Reflections on the past, present and future of the academic/professional interface in accounting

1. Introduction

Accounting and Business Research (ABR) was first published in 1970, sponsored by the Institute of Chartered Accountants in England and Wales (ICAEW), with the objective of disseminating research in accounting and related fields. Now that more than half a century has passed since ABR was founded, this is an appropriate time to reflect on the evolution of the interface between academics and the profession, which ABR sought to foster. In this paper, I consider the state of academic accounting in 1970 and compare it with the present 2024, noting particularly how the changes have affected the academic/professional interface. I also consider the prospects for the future.

During this period, there has been a remarkable growth in the number of accounting academics and in the breadth of their interests. In some instances, the broadening of academics’ skills has matched that of professional needs, facilitating communication between the two groups, but in other cases, academics have seemed to be more concerned to address subjects which appeal more to their fellow academics, particularly those who edit high status journals. There is an ongoing tension in the relationship between the independence of academic research and the demand for new knowledge which will help the practitioner to address emerging problems, such as sustainability reporting and artificial intelligence.

These are necessarily personal reflections, shaped by my own experience as an accounting academic throughout the period. Thus, they focus mainly on the UK and on financial reporting, although I hope that they will resonate with experience in other countries and in other areas of accounting. The USA particularly has had many similar experiences to the UK and has been an important influence on developments here.

2. The past: 1970

In 1970, accounting in UK universities might well have been described as a ‘cottage industry’. Typically, accounting was taught within departments of economics or commerce, usually with no professor to lead research and stake a claim on resources. Staff were few, and many were part-time, employed in professional practice or industry for most of the time. Very few staff had post-graduate degrees. On the other hand, professional accounting qualifications were regarded as highly desirable and sometimes essential, because of the need for professional accreditation of degree courses.¹

The emphasis on teaching current practice and the lack of colleagues who could provide leadership and support limited both the volume and the variety of research in universities. In this constrained environment, research was limited mainly to the analysis and description of current practical problems of accounting practice using deductive reasoning rather than formal empirical testing. This type of work is dismissed by Watts and Zimmerman (1979) as ‘normative’, supplying ‘the market for excuses’, and inferior to a ‘positive’ empirical research methodology. Nevertheless, this ‘normative’ approach was accessible to practitioners, written in language that they understood, addressing problems that they perceived to be important, and often published in professional journals such as Accountancy (the professional journal of the ICAEW) and The Accountant’s Magazine (Institute of Chartered Accountants of Scotland – ICAS). Thus, it enabled communication between academics and practitioners.

At its most ambitious, this approach yielded high-level critiques of current accounting practice and the institutional arrangements for developing and monitoring professional standards. A notable example, which led to significant changes in the profession's standard-setting practices, was the work of Edward Stamp (Stamp and Marley, 1970). However, for most accounting academics in 1970, research was a hobby; an optional activity to be undertaken in any spare time that was available after the teaching was done.

3. Seeds of change

In 1970, despite these apparent constraints, academic accounting in the UK already had significant achievements and was starting to undergo rapid change. The London School of Economics and Political Science (LSE) had taught accounting for most of the twentieth century. Its first professor of accounting, Laurence Dicksee, (author of an authoritative work on Auditing, 1892) was appointed to a chair in 1914, and later (in the 1930s) a productive research group had developed, led by Professor Sir Arnold Plant, applying ideas drawn from economics, such as opportunity cost (Gould 1974). Members of this group included Ronald Coase, a subsequent Nobel Prize winner in economics, and Ronald Edwards. After the Second World War, Willam Baxter (a graduate of Edinburgh University and a member of ICAS) became Professor of Accounting and, together with David Solomons and Harold Edey, continued the economics-based LSE tradition, contributing particularly to the debate on inflation accounting, which continued beyond 1970.² Edey bridged the academic/professional interface by serving on the ASC’s Inflation Accounting Study Group, and on the Council of the ICAEW.

In the 1960s, the LSE introduced master’s degrees which enabled students who had professional qualifications but no undergraduate education in accounting, to acquire skills in economics, finance and accounting theory. This helped to bridge the academic/professional interface by extending academic training to highly promising young practitioners. An outstanding example was Sir Bryan Carsberg, subsequently a professor at the University of Manchester and LSE, involved in accounting standard-setting at the US Financial Accounting Standards Board (FASB), the UK Accounting Standards Board (ASB) and the International Accounting Standards Committee (IASC) and Director-General of OFTEL (the UK telecommunications regulator). When university accounting departments expanded in the 1970s, most of the newly appointed professors had been associated with the LSE.

Apart from the LSE, there were a handful of other academic groups that were developing a research culture which might challenge and inform the profession, notably in Scotland, where the chairs at the University of Glasgow and University of Edinburgh had traditionally been occupied by part-time practitioners. This changed in 1968 when Edward Stamp was appointed to a full-time chair at Edinburgh. His strident criticism of the profession illustrated the value of independent academics, whose role in the interface was to provide stimulating criticism rather than polite suggestions for improvement in professional practices.

Although research in universities was restricted by the limited resources available, it did exist and was encouraged by some professional bodies, as was the dissemination of research by ABR, first published in 1970 and sponsored by the ICAEW. However, this ‘green shoot’ was a replacement for the former journal, Accounting Research, which had been founded by the Society of Incorporated Accountants and was summarily closed when the Society was absorbed into the ICAEW. This illustrates the ambivalent policy of the ICAEW to fostering the exchange of views between academe and the profession.

Thus, the position in 1970 was that academic accounting was dominated by the demands of professional bodies in teaching and in the limited amount and variety of research that was undertaken. On the other hand, Edward Stamp had demonstrated emphatically the value of the academic as an independent critic.

The seeds of change were there, but they are obvious only with the benefit of hindsight.

4. The present: 2024

Today, the academic accounting community is much larger than it was in 1970, and very different in its interests and activities. The staff are much more numerous and typically (in the case of full-time tenured staff) many more have doctorates and fewer have professional qualifications. This is a dramatic turnaround from the situation in 1970, when a professional training background was dominant. Professional qualifications are now more likely to be found amongst part-time tutors, who are drafted in to teach the more technical aspects of accounting.

The teaching of accounting has changed its orientation towards business studies, with many accounting groups located in business schools, most of which did not exist in 1970. This has encouraged the rapid growth of finance teaching and finance-based research within accounting groups (as well as the emergence of many accounting and finance groups). It has also brought management accounting closer to organisation theory and other aspects of management science which have a bearing on accounting.

Both the volume and the variety of research are much greater than in 1970, reflecting the changing number, interests and qualifications of the staff. Traditional professionally oriented research, of the ‘normative’ variety, which was the predominant paradigm in 1970 and is still required by standard-setters, has become unfashionable amongst academics and has low status.³ Empirical studies such as those in the ‘positive’ style preferred by Watts and Zimmerman (explaining preparers’ choice of accounting method) have become very fashionable, as have other empirical studies such as those of the impact of accounting earnings on share prices, following Ball and Brown (1968) and Beaver (1968). Critical accounting has emerged as another important approach to accounting research. This uses a variety of methodologies, ranging from deductive theory to empirical studies, to explore accounting in its social and organisational context. The world’s leading journal in this field, Accounting, Organizations and Society, was founded in 1976 by another LSE accounting graduate (with important additional training at Chicago), the late Anthony Hopwood. Experimental research has become much more widespread in accounting than in the 1970s, with experiments being conducted across the various sub-fields of accounting and auditing.

4.1. Achievements

This change in the research interests of academics has important implications for the academic/professional interface. It may superficially appear that academics have pursued their own interests, motivated by the need to advance their careers by impressing their colleagues, rather than producing new knowledge intended to improve the practice of accounting. The regulators and standard setters, who have been increasingly numerous in recent years, have received little help from contemporary academic research; they are more likely to draw on old fashioned ‘normative’ research from the past.

On closer examination, this is an incomplete picture, for two reasons.

First, accounting research should not necessarily be confined to the technicalities of book-keeping or even the merits of alternative methods of consolidating accounts. Researching how users process accounting information, or the power relationship between different interest groups involved in the accounting standard-setting process, can be of equal or greater use to understanding the accounting process and its role in society. This can be justified as pure, curiosity-driven research, like some research in economics or sociology, but it also has potential practical use, by informing policy making by government agencies, professional bodies, standard setters and practitioners. A good example of work of this type is Michael Power’s The Audit Society (1997).

Second, the broadening of accounting research has not created an unbridgeable gap between academics and practitioners because the interests of practitioners have, in many cases, moved in a similar direction. This is not a coincidence: both groups have responded to similar pressures. These pressures are due to the evolution of markets and economies. Most obvious is the increasing sophistication of financial markets. This has led to the development of new methods of doing business, including new financial instruments which are not easily accommodated by traditional accounting methods. These instruments played a significant role in ‘creative accounting’, the misuse of accounting to mislead investors and other users of accounts (Griffiths 1986, Smith 1992, Tweedie and Whittington 1990). In response to this and other developments in the marketplace (such as globalisation of financial markets), regulation has increased, and with it the need for new understanding by both the regulators and the regulated. At one time, practitioners struggled with the idea of discounting as a new concept used in accounting standards. Now they struggle to understand option pricing models. Tomorrow, they will struggle with something else: we do not know exactly what it will be, but it is highly likely to be devised by financial economists, somewhere in academe.

There are many examples of academics contributing to the development of the practice of accounting in this changing world. We have already noted a striking example in Professor Edward Stamp’s debate with Ronald Leach (the President of ICAEW at the time) in 1969, which led to the establishment of the ASSC. Later, the debate on inflation accounting in the 1970s involved many academics, some serving with practitioners on official and professional committees (such as Professor Harold Edey’s long service on the ASC’s Inflation Accounting Steering Committee, or Professor Walter Reid’s membership of the Sandilands Committee) and others carrying out research on various alternative policy proposals (such as the Carsberg Report (Carsberg and Page 1984), sponsored by the ICAEW, which summarised the results of a research programme on the benefits and costs of Current Cost Accounting). Later, the ASB’s standard on Goodwill (FRS 10 1998) was influenced by a study of goodwill by a team of academics (Arnold et. al. 1992), funded by the ICAEW. Funding of research by professional bodies also encouraged research. Dialogue between researchers and practitioners was promoted by professional bodies through events such as the ICAEW’s Information for Better Markets conferences, the proceedings of which have been published annually in the International Accounting Policy Forum of this journal. Professional bodies also encouraged the dissemination of research results in a form accessible to practitioners, an example being the survey by Cascino et al. (2013) of research on how financial reports are used.

The development of ‘critical’ schools of accounting has also provided commentary on current accounting practices, in the spirit of Edward Stamp’s early campaign to improve accounting standards. For example, Professor Prem Sikka (now Lord, in recognition of his work) has conducted several campaigns which have led to public awareness of dubious accounting practices. Recently, he has drawn attention to the encouragement, by the ‘Big Four’ accounting firms, of tax avoidance (Sikka 2016).

A distinctive role of academics is to raise new issues that are beyond the immediate horizons of practitioners. An example of this is sustainability, particularly in relation to the environment. This has been a concern for academic accountants such as the late Professor Rob Gray for some years, and their initial role was as ‘whistle blowers’, who drew attention to an important emerging issue which was potentially embarrassing to professionals, because of its implications for their employers. Sustainability has now been accepted as an important issue for practitioners, and the International Sustainability Standards Board has been established. The role of academics will now change to assisting the new process by providing access to relevant research by academics. The inter-disciplinary nature of the sustainability problem should give academics a particularly suitable opportunity to contribute: it opens the possibility of inter-faculty collaboration with scientists, engineers, economists and other disciplines. However, academics should retain their important role as independent critics, so it is not to be expected that their contributions will always support the views of official bodies. They should not become suppliers to ‘the market for excuses.’ Wagenhofer (2023) provides a suitably cautionary commentary on the difficulties of reconciling financial accounting methods with sustainability targets.

Many more instances of useful communication across the academic/professional interface could be cited. Of course, these are specific cases rather than a statistical sample, but they do provide concrete evidence that some effective communication has taken place. However, to provide a more balanced case, we need to consider possible adverse aspects of the process.

4.2. Tensions

Although there has been useful interaction across the academic/professional interface, there could have been more. The switch from the narrow, professionally dominated research interests of 1970 to the eclectic range of research interests of the present time may have gone too far. The new breed of accounting academics typically has less professional training and experience and may therefore find it more difficult to relate to professionals. Moreover, the career incentives for academics have become more heavily weighted towards publication in academic journals, which are addressed to other academics rather than the profession (something that more recent research assessment exercises in the UK have tried to correct by introducing a criterion of ‘impact’).

For at least thirty years, there have been calls for academic research to be more relevant to the needs of policy makers (e.g. Beresford 1994, a former chair of the FASB). There have also been studies by academics, such as Rajgopal (2021), who examines the contribution of academic research to practice over the past fifty years and concludes that it was inadequate. He attributes this to the adverse effects of academics writing to please the editors of academic journals rather than a wider constituency including practitioners and policy makers. Recently, Garcia Osma et al. (2023) discuss these issues and provide statistical evidence (extending the work of Burton et al. 2021) of the low impact of leading accounting journals in non-academic media. They also survey individual academics in order to establish the obstacles to greater impact, such as career advancement being based on to publication in academic journals. Appropriately, their empirical evidence is international, reflecting the international nature of the universities, the accounting profession and the academic journals. Thus, any remedies for the problems identified will have to apply internationally.

This empirical evidence suggests that accounting research, as published in leading academic journals, has a lower impact outside academe than is the case in other academic disciplines, even ones close to accounting, such as finance. The result of his situation has been a relative neglect by academics of the techniques of accounting, as developed by standard-setters and applied by practitioners (which Anthony Hopwood (1987) described aptly as ‘the accounting craft’). This is a pity because this poses many problems that are intellectually challenging and require a level of intellectual rigour that is worthy of an academic discipline, and the practitioners who struggle with them are often very able and experienced people who could engage very effectively with academics. Furthermore, as we have already seen, the developing marketplace which professionals serve demands new skills in subjects such as finance, which academics are well placed to provide.

An example is the measurement of pension obligations. Current accounting standards in the UK and international jurisdictions try to measure the burden of the pension promise on the employer at current value, by discounting the expected future cash flows associated with the obligation. A critical issue in practice is the selection of discount rate. The present standards adopt a high-quality corporate bond rate, which is essentially a compromise between various alternatives (such as the risk-free rate, which would be lower, or the expected return on pension fund investments, which would be higher). Perhaps a more satisfactory, theoretically defensible solution would have been found if more academics trained in financial economics had contributed to the development of the standards. In addition to specific skills, it might be hoped that academics would bring a degree of independent thought, transcending the self-interest, conscious or sub-conscious, which may motivate some participants on the debate, and which led Watts and Zimmerman (1979) to refer to the supply of and demand for accounting theories as ‘the market for excuses.’⁴

Nevertheless, as noted above, there has been a significant contribution by academics to the world of practice, particularly in the burgeoning activity of standard-setting: the regret is that there has not been more information crossing the academic/professional interface. This is a problem of communication.

A partial remedy for this, which has already been noted, is the production of surveys of specific areas of academic research, written in a form that is more digestible by practitioners and by academics with different interests. Another is the creation of journals designed to cross the academic/professional divide, and the divisions within academe caused by the development of new specialisms. This was one of the motivations for the foundation of ABR by the ICAEW in 1970, a relationship reinforced in recent years by the annual ABR International Accounting Policy Forum, containing papers presented at the ICAEW’s annual Information for Better Markets conference. Later examples are Accounting Horizons (founded by the American Accounting Association) and Accounting in Europe (founded by the European Accounting Association).

Each of these journals has made a valuable contribution, but the sheer weight of specialised and technical papers submitted to them has, over time, made them less accessible to the non-specialist: editors can publish only what is submitted to them. Similar pressures have led the Journal of Business Finance and Accounting (founded by John Perrin, shortly after ABR, as an inter-disciplinary journal, covering accounting and finance) to focus more on empirical accounting research at the interface with corporate finance and corporate governance. The British Accounting Association has changed its name to the British Accounting and Finance Association (BAFA), and its journal, the British Accounting Review (BAR) now publishes many finance papers, reflecting the broader research interests of those who inhabit academic accounting departments. Moreover, there has been a proliferation of new specialist journals which may serve to increase the communication barriers within academe, as well as between academics and professionals. A striking feature of many journals in recent years has been the decline of the book review, which was once a valuable means of communication within the academic community, providing succinct, independent commentary on the work of others, in a form accessible to non-specialists.

The dilution of the dissemination of research that is of direct relevance to professionals is not solely the responsibility of academics. Professional bodies also have an important responsibility. In 1970, Accountancy (published by the ICAEW) and The Accountant’s Magazine (published by ICAS) published articles by academics and by interested practitioners (such as technical partners of practising firms) relating to current problems of practice (such as inflation accounting). The ICAEW ceased publication of Accountancy in 2018 and ICAS has replaced The Accountant’s Magazine with The CA Magazine, which, despite its similar title, does not have similar serious technical discussions. The withdrawal of these vehicles for academic/professional dialogue doubtless reflects the commercial pressures on professional bodies (high costs of production and distribution to an increasingly diverse and growing membership) and the low intellectual curiosity of many of their members (leading to low demand for the product), but it is regrettable that, in this instance, professional bodies appear to have attached such a low value to the dissemination of knowledge to their members, which should be a critical component of the infrastructure of a profession.⁵

Thus, the dissemination of academic research results, and the creative feedback from professionals, are not as effective as they could be. As a result, it seems that academics may possibly spend most of their time addressing one another, in academic conferences or in the increasingly laborious process of editing papers for academic journals, rather than engaging with professionals. This is a pity, because the independence of academics has allowed them, in the past, to promote unpopular ideas which needed airing. The independence of academics should not lapse into irrelevance.

5. The future

Predicting the future is hazardous. We have seen that, over the past 54 years, there have been striking changes in academe, in the professional world, and in the relationship between the two. There is no reason to believe that the extent of change will be less in the future but equally we cannot assume that the future direction of change will be the same as in the recent past. However, it is possible, based on present conditions and past experience, to identify areas in which academics and professionals might usefully co-operate in the future.

Recent changes have been driven by international changes in economies and markets. The globalisation of markets, the growth of multi-national companies and the free movement of capital, together with the associated professional services (such as accountancy) have meant that both the practice of accounting and academic research in the subject are internationally grounded activities. Thus, the experience of the UK has been similar to that of many other countries, with the USA, as the world’s largest economy, typically in the lead.

Any consideration of the future needs to take account of this international dimension. This is most obvious is financial accounting standard-setting, where the IASB has become the international leader and is the primary focus for academics hoping to contribute insights. This is particularly the case of the recently established sustainability board (ISSB), which is embarking on a path-breaking exercise in an area without a substantial body of existing practice to guide it. The IASB already publishes its full programme of planned research and due process documents, giving academics notice of its future research needs, and academics do respond, for example by commenting on exposure drafts. It might be hoped that, in the future, the IASB might commission more academic studies relevant to its work (such as reviews of existing standards), rather than relying on its in-house staff. This would add independence and credibility to the IASB’s research and would provide an incentive for academics to address a non-academic audience and engage with current issues of practical importance.

Another important issue is communication of research results to a wider audience. We have noted several useful past innovations (such as journals and research surveys aimed at non-specialists) that have helped to fulfil this need, but there is scope for more efforts to discourage academics from talking only to one another. The underlying difficulty is to change the incentives of academics. At present, publishing a paper in a leading academic journal (where rigorous methodology expressed in technical language is more important than relevance and accessibility to professionals) will carry more rewards (in terms of promotion and status in the eyes of other academics) than, say, writing a critique of an exposure draft for a standard-setting body. A similar issue arises within the academic community: the increased diversity of accounting in the UK means that communication within the academic community is becoming more difficult, preventing fruitful interdisciplinary interactions. At the same time, book reviews and survey articles, which were once valuable bridges between specialisms, appear to be in decline, because they do not carry the status of original research papers. However, incentives can be changed, to create a more favourable environment. For example, in the UK, the funding body has recently made a significant change in the criteria for assessing the quality of research: impact (in the world beyond academe) has been introduced as an indicator of quality and the assessment of impact plays a major role in determining UK universities’ rating under the Research Excellence Framework (and hence determines universities’ public research funding). This should provide an incentive for academics to engage more with the profession.

Of course, all of this assumes that there will be a supply of academics willing and able to conduct relevant accounting research. The period since 1970 has seen an unprecedented increase in the UK university student population and the introduction of funding formulae which give explicit weight to research excellence. Thus, as existing universities grow and new universities are created, the output of research is naturally increased, so that the aggregate supply of research, as measured by the number of aspiring academic researchers is not directly connected to the demand for it. This is also true in the case of non-UK students, who pay ‘full cost’ fees (which include research costs), and whose number has increased partly because of their financial attraction. Accounting academe has benefitted in recent years from this growth in student numbers, as well as the particular growth of business schools, which now employ the majority of accounting academics.

There are now signs that the recent unprecedented growth is levelling off, but the future is uncertain. However, it is certain that we cannot assume the continuation of high growth rates in student numbers and therefore in staff who are potentially interested in research in accounting. The signs which suggest this are apparent in many countries. They include the restriction of government funding for universities (often accompanied by increasing student fees and funding them by loan schemes), and increasing dependence on high overseas student fees, accompanied by a shortage of overseas students (as an increasing number of universities competes for a stable or declining number of students). In this scenario, the specific fate of accounting will depend on the relative success of business schools, where accounting is typically located. They have been a growth area in recent years and appear to be favoured by the perception that they improve their students’ prospective earnings. On the other hand, growth since 1970 of universities and business schools has been historically high and must eventually hit natural barriers: it is impossible that more than 100% of the population goes to university! Moreover, the value of a degree as a signal of quality as an employee, which was never perfect, will become increasingly weak as the number of graduates increases. Thus, it is possible that the numbers of academics in accounting will stabilise over the coming years. In view of the radical changes in recent years, this might allow for a welcome period of relative stability in which accounting can better establish its identity and coherence as an academic subject. The nature of that identity will influence the future of the interface between academe and the world of professional practice.

6. Conclusion: the future of the academic/professional interface

Despite the inevitable uncertainty of the future role and structure of academic accounting, we can identify some features that have evolved since 1970, which are likely to have continuing influence.

First, accounting has become a multi-disciplinary academic subject. Second, accounting is typically located in or associated with business schools, which are also multi-disciplinary. Third, the practice of accounting has also become multi-disciplinary. These mutually reinforcing factors suggest that the broadening of the disciplinary base will remain, and possibly grow, in the future. This does bring challenges, as well as opportunities.

One challenge that was identified earlier is the need for communication, both with practitioners and with other academics. Another is to preserve the independent role of the academic as a critical commentator on the world of practice. In both cases, journals and other means of knowledge dissemination are of crucial importance. The career incentives facing academics may also require adjustment if the relationship between academics and professionals is to flourish.

On the other side of the interface, accounting standard-setting is flourishing at both the national and international levels, creating more demand both for ‘normative’ theory of the traditional type and for empirical studies of the consequences of standards which are under review. New developments in information technology seem likely to continue to challenge regulators, accountants, auditors and users of accounting information, and there will be a demand for new knowledge provided by academic research to inform the response to emerging issues such as artificial intelligence and sustainability.

The distinctive property of academic research is its independence from factional interests. This independence needs to be exercised responsibly, so that it does not lead to irrelevance. This requires engagement across the academic/professional interface in order to identify appropriate research topics, but such engagement needs to be on an equal footing rather than an employer/employee relationship. ABR has an important part to play in all of this.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 The Solomons Report (Solomons, 1974) Chapter 2 provides a vivid picture of the state of academic accounting at this time.

2 This is elaborated in Whittington (1994)

3 This is not to say that all deductive theory has been abandoned. For example, the work of James Ohlson (1995), on valuation models, achieved wide acceptance, despite initial rejection by some leading journals.

4 However, academics do have pensions, so they too need to be aware of their possible biases.

5 The professional bodies also have an important role in determining the education of their members, both pre- and post-qualification. This is another opportunity for interaction with academe. Practice varies substantially across institutes and countries, but the trend towards global standardisation may lead to greater homogeneity in the future.