The Accounting Historians Journal Vol. 19, No. 1 June 1992
Charles W. Wootton EASTERN ILLINOIS UNIVERSITY and Carel M. Wolk UNIVERSITY OF TENNESSEE AT MARTIN
THE DEVELOPMENT OF "THE BIG EIGHT" ACCOUNTING FIRMS IN THE UNITED STATES, 1900 TO 1990
Abstract: This paper examines the growth and changing role of the accounting profession in the United States from 1900 to 1990 with special emphasis on "Big Eight" accounting firms. Major political, economic, and social events of the period and their influence on the accounting profession are analyzed. Each decade is examined in turn, and the historical consequences of the decade on "Big Eight" ac-counting firms in total and individually are presented.
The beginning of the Twentieth Century marked the begin-ning of public accounting as a profession for several reasons. In 1896, the State of New York passed a law restricting the use of the title "Certified Public Accountant" to those passing a state examination. This law was soon followed by similar laws in other states. The establishment of a required examination pro-vided accountants with a more professional image, similar to the one provided lawyers by the bar examination. Furthermore, these laws helped ensure a market for the services of those pass-ing the examination. The responsibility of many accounting firms expanded beyond merely handling bankruptcies and liqui-dations to auditing client financial statements. By 1900, six of the firms that would become "The Big Eight" had been founded. The establishment, survival and growth of these CPA firms, as well as the profession as a whole, was due to the rapid industri-alization at the beginning of the Twentieth Century. During this time, the corporate form of ownership began its rise to promi-nence, along with a corresponding separation of management and ownership. Previts and Merino [1979, p. 129] emphasize the importance of these changes in A History of Accounting in America'. "Perhaps the most important development, in retro-spect, for the emergence of the public accounting profession, was the rise of financial capitalism."