Accounting industry
The accounting industry plays a crucial role in the financial infrastructure of businesses, particularly in the United States. Its origins can be traced back to the early 17th century, with the demand for audited financial records emerging from joint-stock companies like the Massachusetts Bay Company. The modern practices of accounting were significantly influenced by educational efforts at the United States Military Academy in the early 19th century, where performance measurement techniques were developed. The rapid expansion of the railroad industry highlighted the need for organized financial management, leading to innovative accounting practices that would later be adopted by various large corporations.
Throughout the late 19th and early 20th centuries, the accounting profession evolved into a recognized field, with state societies forming to establish standards and regulations. Landmark legislation, such as the Federal Securities Acts and the Sarbanes-Oxley Act, further strengthened the profession's role in safeguarding investor interests and ensuring transparency in financial reporting. By the 21st century, accounting has become indispensable for efficient business management and investor decision-making, cementing its status as a foundational element of the American economy and capital markets.
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Accounting industry
Definition Enterprises concerned with designing financial information systems, recording economic transactions, auditing financial statements, and offering business services such as tax planning, payroll processing, and valuation of assets
The accounting industry serves all sectors of the economy, including for-profit enterprises, nonprofit organizations, and local, state, and national governments. It compiles and interprets data to enable informed business decisions and coordinate business relationships. The industry has been crucial to the efficient management of American business, and accounting is sometimes called “the language of business.”
The demand for audited financial records in American business emerged as early as 1628, when the Massachusetts Bay Company was chartered as a joint-stock company to finance the Pilgrims bound for New England. Modern accounting can be traced back to around 1817 in the classrooms of the United States Military Academy at West Point, New York. The academy established the technique of measuring human performance in the context of grading students. This effort to measure human productivity then spread to the burgeoning railroad industry.
The railroads were a commercial enterprise of unprecedented scale. They required enormous sums of capital and large numbers of workers and managers, and they posed numerous challenges of organization and operation. Accounting data began to be used not only to run the railroads efficiently but also to manage their business profitably and to control the behavior of employees. These uses of accounting information within organizations soon spread to the rest of the large corporations that made up the American economy. Such innovations as the well-known Du Pont model of financial ratios would cement the use of accounting information as an indispensable tool of management.
As part of the Progressive movement for government and business reform toward the end of the nineteenth century, accountants began to organize themselves as a public profession. Beginning with New York in 1897, state societies of public accountants formed to institute educational standards, licensing requirements, and codes of conduct to raise and regulate the quality of accountants auditing corporate financial statements. In addition, by the early twentieth century, university-based research contributed to the development of accounting theory as a framework for accounting practice.
The public accounting industry was put on a firm footing with the passage of the Federal Securities Acts of 1933 and 1934. These laws and others like them, including the Sarbanes-Oxley Act of 2002, are aimed at protecting investors by regulating the content and form of financial information about publicly traded corporations. By the early twenty-first century, the accounting industry had become an integral part of American business in general and American capital markets in particular. It assisted investors and enabled managers in running businesses more efficiently and profitably.
Bibliography
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Eichenwald, Kurt. Conspiracy of Fools. New York: Broadway, 2005.
Fleischman, Richard, ed. Accounting History. 3 vols. London: Sage, 2006.
Levinson, Charles. "Accounting Industry and SEC Hobble America's Audit Watchdog." Reuters Investigates. Reuters, 16 Dec. 2015. Web. 7 June 2016.
Nobes, Christopher. Accounting: A Very Short Introduction. New York: Oxford UP, 2014. Print.
Prince, Russ Alan. "The Future of the Accounting Industry in 2015." Forbes. Forbes, 21 Jan. 2015. Web. 7 June 2016.