Accountancy has been the most rapidly growing profession in Britain over the past 100 years and Britain has had more accountants than other countries. The reason for this is that British companies raised capital via 'blind' investors on the Stock Exchange, whereas other countries used banks. This generated the need for professional auditors in Britain to check that the investors capital was being looked after. The Companies Act 1900 stated that all limited companies accounts had to be audited. Therefore as the number of companies grew in the 20th century so did the number of auditors, who were qualified accountants.
Development of accounting societies The accountants formed themselves into societies to look after their interests and to keep up standards, and therefore their earning power, by excluding those who (a) could not afford the premium of e. g. 500 which was required to enter the 5 year unpaid training with a chartered accountant's practice (b) pass the societies exams. The first body to set up was the Institute of Chartered Accountant in England and Wales (ICAEW) which got its Royal Charter in 1880. Chartered accountants are still the elite of the profession.
Those accountants excluded by the entry requirements of the ICAEW in 1880, by a process called 'closure', set up their own body – The Society of Incorporated Accountants and Auditors in 1885 (which amalgamated with the ICAEW in 1957), with less stringent entry requirements but none the less excluding others, who in turn set up their one societies (which amalgamated in 1939 to form today's certified accountants, today's ACCA). Others formed societies based on different types of accounting e. g. the cost accountants in 1919 (today's CIMA) Accountant's firms.
The major firms, which were partnerships with unlimited liability, have been on top for a long time. The number of firms has fallen from 3880 in 1928 and 8711 in 1978 due to mergers. These led decline of medium sized firms and growth of big boys. There has been a increase in market concentration. Top 10 accountancy firms had 23% of audits in 1928, 31% in 1968, but 51% by 1978 and about 80% now. The firms started off mainly doing insolvency, but then grew, as we have said, due to the growth in audit business which until recently was 60-75% of the accountancy firms' earnings.
Recently there has been the growth in consultancy and taxation work. Firms now operate on global scale via mergers with US and European firms e. g. PricewaterhouseCoopers, Ernst and Young, KPMG, Touche Ross. A major controversy surrounds the role of accountants as auditors and their patent failure to detect fraud in companies like BCCI, Polly Peck and Robert Maxwell. Accountants argue that an audit is not designed to detect fraud but only to say if the accounts present a 'true and fair view'. Debatable.
Is clear that accountants have failed to detect problems with take-overs. e. g.allowed the take over of an American company by Ferranti in 1989 on the basis of fictitious contracts from bogus clients. and this led to the demise of Ferranti and an independent company. Growth of accountants in business Originally outlawed by ICAEW, from the 1st world war accountants increasingly left practice to work for industry: 3% accountants worked in business in 1911, 49% 1951, 64% 1991. They were mainly employed in the financial function of companies, surprisingly little in management accounting or in general management. But accountants have also risen into top management in increasing numbers.
Note the growth in the % who were chairmen, MDs, secretaries and directors; and % of companies that had an accountant on the board. More so than any other profession. Also note the preponderance of chartered accountants. Company boards became more professional generally in the 1950s but the accountants were the most successful due to the rise of the Financial Director. There were very few in 1951 but most companies had FDs by 1970. But the increase in the % of companies with accountant directors was not primarily due to the increased number of FDs because other non-FD accountants were also numerous.