Reviewed by Clifford D. Brown Northern Arizona University
lt is a great honor for me to review the selected writings of a man who has an unparalleled influence on the development of accounting principles and auditing procedures in the United States. Dr. Blough’s eminence is evidenced at the beginning of the volume by three short testimonials which serve as an introduction to the man, his credentials, and his honors and accomplishments. The remainder of the volume contains twenty-eight of Carman Blough’s addresses and articles, arranged in chronological order, starting in 1937 when he served as the first Chief Accountant of the Securities and Exchange Commission.
The first item ought to be viewed as a classic and required reading for accounting history students (and faculty). It was a 1937 address before a large group of CPAs in New York City. In that address, Blough outlined the vast variety of inconsistent accounting practices found in SEC filings that were considered “GAAP” by the registrants. In addition to citing numerous examples of inconsistent practices, he also placed the accounting profession on notice with regard to the need for its members to improve the current state of accounting and reporting practices. If the profession did not respond and initiate steps to promote improvement, then the Commission had the authority to “undertake the prescription of principles.” I believe this speech to be classic, not only because it serves as a bench mark to assess the progress that has occurred in financial reporting over the last forty-five years, but also because it prompted the American Institute (AICPA) to establish the Committee on Accounting Procedure. We have never been so close to having the standard-setting process transferred to the public sector. Without that speech and subsequent actions it evoked, financial accounting and the profession might be significantly different.
Other articles in this collection focused on a wide variety of subjects. Each article, however, reflects Carman Blough’s unending crusade for improvement in accounting and auditing practices. For example, there are selections reflecting his concern as to the meaning of financial statements and the responsibilities of both the auditor and management. In reading these selections, correspondence to today’s concerns is apparent. For example, in one 1938 article appearing in The Controller, Blough expressed a concern that some of the “comprehensive footnotes” accompanying financial statements in recent years “may be made to confuse rather than to assist the investor.” In another 1939 address at the Central States Accounting Convention he stated that “A corporation has a definite responsibility for the statements it presents and has no right, . . . to publish them unless it presents them as its own.” This statement is directly applicable to the current requirement that management must state its responsibility for the integrity of the financial data in the annual report.
Many of the other articles and addresses in this volume highlight Blough’s efforts as a member of the Committee on Accounting Pro-cedure, as Director of Research of the AICPA for sixteen years, and as a member of the Accounting Principles Board. In fact, nineteen of the articles are selections from those sixteen years when he was Director of Research. The subject matter of these nineteen selections not only related to specific technical accounting and auditing matters that were being considered by the AlCPA’s official committees at the time, but also reflected Blough’s views toward the role of research in the standard-setting process and his concern that standards promulgated be based on sound theoretical underpinnings. Many of those selections would also be suitable as required reading in many financial accounting and auditing courses at both the undergraduate and graduate levels.
For example, the article “Auditing Standards and Procedures” is an excellent introduction to the distinction between auditing standards and auditing procedures, and would enrich any auditing course. Two other selections entitled “Responsibility to Third Parties” and “Current Developments in Accounting and Auditing” would also be appropriate for auditing courses. Other articles such as, “Can Conventional Accounting Cope With Inflation,” “Depreciation—To Measure Income or to Provide Funds For Replacement?,” and “Accounting Research for Better Financial Reporting” all would enhance financial accounting courses by adding the much needed historical perspective. In addition, “Nine Ways to Render an Annual Report More Useful to Stockholders” and “The Meaning of Generally Accepted Accounting Principles” are two examples that would be very appropriate for even elementary courses.
A common denominator in all his addresses and writings in this volume is his unwearied and unyielding efforts to improve (and to see improved) the current state of financial reporting. Those who today question “improvement” or “lack of improvement” in financial reporting need only read the last article in this collection entitled “The Past is Prologue” to gain an appreciation for current financial reporting. Blough refers to a 1921 effort to secure rudimentary sales, cost, and non-operating income data from thirty companies. He stated this effort “brought very little information, . . . forty percent did not answer at all … and about another forty percent replied that the information was confidential and could not be disclosed.” To see and to be a cogent force in a transformation from that situation to the current state of financial reporting must be very gratifying.
In addition to specific selections referred to above, the entire collection could be used to introduce students to what milestones in a full career really mean, and to serve as a reminder to contemporary accountants of one man’s immeasurable influence and service to the accounting profession. One of the saddening events of 1981 was the death on March 9 of Carman Blough.
