ACCT 1001: Accounting 1A

Sem. 1, 2010, Lecture 1

Record-Keeping &
Accountability: Lessons from
(Pre-) History
Chris Poullaos
 ‘The palest ink is better than the best
memory’ Chinese Proverb

‘Knowledge of the past, the record of truths

revealed by experience, is eminently
practical, as an instrument of action and a
power that goes to making the future’ Lord
Acton

Quotes from Basu et al (2009, 895)

2
From Basu et al (2009, 898)

3
From Basu et al (2009, 898)

4
 Apparently, the tokens/tablets were used in the
ancient ‘Near East’ to keep track of ‘resources’
(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 ‘debt’ to the
other)
(See Mattesich 1994; Carmona & Ezzamel [C&E]
2007)
5
 These ‘records’ were regarded as authoritative,
especially when:
• both parties agreed as to the contents and/or
had their ‘own’ copy
• were prepared by specially trained ‘scribes’ and;
• there were (other) witnesses.
They were used as and aid to memory, to
avoid/settle disputes between the parties,
‘monitor performance’ (C&E 2007, 182-95)

6
 Remarkably, the early versions preceded (and
contributed to the evolution of):
• writing
• abstract numbers/arithmetic
• money
• production and exchange of resources within a
‘market economy’ populated by ‘economically
rational’ individuals
(Mattesich 1994; C&E 2007)
Let’s think about that for a minute . . . . .
7
Let’s think about that for a minute . . . . .
• Cause & effect
• Note also the ‘themes’ identified by C&E (2007,
195-200), including:
– sophistication of the record-keeping
– multiple spheres and levels of ‘accountability’
– connection between records and ‘social and religious
norms and beliefs’ (199)
• How deeply embedded record-keeping is in
‘civilization’ (organised social living) – still the case
today!
8
 More on ‘accountability’: For C&E
• It involves the ‘rendering of an account’ to
others (e.g., the state, the temple, a
superior, an ‘equivalent party’) and,
potentially, even to oneself (179-80, 195).
• Such accounts are ‘a pervasive way of
making sense of the world by rendering it
observable and reportable’ (179-80)
• Accountability processes ‘are endemic to
all social organizations across human
history’ (178)
9
 More on ‘accountability’: For C&E
• ‘Accounting’ (for resources) is one way, or
form, of ‘rendering an account’; and
• The clay tablets (etc), as ways of ‘keeping
records’ about resources, are forms of
‘accounting’

10
 Another slant on ‘accountability’
• ‘Whenever the advance of civilization
brought 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 would
become apparent’ (quote in Birkett 1967,
125)
• The emphasis here is upon checking the
account rendered
• Examples (from Birkett 1967, Fu 1971)
11
 Another slant on ‘accountability’
• ‘Whenever a person [‘principal’]
transfers or delegates control over
resources . . . to another . . . [‘agent’]
and requires a report from the agent on
the condition of the resources . . . the
relationship of the agent to the agent
will be described as one of
accountability’ (Birkett 1967, 154)

12
 Another slant on ‘accountability’
• ‘In order to formulate and render his
account the agent may employ a person
designated as a preparer of accounts.
In order to check the accuracy of the
report of his agent, who potentially may
gain from deceit the agent may employ
a . . . verifier of accounts’ (ibid.): an
historically grounded proposition

13
Another slant on ‘accountability’
Today (in Australia), preparers
and verifiers are both members of
‘the accounting profession’; as
represented by professional
bodies such as the Institute of
Chartered Accountants and CPA
Australia.
14
 Yet another slant . . .
From Basu et al (2009), also based on
historical evidence (+ current theories of
the brain, human motivation,
anthropology and economics):
• Remembering and communicating
information is a prerequisite for
reciprocity (e.g., exchange) and
reputation formation

15
 Yet another slant . . .
• However, the (unaided) human brain
only has enough memory capacity to
sustain cooperation and reciprocity in
groups of up to about 200. In larger
groups:
• Record-keeping, as an ‘external’ aid to
memory, helps to track a trading
partner’s past behaviour (‘track record’).
16
 Yet another slant . . .
• ‘Track records’/reputations help with the
decision of whether to (continue to) trade with
particular persons
• Records also ‘establish reliable social
memory and common knowledge’ useful in
structuring exchanges (895)
• ‘Better’ (more informative) records facilitate
(more) complex exchanges across time and
space (e.g., by securing property rights)

17
 Yet another slant . . .
• That is, the ‘better’ the records, the
‘more’ 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, the
greater the wealth that can be created

18
 Yet another slant . . .
• Other things being equal [a very big ‘if’]:
the better the record-keeping the
wealthier the society/ economy
• Record-keeping ‘is a precursor
[necessary condition of] rather than the
result of economic complexity’ (896).

19
 Nuances and Paradoxes
• The previous arguments seek some
‘core’ or ‘essence’ of accounting going
back 10,000 years; yet there is always a
question-mark about how useful
accounts of the past are ‘now’: the
‘present’ always seems different from
‘then’ and the ‘future’ will be different
again.
20
 Nuances and Paradoxes
• The form and function of accounting
is constantly changing and there is
ongoing dispute about its ‘purpose’ in
specific contexts; especially when
‘purposes’ from previous contexts
continue to resonate with the present.
21
 Nuances and Paradoxes
• For example, some ‘principals’ (of today)
seem to want a ‘stewardship’ account of
what ‘agents’ did with ‘their’ resources;
while also seeking ‘useful information’ to
guide decisions about how to allocate
‘their’ resources. These two types, or
functions, of accounting may overlap but
they are not necessarily identical.

22
 Nuances and Paradoxes
• In the ‘modern capitalist’ era [more on
this in Lecture 2] there have been
(other) ongoing debates about how to
combine information about individual
transactions/resources/debts into
meaningful aggregates of ‘income’,
‘wealth’ (etc).

23
 Nuances and Paradoxes
• 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 ‘principals’ and
‘agents’; thus
24
 Nuances and Paradoxes
• While it seems vital that accounting be
‘true’, ‘fair’ and ‘objective’ there are also
strong incentives to make it otherwise;
and/or to challenge it as being ‘untrue’,
‘not fair’ and ‘not objective’. [More on
this in later accounting units.]

25
 Nuances and Paradoxes
• Thus there is tremendous pressure on
flesh-and-blood accountants to do their
work ‘ethically’ (or not); especially as
verifiers/auditors; and
• To the extent that accounting is
regulated/ subject to public debate it is
also ‘political’.

26
 Nuances and Paradoxes
• The prevalence of accountabilty relationships
/accounting throughout society has ‘macro’
effects going beyond individual relationships.
For C&E: accounting, as an important
element in accountability ‘has been a
powerful mediating institution among
individuals, institutions and society’ (200)
• In ancient Mesopotamia and Egypt it contrib-
uted to ‘economic and social order’ (200).
27
 Nuances and Paradoxes
• A similar claim might be made about
the ‘modern’ and ‘contemporary’ eras;
although, with the emergence of
powerful market mechanisms, some
would highlight accounting’s
contribution to the allocation and
distribution of ‘resources’, locally and
globally.
28