Top 10 Most Influential Accountants
Who are the 10 most important accountants in history?
Accountants rarely make the limelight, and even more seldom for good reasons. So, while evidence of the use of accounting records dates back more than 5,000 years, it's hard to put actual names to those who marked key stages in the development of accounting through the ages. Here's one view of the 10 most important accountants in history.....
1. Amatino Manucci (1299)
The first double-entry bookkeeper?
Although various systems of accounting are in evidence much earlier, the roots of modern accounting techniques seem to lie with Italian merchants in Florence in the thirteenth century. The Italian city states of the time were the economic powerhouses of Europe, experiencing rapid urbanisation, innovating in commerce and lying on important trade routes. Merchants were generally not manufacturers themselves, they bought and sold to make a profit, and were therefore experienced at calculating costs and profit margins. The increasing levels of trade, and wealth, gave rise to the need for improved record keeping.
Amatino Manucci, a partner in the Florentine business Giovanni Farolfi and Company, maintained the ledgers for one of its French branches at Salon. The 56 pages that still exist cover the period 1299 - 1300, and contain many of the elements of double-entry bookkeeping recognisable to this day: debtors, creditors, expenditure, profits, inventory and partners' drawings. The ledgers are considered by many to be the first example of full double-entry bookkeeping.
2. Richard Chesterfield (1356)
The first government auditor?
The first record of a public official with responsibility for auditing government expenditure is a reference to the 'Auditor of the Exchequer', in Scotland in 1314, although the first known holder of the post dates from 1373.
The equivalent post in England was the Auditor of the Receipt of the Exchequer. The Exchequer of Receipt, a government function concerned with the collection of revenue, had been in existence since at least 1176, although the first records of the post of Auditor of the Receipt of the Exchequer date from 1356. The first recorded incumbent of the post was Richard Chesterfield, of which little is known.
Rather more is known about the first recorded holder of the office of Auditor of the Exchequer in Scotland. John Barbour, one of the Auditors of the Exchequer in 1373, was also a poet, and is most well-known for the poem 'The Brus', about the actions of Robert the Bruce (Robert I of Scotland) and the Battle of Bannockburn in particular.
Although the forms and structures of government have evolved over the centuries, an almost unbroken line can be drawn from these origins of government audit to the present day, ending with the National Audit Office, which has had responsibility for the audit of the central government functions of the UK since 1983.
3. Luca Pacioli (1494)
The author of the first accounting textbook?
Although evidence of the development and use of the system dates from almost two hundred years earlier, it is Luca Pacioli who is usually regarded as the 'father of double entry bookkeeping'.
A Franciscan friar and mathematician, Pacioli published a number of works covering such diverse topics as commercial arithmetic, algebra, geometry, proportion, mathematical puzzles and even magic tricks. While in Milan, Pacioli taught mathematics to Leonardo da Vinci, and da Vinci provided illustrations for Pacioli's last published work, De Divina Proportione. However, it is his earlier work Summa de arithmetica, geometria, proportioni et proportionalitÃ for which he is most remembered.
Summa, a collection of the mathematical knowledge of the time, included a section on bookkeeping entitled Particularis de Computis et Scripturis. Pacioli, accused of plagiarism in some of his works, was clear that he was describing a system, 'the Venetian method', which was already in existence. To this existing system he did, however, add the 'Summa Summarum' (the 'trial balance') - a method for establishing whether the ledgers were in balance. Pacioli may also be the first to recommend that the ledgers should be subject to an independent review, to prevent fraudulent practices.
Summa was published in Venice in 1494, and benefitted greatly from the relatively recent invention of the printing press. As the first full published description of double entry bookkeeping its influence was far reaching, and it was translated and adapted in several languages across Europe. An indicator of its influence and completeness is the lack of further notable developments in accounting for the next two hundred years.
Although the Summa was the first published accounting 'textbook', an earlier manuscript which describes double entry bookkeeping does exist: Della mercatura e del mercante perfetto, believed to be written in 1458 by Croatian Benedikt Kotruljevic. Unfortunately for Kotruljevic it was not officially published until 1573.
Fine Arts Reproduction:
Nicola Cianfanelli "Leonardo da Vinci stellt Ludovico Sforza, Herzog von Mailand, den Mathematiker Luca Pacioli vor" 105 x 75
The original accounting textbook
In the UK:
The Rules of Double-Entry Bookkeeping. Particularis de Computis et scripturis.
And in the US:
4. Thomas Stevens (1600)
The first company accountant?
The first major 'joint-stock' company of modern times was the East India Company, which was granted its Royal Charter on 31 December 1600, by Elizabeth I. Shares in the company were owned by merchants and aristocrats, and their liability for the debts of the company was limited to the face value of their shareholding.
The company grew rapidly, surviving for over 250 years. At its peak it controlled 243,000 square kilometres of India, covering a population of 90 million people, issued its own coins and maintained an army of 200,000 men. Such a huge operation required efficient administration, and the company established detailed governance and control systems which were laid down in the 'Court Minutes' and the 'Laws and Standing Orders', and these included descriptions of the duties of the accountant and auditors. Every director was able to inspect the accounts as they thought fit.
Ultimately, the British government sought to reduce the power of the company, and after a succession of Acts of Parliament modifying its remit it was ultimately nationalised in 1858 following the Indian Mutiny. In 1874, after the payment of a final dividend and redemption of its shares, the company was dissolved.
While its political influence and control over vast territories sets it aside from the companies of today, it was, in many other senses, the first modern, shares based, limited liability company. Its first Accountant General was Thomas Stevens. Although extensive records of the company are available from 1657 onwards, and are held by the British Library, no records relating to the earlier period of the company's existence survive, and little is known of Thomas Stevens. However, as the first accountant of the first modern company his tenure marks a significant point in accounting history.
5. Charles Snell (1720)
The first civilian auditor?
The South Sea Company was established in September 1711 with the ostensible aim of obtaining exclusive trade rights to the 'South Seas' (South America). However, its founders were more interested into turning it into a rival to the newly established Bank of England.
The trading rights proved much less profitable than expected, but despite this the company took on more government debt, until the majority of British government debt was held by the company (around Â£52bn in today's terms). A combination of talking up its prospects, bribery and issuing shares to those in positions of power (including politicians) without requiring initial payment until the shares were later sold at a profit, caused the value of the shares to rise tenfold in a year. Dividends vastly in excess of the real profits of the company were promised, and to meet these the company relied on the issue of new shares, and on the share price remaining high.
As the shares neared their perceived peak, many shareholders decided to sell and take their profits. Despite the efforts of the directors, the share price began to fall. Once the decline was in evidence shares were sold at an ever greater rate, until they had fallen back to their near original level. Those who had borrowed to buy shares while the price was high were ruined; the 'South Sea Bubble' had burst.
Parliament was recalled and an investigation began. As part of the investigation Charles Snell was engaged to audit the company's books. Reporting in 1721 the investigation uncovered widespread fraud and corruption, including the distribution of free shares to members of the government. Among those tried and convicted was John Aislabie, the Chancellor of the Exchequer, who was imprisoned in the Tower of London.
Charles Snell's role in the investigation into the activities of the South Sea Company is the first recorded engagement of an independent civilian auditor.
An historical tour de force from author Robert Goddard, inter-weaving real historical characters and events surrounding the collapse of the South Sea Company with highly plausible fiction, to create a fast-paced tale of murder, intrigue and corruption that goes to the very heart of the British Establishment.
At the height of the investigations in to the collpase of the South Sea Company, a penniless mapmaker is offered a way out of his debts: transport a package out of the country. Falsely accused of murder, and with government agents on his trail, he soon realises that the package is far more important than he could ever have imagined....
6. Josiah Wedgwood (1772)
The first cost accountant?
Josiah Wedgwood is best known for the fine pottery which bears his name to this day. Wedgwood's Etruria factory at Stoke-on-Trent opened in 1769 and operated from the same site for 180 years before relocating. Known best for his iconic 'jasperware' (blue china, overlaid with white decoration), Wedgwood was also a fellow of the Royal Society, a prominent slavery abolitionist and the grandfather of Charles Darwin.
An innovator, credited not only with the industrialisation of pottery manufacture but with greatly improving the quality and aesthetic appeal of the crockery of the day, he was able to command high prices, receiving orders from nobility, including Queen Charlotte (wife of King George III) and Empress Catherine of Russia. With high prices and handsome profit margins Wedgwood initially had little interest in understanding the detailed costs of his business.
However, during a downturn in business in the autumn of 1772, Wedgwood began to make a concerted attempt to cost every item of production, and in doing so establish the profit or loss realised each time a particular product was sold. As well as the obvious variable costs of production (direct wages, clay) his costing calculations also included indirect costs (coal, warehousing, transport) and the apportionment of fixed costs (such as rent). Wedgwood realised the value of such information, identifying perhaps for the first time the economies of scale of mass production (by aiming to reduce expensive 'one-off' commissions). In trying to reconcile his costing calculations to the overall financial position of the company he was able to identify embezzlement on the part of his head clerk. Wedgwood went on to cost new methods and products before commencing their manufacture, and used his costing information to set differential prices for his products.
While others at the time were also developing various methods of cost accounting to aid business decision making, including the Carron Company in Scotland, the surviving letters and records of Wedgwood make a compelling case for his place in history as the first cost accountant.
Cost accounting source: McKendrick, N. (1970) 'Josiah Wedgwood and cost accounting in the Industrial Revolution', Economic History Review, vol. 23, no. 1, April 1970 pp45-67.
7. William Welch Deloitte (1845)
The founder of the first of the 'big four' accountancy firms?
A grandson of Count de Loitte, who had fled France during the French Revolution, in 1833 William Welch Deloitte became an assistant to the Official Assignee at the Bankruptcy Court in the City of London. The 1831 Bankruptcy Act had given the first legal recognition to accountants as a profession, enabling them to become 'official assignees' in bankruptcy proceedings.
The Joint Stock Companies Act of 1844 simplified the formation of joint stock companies, by removing the requirement for a Royal Charter or a private Act of Parliament. Companies could now be formed by a registration process. The 1844 Act required the directors of each company to 'cause the Books of the Company to be balanced, and a full and fair Balance Sheet to be made up', and provided for the appointment of auditors to verify the accounts. However, the requirement for every registered company to appoint approved (by the Board of Trade) auditors was not introduced until 1855, as part of the Limited Liability Act which, unsurprisingly given its title, also introduced the concept of limited liability for the shareholders of registered companies. The requirement for companies to file an Annual Return with the Registrar of Companies was introduced in 1856, and in 1862 the various pieces of legislation were consolidated into the Companies Act 1862, which through major revisions in 1929, 1948 and 1985 has evolved into the current UK company law contained in the Companies Act 2006.
The rapidly changing business environment of the 1840s, with shareholders wanting to ensure their investment was safe and prospering, created an ideal environment for the expansion of the accountancy and audit professions. It was in this context that William Welch Deloitte opened his accountancy practice in London in 1845, at the age of 25. In 1849 Deloitte was engaged as the independent auditor of the Great Western Railway. He went on to develop a system specific to railway accounts which became the industry standard.
Although it has gone through many mergers and restructures, the Deloitte name remains as one of the 'Big Four' global accountancy firms today.
Did you know?
The 84th Academy Awards of 26 February 2012 represent the 78th consecutive year the Oscars balloting process has been overseen by ‘Big Four’ accountancy firm PriceWaterhouseCoopers.
8. Alexander Weir Robertson (1853) - The founder of the first professional accountancy body?
Excerpt from the Royal Charter of the Society of Accountants in Edinburgh (1854)
Image credit: replica created by the author
Public accountants were well established by this time, associated closely with the practice of law (bankruptcy in particular) in Edinburgh and merchants and stockbrokers in Glasgow. Edinburgh had become a world-renowned city for intellectual inquiry and innovation through the period of the Scottish Enlightenment over the previous century. The resulting growth in trade, wealth and the middle classes helped create demand for accountants. Robertson practiced from his house in the New Town area of Edinburgh, originally built for the nobility, but later home to the successful middle classes.
There were 61 original members of the Society of Accountants of Edinburgh, all of whom are named in the Royal Charter. The Society of Accountants in Edinburgh went on to become the Institute of Chartered Accountants of Scotland.
9. Frank J. Wilson (1931)
The first forensic accountant?
From around 1920, Al Capone had risen to prominence as a Chicago gangster, becoming boss of the 'Chicago Outfit' in 1925. Although the Outfit may have only included 200 members, the businesses it was involved in employed thousands, and estimates put Capone's annual income at between US$ 50 -100 million.
With a reputation for ruthlessly dealing with competition, and bribing and intimidating law enforcement, politicians, judges and juries, Capone successfully evaded any serious criminal convictions for eleven years.
With attempts to curb the Outfit's activities having been largely unsuccessful, and public outrage growing following the St. Valentine's Day Massacre, efforts to bring Capone to justice intensified. While Elliot Ness and his 'Untouchables' from the Prohibition Bureau attempted to close down some of Capone's illegal establishments, the Treasury Department's Special Intelligence Unit appointed one of its staff, a 42 year old accountant named Frank J. Wilson, to lead an investigation into Capone's tax affairs. Following a 1927 Supreme Court ruling, which set a precedent that income tax must be paid even on illegal income, a charge of tax evasion was seen as the most likely route to secure a conviction.
With Capone not holding a bank account, never filing a tax return or signing anything, building a case was never going to be easy. During the investigation over two million records were examined, and dozens of Capone's associates were questioned. Despite a contract being taken out on his life, Wilson completed the investigation and compiled sufficient evidence for Capone to be charged.
On 24th November 1931 Capone was sentenced to 11 years in a federal prison, fined US$50,000, charged US$215,000 in back taxes plus interest and court costs. He served seven years at the US Penitentiary in Atlanta and at Alcatraz, and was eventually released on 16th November 1939, having paid all his back taxes and fines. On his release Capone was too ill to resume his gangland activities, and effectively retired to Palm Island, Florida, where he died on 25th January 1947.
Wilson went on to become Director of the United States Secret Service from 1937 until 1946. The character of Oscar Wallace in the film The Untouchables is loosely based on Wilson.
10. Professor Sir David Tweedie (2001)
The first champion of global accounting standards?
The establishment of formal rules and guidance ('standards') under which financial statements should be prepared dates back to 1939 in the United States, and 1942 in the UK. While US Generally Accepted Accounting Principles (US GAAP) and UK Generally Accepted Accounting Practice (UK GAAP) have developed over time, the issue of accounting standards really gathered momentum from the early 1970s with the establishment of the Accounting Standards Steering Committee (UK, 1970) and the Financial Accounting Standards Board (US, 1973).
With global trade expanding, the need for common accounting standards to aid the comparison and analysis of financial statements from companies in different countries grew. Although the International Accounting Standards Committee had been issuing standards for international use since 1973, they were not highly regarded.
It was not until the establishment of the International Accounting Standards Board (IASB), in 2001, that international accounting standards really began to be taken seriously. The IASB issues International Financial Reporting Standards (IFRS), and remains responsible for the earlier International Accounting Standards (IAS). More than 100 countries around the world require or permit the use of the standards, including Argentina, Australia, Brazil, Canada, all member countries of the European Union, Russia, South Africa and Turkey. Japan and the United States permit their use for international companies, and are working towards eventual convergence.
As the chairman of the IASB from its inception in 2001 until 2011, Professor Sir David Tweedie successfully led the revitalisation of international accounting standards, and their widespread adoption around the world, and might therefore be regarded as the first true advocate of global accounting standards.
You’ll notice that each of the ten suggestions is posed as a question rather than a statement. As with most systems, the development of accountancy has been an evolutionary process across many hundreds, if not thousands, of years. Inevitably, many people have played their part. Don’t agree with the list? Who’s been forgotten? Please leave your comments below!