Reviewed by Stephen E. Loeb University of Maryland

As the name implies, this Arno Press reprint is, in reality, two books compiled as one book. This being the case, each work will be reviewed in the order of its appearance in the Arno Press compilation.

I. The Etiquette of the Accountancy Profession.

This work was originally published in 1927 by Gee & Co. (Pub-lishers) Ltd. The manuscript is in book form and is based on a series of articles that appeared in The Accountant. The author is identified as “A Chartered Accountant.”

The book attempts to guide the Chartered Accountant as to correct behavior in performing his or her professional role. A wide variety of topics are considered including: fee splitting, incompatible occupations, ethical sanctions, advertising, solicitation, changing auditors, confidentiality, and forecasting.

The work contains some interesting data on accountants sanctioned by the Institute of Chartered Accountants in England and Wales. On page 68 the book points out that between 1921 and 1926 only 26 members were either suspended or expelled from the Institute for ethical violations.

The work contains some interesting discourses on the subjects covered. The discussion on “incompatible occupations” is most in-teresting. It is noted that the rule is a general one; the determination of the incompatibility of any occupation to be determined in actual cases. The book does indicate that practicing public ac-counting and being either a stockbroker or an auctioneer is unethical for all public accountants except those practicing both occupations when the rule was first adopted in May of 1880 or who purchases or becomes a partner in a combined business in existence on May of 1880. These lucky individuals were excepted from the proscription.

The policy of “grandfathering” ethical norms seems to this reviewer most interesting. Is it possible for similar professional actions performed at a particular moment of time to be ethical for some practitioners and unethical for others? Are we really concerned with ethical behavior when one criterion for sanctioning appears to be when the individual actually began to perform the action? Such rules reduce the legitimacy and viability of a code of ethics. To its credit, the book does hint at compromises that must be made in the early years of a profession.

The book at times tries to differentiate between “professional ethics” and “professional etiquette.” If there is such a difference, the book does not make a totally clear distinction. The book does indicate, however, that at that particular time the British profession had both formal written and informal ethical norms. Correctly, the work does note the dynamic nature of professional ethics.

In summary, the work is of significance in that it provides the reader with a notion of the state of the ethical norms and their en-forcement in the British public accounting profession during the early 1920s.

II. The Ethical Problems of Modern Accountancy

This work first published in 1933 by The Ronald Press Company is an anthology of a series of lectures delivered in 1932 at Northwestern University.
The first article (lecture) was written by Professor Vandeveer Custis of Northwestern University and is entitled “lntroductory—Ac-countancy as a Profession.”

Professor Custis takes what might be termed a “static attribute” approach to defining a profession. On page 4 he suggests that “legitimate” professions (1) render a service, (2) have “. . . a certain psychological unity . . . among practitioners, and (3) have a code of ethics to govern their professional conduct.” He (p. 23) notes that accountancy meets these criteria and thus is a profession (a young profession). The bulk of the Custis article is spent proving these contentions. The arguments made are well done and set the stage for a lecture series on ethics and accountancy. To his credit Professor Custis makes a strong case for the importance of the third party obligations of independent auditors. In fact, this last concept is discussed throughout the lecture series.

The next lecture was given by George O. May of Price, Water-house and Company and is entitled “The Accountant and the Investor.” May identifies the attest function as the work of an accountant that is of particular concern to the investor. In discussing the attest function he (p. 29) emphasizes that exact precision is not possible in the accounts of large modern corporations. He (p. 30) contends that accounts are subject to estimate and opinion. Mr. May emphasizes the importance of the auditor’s obligation to third parties. He emphasizes the importance of objectivity and independence from an audit client.

In his lecture, Mr. May also discusses differences of opinion be-tween an independent auditor and a client. In such a situation he suggests that the independent auditor do what is best for investors.

The third lecture was given by J. M. B. Hoxsey who at the time was Executive Assistant for the Committee on Stock List, New York Stock Exchange. The lecture was entitled “The Accountant and The Stock Exchange.” Mr. Hoxey presents an interesting discussion of relations of accountants with the New York Stock Exchange at that time. He emphasizes the important obligations that external auditors have to investors. He also discusses a number of then current financial accounting problems.

The fourth lecture in the series was presented by Arthur Andersen of Arthur Andersen and Company and was entitled “The Accountant and His Clientele.” Andersen hones in on two basic points: (1) the increased opportunity for service to clients in areas that we view today as management consulting; and (2) the then relatively new realization of the third party obligations of the external auditor in the attest function. Andersen, on pages 97 and 98, laments that no mechanism existed then to protect the auditor from replacement in a legitimate disagreement with a client. He appears to be concerned with clients shopping for independent auditors that will agree with them (the clients) for a price. Furthermore, he wishes for a mechanism for CPAs replaced in such circumstances to present their position. It was to be about forty more years until the SEC provided independent auditors with such an opportunity.

The fifth lecture was presented by Eugene M. Stevens, then Chairman of the Board, Federal Reserve Bank of Chicago. Mr. Stevens’ lecture was entitled “The Accountant and the Investment Banker.” In the lecture he discusses the accounting profession, the investment banking business, and the independent auditor’s responsibilities to investors. He stresses the importance of the external auditor’s independence.

The final lecture was delivered by Dean J. Hugh Jackson of the Graduate School of Business, Stanford University. It was entitled “The Accountant and his Profession.” Dean Jackson in his lecture recognizes the crucial importance of the CPA’s responsibilities to third parties. However, his emphasis is on ethical issues internal to the accounting profession. He stresses that practicing CPAs should contribute to the profession’s body of knowledge. Further, he suggests that accountants should assist in the development of the accounting profession by being active in professional accounting groups. Dean Jackson concludes with a discussion of collegial ethical norms.

In summary, this collection of lectures provides an interesting discussion of the prominent ethical issues facing the profession during the early 1930s.