Law and Accounting: Transition and Transformation
| Published date | 01 November 1991 |
| Date | 01 November 1991 |
| Author | Judith Freedman,Michael Power |
| DOI | http://doi.org/10.1111/j.1468-2230.1991.tb01850.x |
THE
MODERN
LAW
REVIEW
~~
Volume
54
November 1991 No.
6
Law and Accounting: Transition and Transformation
Judith Freedman and Michael Power
*
Introduction: Knowledge and Practice
The
Mudern
Law
Review
was founded to deal ‘with the law as
it
functions
in
society’
and to include
in
its field ‘those branches of scientific study
in
which the law is
an important but not the only factor.” The founders of the Review specifically
hoped for ‘contributions
in
the border territory between law and cconomics,
sociology, political science and the other fields of study with which
we
are hoping
to
collaborate.’2 Accounting was not referred to by name
in
the initial issues of the
Review, perhaps because, like law itself,
it
was still struggling
to
secure its academic
credentials. However, contributions by members of the
LSE
Accounting and Finance
department and other non-lawyers working on accountancy related issues3 were
being published
in
the Review
in
the
1940s
and
~OS.~
Clearly, the ‘border
territory’ between law and accountancy is therefore an area well
within
the original
aims of the
Review.
This
in
itself
is
sufficient justification for this special issue,
especially since
in
recent years there have not been contributions to the Review by
accountants.s However, there are also other reasons which
make
such a venture
particularly appropriate.
The interface between law and accountancy, in the broadest sense
of
both terms,
is currently an issue of intense concern
in
the
world
of
professional practice.
At
*Respectively, Scnior Research Fellow in Company and Commercial Law. Institute
of
Advanced Legal
Studies; Lecturer, Department
of
Accounting
and
Finance, London School
of
Economics and Political Science.
The views expressed
in
this introduction are our own and do not necessarily represent those of the Editorial
Committee. of the
Modertr
Lrov
Review.
Judith Freedman is a member
of
the Law Society Conipany Law
Committee. She acknowledges her debt to its members and especially those on the Accounting Matters
Working Party,
but
this piece is written entirely
in
her personal capacity and should not be takcn as
representing the vicws
of
the Committce or
thc
Working Party.
I
Editorial, (1937)
1
MLR
I.
2
Editorial, (1938)
1
MLR 257.
3 Such as William Baxter, Harold Edcy and Basil Yamcy who, among others, founded a distinctive
‘LSE tradition’
in
accounting.
4 For example, see Baxter,
‘British
Trmisporr
Com,iissioti
v
Goidey’
(1956) 19 MLR
365;
Edcy,
‘Accuracy and Inaccuracy in the Profit Calculation’ (1954) 17 MLR
229;
Yamcy, ‘Aspccts of the
Law Relating to Company Dividends’ (1941) 4 MLR 273.
5
The scarcity of legal literature dealing with accountancy is conimcnted on by McGce
in
his contribution
to this number and will be evident from a perusal of the footnotes to the articles.
Tlic
Modiw
Lrriip
Hivicw
54:6 Novciiibcr I991 0026-7961
769
The
Moclcrii
Lrrw
Review [Vol.
54
one level, the professions are, of necessity, becoming more interdisciplinary. This
reflects the fact that the substance of law and accountancy as ‘bodies of knowledge’
are becoming increasingly interrelated largely
in
response to the growing sophisti-
cation of financial markets and the consequent complexity
of
related regulatory
processes. One might even go
so
far as to say that, for certain kinds of transaction,
it
has become impossible to reflect upon
UK
business law and accounting
in
isolation
from one another. This proximity is evident not merely at the level of substantive
developments
in
company law, concepts of legal liability and the regulation of
financial reporting.
It
also has much
to
do
with
a shifting institutional territory,
the changing nature of the legal and accounting professions and their claims to
expertise on behalf of clients, regulators and a wider public. This conjunction of
legal and accounting based technologies, reflecting transformations
in
the marketplace
for financial services, might suggest that interdisciplinarity
,
both intellectually and
in
terms of professional organisation, should be a natural outcome. However, as
points of contact increase
so
do the opportunities for collision and conflict. One
potential result of these changes is
a
‘battle’ for territory
in
terms of controlling
access to particular areas of work and
to
the processes of financial regulation.
However, the relation between accounting and law is far from being a straight-
forward story of conflicts of interest and power struggles.
At
another level, hidden
to some extent by apparent moves towards interdisciplinarity, there exists a lack
of mutual comprehension between accountants and lawyers; fundamental differences
in analytical styles which have their basis
in
varied historical, cultural and educational
patterns of development. Thus, failures of communication may be as much
epistemological
in
origin as a simple function of professional self-interest. This is
a significant and largely invisible obstacle
to
those who
wish
to solve the problems
of business regulation
within
existing disciplinary structures.
This special issue aims
to
provide a forum for the analysis of these issues and
in
doing
so
it
may constitute a modest step towards mutual comprehension. Inevitably,
the composition of the issue says much about the existing institutional, educational
and cognitive modes of demarcation between the fields
of
law and accounting. Aside
from the article by Dezalay, a sociologist by training, all the contributions are
‘interdisciplinary’ in the sense that the authors seek to address an ‘alien’ discipline.
At
the same time, a number of these articles are actually written firmly from the
perspective of the author’s ‘home’ discipline.6 Clearly, there are formidable
intellectual boundaries to be broken down
in
this process. Yet, as recognised
in
many of the contributions, these boundaries are presently subject to radical pressures
for change.
Accounting and the law can no longer be juxtaposed as quantitative and qualitative
opposites.7 There is an emergent and necessary interpenetration of practices which
brings new and largely unforeseen problems of professional demarcation and
6
This is a necessary tension at the heart of any ‘interdisciplinary’ programme;
it
can only get going
with the help of the very categories which
it
is attcinpting
to
transform.
7
Murphy
has
recently argued that thc two disciplines are misunderstood by simply juxtaposing calculative
and adjudicativc perspectives. In addition, his view is that law has abdicated its position as a ‘system
of truth’ within a political discourse about the forms
ofgood
government; for exainple,
it
has become
a second-hand and increasingly self-rcfercntial practice in relation
to
the newly positivised world of
financial transactions. See Murphy, ‘The Oldest Social Science‘! The Epistenlic Properties of the
Common Law Tradition’
(1991)
54
MLR
182,
191.
Interestingly, management accounting has been
subject
to
similar criticisms in recent years. Regaining contact with ‘products’ is part
of
a new demand
for relevance. See Millcr and O’kary, ‘Accounting Expertise and the Politics
of
the Product: Econoniic
Citizcnship and Modes of Corporate Governance’ (forthcoming)
Accoiuirirrg.
Orgcitiisurioirs
citid
Sociel)i.
770
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