ACCT 1001 S1-2010 Week 1

8/8/2019 ACCT 1001 S1-2010 Week 1

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ACCT 1001: Accounting 1A

Sem. 1, 2010, Lecture 1

Record-Keeping &

Accountability: Lessons from

(Pre-) History

Chris Poullaos

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From Basu et al (2009, 898)

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From Basu et al (2009, 898)

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Apparently, the tokens/tablets were used in the

ancient µNear East¶ to keep track of µresources¶(e.g., animals, foods, textiles, metals, jewellery,

etc) especially when:

multiple parties were involved; and

one party was entrusted with the

resources of another (or one had a µdebt¶ to the

other)

(See Mattesich 1994; Carmona & Ezzamel [C&E]

2007)

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These µrecords¶ were regarded as authoritative,

especially when: both parties agreed as to the contents and/or

had their µown¶ copy

were prepared by specially trained µscribes¶and;

there were (other) witnesses.

They were used as and aid to memory, toavoid/settle disputes between the parties,

µmonitor performance¶ (C&E 2007, 182-95)

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Remarkably, the early versions preceded (and

contributed to the evolution of):

writing

abstract numbers/arithmetic

money production and exchange of resources within a

µmarket economy¶ populated by µeconomically

rational¶ individuals

(Mattesich 1994; C&E 2007)

Let¶s think about that for a minute . . . . .

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Let¶s think about that for a minute . . . . .

Cause & effect Note also the µthemes¶ identified by C&E (2007,

195-200), including:

± sophistication of the record-keeping

± multiple spheres and levels of µaccountability¶

± connection between records and µsocial and religious

norms and beliefs¶ (199)

How deeply embedded record-keeping is in

µcivilization¶ (organised social living) ± still the

case today!

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More on µaccountability¶: For C&E

It involves the µrendering of an account¶ toothers (e.g., the state, the temple, a

superior, an µequivalent party¶) and,

potentially, even to oneself (179-80, 195).

Such accounts are µa pervasive way of

making sense of the world by rendering it

observable and reportable¶ (179-80)

Accountability processes µare endemic toall social organizations across human

history¶ (178)

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More on µaccountability¶: For C&E

µAccounting¶ (for resources) is one way, or form, of µrendering an account¶; and

The clay tablets (etc), as ways of µkeeping

records¶ about resources, are forms of

µaccounting¶

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Another slant on µaccountability¶

µWhenever the advance of civilizationbrought about the necessity of one man

being entrusted . . . with the property of

another the advisability of some kind of

check upon the fidelity of the former wouldbecome apparent¶ (quote in Birkett 1967,

125)

The emphasis here is upon checking theaccount rendered

Examples (from Birkett 1967, Fu 1971)

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µWhenever a person [µprincipal¶]transfers or delegates control over

resources . . . to another . . . [µagent¶]

and requires a report from the agent onthe condition of the resources . . . the

relationship of the agent to the agent

will be described as one of accountability¶ (Birkett 1967, 154)

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µIn order to formulate and render hisaccount the agent may employ a person

designated as a preparer of accounts.

In order to check the accuracy of thereport of his agent, who potentially may

gain from deceit the agent may employ

a . . . verifier of accounts¶ (ibid.): anhistorically grounded proposition

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Today (in Australia), preparersand verifiers are both members of

µthe accounting profession¶; as

represented by professional

bodies such as the Institute of

Chartered Accountants and CPA Australia.

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Yet another slant . . .

From Basu et al (2009), also based onhistorical evidence (+ current theories of

the brain, human motivation,

anthropology and economics): Remembering and communicating

information is a prerequisite for

reciprocity (e.g., exchange) andreputation formation

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However, the (unaided) human brainonly has enough memory capacity to

sustain cooperation and reciprocity in

groups of up to about 200. In larger groups:

Record-keeping, as an µexternal¶ aid to

memory, helps to track a trading

partner¶s past behaviour (µtrack record¶).

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µTrack records¶/reputations help with the

decision of whether to (continue to) trade with

particular persons

Records also µestablish reliable social

memory and common knowledge¶ useful in

structuring exchanges (895)

µBetter¶ (more informative) records facilitate

(more) complex exchanges across time and

space (e.g., by securing property rights)

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That is, the µbetter¶ the records, theµmore¶ the exchanges that are facilitated

The more the exchange [the more stuff

we can get from others] the greater the

specialisation/ division of labour

The greater the division of labour, thegreater the wealth that can be created

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O

ther things being equal [a very big µif¶]:the better the record-keeping the

wealthier the society/ economy

Record-keeping µis a precursor

[necessary condition of] rather than the

result of economic complexity¶ (896).

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Nuances and Paradoxes

The previous arguments seek someµcore¶ or µessence¶ of accounting going

back 10,000 years; yet there is always a

question-mark about how usefulaccounts of the past are µnow¶: the

µpresent¶ always seems different from

µthen¶ and the µfuture¶ will be different

again.

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The form and function of accounting

is constantly changing and there is

ongoing dispute about its µpurpose¶ in

specific contexts; especially when

µpurposes¶ from previous contexts

continue to resonate with the present.

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F

or example, some µprincipals¶ (of today)seem to want a µstewardship¶ account of

what µagents¶ did with µtheir¶ resources;

while also seeking µuseful information¶ toguide decisions about how to allocate

µtheir¶ resources. These two types, or

functions, of accounting may overlap butthey are not necessarily identical.

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In the µmodern capitalist¶ era [more onthis in Lecture 2] there have been

(other) ongoing debates about how to

combine information about individualtransactions/resources/debts into

meaningful aggregates of µincome¶,

µwealth¶ (etc).

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The last para in Basu et al (2009, 910)is hugely anachronistic in ignoring the

previous point(s). [More on this in later

accounting units.]

Accountability relationships often

involve significant disparities in the

relative power of µprincipals¶ and

µagents¶; thus

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While it seems vital that accounting beµtrue¶, µfair¶ and µobjective¶ there are also

strong incentives to make it otherwise;

and/or to challenge it as being µuntrue¶,

µnot fair¶ and µnot objective¶. [More on

this in later accounting units.]

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Thus there is tremendous pressure onflesh-and-blood accountants to do their

work µethically¶ (or not); especially as

verifiers/auditors; and

To the extent that accounting is

regulated/ subject to public debate it is

also µpolitical¶.

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The prevalence of accountabilty relationships

/accounting throughout society has µmacro¶

effects going beyond individual relationships.

For C&E: accounting, as an important

element in accountability µhas been a

powerful mediating institution among

individuals, institutions and society¶ (200)

In ancient Mesopotamia and Egypt it contrib-

uted to µeconomic and social order¶ (200).

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A similar claim might be made aboutthe µmodern¶ and µcontemporary¶ eras;

although, with the emergence of

powerful market mechanisms, some

would highlight accounting¶s

contribution to the allocation and

distribution of µresources¶, locally and

globally.

ACCT 1001 S1-2010 Week 1

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