Gary John Previts CASE WESTERN RESERVE UNIVERSITY
and
Dale L. Flesher UNIVERSITY OF MISSISSIPPI

RETROSPECTIVE: ANDREW BARR: LONGEST SERVING SEC CHIEF ACCOUNTANT

Andrew Barr, born in Urbana, Illinois, in 1901, was one of the earliest professional accounting executives to develop a career with the federal government. He died on November 29, 1995 at his Urbana home. Barr worked for the Securities and Exchange Commission (SEC) from 1938 to 1972—the last 16 years as chief accountant.1 This tenure made him the longest serving chief accountant to date. After living at the University Club in Washington, DC, for over 40 years, he returned after retirement to Urbana, a city where several generations of the Barr family had lived and worked as brick manufacturers [Barr, 1992].

In his later years, Andrew Barr was a respected senior statesman in accounting circles because of his role in shaping SEC policy and because he had served as government accounting’s informal ambassador to the rest of the accounting profession. He began his SEC career as a research accountant investigating the McKesson & Robbins case, and went on to deal with many of the most fractious issues facing the accounting profession in the United States. Through his job and through his involvement with the Association of Government Accountants (AGA) (formerly known as the Federal Government Accountants Association), Barr became active in many aspects of the accounting profession. His contributions have been acknowledged with several awards including the President’s Award for Distin

lThis paper is based on the results of a research project funded by the Association of Government Accountants (AGA) Education and Research Foundation. The purpose of the grant was to conduct and videotape an oral history interview with Andrew Barr. That videotape is the basis for much of the material in this paper.

guished Federal Civilian Service (the highest honor the federal government can bestow on a career employee) (1960), AGA’s Distinguished Leadership Award in 1961, the AICPA’s Gold Medal Award in 1964, and AGA’s Robert W. King Memorial Award in 1968. Also, the AGA annually gives the Andrew Barr Award to a distinguished contributor to government accounting from the private sector. Barr was also inducted into the Accounting Hall of Fame at Ohio State University in 1963 and was a life member of the Academy of Accounting Historians (one of only ten at the time of his death). George Washington University and the University of Illinois honored Barr with honorary doctorates [Barr, 1992].

THE EARLY YEARS

After growing up in Urbana, Barr attended the University of Illinois, where he received both bachelors (1923) and masters (1924) degrees. He passed the CPA exam in 1924 and joined the Chicago CPA firm of Reckitt, Benington, and LeClear as a staff accountant. His Illinois professor Hiram T. Scovill was instrumental in assuring the young Barr that he would learn more by going with a small firm than if he joined a national CPA firm. Following two years in public accounting, Barr decided to enter the academic field as he joined the accounting faculty at Yale University. He spent 12 years at Yale (19261938) where he became acquainted with such individuals as Ralph C. Jones, William Werntz, and William O. Douglas.
Barr decided to enter government service because he valued the opportunity to serve at a time when the country was attempting to restore itself from the devastating depression. Barr saw the chance to get in on the ground floor at the SEC. He initially earned about the same salary at the SEC as he earned at Yale.

Although much of Barr’s life was devoted to accounting, he had at least one other avocation—military history—which stemmed from his service in World War II. Barr had been a member of the Reserve Officer Training Corp (ROTC) at the University of Illinois. When called to duty in February 1941, he entered as a cavalry major, but was soon promoted to Lieutenant Colonel. He was the official historian for the 3rd Armored Division for World War II and authored the volume entitled Spearhead in the West—The Third Armored Division. He was discharged as a colonel in 1946, but continued as a member of the Army Reserve until 1961. Barr’s role in the military (G2, intelligence) was related to his work with the SEC. His Army unit executive officer thought Barr’s experience on the McKesson & Robbins investigation was good training for an intelligence officer. Barr explained the reasoning behind this metamorphosis as follows:

(I)t is very easy to relate generally accepted auditing standards (general, field work, and reporting) to the work of an intelligence officer in combat. That officer must have adequate technical training and proficiency, have independence in his judgments and must exercise due professional care in his work. He must supervise his staff and lowerechelon personnel, evaluate procedures employed and secure sufficient evidential matter through inspection, observation, inquiries and confirmations to support the reports he submits to both lower and higher headquarters in the chain of command. He is required to express his view of enemy capabilities and should have adequate support for his conclusions, or if necessary qualify with reasons. He must be able to judge the importance of bits of evidence received, determine which require immediate attention by the commanding officer, and what should go in his late night report for delivery before orders are issued in lower units for the next morning’s operations. It takes only a little imagination to compare the work of the intelligence officer in combat and the auditor on a complex assignment. McKesson & Robbins was good training [Barr, 1980, pp. 34].

ACTIVITY IN PROFESSIONAL ORGANIZATIONS

Andrew Barr worked in the late 1940s to get AGA founded to enable federal accountants to coordinate their work with colleagues in other agencies. Barr was the AGA’s fourth president (195354) and served on most committees of that era. He played a major role in getting governmental accounting service accepted for CPA exam experience requirements.
Because of Barr’s close working relationship with CPAs in public practice and with corporate accountants, he made an ideal ambassador from AGA to other organizations. In fact, Barr was active in the AICPA, serving on its Council, and the National Association of Cost Accountants (now Institute of Management Accountants),, which he served as Washington Chapter president. He explained that he first joined the latter organization because then chief accountant Earle King thought somebody from the SEC should be a member. It was decided that since Barr had no family, he would have more time to attend the meetings. Barr was also an active member of the American Accounting Association, which he served as a vice president in 1956. Barr was AGA’s official delegate to the 8th and 9th International Congresses of Accountants in 1962 and 1967 (in New York and Paris). He attended the Congresses with the approval of the Commission, but did so at his own expense. Because of Barr’s activities, the AGA became an accepted organization among other groups of accountants. The AGA leadership of the 1970s recognized this contribution when it asked Barr to write a chapter on “Relations With Other Organizations” for the AGA’s 25th anniversary history volume.

RESEARCH ACCOUNTANT— THE MCKESSON & ROBBINS CASE

SEC chief accountant Carman Blough had interviewed Barr in 1938 when Andy decided to leave his academic post at Yale, but when Barr reported for work, Blough had decided to leave the SEC. As a result, Barr’s first assignment was to be directed by W. W. Werntz, who served as chief accountant from May, 1938, until April, 1947. Werntz faced the issues of the McKesson & Robbins fraud, and the concerns presented in it about the adequacy of audit procedures and corporate financial reports. At a time when investor confidence was beginning to be restored in the stock market, this affair represented the first true test of the SEC’s ability to address matters involving questionable activities which occurred under its jurisdiction.

Werntz assigned Barr to the McKesson case, to work as a Research Accountant. Barr’s tasks included assembling the facts and materials which would provide the basis for the SEC’s inquiry into the case. The challenge was arduous if only because there was no precedent for the proper process to follow in such a situation. The challenge which Werntz and Barr faced was how to obtain, for the records, a basis for understanding the state of the art of audit procedure and practice. Werntz decided to obtain testimony from noted practitioners. While individual accountants had testified from time to time in Congress on legislative matters, such evidence was not common for investigative matters involving regulatory agencies. For a regulatory agency to undertake such an inquiry of the profession itself was a matter involving the need for diplomacy. Werntz succeeded at this— arranging for the appearance of top accounting professionals who provided expert testimony at the public hearings held in New York during early 1939 [United States, 1939]. Barr played a key role by preparing the questions to be asked of the witnesses. The witnesses included top accounting firm partners, one academician, and representatives from the Controller’s Institute (now Financial Executives Institute) and the American Institute of Consulting Engineers. These witnesses—reading like a who’s who of the profession—included:

Samuel J. Broad; Peat, Marwick, Mitchell & Co.
Charles O. Wellington; Scovell, Wellington & Co.
Victor H. Stempf; Touche, Niven & Co.
William H. Bell; Haskins & Sells
Norman J. Lenhart; Lybrand, Ross Bros. & Montgomery
John K. Mathieson; Mathieson, Aitken & Co.
Henry A. Home; Webster, Home & Blanchard
Charles B. Couchman; Barrow, Wade, Guthrie & Co.
Hiram T. Scovill; University of Illinois
Joseph J. Klein; Klein, Hinds & Finke
George D. Bailey; Ernst & Ernst
Charles W. Jones; Arthur Andersen & Co.
Arthur Tucker; Controllers Institute
George W. Burpee; American Institute of Consulting Engineers
The firm of Price Waterhouse & Co. was noticeably absent from the above list due to its involvement in the McKesson & Robbins case.

By the time the SEC report on the case had been completed, the professional practice community had reacted to the concerns by extending audit procedures to require the confirmation of receivables and the observation of inventories. In addition, the American Institute had established a standing Committee on Auditing Procedure. The McKesson & Robbins case occupied Barr’s life from the time he joined the SEC until almost the time when he was called to active military duty in early 1941. As mentioned previously, his investigative duties with the SEC led to his being appointed an intelligence office in the Army.

2The hearing has been reprinted in one volume, United States of America before the Securities and Exchange Commission in the Matter of McKesson & Robbins, Tnc. Testimony of Expert Witnesses. NY: Garland Publishing Co, 1982.

BARR’S CHIEF ACCOUNTANT YEARS

Following his military service, Barr returned to the Commission in May 1946. Earle King became chief accountant in 1947 and Barr became assistant chief accountant. In 1950, Barr accepted a new duty as Chief Accountant of the Division of Corporation Finance, where the active review of registrant filings was the main responsibility. Interestingly, this was a period in Barr’s life that has been little documented, and there is seemingly little to document. He had but one publication during this period (out of more than 60 papers during his career) and he rarely discussed his duties in the Division of Corporation Finance. He was kept quite busy these years because of the backlog of work that existed when he arrived and the small staff available.

Upon Earle King’s departure from the SEC in November 1956, Barr was named SEC Chief Accountant. Barr became involved almost immediately in an attempt to reconcile differences between the American Institute’s rules relating to auditor independence and those of the Commission. His arguments were carefully set forth in his 1959 paper “The Independent Accountant and the SEC,” an address given at the Ohio State Accounting Institute and later published in the Journal of Accountancy [1959]. A major area of difference was with regard to the view of independence. The professional auditors argued that independence was a “state of mind” and was not necessarily impaired “in fact” by financial interests—such as in a client whose shares might be used to compensate the auditor for services involved in taking a small company public. It was Barr’s, and the SEC’s view, however, that these relationships cast doubts on such connections as conflicts of interest. At least in appearance these were conflicts and such interests should be avoided or prohibited when material. Barr used historical anecdotes to support his views on independence and used references to accounting history to support many of his writings and speeches [for example, see Barr, 1966].

The initial restriction on financial relationships later led to increased observation of other “appearance” rules as the basis for evaluating independence. The Commission continues to follow the precedents established by Barr in requiring that financial relationships be limited per se. Barr later stated that some accountants privately supported his interpretation of independence because it took the pressure off of them to provide audit services to businesses with which they were in some way related. On one occasion a CPA came to Barr’s office to thank him for the prohibition against auditing his family’s business.

Among other issues faced by Barr during the 1960s was the stop order issued against Atlantic Research Corporation in 1963. The Atlantic Research case was significant because it showed how a company might use differences between Commission rules and the application of generally accepted accounting principles to show different results on the income statement filed with the SEC from those reported on the shareholders’ annual report, both of which had been audited. By challenging this practice, Barr initiated a process which his successors would follow. Eventually, as a result of this and similar concerns over differential disclosures, the gap between 10K and annual report contents was eliminated. Along with the differential disclosures, Barr also lamented the fact that annual reports had become public relations tools, with artists being just as important in their preparation, or more so, than financial accountants.

Accounting for the investment tax credit was another area of controversy involving Barr. The administration of President John F. Kennedy proposed, as a means of economic stimulation, to provide a seven percent credit against federal income taxes for most forms of capital investment. For corporate taxpayers, such a credit was the equivalent of a cash refund since the credit could be applied immediately.

The newly formed Accounting Principles Board (APB) favored a view whicli required, for financial statement purposes, a deferral of the credit’s recognition, which resulted in little immediate effect on corporate income statements. The APB’s position deferred the amount and allocated or matched it to revenues over the life of the eligible assets acquired. The deferral versus immediate flowthrough controversy split the profession, with the major public accounting firms being about equally divided as to their positions.

The leadership of the profession, seeking to establish the authority of the APB, was concerned that the APB, in only its second authoritative opinion (and the first of any substance), needed to gain the support of the SEC to insure that the new organization would achieve its proper status. Barr’s reasoning to allow either method is contained in a paper entitled “Accounting Treatment of Investment Tax Credit on Corporate Financial Statements” [Barr, 1980, pp. 286289] which was published as a part of Barr’s collected papers by the University of Illinois. In his reasoning, Barr argued that the credit was “in substance a reduction in income taxes;” and not “a reduction in or offset against a cost otherwise chargeable … to future accounting periods.”

By this reasoning Barr acknowledged, as well, that it was the intent of Congress to create immediate benefit from such an investment tax credit. Barr later liked to point out that in the 1970s when a version of the investment tax credit was again reinstated, Congress specified in the legislation that either method—deferred or flowthrough—was acceptable for financial accounting purposes. The investment credit episode demonstrated the political significance of deciding an accounting treatment.
Andrew Barr was also involved in assisting the Commission in preparing for Congressional hearings which resulted in the 1964 amendments to the securities acts. These changes were necessary because the original securities acts, nearly 30 years old, had not anticipated changes in the market for publicly traded securities. Many large companies which traded on the overthecounter market were often able to avoid SEC filing because they were not formally listed on a stock exchange even though they sought capital through public markets. The 1964 acts extended investor protection and the disclosure requirement process to overthecounter stocks and to major transportation companies such as the Pennsylvania and New York Central railroads. Transportation companies had previously been exempted from SEC filing requirements because they were subject to Interstate Commerce Commission oversight.

SUMMARY AND CONCLUSION

When Andy Barr retired from the SEC in January 1972, he was 70 years of age—and had achieved international prominence as a leader of his profession. Two principles describe Barr’s approach to his role as an important accounting executive in the federal government during the rapid period of economic growth in the 1950s and 1960s. First, he supported the view, which had become established in the SEC whereby corporate management had both the right to express its views in corporate annual reports and the responsibility to do so fairly. This view was tested in the Atlantic Research Corp. case where Barr felt that management’s view as contained in the annual report departed materially from the results filed with the Commission under Reg. SX rules. Second, Barr’s actions were consistent with achieving the greatest possible cooperation with all elements of the practicing accounting community. He was an accessible chief accountant who was willing to pick up the telephone and talk about individual problems with practitioners as the problems arose.

Although Andy’s formal academic career was relatively brief, 12 years at Yale, his lifelong scholarship is evidenced in his collection of papers published in 1980 by his alma mater, with more than 60 journal articles (including five or more each in the Journal of Accountancy and The Accounting Review), by his contribution to the authorship of the 3rd Armored Division’s official history, and by his support of successful efforts to collect and publish the writings of his predecessors with the office of the Chief Accountant. Similarly, his activity in a variety of professional organizations extended his influence in the profession and broadened his horizons far beyond what would be expected of a person in his role.
Andrew Barr was a lifelong bachelor. His family was the SEC, the AGA, and the Army’s 3rd Armored Division. When asked to summarize his life, he stated that everything he did was related to his education at the University of Illinois—particularly his accounting and R.O.T.C. courses. Many people he dealt with in his career were similarly graduates or faculty members at Illinois. Thus, Barr concluded that an individual’s life is dependent upon one’s education. Barr used his education for a career in public service as an accountant. He will be remembered for his contributions and his counsel to a growing profession.

REFERENCES

Barr, Andrew, “Comments on Accounting Principles,” Journal of Accountancy, Vol. 122 July, 1966, pp. 5860.
Barr, Andrew, Interview by the Authors, Urbana, IL, July 1618, 1992. A videotaped copy of the interview is available from the Academy of Accounting Historians’ Accountancy Videotape Center at the University of Mississippi.
Barr, Andrew, “The Independent Accountant and the SEC,” Jounial of Accountancy, Vol. 108, No. 4, October, 1959, pp. 3237.
Barr, Andrew, Written Contributions of Selected Accounting Practitioners: Andrew Barr, ChampaignUrbana: University of Illinois, 1980.
United States of American Before the Securities and Exchange Commission in the Matter of McKesson & Rabbins, Inc.: Testimony of Expert Witnesses, Washington: U. S. Government Printing Office, 1939.