Ethics and Financial Reportingin the United States /. C. Stewart

ABSTRACT, The purpose of this paper is to describebriefly the institutional arrangements which conditionthe activities of accountants in the United States; toheighten an awareness of the values which are embodiedin the existing structures of accountability; to appraisethe consistency with which the established ideals ofsociety have been actualised in financial reporting, andto discern the shape of the emerging history of financialreporting in the light of new values and possibilities, Isuggest that the tradition of fair presentation in financialreporting is in danger of being eliminated by a purelypolitical response to previous abuses. Mandatoryaccounting standards do have a role in preventing theseabuses, but they can also be seen as instruments of dis-tributive justice. To promote an awareness and discus-sion of the issues, I point out some of the goals andvalues underlying a few of the major structures designedfor the distribution of economic costs and benefits.

I. Introduction

The major ethical problem of financial reportingis that management, which has the responsibilityfor preparing financial reports, cannot impartial-ly report on its own achievements (see J. C. Bur-ton, 1972). Accounting Standards are the ruleswhich accountants use to measure and reportbusiness transactions to the public. They con-stitute accountants' "authority for defying man-agements' (their employers') wishes" (G. J.Benston, 1975). For, as C. E. Johnson (1966)put it: "Managers would not be human if they

I. C. Stewart is Associate Professor of Accountancy atthe University oJ Auckland. He was formerly a SeniorLecturer at the Victoria University of Wellington. Heis the author of several articles which have been pub-lished in various business journals.

did not wish the report card to be favourable"(p. 91). The purpose of this paper is to describevery briefly the institutional arrangements whichcondition the activities of accountants in theUnited States; to heighten an awareness of thevalues which are embodied in the existing struc-tures of accountability; to appraise the consis-tency with which the established ideals ofsociety have been actualised in financial report-ing, and to discern the shape of the emerging his-tory of financial reporting in the light of newvalues and possibilities.

II. The institutions

The Financial Accounting Standards Board(FASB), a private sector body, presently estab-lishes accounting standards. The FASB com-menced operations in 1973 with more independ-ence and resources than either of its twopredecessor bodies. The Securities and ExchangeCommission (SEC) requires that publicly ownedcorporations use the standards established bythe FASB. The SEC has itself sufficient authorityto promulgate accounting standards as part of itsresponsibility to protect the public under thesecurities legislation of 1933-34. However,since 1938 the Commission has chosen to let theaccountancy profession lead the way in the for-mulation of accounting standards. It has, in afew cases, overruled an accounting standard oracted when the FASB or its precedessor bodiesdid not.

Although the FASB sets reporting standards,it does not implement them. It has long beenacknowledged that the accounts of a corpora-tion are primarily the responsibility of manage-

Joumal of Business Ethia 5 (1986) 401-408.© 1986 by D. Reidel Puhlishing Company.

402 /. C. Stewart

ment. Professor Moonitz (1968) has pointed outthat the opposition expressed by management toaccounting standards — that its flexibility mightbe hampered — is "part of the larger process bywhich management as a class has sought to con-solidate its power" (p. 629). Professors Wattsand Zimmerman (1979) have been researchingthe question of how corporate managementrespond to new standards proposed by theFASB (the Board invites written responses frominterested parties to exposure drafts of proposednew standards). Their conclusion is that manage-ment acts in its own self-interest, one benefitof which might be increased personal compensa-tion if reported net income increases. The sameauthors, in another study (1978), argue, how-ever, that the likelihood that reported netincome will be used to justify political actionincreases with the size of a corporation. Largefirms may be subject to antitrust action orregulation because of their dominant marketposition. The authors conclude that managers inthese firms find it in their best long-run intereststo have accounting standards that result in lowerreported net income. For example, under FASBStatement No. 19 (1977) oil and gas producerswere required to adopt successful effortsaccounting. Under this method, exploration anddevelopment costs associated vnth unproductiveefforts woxild be written off against income inthe year incurred. Hence reported profits wouldbe lower as long as a company is not contractingits operations. This action was supported general-ly by large companies (that had reason to feargovernment control) and opposed by small com-panies (many of which would have had to reportmuch more variable net income). The SEC heldhearings on the standard and decided to permitcompanies to use either the successful-efforts orfull-cost method and the FASB rescinded itsstandard.

Historically, as R. Boland (1982) put it recent-ly, "accountants have been accused of placingtoo much trust in managements, of acquiescingtoo readily to managements' interpretations ofaccounting principles, of overlooking obviousabuses of financial reporting, and of being toosympathetic to their clients' interests" (p. 113).^As early as 1936 the then chairman ofthe SEC,

Mr Landis, warned that the loyalties of account-ants to management were stronger than theirsense of responsibility to the investor (see J. L.Carey, 1979, p. 262). More recently D. C. Sale(1981) said of the auditor's role in society thatit had changed from a once feared watchdog tobecoming management's poodle!

III. Values and their actualisation

Since the accountancy profession was introducedinto the United States by British Accountantsduring the second half of the nineteenth cen-tury, it is not surprising to find the opinionparagraph of the auditors' report using suchphrases as correctly sets forth, exhibit a true andfair view, accurately record conditions, representthe true financial position (G. Cochrane, 1950).Unlike the United Kingdom, however, auditorsin the United States did not have any statutorybacking before the 1933 securities legislation.Although individual auditors proclaimed thatfinancial reporting was a quest for tnith,2 itsoon became apparent that the individualmorality of the auditor could no longer be reliedupon to deter the growing power of the mana-gerial class. In 1926, a Harvard Professor,William Z. Ripley wrote an article which con-tained specific criticisms of reporting practiceswhich he regarded as deceptive. A. A. Berle andG. C. Means in The Modem Corporation andPrivate Property (1932) built on Professor Rip-ley's criticisms. The authors pointed out methodsof "accounting manipulation" which could beused to show abnormal profits through inven-tory valuations, depreciation, issue of bondswith stock or stock warrants, over-valuation ofassets, charges to surplus that should go toincome, elimination of nonrecurring expensesfrom income accounts, and crowding of salesinto the last period.

Professors Merino and Neimark (1982) arguethat "given the quality of financial informationthat was being reported at the time, investorswere not necessarily behaving irrationally indismissing financial reports as a source of invest-ment information" (p. 42). The authors pointout that prior to the securities legislation of

Ethics and Financial Reporting 403

1933, reliance was placed on "moral regulation"and a "two-tiered" market structure in whichthe knowledgeable tier would establish pricelevels that would provide reliable trading signalsto the lower tier (the average investors). Theauthors note that by the 1920s the acceptanceof the two-tiered market structure contributedto what became widespread advocacy of tradingrules based on trends in prices and tradingvolumes rather than on intrinsic analysis (pp.41-42). In sum, the "information asymmetriesinherent in the two-tiered market structure andprevailing investor trading practices providedboth incentives and opportunities for marketmanipulation" (p. 45). I. Friend and R. Wester-field (1975) contend that the ability of theknowledgeable to take advantage of insideinformation and the relative profitability ofinsiders and specialists were much greater in thepre-SEC period than in the post-SEC period(p. 471). Fairness in a post-securities acts eracould, therefore, be interpreted to mean thatall had equal access to information as well asequal opportunity to participate in the securitiesmarket. Mandatory disclosure regulations wouldhelp eliminate information asymmetries andassist in removing the incentives for manipula-tive behaviour.

Some eight years before this legislation, aleading accountant, G. O. May, had initiatedefforts to deal with many of the problems thelegislation was designed to solve (J. L. Carey,1979). Mr. May feared government intervention,and so he proposed that standards be establishedthrough co-operation with the accounting profes-sion, the stock exchanges, the investmentbankers and commercial banks. Professor Zeff(1984) has recently noted that G. O. May's"very substantial effort to ward off the interven-tion of the federal government in the establish-ment of accounting principles failed... the forcesunleashed by the Great Depression were irrever-sible" (p. 452).

One of the achievements of the Committee onco-operation with the stock exchanges, whichMr. May chaired, was to draw up a standardform of the auditors' report which stated, in part,that the "balance sheet and related statement ofincome and surplus fairly present, in accordance

with accepted principles of accounting consis-tently maintained by the company during theyear under review, its position at December 31,1933 and the results of its operations for theyear. Accepted principles of accounting was sub-sequently changed to generally acceptedaccounting principles (GAAP).

Mr. Carman Blough, the first chief accountantof the SEC (1935-38), thought that fairnesswas too subjective and not acceptable as astandard to follow. He concluded that only ifjudgments were reached within a framework ofGAAP could there be any test of reasonablenessor honesty of a particular presentation (see J. W.Pattillo, 1965, p. 66). In 1938, in AccountingSeries Release No. 4, the SEC decided to acceptaccounting principles having "substantial author-itative support". This was a major impetus tothe codification of GAAP. The American Insti-tute of Accountant's Committee on AccountingProcedure (CAP) issued some 51 AccountingResearch Bulletins (ARBs) between 1939-59.This trend has continued under the AccountingPrinciples Board (APB) (1959-73), which issuedsome 31 Opinions, and the FASB, which has sofar issued more than 80 standards. As R. Boland(1982) puts it "moral mysteries [are] beingtransformed into impersonal techniques" (p.120). GAAP has come to be regarded as thespecification of the conditions to be met for therealisation of fairness in financial repdrting. In1980, the American Institute of Certified PublicAccountants proposed to delete the words fairlypresent from the audit opinion on thesegrounds. On his recent retirement from theFASB, Ralph Walters lamented that:

I'm afraid the accounting profession has had trainedout of its mind the idea of the true and fair view, orthe fair presentation concept. Fair presentation byitself doesn't seem to mean anything here any more.Everything is GAAP, and GAAP by and large is afairly specific set of rules. (1984)

The consolidation of managerial power

The Committee on Accounting Procedure (CAP,1939—1959) experienced occasional disagree-ments vidth the SEC, and challenges from other

4CM /. C. Stewart

sources aroused concern about the authorityattaching to ARBs (see S. A. Zeff, 1972). One ofthese challenges came from L. Spacek whocharged that the CAP yielded to industry pres-sures on matters of accounting principle. Mr.Spacek (1961) believed that flexibility of report-ing rules had been used as an excuse to preventimprovements in financial reporting, not toadvance it. Although an Institute Committeeconcluded that Mr Spacek's allegations wereunfounded. Professor Zeff (1984) reports thatMr Spacek's criticisms were consequential in ahigh-level review of the process of establishingaccounting principles. The outcome of this wasthe establishment-of the Accounting PrinciplesBoard (APB) in 1959. During the life of theCAP, the Committee had been constantly facedwith the question of what authority shouldattach to its pronouncements. This issue was notresolved until 1964 when the APB attemptedto eliminate equally acceptable GAAP andimposed a burden on auditors to justify materialdepartures from principles accepted in A'PBOpinions. The APB was also charged to "movetoward the reduction of alternative practices inaccounting" (quoted by S. A. Zeff, 1984,p.458).

This attempt to constrain the choice ofreporting practices resulted in widespread hos-tility from corporate management. For example.Professors S. A. Zeff (1972) and C. T. Horngren(1973) describe how the humber of feasiblealternatives for setting standards was reduced inthe purchase-pool debate and the marketablesecurities debate. Research on the former issuefound that during the great merger wave, whichreached its zenith in 1967—69, firms recordedmergers by the method that maximised reportedincome (R. M. Copeland and J. F. Wojdak, 1969).It was su^ested that improper accountingmethods stimulated mergers especially of theconglomerate variety {Economic ConcentrationHearings, 1970, p. 4844). The Federal TradeCommission reached a similar conclusion. Theirreport alleged that some managements tookadvantage of the variety of alternative accountingrules to obscure results, hide profit declines andto overstate growth in earnings {EconomicReport on Mergers, pp. 23, 141, 159). A. C.Sampson (1983), now chief accountant at the

SEC, charged that during this period "manage-ment were taking advantage of inadequateguidance in accounting principles to inflatereported earnings".

Perhaps it was in an attempt to stop the mani-pulation of corporate earnings that the earlystandards (1974-77) of the FASB emphasiseduniformity as a major objective along with aphilosophy that the latitude allowed manage-ment to control reported results by makingaccounting choices should be reduced (see, forexample, standards on Research and Develop-ment, Statement No. 2; Contingencies and Con-tingency Reserves, Statement No. 5; ForeignCurrency Translation, Statement No. 8; Leases,Statement No. 13; and Oil and Gas, StatementNo. 19). Since 1978, however, there is someevidence that management may be given greaterdiscretion in accounting policy selection (see,for example, standards on the Effects of Chang-ing Prices, Statement No. 33; Foreign CurrencyTranslation, Statement No. 52; and Oil and GasAccounting, Statement No. 69). Instead ofemphasising the preventative role of accountingstandards — the lessening of the chance of scan-dals and frauds — the emphasis now seems to beon the informativeness of standards. Two sig-nificant sentences from the FASB's (1978) con-cepts statement on objectives of financial report-ing are as follows:

1. Financial reporting should provide informationthat is useful to present and potential investorsand creditors and other users in making rationalinvestment, credit, and similar decisions (Para-graph 34).

2. Thus, financial reporting should provide informa-tion to help investors, creditors, and others assessthe amounts, timing, and uncertainty of prospectivenet cash inflows to the related enterprise (Para-graph 37).

Whereas fairness was defined in terms of investorprotection, now fairness appears to be inter-preted in terms of what maximises the useful-ness of information for investment analysis.Whereas fairness represented the goal of finan-cial reporting, it is now defined by the FASB'sobjectives of financial reporting.

Ethics and Financial Reporting 405

IV. An evaluative interpretation

It has only been by mandatory reporting stand-ards (and here the backing of the SEC is decisive)that a measure of trust has been restored in themoral capacity of management. As ProfessorBenston (1975) put it: "'Generally acceptableaccounting principles' and 'conservatism' aredevices whereby CPAs can and do protect theirintegrity" (p. 13). Accountants do not wish tobe considered the tools of unscrupulous mana-genient. In this sense accounting standards havebeen important instruments of social justice.Although the justice which has resulted from theprocess of setting accounting standards may notfall into the category of morally created values,if morality is defined purely from the perspectiveof the individual auditor's quest for truth, fromthe viewpoint of society, these standards dorepresent moral achievements (see R. Niebuhr,1933, pp. 31-32).

The difficulty this gives rise to, however, isthat ends are being transformed into means. Asin many other areas in society, doctrine is beingconverted into procedure (see J. Ellul, 1964).Fairness has no independent meaning apart fromGAAP. The danger is that accounting standardsmay come to be regarded as possessing value inand of themselves quite independently of theconscience of the accountant who applies them.J. C. Burton, commenting on the experience ofthe APB, observed in 1972 that: "By writingprecise rules the Board made it possible forpeople to observe the letter and avoid the spiritwith the blessing — and often the assistance — oftheir auditors" (quoted by R. P. Brief in M.Chatfield, 1978, p. 5). Thus auditors arebecoming ethically emasculated. Now the FASBis subjecting GAAP to an analysis of the objec-tives of financial reporting and the emphasis ison what is useful information for assessing theamounts, timing and uncertainties of prospectivecash inflows to the firm within the context ofserving the allocative efficiency of capitalmarkets.

There are two problems to which thisdevelopment gives rise. The first is that allowingmanagement more discretion to achieve informa-tive disclosures (for example, the standard on

Foreign Currency Translation, Statement No.52), as A. C. Sampson (1983) recently remarked,increases the responsibility for an effective andobjective application of the standard. If thisdiscretion is not exercised responsibly, then aswing back to preventative disclosures with theirrigid uniformities can be expected.

The second, and more fundamental issue, iswhether the FASB should serve the goal ofeconomic efficiency or whether the Boardshould serve as well (or instead) goals defined bythe norms of distributive justice. Of course thereare many approaches to distributive justice andthe various candidate structures have differentgoals each of which fosters and preserves dif-ferent values. A few of these will be mentionedby way of illustration.

The first is G. Winter's (1966) norms of jus-tice. These are: (1) equal freedom as the right toconsent in decisions; (2) equal right to partici-pate in culture and society and (3) equal accessto the conditions oflife and opportunity (p. 232).For Professor Winter the goal of this structure isits adequacy for preserving the human com-munity against its own alienations and forraising man's social existence to more inclusivelevels of community. His emphasis on humaninterdependence places equal access to the con-ditions of life prior to any other values in thehierarchy. Similarly, he argues that equal oppor-tunity to participate in common culture andsociety take priority over particular interests ofpower (p. 250).

If one applies this ethic of interdependenceto the FASB's objectives of financial reportingone is struck by the lack of fitness of theBoard's objectives to the claims of the historicsituation. As Professors Dopuch and Sunder(1980) put it:

the dominant-group objectives [investors and credi-tors], assuming user primacy, do not reflect theeconomic reality of the power of suppliers [themanagers] in the accounting market place and aretherefore unworkable (p. 15).

Although the FASB's preference is for neutrality(see the Board's second concepts statement,1980), parties adversely affected by its rulingsare not sufficiently convinced that it makes

406 /. C. Stewart

social choices by maintaining a balance betweenthe conflicting interests in society.^ ProfessorsDopuch and Sunder (1980) revive the idea of anaccounting court as a better mechanism forrecognising the vitalities and interests to bebalanced. Mr. Spacek made a similar suggestionin 1958 when he argued that an accountingcourt should adopt a public utilitarian view-point.

An accounting principle to be of utility to consumer,labor, stockholder and management would requiresupport in each pronouncement as to why the prin-ciple adopted produces a fair result from the stand-point of each of these segments of society (1964, p.

. 446).

This proposal accords with the essential struc-ture of justice as outlined by G. Winter. Itaffirms equal freedom as a right to consent indecisions on accounting standards and, it affirmsequal dignity of personal being by participationin the process by which they are established, notonly by investors and creditors but by all affect-ed parties.

Of course the precise weighting given to thesevalues can vary. In contrast to G. Winter, whoemphasises the eradication of human alienation,J. Rawls (1971) emphasises an egalitarian ideal.His conception of justice as fairness comprisesan initial situation and two principles: (1) "Eachperson is to have an equal right to the mostextensive total system of basic liberties com-patible with an similar system of liberty for all"(p. 250) and (2) "Social and economic inequali-ties are to be arranged so that they are both (a)to the greatest benefit of the least advantagedand (b) attached to offices and positions open toall under conditions of fair equality of oppor-tunity" (p. 83). This is with the proviso that thefirst principle is to be held prior to the secondprinciple. These two principles are the solutionto the problem of choice presented by an originalposition in which a nian does not know histalents, social position or the stage of develop-ment of the particular society. This is a justifi-catory device so that natural or social contingen-cies do not put some parties at an advantage;that is, the original conditions ensure fairnessbetween moral beings. The aim is to constitute a

model of procedural fairness that is acceptableto everyone. The system is thus designed so thatthe resulting distribution is just.

Professor Rawls includes in the economicinstitutions for justice the idea of social mini-mum for the least favoured which is consistentwith required savings and the maintenance ofequality in the assignment of basic rights andduties. Under this view, the FASB would have tofocus on the least fortunate constituents insociety and ensure that in its decision making itwas maximising their long-run expectations.

J. R. Lucas (1980) argues that ProfessorRawls's theory is open to objection on the scoreof fairness. "The dialogue which Rawls conductswith the worst off, seeking to reconcile him withhis lot, needs to be conducted vsdth each person,seeking to reconcile him with the outcome,looking at the pay-off that he receives, consider-ing whether any other outcome, with a largerpay-off for him, would be better, and if notwhy not" (p. 67). The sorts of substantivereasons that should weigh in such discussionsmust be both "inescapable" and "individualised"(p. 12). Thus justice is "the condition of being <able to enter into the reasoning behind decisionsand accept them, even though adverse, as ourown" (p. 69).

In emphasising the rationality of justice, J. R.Lucas contends that the sort of reasoningemployed in this dialogue is characteristicallydialectical in form. "Its logic, instead of beinga deductive logic, where premisses necessitatetheir conclusions, is a logic of one side of anargument and another, of pros and cons, ofproposals and objections, of prima facie caseswhich may be countered, and presumptionswhich may be rebutted" (p. 39).

Repeated attempts to logically deriveaccounting standards from a set of objectivesand definitions overlook that standards dependnot only on premisses, but also on moves madein response to them, the counters to them, andso on.

Were the FASB to explicitly recognise thenature of financial reporting as a social activity,the Board could, as Professors Dopuch andSunder (1980) suggest "...define mechanismsfor arriving at a compromise ruling after a

Ethics and Financial Reporting 407

hearing has been given to all affected groups insociety" (p. 18).

Then, too, there are those who argue forderegulation of financial reporting. ProfessorG. J. Benston (1981) points out that voluntaryreporting standards are likely to result in a moreefficient use of resources than mandatorystandards. But as R. A. Shiner (1984) has noted,this particular goal fosters the "...libertarianindividualist value of freedom of choice. It is amechanism for distributing economic benefitsand costs given that goal and aim" (p. 236). Thequestion Professor Shiner raises is: "Do we wanta society with this particular distributional struc-ture, or should we consider designs of distribu-tional structures which give weight to otherfactors...?" (p. 236). For example, the onesemphasised by Professors Winter and Rawls.

Given that accounting standards are a meansof effecting wealth transfers in the community,the FASB must directly address fairness per se.Professor Ijiri (1983) has commented "...thetask of providing information useful foreconomic decisions is not easy; but it is child'splay compared to the agony of finding a thinline of fairness between the conflicting interestof the two parties" (p. 81). C. T. Devine's(1960) conclusion is still applicable: "Account-ants may not be able to reshape the ethicalthinking of the age, but they can make a smallcontribution by recognising their social responsi-bilities" (p. 399). A greater sensitivity to thetradition of jaimess in financial reporting wouldbe a step m the right direction.

Acknowledgement

I have benefited from many helpful comments &om mycolleagues on earlier drafts of this article, in particular, Iwish to thank Mike Bradbury, David Emanuel, TonyFairfield, Tony Harris, Michael Keenan, Kim Lai,Michael Morris, Bruce Tabb, Jilnaught Wong andEmeritus Professor Johnston, as well as Steve Zeff ofRice University. I have also benefited from the com-ments of the participants in the Departmental ResearchWorkshop at the University of Otago.

Notes

' I am grateful to Professor K. Moores of Otago Univer-sity for drawing my attention to this article.^ See, for example, R. H. Montgomery (1939) whowrote that from 1889 to 1939 he had been associatedwith partners and associates "who have had and have apassion for finding and telling the truth about accounts."He went on "It is the only school I know ... I insist thattruth in accounts and in the presentation of accounts isall that matters" (p. 47). This view was widely shared(see H. R. Hatfield (1909, p. 170); W. M. Cole (1915, p.vi); W. A. Paton (1922, p. 425); T. H. Sanders, H. R.Hatfield and U. Moore (1938, p. 26) and K. MacNeal(1939, p. 1)).? The FASB, in its first concepts statement (1978),argued for a large commonality of interest of all outsideusers in the prediction of the amounts, timing and uncer-tainties of future cash flows (see paragraph 25). How-ever, with user heterogeneity, neutrality becomes morecomplex. Standard setters are faced with the problem ofbenefiting one group at the expense of another, henceimplicit trade-offs become necessary.

References

Benston, G. J.: 1975, 'Accountants' Integrity andFinancial Reporting', Firumcial Executive, pp. 10—14.

Benston, G.J.: 1981, 'Are Accounting Standards Neces-sary?' in Sir Ronald Leach and Edward Stamp (eds.),British Accounting Standards: The First 10 Years,(Woodhead-Faulkner), pp. 201-214.

Berle, A. A. and G. C. Means: 1932, The Modem Cor-poration and Private Property, (Macmillan).

Boland, R.: 1982, 'Myth and Technology in the Ameri-can Accounting Profession', Joumal of ManagementStudies 19 (1), pp. 109-127.

Burton, J.C. (ed.): 1972, Corporate Financial Reporting:Ethical and Other Problems (AICPA).

Carey, J. L.r 1979, 'The Origins of Modern FinancialReporting', in T. A. Lee and R. H. Parker (eds.):1979, The Evolution of Corporate Financial Reporting(Nelson), pp. 241-64.

Chatfield, M. (ed.): \97i. The English View of Account-ants Duties and Responsibilities 1881-1902 (Arno).

Cochrane, G.: 1950, 'The Auditor's Report: Its Evolu-tion in the U.S.A.', The Accountant CXXIII, pp.448-60.

Cole, W. M.: 1915, Accounts, Their Construction andInterpretation (Houghton Mifflin).

408 /. C. Stewart

Copeland, R. M, and Joseph F. Wojdak: 1969, 'IncomeManipulation and the Purchase-Pooling Choice',Journal of Accounting Research, pp. 188—195.

Devine, C. T.: 1960, 'Research Methodology and Ac-counting Theory Formation', The Accounting Review,pp. 387-99.

Dopuch, N. and S. Sunder: 1980, 'FASB's Statementson Objectives and Elements of Financial Accounting:•A Review', The Accounting Review, pp. 1—21.

Ellul, J.: 1964, The Technological Society (VintageBooks).

Federal Trade Commission, Economic Report on Cor-porate Mergers, Reproduced in Economic Concentra-tion, Hearings before the Sub-Committee on Anti-trust and Monopoly ofthe Committee on the Judiciaryof the U.S. Senate, 91st Congress, 1st Session, Part8A (Washington, 1969).

Financial Accounting Standards Board, Objectives ofFinancial Reporting by Business Enterprises, State-ment of Financial Accounting Concepts No. 1,(FASB, 1978).

Financial Accounting Standards Board, QualitativeCharacteristics of Accounting Information, State-ment of Financial Accounting Concepts No. 2,(FASB, 1980).

Friend, I. and R. Westerfield: 1975, 'Required Dis-closure and the Stock Market: Comment', TheAmerican Economic Review, pp. 467—72.

Hatfield, H. R.: 1909, Modem Accounting (Appleton-Century).

Horngren, C. T.: 1973 'The Marketing of AccountingSt^nd^ds', Journal of Accountancy, pp. 61—66.

Ijiri, Y.: 1983, 'On the Accountability-Based ConceptualFramework of Accounting', Journal of Accountingand Public Policy, pp. 75-81.

Johnson, C. E.: 1966, 'Management's Role in ExternalAccounting Measurements', in Research in Account-ing Measurement, (American Accounting Association).

Lucas, J. R.: 1980, On Justice (Clarendon Press).MacNeal, K.: 1939, Truth in Accounting (University of

Pennsylvania Press).Merino, B. D. and M. D. Neimark: 1982, 'Disclosure

Regulation and Public Policy: A Sociohistorical Reap-praisal', Journal of Accounting and PubUc PoUcy, pp.33-57.

Montgomery, R. H.: 1978, Fifty Years of Accountancy,(Arno Press), (First printed by Ronald Press Co.,1939).

Moonitz, M.: 1968, 'Why is it so Difficult to Agree Upona Set of Accounting Principles?', The AustralianAccountant, pp. 621—31.

Niebuhr, R.: 1932, Moral Man and Immoral Society(Scribners).

Paton, W. A.: 1922, Accounting Theory (Ronald PressCompany).

Pattillo, J. W.: 1965, The Foundation of Financial Ac-counting (Louisiana State University Press).

Rawls, J.: 1971, A Theory of Justice (Harvard Univer-sity Press).

Ripley, W. Z.: 1926, 'Stop, Look, Listen!', The AtlanticMonthly, pp. 380-399.

Sale, D.C: 1981, 'Auditors' Responsibilities the Gather-ing Storm',/o«m<iZc>/i4ccoufjfaMc;y, pp. 76—83.

Sampson, A. C: 1983, 'A Regulator's View ofthe FASB:the First 10 Years and After', Journal of Accountan-cy, p. 46.

Sanders, T. H., H. R. Hatfield and U. Moore: 1938, AStatement of Accounting Principles (AICPA).

Shiner, R. A.: 1984, 'Review Essay: Deregulation andDistributive Justice', Journal of Business Ethics, pp.235-55.

Spacek, L.: 1961, 'Are Accounting Principles GfenerallyAccepted', Journal of Accountancy, pp. 41—46.

Spacek, L.: 1964, 'The Need for an Accounting Court',in S. A. Zeff and T. F. Keller (eds.). Financial Ac-counting Theory: Issues and Controversies (McGrawHiU), pp. 438-50.

Walters, R.: 1984, 'Looking Back in Sorrow',. Inter-national Accounting Bulletin, Supplement, pp. 6—9.

Watts, R. L. and J. L. Zimmerman: 1978, 'Toward aPositive Theory of the Determination of AccountingStandards', The Accounting Review, pp. 112-134.

Watts, R. L. and J. L. Zimmerman: 1979, 'The Demandfor and Supply of Accounting Theories: The Marketfor Excuses', The Accounting Review, pp. 273-305.

Winter, G.: 1966, Elements for a Social Ethic (Mac-millan).

Zeff, S. A.: 1972, Forging Accounting Principles in FiveCountries: A History and an Analysis of Trends(Stipes).

Zeff, S. A.: 1984, 'Some Junctures in the Evolution ofthe Process of Establishing Accounting Principles:1917-1972', The Accounting Review, pp. 447-68.

Department of Accountancy,University of Auckland,Private Bag, Auckland,

New Zealand.