The First Century of the CPA

By Flesher, Dale L.; Miranti, Paul J. et al. | Journal of Accountancy, October 1996 | Go to article overview

The First Century of the CPA

Flesher, Dale L., Miranti, Paul J., Previts, Gary John, Journal of Accountancy

Public accounting was one product of the forces that transformed the United States in the late 19th century. The country moved from a primarily rural and agricultural society to one that was urban and industrial. Although the increased importance of Wall Street was a new force, the Main Street bankers in every town and hamlet were equally important as small businesses turned to their bankers for credit. These changes created a more complex social order, requiring the specialized knowledge of new professions.

One emerging profession was public accounting, whose members, like the characters in Frank Baum's contemporary classic, The Wizard of Oz, were in search of the yellow brick road to personal fulfillment. But in the accountants' case, the search involved the acquisition of income and status by winning acceptance for their auditing, management consulting and, later, taxation services.


The focal point of the efforts to organize the profession of public accounting was in New York City. Here, two rival organizations competed to create a framework for professional governance. First, there was the Institute of Accounts, an organization founded in 1882 that brought together public accountants, bookkeepers and businessmen interested in accounting. The membership was further unified by a nationalistic outlook supporting the post-Civil War reconciliation of the North and the South. Its leaders included Union Colonel Charles E. Sprague, an accounting theoretician and president of the Union Dime Savings Bank, and Major Henry Harney, formerly of Baltimore, who had served in Robert E. Lee's Army of Northern Virginia.

The rival American Association of Public Accountants (AAPA), founded in 1887, emulated the traditions of the British profession of chartered accountancy. Its founders included Edwin Guthrie, a chartered accountant, Frank Broaker, a correspondent for several British accounting firms, and Richard Stevens, whose family had founded the Stevens Institute of Technology in Hoboken, New Jersey.

Both organizations issued certificates of proficiency to their members. As early as 1884, the Institute of Accounts issued certificates based on passing an examination. The AAPA, the forerunner of the American Institute of CPAs, began issuing certificates in 1887 on the basis of experience. However, this early certification was limited because the organizations could not restrict practice by nonmembers. Legislation was needed to control the growing ranks of practitioners.

It was Henry Harney and Charles Sprague who wrote the original CPA bill that was submitted to the New York legislature. It was introduced in February 1895 but failed to emerge from a House committee and was defeated in the Senate. At the same time, another bill was being circulated by the AAPA. In March 1895, members of the rival organizations met to negotiate the differences between the two bills; the nationalistic bill from the Institute of Accounts was selected with one alteration: The provision requiring CPAs to be U.S. citizens was changed to allow individuals who planned to become citizens to be CPAs. Thus the British-dominated AAPA supported the Institute bill. In 1896, Frank Broaker led the profession's lobbying interests, and the bill passed by almost unanimous vote. It was signed by the governor on April 17, 1896. This law had a grandfathering provision allowing experienced practitioners to become CPAs without taking an examination.

In 1897, the first state CPA society, was established in New York under the charismatic leadership of Charles Waldo Haskins, a descendant of poet Ralph Waldo Emerson.

Within four years of the New York CPA law, Pennsylvania, Maryland and California passed similar legislation. By 1921, with passage of the New Mexico law, the professionalization of public accounting had spread throughout the nation.

In 1905, the AAPA merged with the Federation of Societies of Public Accountants in the United States (a loose connection of state accounting organizations) and kept the AAPA name; many CPAs viewed the merger as the first step in obtaining uniform national standards for the profession. …

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