Our study examines the potential independent auditor concentration and competitiveness that may occur as a result of the recent mergers within the Big Eight firms. The study is limited to an examination of the independent auditors of large companies, defined as companies listed on the New York Stock Exchange, American Stock Exchange, or traded in the national Over the Counter Market. Both aggregate and individual market shares are examined for each exchange. Mergers do not necessarily result in less competition and higher prices. This may be the case with the Big Eight mergers. By merging, the smaller Big Eight firms became more competitive with the larger firms. Although there will be fewer major competitors in the future, the remaining firms should be more comparable in size, market shares, and resources available. Therefore, these mergers may produce more competition among the major accounting firms rather than less.

The changing genderization of the accounting workforce in the US, 1930-90

The accounting profession in 1930 was predominantly a male workforce. By 1990, the gender composition of accounting had changed dramatically. Women, who in 1930 had represented only 10 per cent of the accounting workforce, now represented over 50 per cent of the workforce and earned 53 per cent of the accounting degrees. Increases in the aggregate workforce were not accompanied by subsequent proportional increases in participation at the upper-management levels of accounting firms. Thus, what occurred was a stratified regenderization of the aggregate workforce rather than an overall regenderization of the accounting profession. This paper delineates the historical, cultural, legal, economic and educational forces that led to this changing genderization.

The Changing Genderization of Bookkeeping in the United States, 1870–1930

During the time period from 1870–1930, economic, social, demographic and educational forces interacted with the separation of accounting from bookkeeping. The result of this interaction was the changing genderization of the bookkeeping workforce. This paper suggests that this change process cannot be fully understood until both environmental forces and the emergence of accounting from bookkeeping are considered. Evidence of this interaction comes from Census data as well as historical documents.

An historical perspective on mergers and acquisitions by major US accounting firms

This study presents an historical perspective on mergers and acquisitions by major US accounting firms throughout the twentieth century with special emphasis placed on such activity during the last fifty years of this period. The focus of this perspective is: (1) the importance of mergers and acquisitions in the formation and growth of major accounting firms; (2) the relationship between the internationalisation of trade and the internationalisation of major accounting firms; and (3) the ways in which accounting firms have used mergers as a response to an increasingly competitive environment.

THE DEVELOPMENT OF “THE BIG EIGHT” ACCOUNTING FIRMS IN THE UNITED STATES, 1900 TO 1990

This paper examines the growth and changing role of the accounting profession in the United States from 1900 to 1990 with special emphasis on “Big Eight” accounting firms. Major political, economic, and social events of the period and their influence on the accounting profession are analyzed. Each decade is examined in turn, and the historical consequences of the decade on “Big Eight” accounting firms in total and individually are presented.

THE EMERGENCE OF MECHANICAL ACCOUNTING IN THE U.S., 1880–1930

For centuries, accounting was a manual process. Starting in the late 1800s, a series of technological innovations emerged that not only changed the way the accounting process was conducted but dramatically changed the workplace, the workforce, the information provided, and the accounting profession itself. By 1930, most major US companies had adopted mechanical accounting as a more efficient way of processing accounting information. This paper examines the historical development and influence of mechanical accounting in the U.S. from 1880 to 1930.

Use of financial statements to legitimize a new non-profit organization during the US Civil War: The case of the Northwestern Sanitary Commission

Research has shown that organizations historically have used accounting and financial reporting to gain needed legitimacy for their actions and existence. In the case of non-profit organizations, this legitimacy is critical for they often depend upon external contributions to survive. This article explores how the newly-formed Chicago-based philanthropic Northwestern Sanitary Commission used its financial reports to legitimize its operations as well as to respond to rumors concerning its stewardship of donated funds and supplies from 1861 to 1865 during the US Civil War. This exploration contributes to our understanding of the historical development of non-profit accounting.

The legal status of account books in colonial America

From the first English settlement in colonial America to the beginning of the Revolution, the legal status of account books evolved. During this period, there was a scarcity of hard currency which made commercial transactions largely dependent upon a credit based, barter based economic system. Business transactions often were represented by book debt. As merchants brought legal actions over book debt disputes, American colonial courts and legislatures began to examine the English common law rules that placed several restrictions on the introduction of account books into evidence. Responding to economic and social necessity, colonial America developed a legal system that was more flexible and pragmatic than was the English system in regard to admitting account books into evidence. Thus, American colonial courts and legislatures met the commercial needs of the new world, and in so doing, provided the impetus for examining accounting standards, fiduciary duty and financial statements in todays American legal system.

THE RECOGNITION AND VALUATION OF CURRENT ASSETS ON THE BALANCE SHEET IN THE UNITED STATES, 1865–1940

A. C. Littleton [1933, pp. 149–151] in Accounting Evolution to 1900 wrote that the sub-division of financial statements and the valuation of assets were two of the most important elements in the development of modern financial statements. The purpose of this paper is to explore the historical evolution of the recognition, grouping, and valuation of current assets on the balance sheet in the United States between 1865 and 1940 at which time the basic format for reporting such assets had been adopted. The paper expands the examination of the balance sheet beyond a traditional emphasis on long-life assets to an investigation of the evolving classification of current assets with a special emphasis on the influence of financial users (especially creditors) for its unique development. Historical illustrations of the ways in which companies presented and valued current assets on the balance sheet are presented.