In Balance: An Account of Alberta’s CA Profession
(Complete text)
By Peter McKenzie-Brown and Stacey M. Phillips
“Accounting has one primary function – facilitating the administration of economic activity. This function has two closely related phases: (1) measuring and arraying economic data; (2) communicating the results of this activity to interested parties.” – W.A. Paton, 1949
Canadian Cataloguing in Publication Data
McKenzie-Brown, Peter
In balance: an account of Alberta’s CA profession
Includes bibliographical references and index.
ISBN 0-9691132-1-8
Accounting – Alberta – History. I. Phillips, Stacey, 1970- II. Institute of Chartered Accountants of Alberta. III. Title.
HF5616.C22A45 2000 657’.097123 C99-901666-0
Table of Contents
Chapter 1: The Early Years
Chapter 2: Peace and War: 1910 – 1919
Chapter 3: Ten Years that Roared: 1920 – 1929
Chapter 4: The Great Depression: 1930 – 1929
Chapter 5: The War Continues: 1929 - 1945
Chapter 6: From Leduc to Suez: 1946 - 1956
Chapter 7: Birth of the Modern Era: 1957 - 62
Chapter 8: Centennial Decade: 1963 – 1972
Chapter 9: Economic Turbulence: 1973 – 1986
Chapter 10: Turn of the Century: 1987 - 2000
Acknowledgements
The authors gratefully acknowledge the help of many people from the accounting community in the preparation of this book. First and foremost, these include an oversight committee comprised of Ross Denham, Bill Stephen and Karin Holmgren.
Other individuals also reviewed the penultimate draft (or portions thereof). These included Steve Glover, Ross Skinner, Bill Halford, Keith Adams, John Collins, Marie Iwanow and Jayda Rosenthal. Mary McGurran also provided material on the changing role of women in the profession, and Don Salmon, Bill Rogers, Peter Valentine and Andrew Wingate provided background on Alberta government audits. Also, Mike Williams, Ronald Baines and Henry Lawrie collected materials for the sections on oil and gas accounting. John Collins’ comments on the final draft suggested particularly valuable and extensive new ideas and information to include.
Lorne Baxter, David Bentley, Travis Bouck, Elvin Christenson, John Collins, John Ferguson, Eric Geddes, Steve Glover, Alex Hamilton, Dick Haskayne, Brandy Horn, Keith Huckvale, Jill Kleebaum, Allan McTavish, Jim Miller, Thomas Mundy, Ed Roberts, Carl Smith and Bob Waller all consented to be interviewed. In addition, the institute’s archives yielded valuable transcriptions of interviews from earlier years. The subjects of those sessions were Elvin Christenson, Bill Grace, Merv Graves, Doug Hagerman, Ray Harris, Keith Huckvale and Haughton Thomson.
The genealogy of Alberta’s large CA firms was a large project in itself, for which Bill Stephen deserves full credit.
In our quest for information from the Canadian Institute, we relied heavily on the efforts of Susan Gambles. And to confirm some details of petroleum economics and policy development, we solicited the assistance of Hans Maciej, retired vice-president of the Canadian Petroleum Association.
We have not footnoted material that came from interviews or the archives of an accounting institute, but have used standard citation procedures for other copyrighted material and from the Canadian Chartered Accountant and CAmagazine. In practice, this means the reader must assume we have correctly interpreted material found in the Alberta Institute’s archives – generally speaking, minutes, reports, letters, memos and annual reports – and correctly quoted those CAs interviewed. To a very small extent, we have used historically significant quotations from daily newspapers and from The Canadian Encyclopedia and the Encyclopedia Britannica (1943 and 1996 editions) without citation. The quotes from Winston Churchill are available from any authoritative collection of his wartime speeches. In addition, some background material came from the newsmagazine The Economist.
We also acknowledge the Institute of Chartered Accountants of Alberta for initiating and funding this project. Other major financial sponsors included Deloitte & Touche LLP, Ernst & Young LLP, PricewaterhouseCoopers LLP and KPMG LLP. Peter Kruczko Professional Corporation (Edmonton) and King & Company (Edmonton) also contributed financially to this history.
Foreword
This book is about the history of Alberta’s chartered accountants and their first ninety years. It is the story of accountants and those individuals, issues, events and environments that prevailed in Alberta for nine decades. Those years mark what we are today.
The question might be asked, of course: “Is it really necessary to look back?” Why should any of us want to read about this? A recent student, Thomas Wylie observed in a letter to CAmagazine that: "With all due respect, Luca Pacioli is not a topic of conversation around the water cooler."
This history offers benchmarks, context, relationships, knowledge and, one hopes, a little better understanding of the present. Observations about these things should help us. Perhaps, too, it might just be enjoyable to read about ourselves. We might also agree that an historical perspective gives us some background to confront criticism, influence complex events before us right now, make changes for the better, and confidently address the unknown.
From this history about Alberta’s CAs we may learn why we do some of the things the way we do. We might also develop a better understanding of which policies work and which do not. For sure we will find out that some, maybe all, of the issues are never resolved. They mutate. They evolve as environmental conditions change. This is good. The Alberta profession with its strong and interesting history has contributed provincially and nationally to a rich discipline. In the year 2000 it has resulted in a vibrant group, some 7,000 strong, of highly accomplished men and women.
Neither does this history forget the always present and desirable social interaction that has prevailed among the membership. It has been most important throughout the decades. In the first instance it may have existed because formal annual meetings were needed. More importantly, however, there was a desire by Alberta’s CAs to have fun with their colleagues. The idea of fun may have seemed improbable in the early annual meetings held at the Banff Springs Hotel. Later though, the get-togethers occasionally became more “exuberant,” as in The Great Train Ride of 1969, and as evidenced by the outrageous costumes worn by some in that era. Recently, however, there has been an evolution to more focused recognition dinners and events that formally highlight the accomplishments of members and others.
At least four key themes arch the decades of the Alberta profession and are ever-present in this history. Education, governance, advertising, and professionalism or standards recur, usually prominently but sometimes less so, throughout the past 90 years.
It was recognized, almost from the beginning, that education was a key ingredient of a strong profession. Our connection with the University of Alberta started very early in our history. The struggle to recruit students, the question of lessons and lectures — and the ”Queen’s Course,“ of course! — was constant into the 1950s. Establishing a foundation for education, the early trials and tribulations of the now-accepted regime of professional development, the pride and disappointments associated with the Uniform Final Exam process, the establishment of a Winspear Chair of Accountancy and many other noteworthy events spanned these decades and helped bond members.
The first ten years of our history salute the pioneers of the Alberta profession. They needed to carve out a niche for themselves in the business community. Their foresight benefits all of us to this day. They exuded both confidence and uncertainty. The act of petitioning the legislative assembly for legislation to give them their particular franchise in business evidenced confidence and foresight. Steps relating to reciprocity, standards of admission, governance, the role of women in the profession and advertising, needed strong resolve in the face of hesitancy or indifference. And, this was a time of forging initial relationships with other accounting bodies that, at least in one case, had an ironic twist in the following decade.
The underlying themes that formed the profession in Alberta continued. The 1920s once more revealed the difficulties of implementing a quality professional education experience. It was also a time when the recently passed Income War Tax Act and other legislation were instrumental to the future prosperity of the profession. We see, too, that the profession frowned on advertising and was officially indifferent to women becoming CAs.
The thirties challenged accountants just as they did others. Great developments in accounting technique and practice came out of the economic depression. Education, governance, discipline and advertising were still catching up. These old issues had a new context. The war years were notable for personnel shortages on the home front and the great sacrifices in the theatres of war made by many CAs. Again, problems relating to education and the other themes did not disappear. Returning CAs had to be accommodated at the University of Alberta and by the practicing offices.
The fifties and sixties were years of growth — in education, governance and standards. ”Public relations” began supplanting the narrower idea of advertising. Regulatory legislation was now under serious study. As the 1970s unfolded, the economic ravages of inflation and a federal oil policy once again brought big changes to Alberta’s CAs. GAAP was no longer the same. Many saw that these were indeed, dynamic and subject to change. A limited form of price-level accounting and current values were in the minds of many practitioners. Accounting practices for oil and gas were developing quickly. As this period flowed into the eighties, one saw acute financial concern, education (again) in the form of the Geddes Report, women in the profession, specialization and regulatory legislation in the forefront of the profession’s interest. Such matters were the drivers of many actions and policies during this period. It is instructive and, for many, interesting to watch these events and conditions unfold in the pages that follow.
Finally, the last ten years are, perhaps, too close yet to allow for much in-depth comment or analysis. It was, however, a most noteworthy period in which all of the themes of education, governance, public affairs and standards required the close attention of all members.
Enjoy the following pages. Those who wrote and have had input into this project wish you a pleasurable journey into the past — into a part of Alberta, the lives of individuals and the significant events that have made Alberta’s CAs proud participants and leaders in their profession. We hope that, after reading and browsing the material in this book, you will delight in engaging your colleagues at the water cooler on 90 years of good change.
Ross A. Denham
William G. Stephen
Preface
In any normal sense of the word, the ICAA’s first annual meeting was a modest affair. Only four members attended, and they duly elected themselves to serve as officers. In so doing, they replaced an interim council that had elected itself a few months earlier. They re-appointed the institute’s auditor, too. They also passed a motion to join the Dominion Association of Chartered Accountants (DACA), now the Canadian Institute of Chartered Accountants (CICA). After years of conflict, DACA had finally become the umbrella organization for Canada’s chartered accountants.
And they committed those deeds to paper. The neatly typed pages of minutes from the ICAA’s first annual meeting are rich with a sense of occasion. This was the beginning of a long tradition of keeping detailed records of the institute’s affairs.
As we rummaged through the seemingly endless volumes of minutes and other documents assembled over 90 years, we were often struck by what appears to have been a profound sense of history within the Alberta Institute. Perhaps because it was legislated into existence when the province was only five years removed from being part of the Northwest Territories, the institute’s founders seem to have understood that the new organization had a destiny to fulfill. Perhaps the institute’s later appreciation of its past derives from that early conviction.
The only major milestone the institute did not celebrate was its 25th anniversary – most likely because the dirty thirties provided little cause and fewer funds to celebrate. About a decade later – shortly after the Second World War – council began considering the preparation of an institute history for the first time: nothing happened.
However, when 1960 rolled around, the institute celebrated its 50th anniversary with alacrity. An even greater celebration took place ten years later. The guest of honour was Ernest Manning – Alberta’s longest-serving premier and a giant among Canadian politicians; he had recently been appointed to the Senate.
Manning told the assembled crowd that accountants should take more notice of public concern about the qualitative aspects of life. Reflecting the mood of the times, which called for sometimes-radical social change, he told the institute: “There must be a whole new alignment and restructuring of the private sector and the businesses which comprise it.” Manning added that CAs “have a unique opportunity to develop a system of social accounting.”
As this history suggests, almost every era of the twentieth century saw realignment and restructuring in the private sector. What we also attempt to show is that those periodic upheavals progressively turned Alberta’s CAs into central figures in the province’s business life.
But let’s continue with institute milestones. When the institute celebrated its 75th anniversary, it did so in part with a series of historical newsletters, titled Perspectives. To an extent, Perspectives relied on efforts from 1978, when Haughton Thomson – a senior member of the profession – took some important steps to preserve the institute’s oral history. He interviewed such prominent old-timers as Elvin Christenson, Merv Graves and Doug Hagerman, and had those interviews transcribed.
For the members who were keenest to retain the institute’s history – most of them older members whose greying heads contained vivid memories of continual, remarkable and sometimes convulsive change – this was not enough. Perspectives had barely rolled off the presses before the institute formed a sub-committee dedicated to the preservation of its history.
In the end, the institute seized another milestone, its 90th anniversary, as the occasion for commissioning a formal history. Coincidently with that milestone, the world’s Gregorian and Julian calendars would be celebrating a rollover to the year 2000. One millennium was passing, another being born. The institute decided to celebrate this milestone in an appropriate way. Finally, council decided, it was time to record the story.
Does this volume fully report the ICAA’s history? The answer, of course, is “No.” But to get a sense of how daunting this project was, consider the background.
The institute’s extensive minute books began with a slim volume from the second decade of the twentieth century. As the century wore on, there were exponential increases in the volume of archived material. For example, when the authors asked for Chapter 9 research materials, a truck delivered 30 volumes of minute books plus other materials in seven large boxes. Each of those volumes was replete with information that could have added depth or interest to this work. (Frustratingly, one of the minute books for 1984 and all of those for 1985 were missing. Those voids left gaps in our understanding of the story.)
Another reason this book could not possibly be complete is that the authors are writers rather than accountants. Our paths have rarely crossed those of the thousands of men and women whose lives have been affected by the institute, and who themselves have affected the institute’s life. As we learned during 15 months of research and writing, those people were students, teachers, committee volunteers, members of council and staff. Most are living; many are not.
Given those circumstances, no book could do justice to the institute’s story. Our hope, however, is that our writer’s instinct for detail, our passion for history and our gathering understanding of the CA profession have enabled us to illuminate two central themes.
The first is that narrative cannot live in isolation. The ICAA was constructed upon a foundation that reached thousands of years into the past. And since its creation, the institute has been profoundly affected by external events. For the first half of the institute’s life, these included three wars, the Great Depression, and the decline of the British Empire. Other factors have included inflation; taxation and economic policy; resource extraction and industrial growth; local and national politics; technology; the changing roles of men and women; immigration and economic globalization. This book can hardly do justice to any one of those developments, but it hints at their effects.
Our second theme is at the other end of the spectrum. Men and women make history. To the extent we could, we have given voice to individuals. We have quoted them and observed small incidents and particulars of their lives. Our hope is that we sometimes gave a sense of who they were, how they thought and even how they lived. We regret that we could not do more of this.
Not all of the people covered in this book were principled or competent. Scandal tainted the professional lives of two of the institute’s 11 founding members, for example. Most of the institute’s men and women have been upstanding and principled, and highly respected for it.
A noteworthy gesture related to professional ethics came with the death in 1938 of Frank Harvey, who had been a dedicated and tireless institute volunteer. On hearing of his passing, council convened a special meeting to pass a resolution of sympathy. That resolution resolves, “That the members of this Council desire to place upon the records the following tribute to the memory of their departed colleague and that the page in this book following the minutes of this meeting be forever left blank as a token of his unsullied reputation.” For us as researchers, that simple gesture was rich with humanity. It helped make his life a living part of the pages of history.
We found endless pleasure in discovering such vignettes. However, we rarely had the opportunity to forget that we were non-accountants who only brought writing skills and love of history to bear on this project. If we have done justice to the institute’s history at all, it is because of the support of Ross Denham and Bill Stephen. Those gentlemen patiently explained the mysteries of accounting to us, endlessly corrected our technical errors, cajoled other institute members into providing us with valuable background information, and stickhandled our final draft through a battery of expert reviewers.
The third invaluable member of our oversight committee was the ICAA’s Karin Holmgren. Karin tracked down obscure pieces of information for us with amazing resourcefulness and dexterity, and reviewed each of the many drafts with an expert editor’s eye.
Without the keen collaboration of these three, there would have been no book. Book or no book, of course, the institute would still have had a long, proud history. We feel honoured to have been chosen to record it.
-- Peter McKenzie-Brown and Stacey Phillips
"[By 1905] the West was bringing prosperity to the whole country, and the eyes of the world were fastened on Canada...The regional pride that Westerners felt was being transformed into a new nationalism. Since 1867, Canada had been an awkward entity, its Pacific province cut off from the East by two thousand miles of empty prairie. Now Canadians saw their Dominion with new eyes. The vacuum was filled; a new heartland had emerged, vibrant, confident, prosperous.” – Pierre Berton, 1984.
Chapter One — The Early Years
The incident that best symbolizes the introduction of accounting to Alberta did not even take place in the Canadian prairies. Rather, it occurred a thousand kilometres from the eastern border of today’s Alberta. The place was a remote corner of the Canadian Shield. The year was 1719. The event was an exchange of goods between a Hudson’s Bay Company trader and a Cree Indian.
To appreciate that incident, which we will return to shortly, it is first helpful to explore the origins of trade in Western Canada. That is because accountancy is a handmaiden of commerce. To understand accounting, you must also understand common commercial practices.
The extent of pre-Columbian Aboriginal trade is impressive. For example, the ancestors of today’s Inuit traded amber from the most northerly of the Arctic Islands, copper from deposits near the southern edge of the Arctic Ocean and meteoric iron from northern Greenland. That trade does not seem to have crossed the ethnic divide between Inuit and Amerindian peoples, however.
In the continent’s temperate zones, trading networks were far more complex. According to the archaeological record, the land we now know as Alberta has sustained commerce in one form or another for at least 8,500 years. The first Albertans traded for tools made from the volcanic glass obsidian, quarried and shaped by early artisans in today’s British Columbia and Wyoming. Other valued tools were manufactured from local copper mines along the western edge of Lake Superior. In addition, tools that have been excavated in Alberta are traceable to silica quarries in today’s Dakotas and Northwest Territories.
Archaeology has not identified quarries in early Alberta from which distinctive trade goods were manufactured. However, trading goods from the region might have included bitumen gathered at seeps along the Clearwater River, near its confluence with the Athabasca. Aboriginal peoples often used this dense, sticky tar to caulk their canoes. Regardless of the products exchanged, the region has long been connected to intricate commercial networks.
Although there was trade, there were no documented accounting systems among Canada’s Aboriginal peoples. Conditions on the prairies, which included long winters and vast herds of bison, were well suited to hunting and gathering. It was therefore unlikely that accounting would develop, since early accounting systems arose from the technologies of agrarian societies.
According to most accounts, four conditions must exist before sophisticated accounting practices (as we know them today) can develop. The first is a written language. The second is a system of numbers. Readily available writing materials are the third. But the most important is the accumulation of wealth, including the use of a common currency or coinage to facilitate exchange. Where it developed, agrarian society enabled wealth to be created in the form of herds, production and other property. It also created conditions in which such technologies as literacy, counting and coinage could develop.
It was not until the Aboriginal peoples of Western Canada started making regular contact with Europeans that a common currency — furs — enabled North American trade to really flourish. The creation of that common currency marks the introduction of accounting systems into Canada’s West.
Sidebar: Reading, Writing and Arithmetic
During preparation of this book, professor Daniel Thornton of Queen’s University brought to the authors’ attention a paper that disputes the common notion that you need to read, write and do simple math to create an accounting system. In their lengthy article, the four CAs note that the Sumerians “had developed a prehistoric form of accounting, complete with debits and credits, to track physical flows of goods and social obligations to pay for them. By 3500 BC, before people knew how to read, write or count, they were making kiln-fired tokens that represented resources such as cows, goats and wheat.”
Each token was an account representing an asset – a cow, for example. One cow-token equaled one cow. When five cow-tokens were deposited in a clay urn, the urn served as a crude balance sheet. Just before the tokens were dropped into the urn, they were pressed on their soft, clay surface. The visible impressions that were left identified the owner of the cows and thus were an early example of disclosure. According to Thornton and his colleagues, “This accounting system relied on a one-to-one correspondence between the accounting sign and the physical/social referent that it tracked. Such a correspondence was necessary because counting, as we now know it, had not been invented.” Neither had writing.
Some technology historians take this argument further. In effect, they suggest, accounting led to the creation of the literacy and numeracy that became foundation stones of later civilizations. According to one noted thinker, Jared Diamond, “The independent invention that we can trace in greatest detail is history’s oldest writing system, Sumerian cuneiform....In the last centuries before 3000 B.C., developments in accounting technology, format, and signs rapidly led to the first system of writing.” Thus, the creation of wealth (grain, livestock) in antiquity’s Fertile Crescent led to accounting, which in turn led to the development of writing and arithmetic. The earliest known texts are inventories – in this instance, lists of livestock and agricultural equipment. These come from the city of Uruk, Babylonia, and are dated about 3100 BC.
All of the alphabets that originated in western Eurasia descended from cuneiform. And even when literature began to develop more than two millennia after writing was invented, accounting remained a far more important use of the technology. Oddly, the notion that accountants taught us how to read and write is sometimes explained as an early accountant joke.
Hudson’s Bay Company
A landmark year was 1670. That is when King Charles II issued a “grant” (in effect, articles of incorporation) for the Company of Gentlemen Adventurers Trading into Hudson Bay. The grant went to his cousin, Prince Rupert, and a small group of Rupert’s business associates. Today known as the Hudson’s Bay Company or The Bay, that organization’s charter provided for a monopoly over trade in the lands fed by rivers flowing into Hudson Bay. The equivalent of 40 per cent of modern Canada that vast territory was known as Rupert’s Land until after Confederation. It was history’s largest private commercial empire.
To manage such a huge trading area required a well-capitalized organization (the Bay’s initial capital was £10,500) and permanent business operations. Before the creation of the Bay and a few other seventeenth century trading companies, British “venturers” had generally financed each business expedition (for example, the voyage of a trading vessel) separately. The Bay thus represented a new, continuous approach to enterprise, and reflected an important advance in the business entity.
Alberta’s most southerly river systems are part of the Hudson Bay watershed, although water from the northern two-thirds of the province flows into the Mackenzie River Basin. The Mackenzie drains into the Beaufort Sea. However, Aboriginals from all of present-day Alberta quickly developed trade routes to Hudson’s Bay Company “factories.” The Bay’s factories were trading posts at which Aboriginals and the British exchanged pelts for such manufactured goods as axes, beads, broadcloth, brandy, knives, guns, lead and gunpowder. This commerce usually required long, strenuous and frequently dangerous journeys by canoe through white-water rivers and the muskeg of the Canadian Shield.
The beaver pelt was the common currency in these transactions. Early factory books recorded transactions according to “Goods Expended p. Weight Value into Beavor [sic] Amounts” and “Goods Expended p. Number Value into Beavor amounts.” For a century and a half, the standard of currency was the “Made-beaver” — a prime quality skin from an adult animal.
It was to the Bay’s York Factory (in the northeast of today’s Manitoba, on the shores of Hudson Bay) that accounting in Alberta can trace its symbolic roots. In an entry to his log on June 12, 1719, the trading post’s “factor,” Henry Kelsey, wrote that a Cree Indian named Wa-Pa-Sun had brought him a sample “of that Gum or pitch that flows out of the Banks of the River.” Wa-Pa-Sun had delivered a sample of bitumen from a seep along one of northeastern Alberta’s rivers.
Why is this incident significant to Alberta’s accounting profession? First, the fact that Wa-Pa-Sun possessed a sample of bitumen leaves little doubt that he was trading goods from present-day Alberta. And the trading results of that expedition were dutifully noted in the accounts delivered to the Bay’s head office in London. For the first time, in other words, goods known to have originated in today’s Alberta formally entered a bookkeeper’s ledger.
This episode has a second level of historical significance. The delivery of that sample to a British explorer, diarist, trader and bookkeeper led to the first written record of Alberta’s Athabasca oil sand deposit — perhaps the world’s largest hydrocarbon resource, and today the source of 15 per cent of Canadian oil production. As we shall see, Alberta accountants would make substantial contributions to the practice and theory of oil and gas accounting.
For 100 years after Kelsey’s encounter with Wa-Pa-Sun, traders of European origin ventured progressively farther into Western Canada to increase the trade in pelts. They established trading posts throughout the northern portion of the continent. While these men were known collectively as coureurs de bois (“runners of the woods”) because so many came from Quebec, many also hailed from Scotland, Ireland, the United States and British colonies in North America. The most famous of them all was a Scot, Alexander Mackenzie.
The first European to cross North America from east to west and the first to travel the Mackenzie River to its terminus at the Beaufort Sea, Mackenzie was a key shareholder in the Montreal-based North West Company. At the beginning of the nineteenth century, that company engaged in a fierce trade war with the Bay. The sometimes-violent conflict was resolved in 1821, when the two companies combined.
The new entity kept the Bay’s name, but increasingly moved its trade to England through the Great Lakes and the St. Lawrence River, rather than through the drainage systems that flow into Hudson Bay. Some 65 years later, the St. Lawrence trading system would be extended by rail to the Pacific. And that trading system — it stretched from Quebec City to Vancouver — would become the backbone of Canada as a modern state. The implication, of course, is that Canada was constructed upon a trade route – a route that was extended by many thousands of miles in the 1880s by a visionary railroad. Commerce is at the core of the nation.
Double-Entry Bookkeeping
European fashions changed, and demand for beaver felt hats dropped. The market became glutted and the value of the beaver pelt collapsed. But during the years of trade in which beaver pelts were common currency, the methods by which accounts were kept did not change much. The Bay’s factories used a double-entry system of bookkeeping adapted to meet the company’s needs.
Simple bookkeeping at that time did not include the large body of theory that stands behind modern accounting. It could record debts, inventory and other assets, for example. However, it did not have ideas and formal procedures for dealing with debts that were uncollectable; inventory that had been stolen, damaged or spoiled; or assets that had worn out.
Double-entry bookkeeping has existed since at least the fourteenth century. A set of books from Genoa, dated 1340, still exists, and used an excellent double-entry form. The system was used by such Italian banking houses as the one established in Florence by Giovanni di Bicci de’ Medici in 1397. However, this system is most closely associated with Franciscan friar Luca Pacioli, an unsung hero of the Renaissance. His friend and associate, Leonardo da Vinci, illustrated one of Pacioli’s books. The book that created Pacioli’s lasting reputation was his Summa, which was published in 1494 – coincidentally, the year the once-powerful Medici bank failed.
The Summa provided a rigorous analysis of bookkeeping. This treatise, which includes the first printed text on algebra, dealt with a variety of mathematical subjects. It is known in accounting history, however, for its section on accounting which, among other achievements, articulated the mathematical formula behind double-entry bookkeeping: Assets = Liabilities + Owner’s Equity.
The money and date columns in Pacioli’s ledger were almost identical to those in modern ledgers. Entries consisted of brief paragraphs; debits were on the left side of a double page, credits on the right. The trial balance was the end of Pacioli's accounting cycle. If the credit and debit columns were not equal, said Pacioli, "that would indicate a mistake in your Ledger, which mistake you will have to look for diligently with the industry and intelligence God gave you."
The accounting portion of Pacioli’s Summa was a how-to document for the businessman of the day. “Accounts are nothing else than the expression in writing of the arrangement of his affairs,” Pacioli explained. “If he follow this system always he will know all about his business and will know exactly whether his business goes well or not.”
So good was the system that Pacioli codified that it quickly came to dominate European accounting. His Summa was soon translated into five languages, and numerous European writers described his system of accounts – often without giving Pacioli any credit. The first to do so in English was Hugh Oldcastle, in 1553.
Pacioli’s work was a response to the expanding commerce between Europe (especially present-day Italy) and the Middle East. Combined with Europe’s assimilation of Arabic advances in mathematics and science, that trade played a large role in fuelling the Renaissance. It was also a factor in the creation of the first known association of accountants – the Collegio des Raxonati, founded in Venice in 1581. The Renaissance illustrated profoundly how commerce and prosperity can give rise to innovation in art, philosophy, science and technology.
Sidebar: “Doomsday”
The idea of inventories reaches far back in history. The most famous is William the Conqueror’s Domesday Book (pronounced “Doomsday – delivered to King William I of England on Christmas Day, 1085. The greatest administrative achievement of the Middle Ages, these books (there were actually two) were prepared within the remarkably short time of seven months. Technically known as “The Description of England,” their nickname quickly developed. According to a twelfth century treasurer of England, people called it the Domesday Book because its “decisions, like those of the Last Judgment, are unalterable.”
The King had requested a list of every parish, castle, abbey, mill, fishery, house and cottage in his recently conquered domain. He also wanted a record of every family of whatever social rank; of every cow, ox, hog and horse. And he asked this in an era almost completely devoid of written property records.
The King’s assessors visited all but the north of England. They travelled through countryside without maps or mileposts, whose trails were winding, often-muddy tracks. They used forced inquest to ask millions of detailed questions of thousands of inhabitants. The people they visited spoke in thick local tongues and used local measures of value, volume, weight and area. And they frankly resented being a conquered people. Nonetheless, the assessors collated their answers into rough drafts, which they delivered to clerks for further refinement. And a single clerk penned the amazingly comprehensive final documents.
The Domesday Book introduced sophisticated records into medieval Europe, thereby contributing to institutions whose contemporary heirs include, for example, Alberta’s Land Titles office. Domesday was originally prepared for tax and war purposes, so the extensive files and systems of Revenue Canada are another heir.
England now had an inventory upon which to base taxes but did not have an auditor to examine the public accounts. Cash-strapped Edward II appointed an Auditor of the Exchequer in 1314, and England’s early rulers appointed special auditors and took other primitive steps to ensure accurate books. However, the systematization of the audit of public books began during the reign of Elizabeth I. In 1559, she appointed two Auditors of the Imprests – officers who were paid by fee but did their work by deputy. This less-than-satisfactory approach remained in place until 1785, when Britain appointed an Audit Board.
The audit reached a relatively modern state with Westminster’s Exchequer and Audit Act of 1866. This statute gave a lengthy description of the duties of the audit office. It also empowered the sovereign to appoint a “comptroller and auditor-general,” with staff enough to examine and verify the accounts prepared by the public service.
Workshop of the World
The cycle of prosperity and innovation has recurred many times during the five centuries since the Renaissance. During the glory days of the British Empire, for example, the gears of the Industrial Revolution made Britain the “workshop of the world.” Poet William Blake perhaps described the rapidly proliferating manufacturing plants in England and Scotland as “dark Satanic mills.” Those factories were the crucibles in which accounting began to stretch far beyond the simple practice of double-entry bookkeeping.
According to prominent accounting historian Phillip Creighton, accounting “is, surely, the Victorian profession. The beauty of the double entry system with everything in its place and all things predictable and certain, controlled and constrained, with a correct answer to every question, must have seemed to the Victorians almost the perfect form for life on this planet.” This may be, but Victorian Britain struggled bravely and sometimes fruitlessly to create accounting systems that could achieve such lofty ideals.
The Industrial Revolution and the expansion of Britain’s empire had such a huge impact on the structures of trade and commerce that both government and business had to respond. As the scale of enterprise grew, business employed larger work forces. And markets for new technologies (particularly those that applied steam power) created greater need for large-scale investment.
Between 1825 and 1856, Britain responded with parliamentary measures that effectively created the legal framework for the modern corporation. By the end of this period, a company could obtain legal status through registration. The investor had no liability beyond the amount invested in company shares; creditors had no recourse to a limited company’s investors. In addition, the public company could have any number of shareholders.
Legislation passed in 1844 required public companies to present regular financial reports (including a “full and fair” balance sheet), as well as a report from appointed auditors at each ordinary meeting of shareholders. Also in that year, banks incorporated under the Joint Stock Bank Act were required to provide an annual audited balance sheet and a profit and loss account.
Britain’s provisions for mandatory financial statements and audits were dropped in 1855-56, not to be revived until 1900. However, the 1855-56 legislation did encourage good financial reporting practices. According to accounting historian Ross Skinner, the legislation described “a model set of company articles, including enlightened provisions with respect to the accounts to be kept, the audit, and the forms of the balance sheet and the statement of income and expenditure to be laid before the annual general meeting. The model also provided that dividends should not be payable except out of profits.”
By creating the corporation as a legal entity through which to invest capital with limited risk to the investor, Britain’s Parliament spurred an already dynamic private sector. The British soon began using public companies to export investment capital throughout the world.
These far-reaching pieces of legislation effectively acknowledged that the public had an interest in good financial reporting. By doing so, they greatly extended the base upon which accounting could build itself as a profession.
To wrestle with the accounting issues presented by changing technology and new financial reporting requirements, local groups of accountants formed associations. Working ad hoc at first, the members began developing accounting theory that went far beyond double-entry bookkeeping.
Somewhat like the guilds of medieval times, they began to seek exclusivity for their members. The first officially sanctioned accounting body — the Society of Accountants in Edinburgh — received a Royal Charter in 1854. The next year the Institute of Accountants and Actuaries in Glasgow was formed and the Society of Accountants in Aberdeen received its charter in 1867. These three groups later became part of the Institute of Chartered Accountants of Scotland.
From the beginning, the Scottish societies began distinguishing members from non-members by calling themselves “Chartered Accountants” and using the CA designation. The letters CA quickly caught on. While the letters vary according to jurisdiction (CA, CPA and so on), the practice of using a professional designation is now standard.
There are a number of reasons why accounting developed more quickly in Scotland than elsewhere in Britain. One was the high degree of literacy among the Scots, an outcome of Presbyterianism’s belief in the authority of Scripture. A second was that much of the land and many of the businesses located in Scotland were owned in England. Resident Scots were hired to report on stewardship and on estates and trusts. A third was an important difference between early English and Scottish commercial law. Unlike the English, Scots did not greatly limit the number of investors that could participate in a single venture. This increased the need for audited books.
An early history of accounting gives an illuminating example of the ambitions and aspirations of early Scottish accountants. In 1905, Richard Brown wrote A History of Accounting and Accountants. Said he, “It may be of interest to quote here, as a very full compendium of the kind of work which a Glasgow accountant of the early part of the last century professed to undertake, the list of duties which Mr. James McClelland....attached to the circular, dated 12th March 1824, in which he announced that he had commenced business on his own account:
Factor and trustee on sequestered estates.
Trustee or factor for trustees of creditors acting under trust deeds.
Factor for trustees acting for the heirs of persons deceased.
For gentlemen residing in the country for the management of heritable or other property.
Agent for houses in England and Scotland connected with bankruptcies in Glasgow.
The winding up of dissolved partnership concerns and the adjusting of partners' accounts.
The keeping and balancing of all account-books belonging to merchants, manufacturers, shopkeepers, &c.
The examining and adjusting of all disputed accounts and account-books.
The making up of statements, reports, and memorials on account-books or disputed accounts and claims for the purpose of laying before arbiters, courts, or counsel.
The looking after and recovering old debts and dividends from bankrupt estates.
And all other departments of the accountant business.”
Whatever the reasons, by the middle of the nineteenth century Scottish accounting was far more sophisticated than its English counterpart. Accountants migrated from Scotland to London, where they headed many of the most successful accounting firms. They also migrated to New York, Montreal and other North American cities, where they had a huge impact on the profession’s development.
The initial impact of Scottish accounting outside Scotland was in England. Accounting societies developed in London, of course, and in Liverpool, Manchester, Birmingham and other prospering cities. In 1880, London and the provincial societies merged to create the Institute of Chartered Accountants in England and Wales. According to an official history of that body, “Among the great advantages of Charters were the fact that the tradition surrounding them dated back to the fourteenth century, the prestige attaching to them and the characteristics of monopoly they conferred.”
From the beginning, British associations struggled with financial reporting issues. These included, for example, how to account for depreciation in a company’s books, how to account for such fluctuating assets as investments and how to value inventory. The improvements they made to financial reporting helped investors determine whether their money was being invested and managed properly.
At the same time, the manufacturing sector began placing other demands on accounting professionals. Factories throughout Britain needed ways to prepare budgets and better control costs. Accountants and accounting groups responded with what later became known as cost accounting (and, later still, management accounting).
Cost accounting helped revolutionize manufacturing. By capturing the costs of production, it provided information with which the company could budget and forecast results. And as it became more sophisticated, this practice developed into a system for financial and operating control. Industrialization and technological change during the hundred years after 1850 gave this branch of accounting an ever-increasing significance. It contributed to economic growth, since successful companies tended to be those that used cost accounting practices effectively.
While cost and financial accounting made big strides during the Victorian era, problems remained. The railroads proliferating throughout Britain illustrate some of the difficulties that financial reporting had to deal with. Promoters of these capital-intensive enterprises often used bookkeeping methods that were dicey at best. Yet to attract and keep investors, the railroads required books that fairly reflected the company’s financial performance. Solutions eluded the accounting profession for many, many years.
Two problems were at the heart of the confusion. One was how to allocate expenditures to capital and operations. The other was whether business should make a provision for capital depreciation before calculating operating profits. In an effort to impose order onto the resulting chaos, in 1868 Britain imposed legislation on the railroad industry. The Regulation of Railways Act prescribed uniform financial reporting and audit practices, but the procedures introduced were not particularly successful. They did not resolve the question of the distinction between capital and revenue, for example.
Railroads transformed the economy of Britain as they spread to Europe and North America. In Alberta’s case, a railroad brought the province into being.
Sidebar: Accounts in disarray
One of the many notable men to rise through the ranks of The Bay was Donald Alexander Smith, a Canadian fur trader, financier, railway promoter and statesman. Knighted as Lord Strathcona and Mount Royal later in his career, Smith was apprenticed to the Hudson’s Bay Company in 1838 and worked for many years at the fur trade in Labrador. He served as chief commissioner for the company in Canada from 1870 to 1874. After becoming the principal shareholder, he served as governor of The Bay from 1889 to 1914.
Smith did not scale the corporation’s ranks through his proficiency as an accountant. In 1845, he received a scathing letter from the company’s governor, Sir George Simpson. Simpson had just visited his operation at Mingan, Labrador. “Your countinghouse department appeared to me in a very slovenly condition, so much so, that I could make very little of any document that came under my notice. Your scheme of outfits were really curiously perplexing, & such as I trust I may never see again, while letters, invoices and accounts were to be found tossing about as waste papers in almost every room of the house.”
The wooden structure that served as The Bay’s Mingan trading post burned to the ground the following year. “My personal property has been wholly lost, as I had to make my escape in my shirt without either coat, hat or shoes,” Smith reported. However, he claimed, “the more important papers indeed almost all of them and the whole of the cash except perhaps ten or fifteen dollars have been saved.”
In fact, Smith had little left from which to create a balanced account, despite his repeated promises. On New Year’s Day 1847, Simpson sat at his desk and wrote angrily to another Bay employee in Canada, George Barnston. “I cannot understand Mr. Smith’s want of attention to the transmission of his accounts in proper shape: he is very active but appears to me to be wanting in method.”
Smith may indeed have been wanting in accounting method. Like Lord Simpson, however, he was a towering figure in nineteenth century Canadian business, and he was also an influential politician. In 1885 Smith became the central figure in what is perhaps Canada’s best-known photograph. Surrounded by a crowd of railroad workers in south-central British Columbia, he was driving the last spike for the Canadian Pacific Railway.
Canada’s Railway
In the middle of the nineteenth century, railroads financed by British capital began transporting people and goods in central Canada and the Maritime colonies. Nova Scotia had a flourishing shipping industry, but the other colonial economies were mostly based on agriculture and the export of raw materials to the British Isles. The North American colonies felt reasonably secure in the shadow of Britain’s economic and naval might.
This outlook changed with the American Civil War. During that terrible conflict, British sentiment favoured the Confederacy. This gave a boost to the doctrine of Manifest Destiny, the belief among Americans that the destiny of the United States was to govern the entire continent. After its 1865 victory, the Union did not quickly decommission its large armies. Many eyes in the republic were looking north.
As the bloodshed was ending, Upper and Lower Canada (Ontario and Quebec) made an appeal to England. A political coalition asked Whitehall to create out of Britain’s North American colonies a sovereign country with close ties to London. Westminster responded with the British North America Act. Confederation united Nova Scotia, New Brunswick, Quebec and Ontario in 1867.
Led by Sir John A. Macdonald, a Conservative, the newly minted federal government began a grand project to combine British North America into a governable whole. The chosen vehicle for the western portion of this undertaking was a railroad that would connect the commercial centres of Quebec and Ontario with British Columbia and points between. That railway was the Canadian Pacific (CP).
In late 1869, Canada’s federal government acquired the Hudson’s Bay Company lands in Western Canada. Manitoba and the colony of British Columbia entered Confederation the following year, and Prince Edward Island in 1873. To maintain order and assert sovereignty over the new western territory, in 1873 Ottawa created the Northwest Mounted Police (today the RCMP). In Canada’s prairies, law and order therefore preceded settlement — quite unlike much of the experience in the American frontiers.
To tie a ribbon of steel from Canada’s commercial heartland to her western coast, the federal government used land grants and other concessions to encourage the creation of Canadian Pacific, a railway to the Pacific coast. That enormous enterprise, which arrived in today’s Alberta in 1883 and was joined to the coast three years later, removed the major impediments to settlement in Canada’s west.
Settlement
Before the coming of the railroad, small numbers of settlers had arrived in Alberta by canoe, horseback and cart. Their numbers stood at only about 1,000 in 1881. Ten years later, the non-Aboriginal population had increased to some 17,500.
But the federal government wanted to fill the prairies with productive farmers, and it took the energetic leadership of Clifford Sifton to make that happen. By background a Manitoba lawyer, from 1896 to 1905 Sifton was Canada’s immigration minister under the Liberal government of Sir Wilfred Laurier.
A number of factors contributed to Sifton’s remarkable success. He encouraged major recruitment drives for settlers in Britain and Ukraine, whose “stalwart peasants in sheepskin coats” he believed would be well suited to breaking the prairie to the plow. The Canadian Pacific Railway also recruited settlers. Railroads cannot be profitable without goods or people to transport, and the CPR intended to move both.
Another factor that helped encourage settlement was the closing of the US frontier. Lured by the promise of 160-acre homesteads for males of 18 years or more, Americans and people from other countries who had first migrated to the United States began moving into Canada’s prairies. In addition, the development of strains of wheat that could mature quickly increased the agricultural potential of the prairies. These factors and a generally strong economy opened the floodgates of settlement. Canada’s frontiers quickly retreated to the north.
Growth and prosperity characterized the final years of the century. This prosperity was partly driven by technology, which was lowering the cost of almost everything — from raw materials to manufactured goods to basic transportation. Locomotives began pulling long trainloads of settlers, their effects and supplies into Alberta.
Historians refer to the seven-decade period that began in 1890 as Canada’s Great Transition — the era in which the country developed into a mature nation-state. Much of that evolution was driven by events in the prairies. Between 1891 and 1914, an estimated 215,000 men, women and children migrated to Alberta from Britain, the United States and continental Europe (especially Ukraine). Central and Eastern Canada contributed an additional 90,000.
These new arrivals cleared forests and broke sod to start farms. As they confined livestock with barbed-wire fences, they began closing in the prairie. They operated vast ranches, reporting financial performance back to absentee owners. They set up shops and stores. With an eye to exporting grain and beef, they developed granaries and stockyards. They established breweries and other manufacturing operations. They provided services like blacksmithing, milling and construction. Doctors, dentists and lawyers began hanging up their shingles. Accountants started looking after the affairs of young enterprises and new agencies of government.
The region’s hotels were sometimes unable to accommodate the swarms of people being discharged at crowded train stations. The real estate market went from strength to strength. Religious life flourished around the churches springing up everywhere, and schools began to educate the young. Government and municipal buildings went up in larger centres. Civic life became more sophisticated. Theatres and rodeo created the beginnings of an entertainment industry.
The year 1897 began a period of railroad building gone mad. Line construction fleshed out the CP system and eventually created two new transcontinental railways — the Canadian Northern and the Grand Trunk. Central Canada’s railways were already mature, so crews laid the lion’s share of new rail in the prairies. The Prairie provinces soon boasted a dense complex of trunk and branch lines serving an expanding cereal economy. Hamlets, towns and cities sprang up around railway stations and along feeder lines.
Though especially strong in Western Canada, growth was remarkable Canada-wide. With the buoyant optimism that was characteristic of the times, in 1904 Prime Minister Sir Wilfrid Laurier made an oft-quoted prediction to Ottawa’s Canadian Club: “All signs point this way, that the twentieth century will be the century of Canada.”
In the west, the symphony of growth reached a crescendo in 1905, when an act of Parliament welcomed Alberta and Saskatchewan into Confederation. The new provinces were heir to British traditions of law and corporate governance, and organized around a parliamentary form of government. The province’s first premier was Alexander Rutherford, a Liberal. One of the early acts of Alberta’s government was to create a charter for the University of Alberta, to be located in the City of Strathcona (now part of metropolitan Edmonton).
Such technological marvels as electricity and automotive power began gracing the land. The prairies were already connected to the world by telegraph, and local telephony was making an appearance. So was electric lighting (hydroelectric plants began to appear in Alberta in the late 1890s). And the first recorded automobile trip from Edmonton to Calgary (a two-day journey) took place in March 1906.
By this time, virtually all the office technologies that would dominate the accountant’s work were readily available, although in real terms they were far more costly than they are today. These included typewriters and carbon paper; preprinted ledgers, journals and binders; pencils and nib pens; reams of standard and legal-sized paper. These and the other accoutrements that made accounting possible would not be augmented with much more sophisticated tools until after the Second World War. The main exception was the mechanical calculator, which began to be used in the 1920s.
Coal mines in southern Alberta were supplying rapidly growing demand. In the beginning, the market included coal-fired locomotives and the occasional steam tractor; industrial furnaces, fireplaces and stoves; utilities that manufactured coal gas. Coal would be the province’s primary energy source until the middle of the century, and is still a major export.
Many settlers were somewhat aware of Alberta’s oil and gas potential. Around the then-hamlet of Fort McMurray (a remnant of the fur trade), Aboriginals had known long before Wa-Pa-Sun about bitumen seeping into the river. At the turn of the century, a few hardy souls were already trying to coax oil from surface outcrops of this boundless resource.
The town of Medicine Hat developed gas for light and heat in the 1890s, and a local brick-making industry grew around gas-fired kilns. And by 1909, Eugene Coste (often called the father of Canada’s natural gas industry) was in London to raise funds for a natural gas pipeline to the bustling city of Calgary. When the 274-kilometre line was completed three years later, natural gas would begin replacing coal gas and pot-bellied stoves in Alberta’s second-largest city.
This period of sustained economic growth grounded the economy in agricultural exports. But as homesteaders were breaking the soil, urban construction and development were proceeding apace. Entrepreneurs and the town of Medicine Hat were already beginning to exploit the petroleum resources that would eventually displace agriculture as the prime source of provincial prosperity.
Even tourism had begun. To lure wealthy tourists, in the mid-1880s Canadian Pacific began constructing hotels in the Rockies.
The province’s agricultural economy was still small and prey to endless natural disasters — early frost, grasshoppers, hailstorms and, in the south, drought. But the settlers still felt that opportunity abounded. Economic expansion released an unstoppable sense of optimism into the air. The experience of helter-skelter growth made everything look possible.
The first generation to go by the name Albertans, these settlers were astonished at how quickly the streets of new villages, towns and cities filled with horses and wagons. Dazzled by the first of many booms, they correctly believed growth would continue unabated for many years to come.
It was in this dynamic environment of about 350,000 souls that a small, dedicated and forward-looking group of men organized the Institute of Chartered Accountants of Alberta. Legislated on December 16, 1910, the institute’s incorporation created the legal foundation for accounting as a profession within Alberta.
“The amount of tax to be paid by all persons is divided into three classes known as the Normal Tax, the Supertax and the Surtax, all at graduated rates. The Supertax and Surtax apply only to net incomes in excess of $6,000. The Normal Tax applies to income exceeding $1,000 in the case of an unmarried person or widow or widower without dependent children, and $2000, in the case of all other persons.” — Dominion of Canada Income Tax form, 1917.
Chapter Two — Peace and War: 1910-1917
By the year 1910, there was demand for people to account for the finances of business, and the influx of newcomers included accountants and bookkeepers. Some of those claiming to be accountants had no verifiable credentials. Nor did they have verifiable skills or accounting knowledge. After all, anyone could claim to be an accountant and solicit clients, and still can. There were no provincial standards or certification procedures, and therefore no disciplinary measures for poor practice.
Alberta practitioners would need to form a professional organization to deal with educational requirements and other issues, and provincial legislation had a role to play. To the 11 men who created the Institute of Chartered Accountants of Alberta, this much was clear. They followed a pattern established in other Canadian provinces, and which took the lead from Britain.
Canadian Pioneers
Montreal and Toronto were Canada’s accounting pioneers. Montreal was the largest Canadian city, and the country’s primary commercial centre. Most trade between Canada and Britain passed through this strategically vital port.
Rivalry between Montreal and the much newer city of Toronto (established as “York” in 1791) would endure for the first century of Confederation. Toronto was originally created as a British military centre in the aftermath of the American Revolution. The city was positioned within forests with commercial potential. As Empire Loyalists and their offspring tilled the fertile soil, what is now southern Ontario proved to be rich agricultural land. But in the beginning, Toronto’s greatest asset was an excellent harbour in a fortifiable location away from the US border.
The city quickly emerged as the dominant commercial centre in Ontario, and was the capital city almost from the time the colony of Upper Canada was established in 1790. Government spending and employment boosted Toronto’s economy and regional development, and settlers felt comforted by the presence nearby of British troops and ships.
As financial, industrial and commercial centres, Montreal and Toronto loom large in Canada, but have always been small in the international scheme of things. The early roles they played in North American accounting were disproportionate to their economic muscle, however. On this continent, they were the first to incorporate accounting organizations.
Canadians were leaders in the field because of their close ties with Britain, where accounting was relatively advanced. Canada’s pioneering accountants were often Scottish and English imports sent to the colonies to audit British business. They brought new-fangled accounting systems with them. And they would frequently form business relations with bankers, who were a good source of referrals.
In the profession’s earliest days, businesses were small. They were generally owned by a single proprietor or (like the London-based Bay) by a small group of venturers. Few of these enterprises were accountable to any shareholder other than the proprietor. Neither corporate nor personal income taxes were even twinkles in the eyes of politicians, and businesses were generally content with Bob Cratchit-style bookkeepers to keep their affairs in order. Businessmen were frequently reticent about their affairs, and mistrust of the emerging profession was common.
To the extent that accountants were branching out from bookkeeping, they still had limited training — mostly in estates, trusts and liquidations. The first significant appearance of public accountants in Canadian law was in the Dominion Insolvency Acts of 1864, 1869 and 1875. These pieces of legislation called for “Official Assignees” to administer and distribute estates in bankruptcy. One professional focus of many early accountants was thus to serve as trustees — administering the assets of bankrupt companies and settling creditors’ claims.
The profession continued to evolve with the formation of joint-stock companies during the 1870s — a change accompanied by the beginnings of the Montreal and Toronto stock exchanges. Exchanges made it easier to trade securities, but the birth of stock markets in Canada coincided with a worldwide recession that saw banks and other large companies collapse with depressing regularity. Badly stung by losses in the banks and other companies, the business community began to demand more dependable financial reporting and verification of corporate results.
Coincidentally, accountants in Montreal and Toronto met several months apart in 1879 to discuss creating a professional society of accountants in each of their respective cities. It was not a popular idea with all accountants of the day. Some worried that an organized society with the power to discipline members or disallow them from practising might develop – as, in fact, it eventually did.
In the summer of 1879, Montreal established a professional accounting society. The following year, the Montreal society became the first to receive a charter from government.
What became the governing body for chartered accountants in Quebec was the initiative of pioneer accountants James Court and Philip Simpson Ross, both with Scottish roots. Neither had obtained a formal accounting education. Businessmen who served as bookkeepers to pay the bills, they were aware of the developments in Britain that were turning their occupation into a profession.
Of the two men, Ross is the better known, since he formed one of the continent’s first lasting accounting firms. Ross had arrived in Montreal in 1853. He set up an accounting firm in 1858 with the announcement, “I beg respectfully to intimate that I have commenced business here as an Accountant, Custom House & Commission Agent and shall be happy to receive a share of your favours.” A century later, P.S. Ross & Sons merged with the American firm George A. Touche & Co to form Touche Ross. Ross’s firm is probably the oldest component of one of today’s global accounting giants, Deloitte Touche Tohmatsu.
Court and Ross brought 11 other accountants together in Montreal at the Mechanics’ Hall, a community centre. The group agreed to form an organization, the Association of Accountants of Montreal, which would set professional standards of practice for members. This organization went through several name changes before becoming l’Ordre des comptables agréés du Québec, its present name.
Following the lead of their British forebears, the founders sought statutory recognition as a professional body. According to the Quebec association’s 1880 charter, “the objects of the corporation are to promote the efficiency and usefulness of its members, and to afford opportunity for giving expression to their opinions upon all questions bearing upon or affecting their calling.” Quebec’s Ordre would develop with the profession, and candidates for admission would one day be required to take a qualifying exam. Also, the society would create a formal procedure for regulating the behaviour of members. And accountants would one day have to prove they were competent to practise. Once they had done so, however, they could use the now-familiar professional designation Chartered Accountant (CA).
When royal assent to incorporate the Ontario Institute of Accountants and Adjusters of Canada came in 1883, the association immediately changed its name to the Institute of Chartered Accountants of Ontario. That institute addressed issues like those faced by Quebec accountants — and found similar solutions.
Curiously, a Winnipeg organization received a provincial charter in 1886 and held annual meetings for each of the following two years. The organization then fell into a state of abeyance for 14 years. That point notwithstanding, it is worth noting that Quebec, Ontario and Manitoba all had incorporated accounting institutes before the Americans. The accounting organizations in the United States were not incorporated. They were local professional societies.
The Yanks leapfrogged ahead of the Canucks in 1887, however, by forming a viable national organization. Accountants from New York, Philadelphia, Chicago and other cities formed the American Association of Public Accountants, the predecessor of the American Institute of Certified Public Accountants. Because of jurisdictional disputes, such an achievement would elude Canadians for another quarter of a century.
Accounting Wars
The accounting profession continued to expand. In time, demand grew for a national association to bring the provincial institutes together. Public practice accountants, including many who were not even members of a provincial institute, lobbied for such an umbrella.
In 1901, the Senate introduced a bill to incorporate the Institute of Chartered Accountants, Actuaries and Finance, to be headquartered in Montreal; an early draft of the bill had unrealistically been called An Act to Incorporate the Institute of Chartered Accountants of North America. One year later, this legislation supposedly created a single professional body for the nascent accounting profession. This professional body would set standards of accounting practice and reporting, provide education to its members and confer the use of the CA designation across Canada.
This legislation quickly raised questions about federal and provincial jurisdiction, however, and the provincial institutes soon became involved in a wide-ranging dispute with DACA (the Dominion Association of Chartered Accountants). Provincial rights were the main point of contention. According to the British North America Act, the provinces have authority over education and commercial law. Therefore, the provincial institutes contended, only they should have authority over professional issues.
The bitterest struggles were between DACA and the Ontario Institute. The Ontario Institute (headquartered in Toronto) and DACA, based in Montreal got into turf wars that lasted for years. When these battles were at their worst, the Ontario Institute competed openly with the Quebec and Dominion associations for Montreal members. Among its other tactics, the Ontario Institute tried to restrict to itself the legal right to issue the CA designation within Ontario. If successful, this would have excluded DACA members from bearing the CA designation in Ontario unless they were Ontario Institute members.
In 1908, the warring organizations reached an agreement to resolve their differences through a classic Canadian compromise. The driving force was Harry L. Price, the president of Britain’s Society of Incorporated Accountants and Auditors. Price helped facilitate negotiations among Canadian accountants at a conference sponsored by the American Association of Public Accountants. These discussions took place in Atlantic City, New Jersey.
Once agreement had been reached, it took time to make the necessary by-law changes to put the agreement in place. However, the outcome of the Atlantic City compromise was the structure of Canada’s CA organizations as they exist today: a Canadian association, which serves as an umbrella for the provincial institutes. This arrangement reflected the provisions of the British North America Act, which gave the provinces jurisdiction over both education and commercial law. The Dominion Association was now Canada’s overarching professional organization. However, accountants would only receive membership in the national organization through membership in a provincial institute.
Although these unseemly battles were now supposedly resolved, the bitterness of the early disputes lingered. Some early DACA members from Ontario refused ever to apply for membership in the Ontario Institute.
By the time the DACA/provincial institute turf wars were winding down, there were six provincial institutes. Besides Quebec, Ontario and Manitoba, these included Nova Scotia British Columbia and Saskatchewan. It was now obvious that Alberta’s accountants needed to get busy. They were the only accountants in Western Canada without a provincial organization.
Since Alberta had no formally sanctioned provincial accounting organization, there was no practical way for aspiring accountants to receive CA status. In the absence of an Alberta Institute, only the Dominion Association could issue new CA designations to accountants in Alberta, but it did not have the opportunity to arrange to do so during the turf wars. There are no records of a DACA-accredited accountant who moved to Alberta. Thus, Alberta’s only CAs had been accredited in another province or in Britain.
Sidebar: Sister Institutes
This table shows the institutes that belonged to Canada’s national organization as this book was being written. The by-laws of the Dominion Association’s 1902 charter included the four institutes then in existence as members. In a practical sense, however, the early institutes did not join DACA until 1911, when Canada’s CA profession formally adopted the structure it holds today. The Institute of Chartered Accountants of NWT also serves Nunavut, the territory that began life as a northern jurisdiction in 1999.
Provincial/Territorial Institute Founded Joined DACA/CICA
Ordre des comptables agréés du Québec 1880 1911
Institute of Chartered Accountants of Ontario 1883 1911
Institute of Chartered Accountants of Manitoba 1886 1911
Institute of Chartered Accountants of Nova Scotia 1900 1911
Institute of Chartered Accountants of British Columbia 1905 1911
Institute of Chartered Accountants of Saskatchewan 1909 1911
Institute of Chartered Accountants of Alberta 1910 1911
New Brunswick Institute of Chartered Accountants 1916 1918
Institute of Chartered Accountants of Prince Edward Island 1921 1921
Institute of Chartered Accountants of Newfoundland 1949 1949
Institute of Chartered Accountants of Bermuda 1973 1973
Institute of Chartered Accountants of Yukon 1973 1977
Institute of Chartered Accountants of the Northwest Territories 1979 1979
Government and Business Accounting
In many ways, however, it did not much matter whether accountants called themselves CAs or not. Many of the unaccredited pioneer accountants in the province served Alberta’s business community and governments well – by the standards of the day.
Alberta exemplified early government standards. Edward Burley, who served as provincial auditor from 1905 to 1923, did not become a chartered accountant. The accounting system he presided over consisted of statements of income and outgo. During his years in office, the annual summary financial document was the Receipts and Payment Statement. Burley’s approach to accounting was basic, in keeping with the times. The province’s first balance sheet did not appear until after he left office.
Albert Edward Nash is an example of an undesignated accountant in public practice. Although somewhat tainted by scandal, his life helps illustrate how transient careers could yet establish enduring accounting firms.
Born in Wales in 1884, Nash had worked as a clerk for a CA firm before coming to Canada in 1907. Like most other immigrants to the province, Nash and an English friend went to a rural area to homestead, taking advantage of the government offer of land for settlers. Near the hamlet of Onoway west of Edmonton, they started the backbreaking labour of constructing a farm during the summer of 1908.
Farm life in Alberta was not easy. It was hard work under extreme conditions that were quite different from those of the mild, damp Welsh climate. Nash soon left the farm for Edmonton. With limited experience but a good head for numbers, he took several bookkeeping and auditing jobs. Soon he was in public practice.
In 1910, Nash joined with two other accountants — Arnold Soars and Charles Baldwin, a Scottish chartered accountant. The three formed Nash, Soars and Baldwin. When Nash first opened his practice, neither he nor Soars were chartered accountants. This was quite common practice at the time. However, for Albert Nash to achieve CA status was a long time coming. As we shall see, he was the subject of the Alberta Institute’s first formal inquiry into professional conduct.
In 1913, Nash’s firm briefly became Nash, Soars and Jeffreson. Both of Nash’s partners had left the practice by 1915 so he and his brother, Hugh, formed Nash and Nash. Albert Nash served in World War I, however, and returned to Edmonton in 1919. He then left for Toronto to work as comptroller for Maclean’s magazine. He remained in Eastern Canada and joined Clarkson, Gordon, Dilworth & Nash in 1921 (later known as Clarkson Gordon, today Ernst and Young).
According to one record, Nash “was particularly skilled in company management and, during the depression in the thirties, was in effect managing a number of them, including Massey-Harris and Maple Leaf Milling.” Nash served as an adjutant general in World War II until his death in 1944. He died after accidentally hitting his head on a beam during inspection of a prison.
Brother Hugh operated Nash & Nash until 1934, when his son Alan joined him. During the following quarter century, the firm opened offices in Grande Prairie, Peace River, Calgary and Prince George.
Founding the Institute
Alberta began to follow in the footsteps of the other provinces on Friday, November 18, 1910. On that day, the Honourable John Robert Doyle, the Liberal member for Sturgeon, introduced a private member’s bill into the provincial legislature, perhaps on behalf of institute pioneer John Watson. Bill #52 was an act to incorporate the Institute of Chartered Accountants of Alberta, more commonly the ICAA. Royal assent for the formation of the institute was given three weeks later, on December 16.
While Watson – whose later involvement with the institute involved scandal – may have been the person to induce Doyle to introduce the bill, its preparation no doubt involved consultation with other Alberta accountants. Several (perhaps all) of ICAA’s 11 founding members probably had a hand in shaping the legislation. In addition, the drafters of the Alberta legislation had apparently consulted with other accounting organizations. As the newly founded Canadian Chartered Accountant magazine pontificated, “Alberta, the only one of our group to have the benefit of a family consultation in advance, enters upon its propitious existence fully armed to protect itself against invasion of its rights and privileges...with the means of self defense and incentive to development.”
Because of these efforts, the Institute of Chartered Accountants of Alberta Act mirrored CA legislation in other provinces. The Act, which established the rules and by-laws for the institute, has been amended and updated many times. In the beginning, however, it included clauses that were very specific to the times.
The act made allowances for those who were already members of a recognized institute or association. As long as those accountants applied to the ICAA secretary within six months of the charter’s receiving royal assent, they could become members of the Alberta Institute and retain their CA designations.
Membership was divided into two classes: fellows and associates, or FCAs and ACAs. In the 1880s, the newly formed Institute of Chartered Accountants in England and Wales began using these designations, which had very specific meanings. A Fellow Chartered Accountant was a firm partner or a proprietor in practice, while an Associate Chartered Accountant was a qualified member of an accountant's staff, or a member not in practice.
In the Alberta Institute, any member could use the ACA designation. But Canada was more egalitarian than British society, and Canadians adopted the simple designation CA. This left the qualifications for the FCA designation unclear until 1914, when James Marwick applied to council for fellowship standing. Council ruled against Marwick’s request. “Fellowship standing should be granted only to residents of the Province who have rendered some outstanding service to the Institute.” The original act had another provision for those who rendered conspicuous service in respect to education or the general welfare of the institute; they could be elected honourary members. Although this did not entitle them to use the CA designation, this was a moot point. After all, those early honourary members were institute members and, therefore, already CAs.
The charter members also established membership fees and set up an office, which initially resided with the secretary-treasurer. The institute office was located in Edmonton until Secretary Cecil Race died in 1927. Calgary member John Williams was the institute’s secretary-treasurer for the next 11 years, working from Calgary.
When Williams retired from this position in 1938 a special lunch meeting was held in his honour. In appreciation of his long and valuable services to the institute and the profession, Williams was presented with an illuminated address signed by 116 members and with a “purse of gold” contributed by the members.
According to the charter, between six and 21 members could comprise the institute’s council. Each year the institute would hold an annual meeting to elect council members and conduct other business. A long-observed tradition began in 1918. For the first time, the annual meeting was held in the city (Calgary or Edmonton) other than the one in which the president resided. This remained in effect until 1932, after which the rule was turned around. The annual meeting would now be held in the president’s home city.
Annual meetings and council meetings were held on Saturdays. At the 1920 annual meeting, Harry Patriquin moved to hold future annual meetings on a different day of the week. The motion failed, however. In 1930 Hugh Nash unsuccessfully questioned arrangements for the annual meeting again, writing to council that “a game of golf or tennis would be considerably more enjoyable...the dinner and meeting should be held in the evening.”
At least two weeks before the annual meeting, potential nominees would have to announce in writing their intention to run for office. Their nominations would have to include the signatures of two institute members. All members would receive a list of nominees. They could vote irrespective of whether or not they planned to be present at the annual meeting. Council would consist of a president, two vice-presidents, a secretary and a treasurer. One person could hold the last two positions.
To formally meet the provisions of the act, the founders held two distinct meetings. First, a small group anointed themselves as an interim council, chose an interim president and set the date for the first annual meeting three months later. At the annual meeting itself, an even smaller group formally elected themselves as the first official council. Here’s how this occurred.
The first council meeting took place on March 4, 1911. Six members were present: Calgarians John Watson, James Sutherland and Arthur Edwards; George Percy Blythe and Cecil Race of Edmonton; and W.D. Wing, from Lethbridge. Edwards chaired the meeting.
Gathering at one of Calgary’s new business buildings — the Burns Block offices of Messrs. Edwards and Morgan — their first order of business was to select an interim council. Blythe was elected president; Wing and Edwards were both named first vice-presidents; Watson became secretary-treasurer. They also chose Harry Baldwin as auditor.
Next, the group approved preliminary expenses. This happened to be the cost for the institute to incorporate — $303.40. The charter members appointed the Bank of British North America as their bank and set their first annual meeting for June 24.
The site was the original Banff Springs Hotel. Either the distance to Banff was too great or interest in the institute was too small for most accountants to attend. Only four showed up: Edwards, Race, Blythe and Watson. Although their deliberations took place in the original wooden hotel, construction of a new stone structure — the one that is renowned today — had begun nearby.
Although few men were present, the minutes suggest that they approached that first annual meeting with considerable solemnity. Typed in blue ink with the occasional typographical error, the minutes were otherwise impeccable. The founders clearly had a sense of occasion as they laid the groundwork for the new organization.
With each representing an area of the province, they elected themselves officers of the institute. Edwards (who was named the first Fellow of the Alberta Institute three years later) was president. Race was first vice-president, while Blythe was chosen second vice-president. Watson became secretary-treasurer. Although he was not present, Baldwin was re-elected auditor.
The matter of early wages requires some elaboration, since it casts such an interesting light on both the value of the Canadian currency during those years and the rapid growth in administrative effort that the institute required. When Watson first served as secretary-treasurer, he was the only officer to receive compensation – a $25 per annum “honorarium” for his services. In 1913, the secretary-treasurer received $50 per year; in 1914, $100. And when Cecil Race took the job in 1915, he received an annual “salary” of $150. Clearly, the cost of administration was on the rise. To put those sums in perspective, it is worth noting that the Ford Motor Company made headlines in 1914 by announcing that it would nearly double the pay of autoworkers. The company’s new minimum daily wage was $5, and the new workday was eight hours rather than nine.
At the institute’s first annual meeting, Watson committed to obtaining samples of lithographed certificates. The council’s intent was to issue a formal certificate to members, and it was important to choose an appropriate, dignified and official-looking document.
Also at that meeting, they unanimously declared their support for a proposal by which the Dominion Association would take ownership of the accounting exams being held throughout the country. The goal was to make the exams as similar as possible, nationwide. As we shall see, the goal of establishing uniform exams was not achieved for nearly four decades.
Sidebar: The Founders
The 11 founding members of the institute were all immigrants to the province — not surprisingly, since most non-Aboriginal Albertans were new to Western Canada. By the late 1920s, all of the original members had moved from Alberta, retired or were deceased.
Arthur Edwards originally belonged to the Institute of Chartered Accountants of Ontario. He was the Alberta Institute’s first elected president and first Fellow. Edwards resided in Calgary. Before his term ended, he moved to British Columbia where he sat on the council for the British Columbia Institute. He resigned his brief membership in that institute in 1912, after being subjected to an informal investigation.
Born in Glasgow, John Watson migrated to New York and then to Montreal before moving to Calgary in 1906 to become city auditor. Watson was a member of the Dominion Association, and the first secretary-treasurer of the institute. He was president in 1912-13. As this book explains elsewhere, his professional life was later tainted by scandal.
James Sutherland belonged to the Institute of Accountants and Actuaries in Glasgow before moving to Calgary. He served as president of the institute in 1913-14, 1919-20 and 1924-25. He retired from council in 1921 as the by-laws required, and was re-elected the next year. Sutherland continued to serve council until the mandatory retirement rule forced his resignation in 1928. He was transferred to Winnipeg, where he was accidentally killed after being struck by an automobile.
Hugh Anderson first belonged to the Institute of Chartered Accountants of Ontario. While living in Edmonton, he worked for Twin City Coal until he resigned in 1928 and moved back to Ontario.
Also living in Edmonton was Harry Baldwin, a member of the Dominion Association. He was the institute’s first auditor and a partner in the firm of Blythe and Baldwin with ICAA charter member George Percy Blythe. Blythe also was a member of the Dominion Association and worked for the City of Edmonton as auditor from 1905 until 1913, when he relocated to Victoria. Five years later he moved to Havana, Cuba, and worked as the general auditor of Cuba Cane Sugar Corporation. Although Blythe is not officially recognized as the Alberta Institute’s first president, he unofficially served in that role prior to the first elections. The institute named him a Fellow in 1912; when he retired from the institute in 1933, he was elected an honourary member.
A pioneer educator in accounting, Cecil Race was originally a member of the Chartered Accountants Association of Manitoba and was very active in the Alberta Institute. While living in Edmonton, Race served as first vice-president in 1911 and held the position of secretary-treasurer from 1912 until his death in 1927, except for the year 1918 when he was president. Council minutes note that his impartiality and sense of fair play were a great example for others.
While in Canada, Charles Richardson practised accounting from an Edmonton base. On the occasion of its 75th anniversary, the institute published a history that described Richardson as having been “a member of the Transvaal Society of Accountants Incorporated.” Wherever that information came from, it was probably jocular code that meant he was a veteran of the Boer War and had fought in the Transvaal theatre of that conflict. Richardson was elected president of the Alberta Institute in 1914. He was appointed deputy commissioner of finance for the City of Edmonton, later resigning to go into public practice.
Before moving to Edmonton, Charles Lang was a member of the Institute of Accountants and Actuaries in Glasgow. An Institute president in 1938-39 and elected Fellow in 1939, Lang was also appointed provincial auditor after working with the Alberta Department of Agriculture.
A member of the Chartered Accountants Association of Manitoba when he migrated to Alberta, Alexander Mouat originally came to Canada from Scotland in 1882. He served in the Northwest Rebellion as a member of the 90th Rifles of Winnipeg before moving to Pincher Creek. He was named auditor for the City of Edmonton in 1913, and later worked as comptroller-general in British Columbia. He developed a pre-audit system that was highly acclaimed by financial authorities. Mouat was elected an honourary member of the Alberta Institute when he resigned in 1928.
The only founding member from Lethbridge, W.D. Wing originally belonged to the Institute of Chartered Accountants in England and Wales. He was appointed the seventh member of the institute’s council in 1914.
National Reciprocity
Although they took decades to develop, national standards and a uniform system of education would develop consistency among Canadian chartered accountants. They would share nomenclature, practices and ethical standards with their peers, whether they practised in Alberta, Manitoba or “back east.” This groundbreaking development served the profession well. Accounting is one of the few professions with automatic national reciprocity.
It was clear from the very beginning that exams would set the standard for the professional accountant. As early as 1911, the three Prairie provinces held discussions about the desirability of holding joint exams — an idea that would be broached again decades later. The Alberta and Manitoba institutes actually did hold joint exams in 1911-12. The exam papers were identical except for the section covering law.
Initially, not everyone gave full support to the notion of CA status being tied to exam results. Some argued that accountants who had already proved themselves in public practice should be grandfathered, receiving CA status retroactively. Yet the winning faction stressed the importance of the exam as a guarantee of objectivity and impartiality. The 1914 annual meeting, which admitted five new members, formally confirmed that passing the exam was required for admission.
Aware of the activity in Alberta, the Canadian Chartered Accountant reported in 1912-13, “The [Alberta] Institute is in a very flourishing condition, both financially and otherwise, and the lively interest taken is indeed extremely gratifying to all concerned.”
Education and Membership
The debates and decisions of these early days laid the groundwork for a system of education for the professional accountant. With a progressive attitude toward educating its members, the Alberta Institute stressed education from the outset. In fact, the institute charter included provisions for prescribing a course of studies for students and gave the council the authority to make rules and regulations with respect to exams, lectures and other educational requirements.
From 1910 to 1934, CA students were expected to read a required list of textbooks compiled by the institute. These included texts on high school arithmetic, bookkeeping, accounting theory and practice, corporation accounting and auditing, cost accounts, Canadian mercantile law and municipal accounting. In addition, a number of statutes were on the reading list.
Other provinces had already made it mandatory for each student to article with a practising accountant. In 1916, the Alberta Institute followed suit and passed a new by-law to this effect. Starting that autumn, students were required to article for four years. Beginning October 1, 1916, registering with the institute as a “student-at-accounts” was an essential step in the education process.
That student would then “article” with a chartered accountant. The word “article” can be both a verb and a noun for chartered accountants. It derives from the “articles of agreement,” the contract by which he committed to work for a CA (his “principal”) to learn the profession. (Somewhat later, this became known as the indenture.) Since the profession began, accountants have held direct work experience to be at least as important as classroom study.
After the rule about students-at-accounts had been in effect for a year, the institute recognized the need to make allowances for individuals who had articled with CAs in other provinces. This was an early example of national reciprocity. Depending on individual circumstances, the institute would make special provisions for a student’s articling requirements. A practising accountant who belonged to another institute and relocated to Alberta was eligible for membership in the Alberta Institute if he was considered a “public accountant in good standing.” The institute was still adamant, however, that there would be no exemptions for individuals who requested admission without going through the regular channels. After passing the required exams in 1912, W.W. Gould was the first person to be admitted to the institute.
New members were given formal certificates confirming they were qualified to practise as chartered accountants. As official members, each paid annual dues of $11. One dollar of these dues went toward a subscription to the Canadian Chartered Accountant. Through the Alberta Institute, the province’s CAs held membership in the Dominion Association.
The institute soon began the practice of issuing small booklets each year describing the criteria for becoming a CA. The purpose was to advise and communicate with aspiring accountants. These Bulletins of Information also listed recommended textbooks and discussed educational requirements. In 1932, council considered whether it was still necessary to include a list of textbooks in the booklets. After some discussion, they decided that providing the information served two purposes: it was informative for the students themselves, and it let the public know what was expected of the student-at-accounts.
The professional exams were the institute’s most important focus. Shortly after the ICAA was created, council invited the University of Alberta to play a role in the educational process. University president Henry Marshall Tory met with council in 1913 to discuss the logistics of taking charge of the provincial accounting exams and helping determine what the accounting courses should include.
The following year, the university formally agreed to conduct institute exams. The university Senate and the Alberta Institute signed an affiliation agreement. Under the agreement, the Primary Exam was completely under the charge of the university as a test of preliminary education — similar to that required of candidates entering law, medicine and dentistry.
While controlled by the university Senate, the Intermediate and Final exams were professional in character. These exams were to be carried out by a Board of Examiners in Chartered Accountancy appointed on the joint nomination of the president of the university and the ICAA council. In addition, the Alberta Institute’s president would automatically become a representative on the university Senate.
Exam fees were established at the first Board of Examiners meeting on June 26, 1914. The Primary was set at $5, the Intermediate at $15. The cost of the Final was $20. To retake the Primary cost $5, while the cost of retaking the other two exams was $10 per exam. Aspirants to the profession paid a $50 entrance fee — returned if the candidate did not pass the exam or failed to be admitted.
The Primary Exam was identical to the university’s general entry exam. It included tests in English, history or geography, arithmetic, algebra and geometry or bookkeeping. Both the Intermediate and Final exams covered different levels of bookkeeping and accounts, law, auditing and mathematics. Candidates took their exams in either Edmonton or Calgary at the end of the university year.
Once the agreement with the University of Alberta was in effect, successful students were only admitted to the institute with the approval of the university Senate and an affirmative vote in council. The agreement also provided that council would be represented on the Senate. The institute’s first representative on the university Senate was president Charles Richardson.
During the 1914 Board of Examiners’ meeting, examiners were alarmed about poor Bookkeeping 3 results in the final exam. They eventually agreed that the exam had been too difficult to pass in the time given. Accordingly, they decided to count the highest mark (70 per cent) as the exam’s total points. This greatly increased the number of successful candidates, and the board recommended to the Senate that five students receive certificates for having passed the Final, while 14 receive certificates for the Intermediate.
The five successful candidates then applied to become members of the institute. But when council took its vote in June, only four individuals (Kenneth Bowman, John Harvey, Harry Patriquin and Eric Richardson) were elected members. The fifth candidate, Albert Nash, was not.
The first vote on Nash’s application was a 4-4 tie. Upon taking a second vote, council voted 5-2 against his admission. Tenacious to a fault, Nash renewed his application, and council launched its first full-scale investigation into “the professional standing and integrity of the applicant.”
The sub-committee notified all Edmonton members about the investigation, and began to take evidence. Their report – signed by council members Richardson, Gould and Race – enumerated a number of questionable business dealings by Nash and Jeffreson, one of his partners, and observed that the “general opinion” toward his entry into the institute of accountants in Edmonton was “decidedly unfavorable.” The sub-committee did note, however, that “one member of the Institute who has known Mr. Nash for several years and who was associated with him in the same firm of accountants writes very favorably of Mr. Nash’s claims to admission.”
But “in view of the evidence obtained by the Committee as outlined in the foregoing,” they concluded, “we are unable to recommend that Mr. Nash be admitted to membership.”
But this story had still not run its course. In 1919 Nash applied again for membership. After reviewing the evidence from the earlier inquiry and “considerable discussion,” council admitted him in 1919. The reasons for their change of heart are not given, but Nash’s military service in the Great War was probably a factor. Also, his partnership with Jeffreson (who also went to war in 1915) had long ago dissolved. Whatever the case, Gould – a member of the sub-committee that had opposed his admission in 1915 – now seconded the motion that he become a member.
To encourage students to do well on their exams, in 1917 the institute began to award prizes and honours. According to the Bulletin of Information for 1917-18, “A candidate who passes either the Intermediate or Final with 75 per cent or more on each paper is granted Honours. The Council offers each year a prize of ten dollars in gold to the candidate obtaining the highest aggregate marks in the Intermediate and Final examinations respectively.”
In 1914, constitutions were approved for student societies in Calgary and Edmonton. It took four more years for a student society to be established in Medicine Hat. The Canadian Chartered Accountant reported that this “indicates that the opportunities...[in Alberta] for the practice of the profession are appealing to our young men.”
Business Laws Change
As we have seen, new government legislation and regulations helped multiply the opportunities for accountants. This process began with commercial law in Britain during Victorian times, and evolved quickly. By 1907, most public companies in Canada were required to appoint auditors to examine their accounting records and report to shareholders. But the world leader in business legislation was the Ontario Companies Act, which received royal assent in that year.
This act required that four pieces of detailed financial information be provided to shareholders at the annual meeting. These were a balance sheet current to a date not more than three months before the annual meeting; a statement of income and expenditure for the financial period ended on that date; an auditor’s report; and such other information as letters patent or the by-laws of the company might require. The legislation also specified that the balance sheet should distinguish at least 12 classes of assets and liabilities — each of them named in the act. As this practice took effect, business people developed a better understanding of CAs as important intermediaries in matters of finance.
Revisions in 1913 to the Dominion’s Bank Act required each bank to hire practising CAs to conduct an independent audit of its financial statements. Soon after, Canada’s 21 chartered banks published audited financial records for the first time. Prior to these changes, Ottawa had considered having an external audit carried out by either a government department or by the Canadian Bankers Association. Policy-makers decided against either of these approaches on the principle that neither was adequately versed in the complexities of branch banking.
Under the new regulations, each bank was required to hire two auditors. The appointments had to be in the names of the partners rather than in the names of the firms. Further revisions to The Bank Act a year later required the auditors to be from different firms. Both had to sign the financial statement.
Growth
Large accounting firms with roots in the United States and central Canada began to expand into the newly settled Canadian west. Often, senior accountants were brought in to manage the opening of new satellite offices. One example is the firm of Marwick, Mitchell and Company (later known as Peat Marwick), which opened its Calgary office in 1913. This office was a subsidiary of the firm’s Winnipeg office.
J. Train Gray transferred from Winnipeg to manage the office. During the war, he joined the Canadian armed forces and served overseas. Norman Hindsley was his replacement. Hindsley only stayed a year before joining the large meat packing company P. Burns and Company Ltd. as treasurer.
Sam Broad managed the Calgary office beginning in 1916. During his four-year tenure, Broad secured the audit of P. Burns and Company. According to Peat Marwick’s official history, Pat Burns, founder of Alberta’s largest meatpacking company, was illiterate. The book relates a story in which Peat Marwick accountant Thomas Hutchinson served as witness for this legendary cattle baron, who signed a cheque for $12 with an “X.”
Another of Peat Marwick’s major clients in the 1920s was the Hudson’s Bay Company. Most of the accounting work conducted for The Bay was focused on the company’s western-based department stores, fur trading and wholesale activities. Hutchinson, who would become a senior partner in 1960, remembers Hudson’s Bay as a “notable client.”
Broad was one of the first to qualify as a CA in Alberta. As a student-at-accounts, he worked primarily as a bookkeeper to fulfill the necessary requirements. Broad was thus one of the early products of the ICAA’s system of professional education. His articling supervisor liked what he saw, and wrote a glowing recommendation for the young apprentice. He predicted that Broad would do well in the future, “being a person of great integrity and possessing an old head on young shoulders.”
The Alberta Institute participated fully in the life of the national organization. The first member to represent the institute at a Dominion convention was James Sutherland. In 1913, the institute paid his expenses to Halifax — though they were not to exceed $200.
In 1915, the British Columbia Institute suggested curtailing some of the social functions held during these conferences. The Alberta Institute favoured this suggestion but felt “that the drive about the city or a side trip to some points of interest might be arranged without entailing too much expense.”