The Power of “Independence”: Defending and Extending the Jurisdiction of
Accounting in the UK By
Prem Sikka
Department of Accounting and Financial Management
University of Essex, UK
Hugh Willmott
Judge Institute of Management
University of Cambridge, UK
A later version of this article appears in Accounting, Organizations and Society, 20, 6: 547-581
(1995)For more information on published articles by Hugh Willmott please refer to
/> The Power of ‘Independence’:
Defending and Extending the Jurisdiction of Accounting in the United Kingdom*
* Earlier versions of this paper were presented at the Conference ‘Juristes et Comptables en Europe’, Paris,
1992, the 1993 British Accounting Association Conference, University of Strathclyde, and the 1993 Critical
Perspectives on Accounting Conference, New York. We are grateful for comments received at these
meetings and for the constructive criticisms of two anonymous referees.

The Power of ‘Independence’:
Defending and Extending the Jurisdiction of Accounting in the United Kingdom Abstract Accountants are part of what Abbott (1988) describes as ’the system of professions’. Within this system, each
professional group strives to defend and expand its area of jurisdiction in competition with rival professions.
However, challenges to the accountancy profession do not necessarily come only from those who seek to occupy
its territory. Challenges also come from journalists, academics, politicians and others who have no desire to
occupy the territory of accountants but can nevertheless advance some competing discourses that may disrupt
and weaken the profession’s capacity to secure and expand its domain. The paper argues that in the process of
defining, defending and extending its jurisdiction, the accountancy profession attaches considerable importance
to its image of ’independence’. Drawing upon evidence provided from three case studies relating to the events in
the 1970s, 1980s and early 1990s, the profession is shown to have taken a number of initiatives to defend and
reinforce this ‘image’. In its efforts to neutralise and discredit challenges to its aura of independence, the
profession has developed and deployed a variety of tactics. These include revising its ethical guidelines, refining

‘each profession has its activities under various kinds of jurisdiction Jurisdictional boundaries are
perpetually in dispute, both in local practice and in national claims an effective historical sociology of
professions must begin with case studies of jurisdictions and jurisdiction disputes’ (Abbott, 1988 : 2). An attentiveness to disputes over jurisdiction is enlightening and timely in countering a tendency to study
professional groups in isolation from their competitive contexts. Not surprisingly, Abbott’s work is increasingly
cited by students of the accountancy profession
3
(e.g. Dezalay, 1989, 1991; Neu, 1991). However, his approach is
wanting in at least three important respects. First, by focusing upon systems of professions within different nation-
states, he takes little account of how
supranational
pressures increasingly condition both the local practice and
national standing of professional groups (see Montagna, 1986; Dezalay, 1989; Piccioto, 1989; Hanson, 1990)
4
. In the
‘business professions’ at least, interprofessional competition within and between professions is conditioned by
the expanding opportunities for exploiting and regulating the globalization of trade and the internationalisation of
markets for legal, financial and consultancy services. In this paper, we touch upon this point by reference to the
formulation and implementation of the Eighth EC Directive in the UK.

Second, and of greater direct relevance for this paper, Abbott’s approach suffers from a
professions-centric

treatment of jurisdiction disputes. Despite an avowed attentiveness to ‘external forces’ (e.g. the state granting or
diluting auditors a monopoly of the external audit function) that open up or close down jurisdictions, Abbott largely
neglects the importance of challenges posed to the legitimacy of jurisdictions by groups
who do not themselves
seek to occupy their territory,

UK accountancy profession is not homogeneous (Willmott, 1986). Its members are employed in industry,
commerce, local government, central government, state industries, public practices and other organisations of
various sizes. In each of these arenas, accountants are agents of, and are subjected to, diverse and sometimes
contradictory priorities and pressures. Abbott’s (1988) tendency to conceptualise professions as if they are
fundamentally homogeneous (see especially ch. 4), albeit that they may incorporate distinctive specialisms, is
difficult to reconcile with the presence and significance of major differences of orientation as well as work
performed between members of the accountancy profession (Willmott et al, 1993). Not only are these differences
reflected in the existence of specialist associations but they are evident, for example, in the large and growing
proportion of members of the major UK accountancy body, the ICAEW, that work outside of public practice in
multifarious positions within the private, public and voluntary sectors
6
. Thus, when we refer to ‘the accountancy
profession’, we mean first and foremost, those representatives of the major bodies and/or spokespersons of big
accounting firms who take it upon themselves to assert and defend the authority and independence of
accountancy practices in general and the prevailing regulatory arrangements in particular. But, to repeat,
whenever reference is made to the accountancy profession in the UK,
it is necessary to be mindful of its highly
complex and fractured organization as well as the diverse kinds of work undertaken by qualified (professional?)
accountants.The paper is organized as follows. We begin with an overview of the formation and development of the accounting
jurisdiction in the UK. We highlight the heterogeneity and extensiveness of this jurisdiction, its continuing

3

reliance upon audit, and the cultural and historical conditions that have contributed to the size and comparative

The development of the accountancy profession in the UK
8
cannot sensibly be detached from the existence and
organization of other groups that compete to define and occupy particular jurisdictions. In establishing, extending
and defending their terrain, accountants have formed associations and have enjoyed the patronage of the state
and corporations (Johnson, 1972). They have also drawn inspiration from, and sought to displace, the claims of
other groups, principally lawyers but also engineers, who have been competitors in the market place for their
services
9
. In this section, we sketch the historical background to contemporary developments that have posed a
threat to the boundaries of the accounting jurisdiction.

4Forging the Jurisdiction of Accounting in the UK

In the UK, the emergence of sellers of specialist labour who described themselves as ‘accountants’ (amongst
other things) was initially stimulated by a buoyant demand for services in the area of bankruptcy, liquidation and
trusteeship (Brown, 1905; Stacey 1954; Loft 1986). However, accountants’ occupation of this emergent jurisdiction
was vulnerable to competition from other groups. In principle, lawyers were well placed to expand their
jurisdiction into the expanding market for business services; and, indeed, some of them did, especially in Scotland
where a number of the leading members of the Solicitors society practised as accountants (Brown, 1968)
10
.
However, in England and Wales, where the status of accountants (or ‘accomptants’) was less well differentiated
from that of other ‘trades’ - such as ‘turf accountant’, ‘auctioneer’ and ‘ rent-collector’ - the relationship between

become known as "the accountants’ friend", lent statutory authority to the differentiation of ‘ respectable’
accountants from others who were simultaneously engaged in less reputable forms of ‘trade’. And, as if this

5

source of status and support were not enough, the 1862 Companies Act also required that dividends to
shareholders be paid exclusively from income, a requirement that further boosted the demand for ‘respectable’
accountants
12
.

This legislation, which was so supportive of the growth of specialist accounting labour, was enacted prior to the
development of a state register of accountants or even the establishment of an association that could lobby
government. As we have already suggested, the emergent jurisdiction of accounting was secured by an elite of
‘reputable’ accountants, a number of whom were invited to give evidence to Parliamentary Committees (Jones,
1981, pages 48-49). Prominent accountants also made speeches and wrote articles in which they sought to place
competitors in a negative space as they rehearsed the virtues of the professional accountant, as contrasted with
those who lacked their skills and took on many other kinds of work (Cooper, 1886, 1921)
13
.

Prior to the formation of accountancy associations, where examinations eventually became the formal means of
education and qualification, ‘reputation’ and ‘connections’ were all-important. Those who established the most
prestigious of the accountancy bodies were drawn from a self-defining elite of ‘gentleman accountants’, the
Society of Accountants of London being the largest and most influential. Subsequently, a number of the major
societies cooperated to form a national body - the Institute of Chartered Accountants in England and Wales
(ICAEW) - whose elite status was assured, if by nothing else, by an entrance fee of 50 guineas to become a Fellow
Accountants’ occupation of the audit niche was further consolidated in the Companies Act of 1900; and a statutory
monopoly was fully secured in the Companies Act of 1948.

To sum up: that specialist accountants emerged as a distinctive group, rather than as a branch of legal practice, is
attributable to a combination of state sponsorship and the disdain of lawyers for accounting work. Capitalising
upon the opportunities presented by the passing of the 1862 and 1879 Companies Acts, as well as their
connections with financiers, leading accountants formed firms and associations through which they secured the
accounting jurisdiction. Most importantly, they successfully argued that only individuals trained and regulated by
their own associations were fit to act as ‘independent’ auditors. State patronage, institutionalised in the bestowal
of Chartered status upon the elite associations, has subsequently empowered accountants to defend and expand
the accounting jurisdiction. As Abbott (1988) has persuasively observed, "What really determined the history of the (accountancy) profession was the development and shift of its
jurisdiction - from bankruptcy to auditing, with gradual expansion into cost accounting and now into
"management services" (Abbott, 1988 : 26) Since the First World War, when the state moderated its laissez-faire approach to economic management (Loft,
1986), to the present day, the auditing niche has provided the accountancy profession with a base for the
expansion of its the core jurisdictions of ‘accountants in practice’ into a number of other areas, most notably
those of taxation and consultancy, and to be employed in ever greater numbers in industry and the public sector.

The Contemporary Scene : Diversification, Commercialization and Defamation

As Abbott (1988 : 62) notes, but does not elaborate, processes of establishing and defending boundaries of
jurisdiction are mediated by available forms of discourse about jurisdiction. For us, ‘independence’ is a powerful
signifier in such discourse. To develop and sustain a position of power, status and high remuneration, members of

and that such a claim can be unsettled and discredited. For the meaning of social practices, such as the
importance and credibility of audit, is contingent upon sociopolitical developments, developments that can fan
doubts about the accuracy
16
and value, if not the very purpose, of audit. Meanings are irremediably precarious and
cannot in any final sense be fixed. Thus, the aura of independence is inescapably
contestable
. Unless challenges
are circumvented or effectively parried, the claim to independence, and the status and power that it bestows, may
become discredited and devalued, with consequences for the reputation of accountants and their capacity to
secure and extend their jurisdiction.

In contrast to other major European countries (e.g. Germany), the leading UK accountancy bodies comprise
members drawn from both ‘industry’ and ‘practice’
17
. Prior to the development of business degrees in higher
education, becoming a chartered accountant was widely regarded as the passport to a high-flying career in
industry and commerce
18
. Consequently, today, many of the big purchasers of accounting and related corporate
services - such as financial directors and chief executives- are themselves members of the same profession, and
often the same association, as their major providers, such as their auditors. Moreover, whilst the movement of
accountants from industry to public practice is controlled (e.g. practising certificates are required), there are no
restrictions to on chartered accountants moving from public practice to industry. This freedom of movement, in
addition to other factors such as the central role of capital markets in the UK economy and the weak competition
from other professions (e.g. engineers) for business training, goes a long way to explain why the UK has spawned
and supported vast numbers of qualified accountants in comparison to other countries. These numbers, it is worth
stressing, are not inconsequential in terms of lobbying governments. Nor are they unimportant in developing an
extensive network of members, including many members of Parliament
19

grounds for doubting the independence of accounting expertise and increased difficulties in defending its
objectivity. Associated with accusations of (excessive) commercialization is the complaint that auditors are
selected and paid for by company directors (and that he who pays the piper plays the tune); and that, if
accountants want repeat business or continued opportunities to on-sell lucrative services (e.g. tax and
consultancy advice), there is considerable commercial pressure to issue a clean (unqualified) audit report.
Relatedly, there is the suspicion that accountants’ self-regulating methods of developing and enforcing standards
are designed to be sufficiently flexible to accommodate this pressure whilst ensuring that litigation and liability is
minimised when audits ‘fail’.

Whether or not such accusations are justifiable, the reputation of accountants, and ultimately their capacity to
secure and further expand their markets, depends upon their collective ability to avoid or rebut such potentially
damaging criticisms. Failure to justify and defend claims to independence in the face of hostile challenges puts at
risk their self-regulating status, their monopoly of audit business and, by association, their capacity to penetrate
and defend new and highly lucrative areas of jurisdiction. The remainder of the paper examines some of the
stratagems deployed by members of the UK accountancy profession to deflect and neutralise criticisms that have
threatened to unsettle or weaken its capacity to secure and/or expand its jurisdiction.

SECURING THE ACCOUNTING JURISDICTION : 1. RESPONSE TO THE MID-1970s ECONOMIC CRISIS

The mid-1970s were a time of considerable economic instability and turbulence in the UK. The accountancy
profession was directly implicated in this turbulence, and it came under pressure to reform the regulation of audit.
In this section, we sketch the background to the economic crisis of the mid-1970’s before indicating how the
profession sought to restore its credibility, and thereby secure its jurisdiction.

Background to the Crisis
companies such as Moorgate Mercantile, Cedar Holdings, Keyser Ullman, First National Finance Corporation, Slater
Walker, London and Capital Group, Cornhill Consolidated Group and others collapsed. Between December 1973 and
March 1974, the state rescued twenty-one institutions by spending some

400 million. With the collapse of the
Stern Property Group, Vehicle and General, Court Line, Scotia Investments and others, the crisis spread to other
sectors - such as shipping and insurance - and frequently exposed fraud at a massive scale. For one influential
commentator, the crisis was fuelled by the "ease with which eminent firms of auditors turned a blind eye on the wholesale abuse by client
company directors of [legal] provisions. [The directors] operated these public companies for the
principal benefit of themselves and their families; and most regrettable of all, on the virtual
complicity of their auditors, whose efforts are seen to have amounted to a whitewash at best,
and a fatuous charade at worst" (Woolf, 1983 : 112)

10
The state sought to manage the crisis by spending an estimated

3,000 million to rescue ailing concerns (Reid,
1982, page 192) and itself had to seek help from the International Monetary Fund (IMF). As a part of its crisis
management mechanisms, the Department of Trade (DoT) authorised investigations into a number of collapsed
businesses, especially where fraud was suspected (this is discussed in Sikka and Willmott, 1991). The related
press speculation and the eventual DoT reports directly questioned the ability of auditors to act as independent

auditors. Major audit deficiencies were also exposed by the report on London and County Securities (DoT, 1976c).
The company had entered into illegal share dealings and there were also suspect transactions between the
company, directors and their families. The report described the company’s accounts as "misleading to a material
extent" (ibid : 234).

In response to these and other revelations, the quality press expressed growing disquiet about the independence
and integrity of accountants. The Economist (14th February 1976) declared that "Civil servants, politicians, and even City folk are beginning to wonder whether the accountancy
profession is capable of policing itself. unless the profession improves its auditing standards

11

someone else will" (ibid : 79-80). The Investors Chronicle (13th February 1976, page 419) questioned the value of audited accounts and self-
regulation. The Financial Times (10th July 1976) doubted the profession’s ability "to exercise control over the
activities of large accountancy firms" (page 26). Even the ICAEW President was forced to acknowledge that "public confidence in the standards of our performance has been badly shaken by a number of
well publicised cases" (Accountancy, November 1976 :4). Questions relating to the reliability of auditing were raised in Parliament. On 9th February 1976, the Secretary of

"in our view the principle of the auditor first compiling and then reporting upon a profit forecast

12

is not considered to be a good practice for it may impair their ability to view the forecast
objectively and must endanger the degree of independence essential to this work" (page 271). In 1978, the highly publicised collapse of the Grays Building Society once again reminded small investors of the
assumed role of auditing in safeguarding their deposits. The resulting investigation (Registry of Friendly Societies,
1979) found that the auditors had been unable to spot frauds of more than

7.1 million that had occurred during a
period of more than forty years, and which had only come to light when the chairman committed suicide. In
common with a number of other reports
21
, the investigation was highly critical of the auditors.

In Defence of Self-Regulation and Jurisdiction: Auditing Standards, Ethical Guidelines and Disciplinary
Procedures

In the UK, the major accountancy bodies are charged by the state with day-to-day responsibility for regulating
auditing practice. In discharging this responsibility, accounting regulation has been decoupled from auditing
regulation. Whereas pronouncements on general principles of sound accounting practice began in 1942
22
, those
relating to audit did not begin until 1961