To begin we will talk briefly about the evolution of Accounting in both countries.
According to Baylin et al (1996), Accounting standard setting in Canada has undergone a number of significant structural adjustments since the late 19th century. Following Canada's emergence from its colonial status and due to the establishment of new trading partners, there was a change in the demand for accounting and the accounting standard setting process in Canada (Baylin et al, 1996).
There have also been changes in the source of authority for standard setting, the range of interests were formally included in the standard setting process and changes in relative influence of technical versus political concerns. Canada continues to have one of the few private standard-setting processes in the world. (Baylin et al, 1996).
No central source of accounting standards existed in Canada before 18646. Accounting standards were governed by common law. ...
Accounting standards were governed by common law. For example, the Dominium Insolvent Act was introduced in 1864 and was the first legislation to recognise the need for the regulation of accounting and the quality of financial information. (Baylin et al, 1996).
Following this act, Canada witnessed the first real appearance of public accountants to act as "Official Assignees" for the handling of the affairs of estates, which were bankrupt. Foreign influences, government, and the internal needs of the early accounting firms drove the accounting profession, which was still at its infancy. (Baylin et al, 1996). As a result, the legal foundation of accounting rules was limited to a small group of accounting professionals and Directors. (Baylin et al, 1996).
Although the Dominium Insolvent Act of 1864 created a formal accounting rule it was flawed by the fact that it did not provide detailed specifications of accounting standards to be followed. (Baylin et al, 1996). Foreign influences continued dominating the accounting environment with the initial influence derived from the United Kingdom. Governmental legislation concerning the initial structure of accounting as well as the legislation regarding the regulation of companies and commerce reflected the presence of the United Kingdom. (Baylin et al, 1996). Both the provincial and federal governments adopted legislations which were similar to the traditions established in the United Kingdom, particularly, the British Companies Act of 1990, which enshrined the role of the auditor in the financial reporting function. (Baylin et al, 1996).
By the 1920s the importance for American Accounting in Canada increased. This was as a result of the fact that a number of Large Canadian