Accountancy is the production of financial records for organizations and shows readers in money terms the economic resources the company has under its control and represents it in terms of relevance and does this faithfully. Accounting is called “the language of business” because it acts as a vehicle for a business entity to report their financial information to groups of people outside of the company’s day to day activities. Some researchers believe the earliest instance of accounting was from a cave engraving in South Africa that was dated 76,000 years old. However the earliest proven accounting records have been dated back 7,000 years ago and were found in Mesopotamia. The people of the time relied on its primitive practices to record the growth of crops and herds. In Iran during the 4th and 3rd century, socioeconomic situations led to unequal distributions of wealth and so the leaders and priests appointed people to look after the financial matters. Godin Tepe, an archaeological site in western Iran, scripts only containing tables with figures were found. In Tepe Yahya, an archaeological site found in the Kerman Province in Iran, the scripts contained geographical representations as well. In both sites buildings containing large rooms for storage crops had tokens that were used for bookkeeping purposes on clay scripts which represented a cognitive leap for mankind. (Accountancy, n.d.) These early practices of record keeping were used mainly for the record keeper and the proprietor to conduct early business practices. A detailed account of the expenditures of the roman emperor Augustus, the Res Gestae Divi Augusti, listed and quantified the distributions to the people, the grants of land given to army veterans and the financing of temples, shows and games. The account was not of state revenue and expenditure but signified that the executive authority of the time had access to financial information and was designed for planning and decision making. Tacitus, a senator and roman historian, attested to an account of Augustus that listed public revenues and the names of freed slaves in 23 B.C.. There were also accounts of small cash sums received from the sales of surplus and goods manufactured which showed that people computed revenue on a daily basis. Heroninos was the author of a collection of papyrus documents that pertained to the management of a large estate in Roman Egypt which was known for having a complex and standardized system of accounting. (Accountancy, n.d.) The estate was run by administrators in charge of subdivisions that took account of payments to the workforce and general expenditure from the staff. These accounts were later summarized on papyrus scrolls for a yearly account which gave the owner the opportunity to take better economic decisions. Crude practices were later replaced as business began to evolve and multiple investors began to contribute their resources creating joint ventures. During the 13th century, in medieval Europe, merchants depended on bookkeeping to oversee transaction that were financed by bank loans. The use of a debit and credit entry for each transaction introduced the world to double entry accounting. The use of the word debit and credit goes back to the time when single entry accounting was used to record the amounts owed by customers and amounts owed to creditors since the Latin word “debit” means he owes and the Latin word “credit” means he trusts. The Farolfi ledger of 1299-1300 is extensive evidence of full double entry bookkeeping. The ledger pertained to a group of Florentine merchants known as the Giovanno Farfoli & Company who lended money to the Archbishop of Arles. However the oldest record of double entry accounting is the Messari which held accounts of the city of Genoa in 1340 and contained balances of accounts that were carried over from the preceding year. Luca Pacioli wrote the book “Summa de Arithmetica, Geometria, Proportioni et Proportionalita” in 1494, which described the system of debts and credits in journals and ledgers that is still used by businesses today. It was used primarily as a reference point for Venetian merchants who enjoyed the content which included puzzles which helped teach their sons mathematics. It is known for introducing the symbols for plus and minus and is the first known book printed in Italy that contained Algebra. (Accountancy, n.d.) It is worth mentioning that Luca Pacioli did not invent double entry accounting, contrary to popular belief, and his book contained no originality but it is still an important work because it was widely published and used. Pacioli recommends the Venetian method of double entry bookkeeping and contains three major books of account including the memorandum, the journal and the ledger of which the ledger is the central one. The treaty created by Pacioli gave instructions on how to record transactions in different currencies and enabled merchants to audit their books and to ensure they were kept accurate. Those that did not use this system were at greater risk for theft by their employees than those that did.

The Industrial revolution created a need for better cost accounting systems and the formation of corporations created large capital providers who were not part of management but were interested in pertinent results. In the mid nineteenth century the modern profession of chartered accountants and the first public accountant societies originated in Scotland and at this same time London was the financial capital of the world and with the growth of the limited liability company the demand for more proficient accountants were needed to handle increasingly complex global transactions. Early accountants were considered solicitors because many of their clients came from solicitations and were often considered writers. Many members of the “Society of Writers to the Signet”, practiced as accountants and much of the accountant work was done in the office of solicitors. A well-known figure of this time was James Mclelland, a forensic accountant, who recorded his work during the 1820s and acted as an agent for business connected with bankruptcies and dissolving partnerships. To better their status and fight off criticism of low standards, professional bodies in England united and formed the Institute of Chartered Accountants in England and Wales as established by a charter in 1880. Also the Institute of Accountants in Glasgow petitioned Queen Victoria for a Royal Charter as well because of the increase in practicing professional accountants. (Accountancy, n.d.) The petition pointed out that accountancy required a set of mathematical skills and understanding of the legal system given that many accountants were appointed by courts to discuss the evidence of financial matters and so the Edinburgh Society of Accountants adopted the name “Chartered Accountant” for its members. The Institute of Chartered Accountants in England and Wales also used designations like FCA, fellow chartered accountant, and ACA, associate chartered accountant, for its more than 600 members. Thirty one accountants in 1887 created the American Association of Public Accountants and the first standardized test was given a decade later which resulted in the first accountant to be licensed in 1896. Accountants had used committees even before the AAPA was formed in 1887 and at the first meeting of the members that would form the AAPA in 1896 they decided to approve the committee to draft rules and regulations. The first preliminary meeting established the first bylaws and three committees in 1897. The committees included the Finance and Audit Committee, the Committee on Elections, Qualifications and Examinations and the Committee on Bylaws. As the years passed the number of committees grew and in the 1940s there were 34 committees, 89 in 1960 and by 1970 the number of committees had grown to 109. By 1990 the 120 committees were reduced by half and turned into a volunteer group model that increased the emphasis on the use of task forces. This use of task forces allowed for more targeted efforts with specific assignments given to the task forces and then disbanding them upon completion of said assignment. The first tracking and management of task forces began in 1999 and today there are more than 2000 volunteers that are helping accomplish the AICPA’s mission. (History of the AICPA, n.d.) The American Association was succeeded by the Institute of Public Accountants with a membership of 1,150. The name was changed in 1917 to the American Institute of Accountants and remained so until 1957 when it changed to the American Institute of Certified Public Accountants. During 1921, to act as the federation of state societies the American Society of Certified Public Accountants was formed. The society merged with the American Institute of Certified Public Accountants in 1936 and agreed to impose greater restrictions on the requirements for CPAs in the future. In 1934, the Great Depression led to the creation of the Securities and Exchange Commission. Until the Federal Accounting Standards Board (FASB) was established in 1973, The American Institute of Certified Public Accountants and its predecessors had responsibility for setting accounting standards. (Schneider, n.d.) Some attribute the intervention of government, particularly the United States government, to the stock market crash of 1929. A minority of people felt that the market crashed because of a substantial amount of insufficient and misleading financial statements led to inflated stock prices which created the crisis and eventual depression. The Securities Act of 1933 set forth accounting and disclosure requirements for initial offerings of securities while the Securities Exchange Act of 1934 applies to secondary market transactions and mandates requirements for companies whose securities are traded publicly or on over the counter markets. Even though the government gave the SEC the power to set accounting and reporting standards, they delegated this responsibility to the private sector. The first private sector body to set accounting standards was the Committee on Accounting Procedure which was a committee of the American Institute of Accountants. From 1938 to 1959 the CAP issued 51 Accounting Research Bulletins and it dealt with specific accounting and reporting problems. In 1959 the Accounting Principles Board replaced the CAP of which the members belonged to the AICPA. The APB issued 31 Accounting Principles Board Opinions and various Interpretations with four Statements and Opinions. Since there was no framework for dealing with individual issues the approach led to a stern criticism of the accounting profession. So the APB decided to develop a theoretical framework for financial accounting and reporting with APB Statement No. 4, however the effort was unsuccessful. (The Development of Financial Accounting and Reporting Standards, n.d.) The most important flaw of the board was its lack of independence. Since it was mostly composed of public accountants they were subject to critics saying they were subject to self-interest pressure from their clients. This criticism led to their disbandment and the creation of the Federal Accounting Standards Board. The FASB differs from its predecessors in many ways including seven full time members in comparison with the 18 to 21 part time members of the APB. Members include representatives from the accounting profession and many profit oriented companies. The APB was supported financially by the AICPA and FASB I supported by its parent organization the Financial Accounting Foundation. In an order to provide more timely responses

to emerging financial reporting issues, the Emerging Issues Task Force was formed in 1984. The members of the task force include 15 individuals from the private industry, a representative from the FASB and an SEC observer. The task force was designed to include individuals that are aware of emerging financial issues which allow them to come to a consensus on how to account for them. The field of setting accounting and reporting standards has been called a political process. Changes in standards can have a huge impact on companies and investors alike which can redistribute wealth drastically within the economy. The FASB’s role in setting account standards is complex and the accounting principle that they develop provide guidance on how to measure and report economic transactions. They must take into consideration not only the concerns of individual users of the financial information when coming up with these standards but the economic concerns of the society as a whole. This includes coming up with ways that provide better standards that aid in the communication of the financial information and not hinder it. In 1989, the FASB came up with a standard that would force companies that provide health insurance to their employees to deduct the expense of providing the insurance over the employment time of the employee as oppose to the year that they incur it. (The Development of Financial Accounting and Reporting Standards, n.d.) This standard adversely affected companies by reducing their annual income and eventually would reduce the healthcare of the retirees. This provided audiences with an example of how these standards can negatively affect the companies that use them. As proof that these standards could affect companies, AT&T was forced to reevaluate their health benefit plans with the unions of the time. As a direct result of Carl Landegger’s, chairman of The Black Clawson Company, expression fear in this new accounting standard, the FASB modified the standard. “If this becomes GAAP (Generally Accepted Accounting Principles), it will cause pain, it will cause evil. People will literally lose their health care benefits.” (The Development of Financial Accounting and Reporting Standards, n.d.) So the board came up with SFAS 106, the “Employers’ Accounting for Postretirement Benefits Other Than Pensions” and was issued in 1990. Options have a history of being measured by their intrinsic value which is their market price less the price at which the option can be purchased. The FASB saw a problem in that some options would be valued at zero when the market value was equal to the amount that they could redeem the option for and so required that companies report the value of their options at their market value. In 1995, as a result of public pressure the FASB decided to encourage the companies to value their options at market value and not require them. A recent example also arose in 1996, when the FASB decided to investigate the possibility for business combinations to use two separate and distinct methods of accounting, the pooling of interest methods and the purchase method. The discussion under the then existing standards was the subject of how goodwill was treated which was that it was amortized over years thus creating negative earnings, so companies preferred to treat the transaction as a pooling of interest as oppose to creating the goodwill and continue to deduct the amortization expense through the years. Businesses that were using the pooling of interest method for the treatment of goodwill, which was going to be eliminated under FASB, argued that their earnings would appear unattractive under the purchase method. “Clearly the FASB listened and responded to extensive comments from the public and financial community to make the purchase method of accounting more effective and realistic.” (The Development of Financial Accounting and Reporting Standards, n.d.) Under new accounting standards only the purchase method is acceptable but the goodwill is not amortized so as not to create a negative impact on earnings. With the advances in communication and technology, the marketplace in which companies do business continue to expand and become more integrated every day. Many multinational corporations with a home in the U.S. conduct much of their business, over 50%, outside the U.S and with that said many corporations conducting business in the U.S. have a home in other countries. This expansion of the marketplace requires a tougher set of laws and regulations to oversee and manage all the multiple international transactions that are occurring today. Businesses around the world give the responsibility of the creation and enforcement of standards and regulations to both the private sector and the government sector as seen in the United Kingdom which uses a body much like the FASB and France which leaves the responsibility to the government. Transactions become increasingly difficult as the businesses pass from one country to another because of the different regulations and standards that accompany them. In response to these and other varying issues the International Accounting Standards Committee was formed in 1973 to create a global set of standards and in 2001 they later reorganized and changed their name to the International Accounting Standards Board. In 1994, the FASB worked with the IASC to develop standards for the computation of earnings per share. The IASC has issued 41 International Accounting Standards since its inception and has been endorsed by the IASB in 2001 and since then has revised and issued its own set of six standards and called them the International Financial Reporting Standards. By 2002 the FASB and IASB came up with the Norwalk Agreement which formalized the agreement to converge the U.S. GAAP and IFRS and under the agreement they pledged to remove all differences between standards and agreed to collaborate on future ones. More and more countries are adopting this set of standards with the approval of the International Organization of Securities Commissions permitting them to use the standards approved by the board. By 2005, all companies were required to prepare their consolidated financial statements using the IFRS. (The Development of Financial Accounting and Reporting Standards, n.d.) Tedious accounting practices have also been upgraded with the help of computer technology. One of these technologies is Enterprise Resource Planning software which assists in the managing of business practices that vary from purchasing, manufacturing and human resources. Also investors outside of the management circle create a wider audience of the financial statements. This increase in the size of the audience of the financial statements created a split in the accounting field where on the one hand reported for internal management and the other reported for external financing purposes which then led to the need for independent auditors to attest the practices of the business. Management accounting concerns itself with providing information to managers so they can make better business decisions. Financial accounting presents information to people outside the company including potential investors and creditors. Since the needs for management and financial accounts are so different they are subject to different rules and regulations. Generally Accepted Accounting Principles or GAAP directly governs financial accounting in a given jurisdiction and since the start of the Securities and Exchange Commission, publicly traded companies had to file periodic reports to be certified by the members. The Enron scandals had very wide consequences for the accounting industry in 2013. In the case of Enron, high level members of management were manipulating financial reports in order to show a better performance to investors. The scandal influenced the need for tougher regulations to improve the reliability of financial reporting and to increase public awareness in the importance of accounting standards to effectively show the financial reality of companies while being objective. After the revelation of its accounting malpractices Enron filed for Chapter 11 bankruptcy protection in December 1990. (The Development of Financial Accounting and Reporting Standards, n.d.) While the Enron scandal was the biggest bankruptcy in American history it was also the biggest auditing failure as well. The top firm Arthur Anderson went out of business and accountants as a whole faced tougher restrictions while conducting their consultations under the Sarbanes Oxley Act. The Sarbanes Oxley Act of 2002 significantly raised the criminal penalties for securities fraud and for destroying or altering records under federal investigations. At the time Arthur Andersen was one of the five largest accounting firms in the world. As bleak as the situation became as a result of the scandal the truth is it actually created more of a demand for accounting services thus creating more work for accountants.

Works Cited
Accountancy. (n.d.). Retrieved from wikipedia.org: http://en.m.wikipedia.org/wiki/Accountancy
History of the AICPA. (n.d.). Retrieved from aicpa.org: http://www.aicpa.org/about/missionandhistory/pages/history%20of%20the%20aicpa.aspx
Schneider, B. (n.d.). Accounting Basics: History of Accounting. Retrieved from investopedia.com: http://www.investopedia.com/university/accounting/accounting1.asp
The Development of Financial Accounting and Reporting Standards. (n.d.). Retrieved from highered.mcgraw-hill.com: http://highered.mcgraw-hill.com/sites/0072994029/student_view0/ebook/chapter1/chbody1/the_development_of_financial_accounting_and_reporting_standards.html