Warwick Funnell

The Dutch East-India Company and accounting for social capital at the dawn of modern capitalism 1602-1623

Jeffrey Robertson et al. — Sun, 09 Dec 2012 21:20:41 PST

Capitalism’s profound effect on society has encouraged economic and accounting historians to hypothesise about the importance of double entry bookkeeping to its development. According to Sombart the continual reinvestment of the profits earned depended on the existence of a capitalist form of double-entry bookkeeping that would allow investors and managers to measure the return on investments as a means of making rational business decisions. More recently, with particular reference to the English East-India Company Bryer has argued that the adoption of the capitalist form of double-entry bookkeeping was essential to resolving the social conflict between investing capitalist classes that arose with the rise of industrial capitalism in England in the late 17th and 18th centuries by providing the means to calculate the rate of return on socialised capital. This paper widens the historical context of these debates to The Netherlands in the early 17th century by examining accounting practices of the Dutch East-India Company, the epitome of modern capitalism in motives, organization and funding. It establishes that, although the 17th century Dutch were preeminent in Europe in their knowledge of the capitalist form of double-entry bookkeeping, at no time during the period covered by the first charter (1602–1623) of the Dutch East-India Company, or thereafter, did the domestic operations of the Company use this form of bookkeeping across all chambers. This meant that the investors did not have the necessary information that would have allowed them to calculate the return on their investments. Indeed, the Company’s investors neither expected nor demanded information to calculate the return on their investments and, hence, double-entry bookkeeping was not a necessary condition for Dutch capitalism in the manner suggested by Sombart, Weber and Bryer. Instead, the form which capitalism developed in The Netherlands recognised the social and economic impact of its unique geography which produced a society characterised by a monetary economy, a long tradition of joint ownership, and a free market for assets and capital rights.

Negotiating the credibility of performance auditing

Warwick Funnell et al. — Sun, 09 Dec 2012 21:20:40 PST

This paper reports the results of a longitudinal field study of a performance audit which used in-depth interviews and observation to examine the process by which auditees and auditors in the Australian National Audit Office (ANAO) negotiated their relationship. The findings enhance understanding of auditee reactions to both the practice of performance auditing and the auditors themselves and the impact that these have on the credibility of performance auditing. Using the lens of Oliver’s typology of strategic responses, the study confirmed the prevalence of auditee responses to performance auditing by the ANAO which ranged from co-operative acquiescence and co-operation to confrontational defiance. The paper addresses recent and ongoing calls for more studies of public sector auditing in action to deepen our understanding of the responses or manoeuvring of auditors and auditees during the process of performance auditing. A key contribution of the paper is confirmation that performance auditing continues to be a contested activity and its credibility in practice remains uncertain. The empirical (and historical) evidence suggests that audits that are perceived as especially politically sensitive can provoke active forms of resistance, including avoidance and defiance.

Keeping secrets? Or what government performance auditors might not need to know

Warwick N. Funnell — Mon, 20 Aug 2012 19:00:35 PDT

This paper examines the claims made in a recent paper in Critical Perspectives on Accounting by Vaughan Radcliffe about the way in which public sector auditors report their findings. Drawing upon the work of Taussig, he argues that while public sector auditors may know the truth, as may others, they choose not always to tell the truth in their reports and instead to treat what may be publicly unpalatable as a public secret. They modify their findings to ensure that these will be more acceptable to governments and, thereby, enhance their opportunity to influence government. These claims are shown in this paper to overstate the public sector auditor's response to difficult issues. Rather than keeping secrets, the contents of the auditor's reports may instead reflect the constitutional and institutional limitations in which they must work. Most importantly in most jurisdictions they are not to comment on matters of policy which are the domain of the government.

Weberian Theoretical Implications on Development Banking Historical Research: Past, Present and Future

Warwick N. Funnell et al. — Mon, 20 Aug 2012 19:00:34 PDT

Social reform, military accounting and the pursuit of economy during the liberal apotheosis, 1906-1912

Warwick N. Funnell — Mon, 20 Aug 2012 19:00:33 PDT

The Liberal Governments that took office in the years immediately before World War I pursued a policy which sought the radical transformation of British society by establishing the foundations of the modern welfare state. Liberal beliefs required that the funding for this would have to be obtained by achieving economies in other government spending, most especially spending on the army. However, with mounting international political tensions, the new Secretary of State for War, Richard Haldane, knew that Britain's security demanded a significant military capability. Thus, to allow the spending on social reform and to provide an army ready for war, Haldane introduced administrative reforms to ensure that Britain's army was both economic and efficient. These reforms included the beginnings of an 'object-based' system of military accounting which promoted a dominant role for the military in financial decisions.

Audit, Accountability and an auditor's ethical dilemma: A Case study of HIH Insurance

Kathleen A. Cooper et al. — Mon, 20 Aug 2012 19:00:31 PDT

Capitalist accounting in sixteenth century Holland: Hanseatic influences and the Sombart thesis

Warwick N. Funnell et al. — Mon, 20 Aug 2012 19:00:30 PDT

Purpose ÃÂ¿ The purpose of this paper is to examine sixteenth century Netherlands business organisation and accounting practices, then the most advanced in Western Europe, to test Sombart's theory that scientific double entry bookkeeping was an essential prerequisite for the development of modern capitalism and the emergence of the public corporation during the late sixteenth and early seventeenth centuries. Rather than being a development of Paciolian bookkeeping, double-entry bookkeeping in sixteenth century Netherlands was grounded in northern German (Hanseatic) business practices. Design/methodology/approach ÃÂ¿ Sixteenth century Dutch business records and Dutch and German bookkeeping texts are used to establish that north German Hanseatic commercial practices exercised the greatest influence on The Netherlands' bookkeeping practices immediately prior to the development of the capitalistic commercial enterprise in the first years of the seventeenth century. Findings ÃÂ¿ Contrary to Sombart's thesis, scientific double-entry bookkeeping was rarely used in sixteenth century Netherlands, which became Europe's most sophisticated commercial region during the late sixteenth century and early seventeenth century. Instead, extant commercial archives and the numerous sixteenth century accounting texts suggest that Hanseatic business practices and agents' (factors') bookkeeping were the dominant influence on northern Netherlands' business practices at this time. The organisation and administrative practices of Netherlands' businesses prior to the seventeenth century, especially their decentralised structure and lack of a common capital, were founded on Hanseatic practices that were considerably different to the best Italian practice of the time. Research limitations/implications ÃÂ¿ North German influences on Dutch accounting and business practices have significant implications for social theories of the development of capitalism, notably that of Bryer, that assume the use of a scientific (capitalistic) form of double-entry bookkeeping was essential to the development of capitalism from the seventeenth century. This is tested in a subsequent paper which examines the accounting practices of the Dutch East India Company (Verenigde Oost-Indische Compagnie or VOC) which was founded in 1602 at the very cusp of modern capitalism. The research presented here was partially constrained by the scarcity of transcriptions of original sixteenth century bookkeeping records. Originality/value ÃÂ¿ The vigorous debate in the accounting history literature about the dependence of modern capitalism upon a scientific (capitalistic) form of double entry bookkeeping prompted by Sombart has been mainly concerned with England. This paper introduces into the debate material which documents the accounting and business practices of the most commercially advanced region of Europe in the late sixteenth century and the influence of Dutch bookkeeping texts.

An historically informed episodic study of state audit independence

Warwick Norman Funnell — Wed, 25 Apr 2012 18:29:53 PDT

The Reason Why: The English Constitution and the Latent Promise of Liberty in the History of Accounting

Warwick Funnell — Wed, 25 Apr 2012 18:29:52 PDT

In 1215 Magna Carta determined freedom from executive oppression, or liberty, as the essential principle of the English Constitution and parliament as the bulwark against executive attempts to diminish the liberty of individuals. This constitutional precedence of liberty was confirmed after the Revolution in 1688 by the constitutional settlement which strengthened the financial accountability of the executive to parliament. Regular accounting for military expenditures especially became a critical component of the new accountability measures. Despite the overwhelming significance of liberty for the English Constitution and the contributions of accounting to preserving liberty, public sector accounting continues to attract few accounting historians. As a consequence, the vast historical resources contained in British Parliamentary Papers and the records of parliamentary debates continue to go largely unnoticed by all but a few accounting historians.

Accounting for Justice: Entitlement, Want and the Irish Famine of 1845-7

Warwick N. Funnell — Wed, 25 Apr 2012 18:29:50 PDT

Societies are founded on some understanding of justice, however objectionable the dominant meanings of justice may be perceived by those not favoured. All laws of government emanate from this essential feature of social relations for no government will survive without the assistance of significant force if it is not able to convince a sufficient number of citizens that their society is just. For David Hume, Aristotle and Adam Smith justice was first among all the virtues. Smith stipulated that "(j)ustice ... is the main pillar that upholds the whole edifice. If it is removed ... the immense fabric of human society ... must in a moment crumble into atoms" [1976, Section II, Chapter ii, parts 4 and 6]. Smith did not have in mind the distributive justice which we now associate with the achievement of social justice, notably that portrayed by Marshall [1992]. Rather, Smith adopted a Lockean stance and identified justice with the absence of any harm to either an individual's person or to their property; "preservation of property being the end of government" [Locke, 1884, Book II, Chapter IX, section 138, also Chapter XIX, section 222]. Thus, the foundation of justice in capitalist societies is securing property rights [Smith, 1976, Section VII, Chapter ii, part 10; see also Carter, 1989, p.9]. Any threats to property rights, suggested Hume, were equivalent to an attack on the sacred laws of God, the result of which would be tyranny and the destruction of society [Hume, 1960, Book II, section 2, paragraph 2]. The intention of this paper is not to promote one form of justice over another, rather to show how accounting is compatible with, and essential to, an interpretation of justice derived from the rights of property. It is accepted that meanings attributed to justice are not absolute but instead are the products of particular social contexts.

Accounting on the frontline: cost accounting, military efficiency and the South African War

Warwick Funnell — Wed, 25 Apr 2012 18:29:48 PDT

The South African War (1899-1902) exposed significant defects in the administration of the British army which precipitated several parliamentary inquiries. The findings of these inquiries convinced the British Government that army administrators, but especially those responsible for supplying the army, had given insufficient attention to the military benefits which might be obtained from the methods and experience of business. The absence of cost accounting systems throughout the War Office and on the field of battle, resulting in problems for financial management and military efficiency, was given particular prominence by the War Office (Reconstitution) Committee (Esher Committee) and the Royal Commission on War Stores in South Africa. The paper broadens the compass of the debate about the evolution of cost accounting in the latter decades of the 19th and early 20th centuries by demonstrating how the advantages of cost accounting were clearly established and accepted by many senior civilian military administrators and politicians as a result of British experience during the South African War.

On his majesty's secret service: accounting for the secret service in a time of national peril 1782-1806

Warwick N. Funnell — Wed, 25 Apr 2012 18:29:47 PDT

Reforms to the civil list in the late 18th century in England sought to deny the Crown opportunities to use its civil-list funds and sinecures to buy influence in Parliament and, thereby, diminish constitutional protections for liberty. Among the most important reforms were tighter accounting requirements for civil-list spending, including that for the secret services. The unique nature and purpose of the home and foreign secret services, which were the responsibility of the Crown and paid from civil-service funds, resulted in accounting controls which depended upon additional measures to provide Parliament with greater control over spending and enhanced accountability. These enhancements to accountability were especially important at a time of almost continual war between England and France in the decades spanning the close of the 18th century, resulting in significant increases in spending on the foreign secret service.

Military

Warwick N. Funnell — Wed, 25 Apr 2012 18:29:45 PDT

The study of the military and their accounting has reflected the essential political nature and purpose of armies. Accounting historians have had a particular interest in the political protections provided by accounting in Britain after the constitutionally fraught seventeenth century when the supremacy ofParliarnent had been compromised by military intervention. Until the twentieth century, accounting for military expenditures in Britain was determined almost entirely by the need to ensure that Parliament had effective control over how much the military spent; it was not intended to enhance military performance. However, in examining the evolution of cost accounting, accounting historians have suggested that the circumstance of war and military culture have played a role in the evolution of cost accounting. Indeed war, but especially the First World War, has been shown to have provided a critical impetus to the evolution and professionalisation of cost accounting in the early twentieth century. Particularly influential was the greater intervention required of government during the war in the affairs of business through the regulation of production and prices.

Enduring Fundamentals: Constitutional Accountability and Auditors-General in the Reluctant State

Warwick N. Funnell — Wed, 25 Apr 2012 18:29:43 PDT

Reformist governments in pursuing their own political interests have been prepared to put aside enduring understandings of constitutional accountability which emphasize the well-being of the entire community as the manifestation of substantive citizenship and replace it with more easily metricated forms of accountability. The assumption has been that the two forms of accountability are easily, rightly and necessarily substitutable for the other. Auditors-general and other independent officers continue to question the constitutional inconsistencies of these changes, sometimes at grave risk to their very existence. The accountability consequences of contracting out services with the private sector are of special concern to auditors-general.

Preserving history in accounting: seeking common ground between 'new' and 'old' accounting history

Warwick Funnell — Wed, 25 Apr 2012 18:29:41 PDT

Traditional conceptions of accounting history and its achievements are being challenged by new accounting historians who are informed by radical philosophies and approaches to history. This is a belated reflection of movements within the wider discipline of history which can be traced to the Annalists in the 1930's and more recently to the influence of postmodernism. At issue between the traditional and new history are the importance of facts and the pursuit of truth by traditional historians. New accounting historians have decried the reactionary effects of traditional history, which they propose to overcome by substituting accounting as an interested discourse for accounting as a neutral, socially sterile technique. As the conventional form of historical writing, the narrative form also has been disparaged. The paper concludes by arguing that accounting historians should be tolerant of different approaches to accounting history.

Weberian Theoretical Implications on Development Banking Historical Research: "Past, Present and Future"

Hemant Deo et al. — Wed, 25 Apr 2012 18:29:40 PDT

Fijian development banking history exposes the paradox between the community based upon orthodox authority and those in which relations are governed by the commercial ideology introduced by the British colonial powers to foster growth within the Fijian traditional setting. Fijian develoment banking were adapted to the traditional Fijian village economy, ultimately providing the means by which existing structures of power on land ownership and class were significantly enhanced. This conflict between the Fijian culture and the modern growth of development banking can be filtered through the Weberian theoretical framework.

National efficiency, military accounting and the business of war

Warwick Funnell — Wed, 25 Apr 2012 18:29:38 PDT

Costly administrative failures during the South African War were shown by several official investigations to be associated with ineffective and deceptive accounting systems administered from the War Office. They were regarded also as symptomatic of a deterioration in the efficiency of British business and government. To retrieve Britain’s greatness a movement of national efficiency sought to raise efficiency levels in all areas of British national life. Fundamental to the reforms that they advocated were a strong British empire and an efficient army. Thus, military administrators were urged to apply the methods of commerce to the business of war. Amongst the most innovative strategies to raise the commercial awareness and accounting expertise of army administrators were the Army Class at the London School of Economics and Political Science (LSE) between 1906 and 1932 and the army cost accounting experiment (1919–1925) in which the LSE also played a role.

Evidence, myths and informed debate in accounting history: a response to Arnold and McCartney

Warwick Funnell — Wed, 25 Apr 2012 18:29:36 PDT

In their recent paper in Critical Perspectives on Accounting (2003) Arnold and McCartney have uncovered a disturbing number of errors and examples of poor scholarship by accounting historians investigating 19th century British railway accounting. They suggest that these are the consequence of accounting historians uncritically relying upon the work of others without undertaking the more arduous task of returning to original materials (p. 249). The not inconsiderable failings that Arnold and McCartney identify in 19th century railway accounting histories are so egregious that they feel justified in concluding that “there is no reason to believe that the area examined should be unique or even atypical” in the remainder of accounting history (p. 250). There must lurk throughout accounting history a multitude of as yet undiscovered evidential flaws which continue to delude accounting historians and corrode the value of their work. This throws into doubt the merits of not only 19th century railway accounting research but possibly the value of most of the corpus of accounting history scholarship, thereby leading to the suggestion by Arnold and McCartney that “in some cases” accounting history “provides little more than plausible anecdotes” (p. 228).

Accounting and the virtues of anarchy

Warwick Funnell — Wed, 25 Apr 2012 18:29:34 PDT

The ability of accounting to be used for the purposes of economic, social and political oppression is now well recognised in the critical accounting literature. Accounting is far more than an innocuous technology of rational calculation and accountability upon which management and the efficient operation of markets depend. Its contributions to maintaining the hegemony of the state are primarily through its close association with the protection and promotion of property rights. For the anarchist this relationship is the source of entrenched injustice which alienates individuals from their fundamental, moral nature. Elimination of the state allows justice to be reasserted and society to operate on moral principles. When the very existence of the state is questioned, as does anarchism, understanding of the fundamental nature and contributions of accounting need to be renegotiated.

The relevance of the past

Richard Fleischman et al. — Wed, 25 Apr 2012 18:29:32 PDT

This article treats the ability emotions have to point up the relevance of past events and so structure consciousness of history. It shows how knowledge of the past is embodied via the agency of emotions. The case study looks at how history is given emotional expression among the Banabans, a group stemming from Banaba Island in central Oceania and later resettled in Fiji. Under the hegemony of Western "regimes of historicity", the Banabans created a new specific consciousness of history, transforming in the process themselves and their relationships with others. By analyzing several of the channels (oral, artistic, performative) via which Banabans vent their history, the article shows how they articulate knowledge of the past - underscored as relevant by emotions - with awareness of their ethnicity in the past and present. It is argued that emotions are involved in forming historicity, a process that is marked, not least, by reciprocity.