Accounting, Accountability, Auditing, and Financial Scandals Over the Centuries

Abstract

A brief review of the meaning of accountability and related terms is followed by a search for the objectives that accountants have sought over the history of accounting, as revealed in accounting literature. They have included (1) accountability in situations involving conflicts of interests, (2) reporting the owner-manager’s wealth and income, (3) distinguishing between capital and income, or focusing on income, and (4) decision usefulness. No matter which objective is emphasized in the literature, to account is to be accountable, so accountability is inherent in accounting. Several features of the environment in which a series of financial scandals has occurred recently are identified and the responsibilities of certain segments of the broad field of accounting are given attention. The tendency for auditors to lack independence is viewed as critical. The key issue facing those accountants concerned with the accountability of corporate managements is whether the three-party arrangement for auditing can be changed to a two-party arrangement, or if patching holes in the three-part arrangement is all that can be expected.