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The New Reciprocity of Accountancy and Law.

By HAROLD DUDLEY GREELEY. The practical advantages to the lawyer of a training in accountancy, and to the accountant of a training in law, have been suggested in two former articles. Because these advantages naturally are based upon relation in work and interest between accountancy and law, it may be asked why a discussion of such relation, marking the points of contact between the two fields, did not precede the statement of these proximate results. Consideration of the abstract relation has been postponed in order that there might be called to the reader's mind certain concrete connections between the two professions—the practical situations wherein the practitioner of each has occasion to employ knowledge of the other or training in it. This consideration involves first the enquiry whether each profession is a science or an art and then the outlining of what is believed to be the new reciprocity between the two professions, resulting from the business specialization of law and the recent development of accountancy.

A science is all the present knowledge of a subject, co-ordinated and systematically arranged as the result of analytical and critical investigation of truth for the sake of knowledge—“the knowledge of things, whether ideal or substantial.” Art, on the other hand, is the power to do things and is, therefore, synthetic and constructive. In art, truth is but the means to the end, while in science it is the end itself. Accordingly, art concerns itself with a faculty, the development, training and guidance of it, thereby involving discipline in the use of knowledge furnished by science. Perfect art must have a perfect scientific basis. Inversely, “every science has its origin in the art corresponding to it.” *

Amnog the various definitions of law, the only substantial agreement is that it is the standard of conduct for human beings prescribed by the state through its constituted authorities. But it has been suggested that law must be something more than this, for under such a definition it could be changed daily at the caprice of the authorities, and thus there would be caused great embarrassment in business and confusion in family relations. "The Philosophy of August Comte," L. Lovy-Bruhl, 1903, P. 52.

That law is not so changed is due to the theory which underlies it. Law, or this prescribed standard of conduct for human beings, springs from the “social standard, or ideal, of justice.” * That is to say, in accordance with this social standard every social need prescribes a rule, and from the body of social rules thus arising are induced those general principles which become the postulates of law. The next step is to deduce rules of law from the postulates, the deduction of every rule being a problem and establishing a legal precedent. But every precedent established is not followed. When to follow a certain precedent would require bad reasoning or would work an unfortunate result, one inimical to the social need involved, the precedent is disregarded and an exception to it thereby created. A sufficient number of exceptions in time demonstrates the fallacy of the rule of law; and the consequent destruction of a sufficient number of rules of law in time causes the postulate or general principle to be recast. Such being the theory of law, law may be considered a science. But no human being can foretell how rules of law will be interpreted by individual judges, who are experts selected by the law-not to make it. Given nine judges, all trained to reason and all admitting, for instance, the rule of the exact science geometry that the angles of a triangle are equal to two right angles, five may construe a rule of law diametrically opposite to that in which the four others construe it. Hence law, although a science, cannot be said to be an exact science—a conclusion admitted ever since the attempt to petrify justice in the Twelve Tables of Rome.

Law must be distinguished from litigation. The latter is resolvable into a syllogism, the major premise being the proposition of law and the minor premise the statement that a particular case comes under that proposition of law. In the question whether or not law is a science, only the first or major premise is involved. The proving of the minor premise, or what is called the practice of law, may be admitted to be an art.

Now is accountancy a science or an art? It is frequently called a science. Charles Waldo Haskins, in an address before the Massachusetts Society of Public Accountants, June 14, 1900, said, “ Accountancy ..

is a science, an erudition; and not, as some have seemed to suppose, a mere collection of approxi*"The Provinces of the Written and the Unwritten Law," James C. Carter, p. 11.

mative and hardly certain rules indicated by observation and intuition, and to be applied with tact and wariness.” “ Accountancy to-day is peculiarly one of the most complex, definite and positive of the sciences," says a recent writer.* A curious description of both merchants and accountants as “scientific persons ” is found in an English statute:

It shall be lawful for the said court, or any judge thereof, in such way as they may think fit, to obtain the assistance of accountants, merchants, engineers, actuaries, or other scientific persons, the better to enable such court or judge to determine any matter at issue in any cause or proceeding, and to act upon the certificate of such persons. +

Sometimes science and art are confused, as by a speaker at the first annual dinner of the New York State Society of Certified Public Accountants, in 1897, who is reported to have said of bookkeeping, “ Time was when, under this heading, everything pertaining to entries in books was included; but we have come to recognize the difference between the mechanism and the art-between the skill of properly recording and balancing and the science of technical examination and development. “Bookkeeping' is still the name of the one, but 'accountancy' is the title of the other.” Mr. Haskins, in his address quoted above, further said that the accountant is a bookkeeper “in the sense that he thoroughly understands the ins and outs of that art." That is, Mr. Haskins considered accountancy a science and bookkeeping an art, the latter conclusion having the endorsement also of J. Row Fogo. $

Now, in truth, isn't the situation exactly the reverse ? Double entry bookkeeping surely is a science-one of applied mathematics—which seems to be the point of “ The Philosophy of Accounts,” by Sprague. From an investigation of truth, it presents all our present knowledge of the workings of known rules, co-ordinated and systematically arranged, and from its fundamental concepts we can by reasoning deduce rules for novel situations, as, for example, those covering controlling accounts. But can this be said of accountancy or of either of its two divisions, auditing and systematizing? Auditing is essentially practical work. It cares nothing about the general body of truth, and it conducts no investigation for the sake of general knowledge.

"The Accountant as an Expert Witness," Jour. Accy., Vol. I, p. 99.

† 15 and 16 Vict. c. 80, XLII (1852). Under this statute, professional accountants were regularly employed. In re London, etc. Ry. Co., 6 Weekly Reporter 141, (1857).

• History of Accounting and Accountants," Richard Brown, p. 03.

Its purpose is solely to determine the results of operations based on the science of bookkeeping. The knowledge furnished by this science is employed but only a faculty is required to apply it and to construct the conclusion desired. Systematizing is a far cry from a co-ordinated statement of our present knowledge of any subject. Nothing could be more purely constructive. It is the building of a mechanical scheme of books and accounts so that the laws of the science of bookkeeping may act freely upon the recorded transactions. If this reasoning is sound, accountancy would seem to be an art.

How then can be explained the contrary opinion cited above? A possible explanation lies in the fact that accountancy, like every other art, is based on a science.* When accountancy was called a science, the matters were possibly the reasoning of economics which bears a certain relation to accountancy; but undoubtedly the theory of accounts, which in the main is not the theory of accountancy but is the science of accounts, or bookkeeping, and what is known as the theory of auditing, namely, the more or less definite rules for the conduct of audits, which insure discipline in the use of the knowledge furnished by the science of bookkeeping. But accountancy itself is something distinct from the science upon which it is based and the rules which it lays down.

If accountancy were a science, there would not be in the preparation of students for practical work as accountants the difficulty which is admitted to exist, a difficulty commonly revealed by the graduate-novitiate's awkwardness in meeting actual situations. For, “Science ... can be taught; but art must be learned in practice. Granted a good mind in teacher and student, the facts and laws of science may be given over from one mind to another; but the most that a teacher of art can hope to accomplish is to suggest and stimulate activity and, by the sparing use of criticism, correct faults, while the art must be acquired by the student solely through his own efforts and activity.”+ The application of this idea to accountancy has been made by J. E. Sterrett. $ The fact that one's development as a practical accountant is conditioned first upon a training in theory is evidence of the truth of the statement made above that perfect art is based on perfect science. An analogy has often been drawn by writers between accountancy and architecture. This analogy could not for an instant be sustained if accountancy were a science, for under the definitions of science and art offered above architecture is a perfect example of an art. It is “building raised by certain aesthetic qualities to the rank of art as distinguished from purely utilitarian or mechanical building."

* "System der Philosophie," von Wilhelm Wundt, (1889), p. 38. †"The Use of the Margin," Edward Howard Griggs, p. 8. "The Education and Training of a C. P. A.," Jour. Accy., Vol. I, p. I.

Further, it may be asked why accountancy as well as litigation may not be stated as a syllogism with its major premise the theory and its minor premise the statement that the particular case as revealed by the audit or system work comes under that theory; in other words, why accountancy is not a science and the practice of it an art. A glance at the history of accountancy suggests a reason. We are told that accounting in the sense of bookkeeping has a very respectable antiquity. Such accounting was of course not the accountancy we know to-day, but was bookkeeping, a practical art. From that art sprang the science of double entry bookkeeping in the fourteenth century, a science which we still have, changed only in the content of its "present knowledge.” Accountancy probably dates back only to 1720, when one, Charles Snell, conducted a Parliamentary investigation into the affairs of the South Sea Company after the bursting of the Bubble. * Indeed, there is authority for stating that the profession is only fifty years old.† From the time of its inception to this day, the art of accountancy has been developing, acquiring a theory as it has grown, which theory is of course a science; but this scientific theory of accountancy is absolutely dependent on its art and inseparable from it, its only use being the guidance of the accounting faculty. Therefore, because it is a subsidiary thing, it cannot be made a major premise; and thus it differs from law, which exists independently of its practice, and can live without practitioners.

Finally, if it be asked what is added to our knowledge of accountancy and what practical advantage is served by raising the question whether accountancy is a science or an art, it may be answered that an inquiry for the sake of truth should be its own excuse for being, and that accountancy which deals exactly with its material should deal exactly with itself.

• For a description, see "Professional Accountants," Beresford Worthington. † "History of Accounting and Accountants," Richard Brown, p. 314. "First Book of Jurisprudence," Sir Frederick Pollock, p. 8.

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