Reviewed by William J. Schrader Pennsylvania State University
Edwards’ book is much less and much more than its title suggests. It is not a global work on financial accounting, but a more manageable survey of British practice. Nor is it only financial accounting; it deals with industrial development in Britain, legal responses to growing capital needs of professionally managed companies, notable frauds and consequent collapses of leading British companies and their effects on public policy, and the siblings of financial accounting — auditing and investigations, taxation, and management accounting.
The expected deferences to earlier civilizations are covered early in the book, including Babylonia, China, Egypt, Greece, Rome, and even Crete, India, Peru, and Hawaii (!). But these earlier contributions seem lost on Britain. The book depicts a nineteenth century “accounting” in Britain which is predomi-nantly single-entry (even in government), not yet affected by an accounting “profession” except a few strident voices of individuals now legendary, not yet cognizant of management accounting or auditing (except for investigations of fraud) and resistance to disclosure.
Edwards makes his major contribution in Part III, Cor-porate Financial Reporting Practices, and Part IV, Rules and Regulations, which together occupy half of the book. In these pages he recounts the interaction between statute, company managements, the Stock Exchange, investors, and the accounting “bodies” by which reporting standards and “financial accounting” standards evolved.
He makes this political process fascinating reading. His is the British equivalent to George O. May’s Financial Accounting: A Distillation of Experience [1959], which traces the negotiations between Federal Reserve System, Securities and Exchange Commission, New York Stock Exchange, the American Institute of CPA’s and other bodies of accountants in industry and education that lead to GAAP in the United States.
Unintentionally, perhaps, he raises American accounting to parity with British. This will be a surprise to many Americans in teaching and in practice who suppose that America is as much indebted to Britain for accounting and auditing as for language, law and constitutional government.
On the contrary, Edwards shows that British auditing was little advanced beyond checking balance sheets to “the books” by 1900, and that accounting requirements for “regulated indus-tries” evolved almost simultaneously in the two countries. Dis-closure of income statement details, elimination of “secret re-serves,” requirements for depreciation accounting, consolidated statements, requirement for audits of listed companies and ac-counting for pensions, leases, business combinations, all devel-oped concurrently in both countries or trailed in Britain.
By his own choice, Edwards mentions concepts and theory only as they are consequences of “accounting practice.” One should not expect, therefore, analyses and critiques of the sort that distinguish the “financial accounting” books of Gilman in the USA or Baxter in the UK.
As Edwards expected, his book should be of interest to students taking formal courses in “History of Accounting.” More importantly, his book should be read by all the international firm partners under fifty years old whose schooling neglected the social and political processes of the past century from which emerged the public accounting profession as it exists in the 1990s. How incredibly fast it has been thrust onto the stage and how equally fast it could be swept aside!
