¹ Dewing, Arthur S., Corporate Promotions and Reorganizations (Cambridge, 1914), p. 12 Google Scholar.

² Shultz, Birl E., Stock Exchange Procedure (New York, 1936), p. 12 Google Scholar.

³ McLaren, Norman L., Annual Reports to Stockholders (New York, 1947), p. 5 Google Scholar.

⁴ United States Investor, vol. XI (January 20, 1900)Google Scholar.

⁵ McLaren, Annual Reports, p. 4.

⁶ Sears, Marian V., “The American Businessman at the Turn of the Century,” Business History Review, vol. XXX (December, 1956), p. 418 Google Scholar.

⁷ In contrast, beginning in 1844, the British Parliament passed a series of comprehensive statutes, called Companies Acts, which was designed to regulate the formation, management, and winding-up of public companies. Several of these acts prescribed minimum standards for financial disclosure to investors and called for an independent audit of these financial reports. The Directors Liability Act of 1890, which was construed as one of the Companies Acts, made directors under certain conditions liable to compensate persons damaged by false statements in prospectuses or other documents soliciting application for securities. Thus, by 1900, in Britain, the disclosure to investors of certain reliable financial information was mandatory under the threat of legal liability.

⁸ McLaren, Annual Reports, p. 5. On February 20, 1901, the board of directors of Westinghouse Electric and Manufacturing Company, issued a two-page report to a special meeting of the stockholders. The report contained no financial statements but did give the company's sales and total dividends, interest, and sinking-fund payments for 1898–1900.

⁹ In 1914, Arthur S. Dewing published a historical study of a number of the corporate reorganizations which had occurred between 1891 and 1913. One of his sources of information was the financial journals. Speaking of the reliability of the financial press in general, and the Commercial and Financial Chronicle in particular, Dewing said: “As a general rule, … the statements of the press comprise merely the facts made public through the publicity department of the corporation, or unreliable quotations and hearsays, – the ‘news’ upon which the stockmarket trader feeds. In some cases, there are covert attempts to influence the investing public by the insidious ‘write-up’ with which many financial papers prostitute their pages. Distinctly the most useful publication that we have is the Commercial and Financial Chronicle. Its accuracy is striking. Over and over again, the present writer has compared original reorganization plans and corporation reports with the Chronicle digests, and almost without exception no important error has been discovered. The files of the Chronicle too, are accessible to most people. …” Dewing, Corporate Promotions, p. 12.

¹⁰ Strangely, the American textile industry's performance with respect to financial disclosure during the nineteenth century appears to have grown worse as the century progressed. In 1850, the stockholder reports of textile firms in New England generally provided far more financial information than the Davol Mills report of 1899.

¹¹ Preliminary Report of the Industrial Commission on Trusts and Industrial Combinations (Washington, 1900), p. 122 Google Scholar.

¹² The New Jersey Corporations Agency was formed in 1895 for the purpose of furnishing corporations chartered in New Jersey, but operating out of state, with the necessary facilities for complying with the state's liberal incorporation laws. Mr. King's office represented several hundred such corporations including the Amalgamated Copper Company, the American Car and Foundry Company, the American Thread Company, the Pressed Steel Car Company, and the American Soda Fountain Company.

¹³ Preliminary Report of the Industrial Commission, pp. 1109–1110.

¹⁴ Greidinger, B. Bernard, Preparation and Certification of Financial Statements (New York, 1950), p. 3 Google Scholar.

¹⁵ Horack, Frank E., The Organization and Control of Industrial Corporations (Philadelphia, 1903), pp. 79–122 Google Scholar.

¹⁶ For instance, Horack commented on the provision of a Michigan corporation law of 1899 relating to periodic statements to stockholders thus: “In the chapter on manufacturing corporations in the Statutes of Michigan section 15 reads, ‘… as often as once in each year a true statement of the accounts of said corporations shall be made and exhibited to the stockholders.’ How and when the statement is to be made is not mentioned; nor is any penalty attached for failure or refusal.” Ibid., p. 116.

¹⁷ See, for example, Meade, Edward S., “Lecture III – Initial Stages of Organization,” Corporation Finance (“Business 25”): Official Report of the Lectures in Full in 1908–09, Graduate School of Business Administration, Harvard University (Mimeographed, Boston, 1908), pp. 46 Google Scholar ff. Later, in the same lecture series, George O. May, a prominent public accountant, cast some doubt on the thoroughness of these investigations. He said: “I have had personal familiarity with [securities] which were accepted by bankers and by them offered to the public without adequate investigation and on a basis which was essentially unsound. …” “Lecture VIII – Flotation,” ibid., p. 118. These lectures are deposited in the Archives of the Harvard Graduate School of Business Administration, Boston, Mass.

¹⁸ May, George O., Financial Accounting (New York, 1943), pp. 118 ffGoogle Scholar.

¹⁹ See, for example, Sampson, Roy J., “American Accounting Education, Textbooks, and Public Practice Prior to 1900,” Business History Review, vol. XXXIV (Winter, 1960), pp. 446 ffGoogle Scholar.

²⁰ Montgomery, Robert H., “What Have We Done and How?,” The American Institute of Accountants [1887–1937] Fiftieth Anniversary Celebration, 1937 (New York, 1938), p. 80 Google Scholar.

²¹ Brown, Richard (ed.), A History of Accounting and Accountants (Edinburgh, 1905), p. 278 Google Scholar.

²² Montgomery, “What Have We Done and How?,” p. 80.

²³ Preliminary Report of the Industrial Commission, p. 5.

²⁴ Glover, J. D., The Attack on Big Business (Boston, 1954), pp. 103 ffGoogle Scholar.

²⁵ Brandeis, Louis D., Other People's Money and How the Bankers Use It (New York, 1914), p. 103 Google Scholar.

²⁶ Preliminary Report of the Industrial Commission, p. 6. The Final Report of the Industrial Commission issued in 1902 repeats the above recommendations. In addition, it also contains a “supplementary statement” by Thomas W. Phillips, a Commission member. Mr. Phillips wanted the Commission to amplify its recommendations in the area of corporate publicity to provide for a government official to whom all corporations would submit audited annual reports containing a specified list of points on which data were to be provided. In addition, Phillips proposed this official be given a staff of examiners who would at irregular periods and without notice appear at the offices of each corporation to examine, verify, and report upon its books. The reports of the examiners were to be made public. Final Report of the Industrial Commission (Washington, 1902), pp. 669–73Google Scholar.

²⁷ Sears, “The American Businessman at the Turn of the Century,” p. 421.

²⁸ Horack, Organization and Control of Industrial Corporations, p. 80.

²⁹ Preliminary Report to Stockholders of United States Steel Corporation to be Submitted at the First Annual Meeting … January 10, 1902 [Hoboken, N. J., 1902]Google Scholar. Commenting on this report, the Commercial and Financial Chronicle stated: “… we wish to call attention … to a single feature that ought to be an example for every industrial company in the land … What we wish to emphasize is the impression a reading of the report will, we believe, have upon every unprejudiced mind; which is that the United States Steel Corporation has nothing to conceal. Each stockholder obviously is told everything the management knows about the investor's property. … This open, honest way of treating the public … must tend to put [this company's] … securities … in a far safer class for investment than those of so many other industrial companies which adopt a more secretive policy.” (February 1, 1902), p. 230. A modern review of this balance sheet expresses a somewhat different view: “When United States Steel Corporation was organized in 1902 it showed no goodwill or other intangibles in its balance sheet. Thus all its capitalization was ostensibly covered by its property account and working capital. Many years later, it was revealed that no less than $769 million of the plant account was a written-up item, popularly known as ‘water.’” Graham, Benjamin, Dodd, David L., and Cottle, Sidney, Security Analysis (4th ed., New York, 1962), p. 213 Google Scholar.

³⁰ Preliminary Report of the Industrial Commission, p. 296.

³¹ Report of the Board of Directors of the Westinghouse Electric and Manufacturing Co. to the Stockholders, Special Meeting, February 20th, 1901 [Pittsburgh, 1901], p. 1 Google Scholar.

³² Loss, Louis, Securities Regulation (Boston, 1951), p. 123 Google Scholar; Brandeis, Other People's Money, p. 93.

³³ Tugwell, Rexford G., “The Progressive Orthodoxy of Franklin D. Roosevelt,” Ethics, vol. LXIV (Oct., 1953), p. 16 Google Scholar.

³⁴ Galbraith, John K., The Great Crash, 1929 (Boston, 1955), p. 161 Google Scholar.

³⁵ Ripley, William Z., Main Street and Wall Street (Boston, 1925), pp. vi–viiGoogle Scholar.

³⁶ “Desirability of Publicity,” Journal of Accountancy, vol. XLIV (December, 1927), pp. 441–43Google Scholar.

³⁷ Ripley, William Z., “Stop, Look, Listen!” Atlantic Monthly, vol. 138 (September, 1926), p. 380 Google Scholar.

³⁸ Berle, Adolph A. Jr., and Means, Gardiner C., The Modern Corporation and Private Property (New York, 1933), pp. 317 ffGoogle Scholar.

³⁹ “Desirability of Publicity,” pp. 441–43.

⁴⁰ Glover, Attack on Big Business, pp. 304–305.

⁴¹ Ripley, Main Street and Wall Street, p. 210.

⁴² Shultz, Stock Exchange Procedure, p. 17.

⁴³ “Report of the Committee Appointed Pursuant to House Resolutions 429 and 504 to Investigate the Concentration of Control of Money and Credit,” House Reports, 62 Cong., 3 Sess., No. 1593, p. 37.

⁴⁴ At the time this announcement was made a census showed that of the 957 companies listed on the exchange 242 were already making quarterly reports, 79 were reporting semiannually, 339 issued annual statements, and 297 companies had no agreements with the exchange respecting the issuance of such statements. Many of this last group were transportation companies which were subject to the reporting requirements of the Interstate Commerce Commission, and utility companies which were under the authority (as to publicity) of the various state public service commissions. Ripley, Main Street and Wall Street, p. 187.

⁴⁵ May, George O., “Corporate Publicity and the Auditor,” Journal of Accountancy, vol. XLII (November, 1926), p. 322 Google Scholar.

⁴⁶ Whitney, Richard, “Business Honesty, Address Delivered … before the Philadelphia Chamber of Commerce … April 24, 1931” [New York, 1931], p. 9 Google Scholar.

⁴⁷ Ripley, Main Street and Wall Street, p. 213.

⁴⁸ “Report of Industrial Securities Committee,” Proceedings of the Ninth Annual Convention of the Investment Bankers Association of America (Chicago, 1920), pp. 153 ffGoogle Scholar.

⁴⁹ Edelman, Jacob M., Security Regulation in the 48 States (Chicago, 1942), p. 4 Google Scholar.

⁵⁰ H. R. 188, 66 Cong., 1 Sess. (1918); H. R. 12603, 66 Cong., 2 Sess. (1919); H. R. 7215, 67 Cong., 1 Sess. (1921).

⁵¹ See, for example, the following subcommittee reports presented in the respective Proceedings of the … Annual Convention of the Investment Bankers Association: “Report of Industrial Securities Committee,” 1920; “Report of the Business Practice Committee,” 1923; “Report of the Committee on Real Estate Securities,” 1923; “Report of the Special Committee on Circulars,” 1925; “Report of Public Service Securities Committee,” 1926; and “Report of Industrial Securities Committee,” 1927.

⁵² “Report of the Special Committee on Circulars,” 1925, p. 272.

⁵³ “Report of the Business Practice Committee,” 1929, p. 294.

⁵⁴ “Report of Industrial Securities Committee,” 1920, p. 153.

⁵⁵ “Report of Committee on Ethics and Business Practice,” 1924, pp. 210–11.

⁵⁶ “Report of Real Estate Securities Committee,” 1926, p. 248.

⁵⁷ “Report of Industrial Securities Committee,” 1920, p. 166.

⁵⁸ “Report of the Publicity Committee,” 1923, p. 302.

⁵⁹ “Report of Industrial Securities Committee,” 1918, p. 96.

⁶⁰ See, for example, “Stock Exchange Practices,” Senate Reports, 73 Cong., 2 Sess., No. 1455, pp. 100 ff.

⁶¹ The introduction of corporate income taxes not only spurred businessmen to keep better accounting records and take a more active interest in financial accounting, but also led directly to the adoption of certain valuation practices for corporate accounting. For instance, the acceptance of the “last in first out” method of valuing inventory for tax purposes resulted directly in its widespread adoption in industrial financial reports.

⁶² Landis, James M., “The Legislative History of the Securities Act of 1933,” George Washington Law Review, vol. 28 (October, 1959), p. 34 Google Scholar.

⁶³ Anyon, James T., “Early Days of American Accountancy,” Journal of Accountancy, vol. XXXIX (January, 1925), p. 7 Google Scholar.

⁶⁴ Edwards, James D., History of Public Accounting in the United States (East Lansing, 1960), p. 54 Google Scholar.

⁶⁵ Ibid., p. 101.

⁶⁶ Federal Reserve Bulletin, vol. III (April, 1917), pp. 270–84Google Scholar.

⁶⁷ Federal Reserve Board, Uniform Accounting (Washington, 1917)Google Scholar.

⁶⁸ Federal Reserve Board, Approved Methods for the Preparation of Balance Sheet Statements (Washington, 1918)Google Scholar.

⁶⁹ Federal Reserve Board, Verification of Financial Statements (Washington, 1929)Google Scholar.

⁷⁰ Flowers, William B., Criteria for Disclosure of Post-Statement Events (Austin, 1960), p. 10 Google Scholar; “Value of Audited Statements,” Journal of Accountancy, vol. XXVIII (December, 1919), p. 454 Google Scholar.

⁷¹ “Cooperation with Bankers,” Journal of Accountancy, vol. XLVI (October, 1928), p. 286 Google Scholar.

⁷² Flowers, Criteria for Disclosure, pp. 10-11; Campbell, William B., “Cooperation between Accountants and Bankers,” Journal of Accountancy, vol. XLV (January, 1928), p. 12 Google Scholar.

⁷³ May, “Corporate Publicity and the Auditor,” pp. 322–23.

⁷⁴ “Cooperation between Accountants and Stock Exchanges,” Journal of Accountancy, vol. L (October, 1930), p. 242 Google Scholar.

⁷⁵ Bernheim, Alfred L. and Schneider, Margaret G. (eds.), The Security Markets (New York, 1935)Google Scholar.

⁷⁶ Hoxsey, J. M. B., “Accounting for Investors,” Journal of Accountancy, vol. L (October, 1930), p. 251 Google Scholar.

⁷⁷ May, Financial Accounting, pp. 43–44.

⁷⁸ “Stock Exchange Calls for Comparative Statements,” Journal of Accountancy, vol. LIII (February, 1932), p. 83 Google Scholar.

⁷⁹ “Report of the Special Committee on Cooperation with Stock Exchanges of the American Institute of Accountants to the Committee on Stock Lists of the New York Stock Exchange, September 22, 1932,” quoted in May, Financial Accounting, pp. 72–80.

⁸⁰ May, Financial Accounting, p. 57.

⁸¹ Announcement of Richard Whitney, January 6, 1933, as reproduced in: “Stock Exchange Demands Audit of Listed Companies,” Journal of Accountancy, vol. LIV (February, 1933), pp. 81–82 Google Scholar.

⁸² Ibid., p. 82.

⁸³ Berle, A. A. Jr., , “Accounting and the Law,” Accounting Review, vol. XIII (March, 1938), p. 15 Google Scholar.

⁸⁴ Flowers, Criteria for Disclosure, p. 11.

⁸⁵ Graham, Benjamin and Dodd, David L., Security Analysis (3rd ed., New York, 1951), p. 391 Google Scholar.

⁸⁶ Letter from Treasurer of Singer Sewing Machine Company, May 18, 1932. (Corporation Records Division, Baker Library, Harvard Graduate School of Business Administration, Boston, Mass.).

⁸⁷ Ripley, “Stop, Look, Listen!,” p. 385.

⁸⁸ McLaren, Annual Reports, p. 6.

⁸⁹ Ripley, Main Street and Wall Street, p. 211.

⁹⁰ “It Makes One Suspicious,” United States Investor, vol. XI (June 30, 1900), p. 827 Google Scholar.

⁹¹ Ripley, Main Street and Wall Street, pp. 208–209.

⁹² “Stock Exchange Practices,” pp. 55 ff.

⁹³ U. S. Congress, Interstate and Foreign Commerce Committee, House of Representatives, “Stock Exchange Regulation, Hearing, 73d Congress, 2d Session, on H. R. 7852 … and … H. R. 8720 …” (Washington, 1934), p. 49 Google Scholar.

⁹⁴ Berle and Means, Modern Corporation, p. 318; Commercial and Financial Chronicle (September 4, 1926), pp. 1200–1201; Statement by Richard Whitney, President of the New York Stock Exchange made to the Governing Committee and the Membership in regard to the investigations of stock exchange practices by the Committee on Banking and Currency of the United States Senate, August 24, 1932 [New York, 1932], p. 31 Google Scholar; Collver, Clinton, Industrial Securities (New York, 1921), p. 85 Google Scholar.

⁹⁵ Hoxsey, “Accounting for Investors,” pp. 259–61.

⁹⁶ James S. Schindler, “The Need for Accounting Theory and Standards: The Era of Asset Revaluations,” Paper presented at the American Accounting Association Convention, August 29, 1962.

⁹⁷ Littleton, A. C. and Zimmerman, V. K., Accounting Theory: Continuity and Change (Englewood Cliffs, 1962), p. 101 Google Scholar.

⁹⁸ Flowers, Criteria for Disclosure, p. 17.

⁹⁹ Whitney, “Business Honesty,” p. 10.

¹⁰⁰ In 1957, the American Institute of Accountants changed its name to American Institute of Certified Public Accountants.

¹⁰¹ Special Message of March 29, 1933, as quoted in Roosevelt, Franklin D., On Our Way (New York, 1934), pp. 45–46 Google Scholar.

¹⁰² Public Law No. 22, 73 Cong., 1 Sess. (1933).

¹⁰³ Littleton and Zimmerman, Accounting Theory, p. 100.

¹⁰⁴ U. S. Securities and Exchange Commission, Accounting Series Releases Nos. 1–92 (Washington, 1937–1962)Google Scholar.

¹⁰⁵ U.S. Securities and Exchange Commission, Accounting Series Release No. 4 (Washington, 1938)Google Scholar.

¹⁰⁶ American Institute of Accountants, Examination of Financial Statements (New York, 1936)Google Scholar, preface.

¹⁰⁷ American Institute of Certified Public Accountants, Accounting Research and Terminology Bulletins (Final edition, New York, 1961), pp. 8, 9 Google Scholar.

¹⁰⁸ Seawell, L. Vann, “Corporate Annual Reports: Financial Fantasy,” Business Horizons, vol. II (Fall, 1959), p. 92 CrossRefGoogle Scholar.

¹⁰⁹ See, for example, Cerf, Alan R., Corporate Reporting and Investment Decisions (Berkeley, 1961), esp. pp. 66–67 Google Scholar.

¹¹⁰ Anthony, Robert N., Management Accounting (Revised ed., Homewood, 1960), p. 593 Google Scholar.

¹¹¹ The dissolution of the Committee on Accounting Procedure and the creation of the Accounting Principles Board did not lessen the authority of the Accounting Research Bulletins. These Bulletins were to remain in force until specifically cancelled by the Accounting Principles Board. As of December, 1962, none of the Bulletins had been cancelled. In addition, the Accounting Principles Board had issued one opinion of its own related to the accounting treatment of the revised depreciation lives permitted for tax purposes by the Internal Revenue Service in 1962. Also, the Accounting Principles Board's research staff had issued four research studies pertaining to the basic postulates of accounting, the principles of accounting, cash flow analysis and the funds statement, and leases. As yet, no action has been taken by the Board on the recommendations outlined in these studies.