FREE ESSAY ON PROGRESSIVE STUFF

PROGRESSIVE STUFF

TRUTH AND THE EVOLUTION OF THE PROFESSIONS: A COMPARATIVE STUDY OF `TRUTH IN ADVERTISING'
AND `TRUE AND FAIR' FINANCIAL STATEMENTS IN NORTH AMERICA DURING THE PROGRESSIVE ERA
Both advertisers and auditors wrestled with the truth of their text during the
Progressive Era (1880-1940). Although in North America, advertisers adopted truth in
advertising as a theme, auditors rejected true and fair as a description of financial
statements. Auditors instead adopted the weaker statement that financial statements were
consistent with accepted accounting principles. It is paradoxical that auditors compared
with advertisers made the greatest progress toward professionalization during this era.
This article documents debates about the concept of truth in each profession during the
Progressive Era and examines the professional and legal consequences of each profession's
engagement with truth. 
The Progressive Era, roughly the period from the depression of the late 1880s through to
the late 1930s, represents a period of institutional, technical, and social innovation.
During this period, most developed economies made the transition from rural to urban and
from agrarian to manufacturing economies. It is a period when sectional interests,
including many of the modern professions, developed. The Progressive Era is particularly
marked by the conjunction of scientific knowledge and traditional values. It is a period
when science and technology were thought capable of providing for the material wants of
all and that the issue of social justice could be resolved through knowledge. This
conjunction provides the setting in which truth is seen as an achievable state. 
The modern professions emerged from this milieu as occupations concerned with the moral
and technical mysteries of life. The exemplars of the professional model were medicine,
the law, and teaching. The successful professions lay claim to areas of expertise that
were used to define what is normal or right, mediating the client's individual needs and
the values institutionalized in society (Richardson 1997). The process of
professionalization requires an occupation to legitimate its claims to status and
authority. An occupation might adopt certain structural features such as codes of ethics
or university training as a means of establishing a claim to professional status. In this
process, the ability to claim to have found and practice the truth could be a powerful
rhetorical weapon. 
Coincident with the rise of the modern professions, large business firms developed during
this period (Galambos 1983). Two characteristics of these firms provided opportunities
for the developing professions. First, the modern corporations needed significant amounts
of capital to create the infrastructure necessary to carry out their missions. In North
America, this capital was typically raised through public offerings in the stock markets.
The reliance on outside capital created the need for financial audits, and the accounting
profession organized around this opportunity. The key to the success of the audit
profession was the ability to add credibility to financial statements (i.e., to tell the
truth about the financial state of the company). Second, large corporations achieved
economies of scale through the use of technology, but this required a mass market for
their products. Customers without firsthand knowledge of a company or its products had to
be convinced to spend their money. The advertising industry developed to meet this need.

Financial statements and advertisements represent the major forms of communication
between large corporations and two groups of stakeholders: investors and customers.
Auditors and advertisers emerged as the occupations that mediated these links, and each
wrestled with the problem of the truth of these corporate communications. Each of these
occupations had professional aspirations. Consistent with commonsense definitions of what
constituted a profession, they organized professional associations, created codes of
ethics, and attempted to set educational standards for their members. 
The literature of this period provides an indication of the success of these
professionalization attempts by advertisers and accountants. Palmer (1914) was willing to
concede that a broad definition of professions might include some members of the
advertising industry. He offered that nowadays... we should... probably be inclined to
place as a kind of intermediary between the minister and the lawyer the philanthropist
and the publicist as those who study the well being of the community (p. 43).
Carr-Saunders and Wilson (1933, 29) undertook a review of those vocations which by common
consent are called professions. They devoted eighteen pages to accountants but failed to
mention any of the occupations in the advertising industry. Schultze (1982) later studied
the advertising industry's efforts during this era to establish standardized instruction
and licensing or certification requirements (two of the three common characteristics of a
profession identified by Schultze, the other being codes of ethics) and concluded that
the industry did not succeed; even with university instruction in advertising, they were
unable to create a profession. Laird (1998, 242) added that none of the many advertising
associations formed during this era ever succeeded at formulating the standards for
preparation and admission to a profession such as medicine and law; furthermore, their
efforts to pressure members to conform to codes of ethics went unenforced. As we will see
below, the language used by the advertising industry itself during the Progressive Era
makes clear the gap between their perceived status and their professional aspirations. By
the end of the Progressive Era, only one group, accountants, had successfully established
their claim to professional status. 
The success of the auditors in achieving professional status and the failure of
advertisers stand in a paradoxical relationship to these groups' positions on the truth.
In Canada and the United States, the advertising industry lobbied successfully for
legislation requiring truth in advertising, while auditors successfully lobbied against
the requirement that they attest to financial statements being true and fair. The purpose
of this article is to examine the relationship between these groups' engagements with the
truth and their success or failure as professionalizing occupations. 
The remainder of the article is organized as follows. The next section examines the
meaning of truth in philosophical perspective. This section provides a vocabulary for
understanding the various ways in which truth may be interpreted and used. This is
followed by two sections that summarize the history of truth among advertisers and
auditors. The discussion then draws out the key factors that explain the observed
differences between these occupations' engagements with the truth. 
THE MEANING OF TRUTH
For a word with wide currency in everyday use, the meaning of truth remains surprisingly
elusive. Many philosophers are willing to concede that no adequate theory of truth has
yet been found (Horwich 1990, 1). If theorists of truth have met with limited success, it
is perhaps a result of the nature of the task itself. Truth theories set for themselves
the goal of characterizing the essence of truth in all of its various linguistic uses.
The truth theorist, in other words, seeks to answer the following question: what do we
say of something when we say that something is true?(n1) 
Historically, three classes of answers to this question have emerged as dominant:
correspondence theories, coherence theories, and pragmatic theories (see Table 1). Like
most efforts to specify typologies, this one is stymied by ambiguous cases that seem to
fit neatly into none of the categories or that seem to belong to more than one. For our
purposes, however, it is sufficient to focus on the paradigmatic example of each of the
three classes, leaving the ambiguous cases for the philosophers to entertain. 
Correspondence Theories 
Of the three classes of truth theories, correspondence theories are both the oldest and
the most intuitively appealing. Originally espoused by some of the early Greek
philosophers (most notably, Aristotle and the Stoics) and revived again in the modern era
by Descartes, Locke, Hume, Russell, Wittgenstein, and others, correspondence views hold
that the essence of truth is a relationship of correspondence between what is asserted
and some state of the world in which we live. In other words, truth is that which
corresponds to the facts. 
The paradigmatic correspondence theorist is committed to ontological realism. For the
realist, objects exist independently of the human mind; the linguistic assertion and the
state of affairs to which it refers are therefore distinct and independent of one
another. The truth of an assertion is, then, a matter to be adjudicated by reference to
the independent object world. It is true that the book is on the desk because, indeed,
the book is on the desk. 
Despite strong intuitive appeal, correspondence theories suffer from one major weakness
that has rendered them less than satisfactory in the eyes of many philosophers. This
weakness consists of an inability to specify what constitutes a fact. For the proposition
that the book is on the desk to be true, it must be a fact that the book is on the desk.
Yet what can the correspondence theorist mean by the fact that the book is on the desk,
except that it is somehow true that the book is on the desk? The theory threatens only to
say that a proposition is true when what it names is a truth (Johnson 1992, 42). This, it
is argued by some, does not go very far in identifying the essence of truth. 
Coherence Theories 
This theoretical shortcoming in the correspondence view of truth helps one to appreciate
why alternative--and, for most people, less intuitive--theories also have been advanced.
Coherence theories are the most widely held of these alternatives (Horwich 1990, 9). For
coherence theorists (e.g., Bradley, Blanshard), the truth of a proposition is judged by
its coherence with a body of propositions that are held to be true. It is true that the
book is on the desk because such a proposition coheres with an entire web of interrelated
beliefs that we also hold to be true. This web of beliefs comprises what Johnson (1992,
25) calls the world of our awareness, within which books, desks, their roles, and their
meanings are understandable. It is only by recourse to this world of our awareness that
the truth of the proposition the book is on the desk can be assessed. 
The paradigmatic coherence theory is informed by a metaphysics of absolute idealism.
Absolute idealism makes the object world dependent on the mind, such that brute facts, in
the realist's sense of an independent object world, simply do not exist. In their place,
the idealist posits an absolute reality, in which all things are what they are only by
virtue of their relationship to other things. This reality, moreover, is accessible only
through the human mind. 
Given these metaphysical presuppositions, there is no independent object world to which
we might appeal in adjudicating truth. Instead, for the idealists, there is only the one
large web of interrelationships that comprises the totality of what we currently know of
the absolute. The truth of any given proposition, therefore, can only be judged on the
basis of how well that proposition coheres with the body of propositions that determines
what we presently know of absolute truth. 
But even if one is willing to accept that coherence is a reasonable way to assess the
truth of at least some propositions, this does not imply its adequacy as a description of
the essence of truth. To serve as an adequate theory of truth, there must be no truths
that cannot be said to be so on coherence grounds. For many critics, coherence theory
fails in this regard. The point of contention generally is that coherence theory does not
seem to admit a distinction between what we would, given our existing corpus of beliefs,
be warranted in holding to be true and what is, in fact, true. While the coherentist
might well respond that this is merely indicative of an incomplete knowledge of the
absolute, critics with less faith in idealist metaphysics remain unconvinced. 
Pragmatic Theories 
Around the turn of the century, the American philosophers Peirce, James, and Dewey
elaborated versions of an alternative theory of truth, inspired by the philosophy of
pragmatism for which they are known. Although there are important differences in how each
of these thinkers conceptualized truth, all pragmatic theories assert that in one way or
another, truth is what is useful to believe. For Peirce, usefulness was inextricably
bound up with scientific methodology and the resulting scientific knowledge. For him, as
for Dewey after him, truth was that which is or would be agreed to on investigation. For
James, by contrast, usefulness was operationalized as long-term expedience, a criterion
that was meant to extend the definition of truth beyond science and into religion and
metaphysics as well (Johnson 1992, 64-65). 
Pragmatic theories of truth, unlike the correspondence and coherence theories to which
the pragmatists explicitly opposed them, are not concerned with identifying the essence
of truth (Allen 1993, 63). Instead, the pragmatists provide an account of the practical
value of truth, where this value is measured by the favorable outcomes that the belief
makes possible. Such a conception of truth is consistent with pragmatic philosophy, which
holds that all meaning is anchored in practice. Thus, a difference in meaning--such as
the difference between a true and a false belief--must involve some difference in
practice. True beliefs, therefore, are simply those that work out well in practice. 
Pragmatic theories of truth have been criticized as being too subjective to serve as an
arbiter of truth. What is useful to believe, it is argued, depends on what is useful to
the individual holder of the belief. In addition, what is useful in the long run to the
holder of the belief may well differ from what is immediately useful to the holder of the
belief. In response to numerous criticisms such as these, pragmatists have refined the
concept of usefulness, resulting in many different variations of the theory, some of
which are only marginally compatible with one another. Nonetheless, objections of this
sort have remained major stumbling blocks for pragmatic theories of truth. 
Truth Theories and Truth Criteria 
Each of the theories discussed above seeks to provide an account of the nature of truth
in all of its various linguistic uses. Thus, for any given claim or belief, each theory
would provide its own account of what makes the claim or belief true. Consider the
proposition that the sun rises in the morning. Supposing that theorists of each of the
three camps were willing to ascribe truth to this claim, the differences in theory
manifest themselves as differences in the reasons each group would give for its
willingness to grant that the proposition is true. For the correspondence theorist, it is
true that the sun rises in the morning because such an assertion corresponds to a state
of the world that is independent of the person who is making the assertion. For the
coherence theorist, the proposition that the sun rises in the morning is true because it
coheres with numerous interrelated propositions about the relative position of the earth,
the sun, and the observer--propositions that themselves cohere with the one absolute
reality. For the pragmatists, in turn, the proposition that the sun rises in the morning
is true because such a belief produces beneficial results in practice--it allows,
perhaps, one to gauge the passage of the day by the position of the sun, or it suggests
where to look in the sky to observe the appearance of the morning sun. 
When proponents of the different theories appeal to different reasons for asserting that
a proposition is true, they are effectively proposing different criteria by which truth
may be assessed. For correspondence theorists, the relevant criterion is correspondence
with an external reality. For coherentists, it is coherence with accepted belief. For the
pragmatists, truth is assessed by its usefulness in practice. Because of the emphasis on
truth criteria, it is easy to lose sight of the fact that each theory sees itself not as
identifying merely a criterion of truth but as capturing the very essence of truth.
Indeed, the distinction between truth criteria and the essence of truth has been invoked
by proponents of one theory to grant the criteria while rejecting the essence of a rival
theory. 
With the exception of a handful of philosophers, most people probably do not hold any
particular theory of truth. That is, most of us have probably never considered--much less
resolved--the issue of what essential attribute identifies truth. By contrast, we
routinely employ truth criteria in our interactions with others. Truth criteria are
evident in the reasons people give for believing what they do or the reasons that
speakers offer for why their claims should be accepted as true. Truth criteria, in short,
play a prominent role in the linguistic activities of justification and persuasion. Thus,
by examining what a speaker says, it is possible to discern the truth criteria employed
by that speaker, even if the speaker has never considered the underlying issue of the
nature of truth. 
In the discussion that follows, this article draws on the concept of truth criteria to
illuminate the types of truth claims proposed or opposed by auditors and advertising
agents. In doing so, we avoid attributing truth theories to either professional group or
to either of the two principal stakeholder groups with which they were communicating. The
historical records that inform this analysis do not permit one to make further
inferences. 
TRUTH IN ADVERTISING
In the movie Miracle on 34th Street, there were actually two miracles. We learn that
there really is a Santa Claus. More miraculous, however, was seeing the Macy's managers
tell customers the truth, the whole truth, and nothing but the truth. Truth has been an
issue of concern in advertising for centuries and remains so today. However, a
significant movement from within the industry for truth in advertising began with
magazine publishers' campaigns against patent medicine companies during the 1880s and
culminated in the 1910s with efforts by the Associated Advertising Clubs of America
(AACA) to enshrine truth in state legislation supported by an industry-organized police
force of vigilance committees. By 1914, the movement had spread to Canada as the AACA
became the Associated Advertising Clubs of the World (AACW), and the American strategy
was largely mimicked in Canada. 
By the late nineteenth century, fraudulent advertising was commonplace in North America
(Wood 1958). Reputable manufacturers of branded products generally were truthful in their
advertising. Some disreputable ones were relatively harmless, such as the mail-order
company in the 1880s that offered a Potato-Bug Eradicator for ten cents and delivered two
pieces of wood with instructions to place the potato bug between them and press together.
However, many others were reckless and irresponsible, none worse than the patent medicine
companies. Some of those medicines contained as much as 40 percent alcohol; others
contained poisonous drugs. Brown's Vegetable Cure for Female Weakness promised to cure a
dragging sensation in the groin, sparks before the eyes, hysteria, temple and ear throb,
a dread of some impending evil, morbid feelings, and the blues (Wood 1958, 331). 
In 1892, the Ladies' Home Journal announced that it would no longer accept advertising
from patent medicines and followed with a long and bitter campaign of editorials and
articles against the entire patent medicine industry. It even attacked other magazines
that accepted and published patent medicine advertising. Lydia E. Pinkham became rich and
famous during the 1870s for her cure-all Vegetable Compound. It was advertised as 
a sure cure for Prolapsus Uteri, or Falling of the Womb .... Pleasant to taste,
efficacious and immediate in effect. It is a great help in pregnancy and relieves pain
during labor .... For all weaknesses of the generative organs of either sex. It is second
to no remedy that has ever been before the public and for all diseases of the kidney it
is the Greatest Remedy in the World. (Wood 1958, 327) 
But for years after she died in 1883, the Pinkham company kept Mrs. Pinkham's picture in
their ads and invited women to write to her for advice. By 1904, the Ladies' Home Journal
had had enough and reproduced some of these ads together with a photo of Mrs. Pinkham's
gravestone showing that she had been dead for twenty years (Wood 1958,327). That
juxtaposition of the actual circumstances with the statements in the ads clearly relied
on the lack of correspondence between them to demonstrate rather dramatically the lack of
truth. 
What many of the publishers were really after was passage of food and drug legislation to
drive the patent medicines from the market. In 1906, they were successful as the U.S.
government passed the Food and Drug Act. Two years later, the Canadian government
followed suit with the Proprietary Medicines Act. In both cases, the intent was to
protect the public against unsafe food and drug products; false advertisements of such
products came under the acts' jurisdictions. Government wanted truth in advertising to
protect consumers from harmful products; publishers wanted truth in advertising to create
greater public confidence in advertising and generate more advertising business. 
As early as 1888, there was concern from even deeper within the advertising industry over
the issue of truth in advertising. Printers' Ink (PI) was the first advertising industry
trade journal. The first issue of PI featured an editorial that included the following: 
It is no greater mistake for him that has something good and genuine to sell, to leave
the public to find it out for themselves than to attract people by a taking advertisement
that lacks the element of truth. In the profession of the law, the capable yet
conscientious advocate makes use of all the address and skill of which he is possessed,
to present his client's case in its most favorable aspect or bearing, yet he never
departs from the evidence. So with the advertiser--he should commend his wares or
services to the public in the strongest and most skillfully arranged light they will
bear; but the things commended should be the things he has at his disposal and he should
never represent them as having properties they do not possess. (Quoted in It's Still Good
1938, 31) 
Advertisers were not expected to understate their claims, just to tell the truth. Here,
truth meant using only properties that the product actually possessed. That appeal to
correspondence criteria of truth would reappear in 1911, when PI joined forces with the
AACA. 
The AACA was formed in 1905 when a dozen local advertising clubs in various U.S. cities
organized themselves into a national association. By 1911, the AACA had more than 100
member clubs with thousands of members. In 1914, the name was changed to Associated
Advertising Clubs of the World when the Toronto Advertising Club was added and the annual
convention was held in Toronto. By 1916, AACW membership numbered more than 15,000.
Although the original purpose of the local clubs may have been social, the AACA was
formed to advance the advertising profession through such activities as teaching
professional skills, correcting abuses, exposing fraudulent advertising, and maintaining
a bureau for the registration of advertising men (Schultze 1982, 196). Its aim was thus
the professionalization of the advertising industry. 
Although formal education was a founding ideal for the association, its members were
never able to agree on how to implement that ideal. Some believed that the industry
should provide course materials and choose the teachers. Universities at that time were
beginning to offer business programs, but many were unwilling to offer advertising;
certainly most were unwilling to allow business to design their curricula. When
universities did begin to teach advertising between 1900 and 1910, it came in two forms.
Business schools taught the subject as part of the study of management and marketing. At
some institutions, though, journalism departments taught advertising as part of newspaper
publishing. Thus, there emerged two very contrasting approaches to instruction, and the
advertising industry was largely powerless over the formal education it had hoped to
control. As Schultze (1982, 206) concluded, Although advertisers wished to create a
profession, that was a dream that would not become a reality even with university
instruction. 
Like Pinnochio, many advertisers believed they could become a real profession if only
they told the truth. In its founding year (1905), the AACA resolved to expose fraudulent
schemes and their perpetrators, described in the following ways: 
1. Misleading statements, insinuations, and illustrations that give impressions of value
or service not inherent in the product. 
2. Suggestions of cures and palliatives, and lures of beauty and health building that are
not founded on scientific fact. 
3. Part truths of scientific information that imply a benefit not supported by science. 
4. Claims of general underselling not capable of proof and untrue in their insinuations
and impressions. (Kenner 1936, xvii-xviii) 
The theme throughout these examples was a lack of correspondence between an advertised
claim and the actual circumstances-and science was held as the ultimate arbiter of truth.
Less clear in these early attempts to define truth were the industry's motivations,
beyond the wish for professional status. 
A speech given at the 1911 AACA convention made the connection between truth and
professional status in the following way. If you are to become a profession, you must
here and now formulate a code. That code need spell but the one word, Truth, and all
other worthy things shall be added unto you (quoted in Kenner 1936, 21). And another at
the same meeting added, 
[When] the goods advertised are exactly as described .... Such a state of affairs would
make the advertising man a sort of auditor or expert accountant, whose one object is to
present the truth of the case to his employer, who is not so much the man who pays the
salary as the people at large whose buying power makes that salary possible. (Quoted in
Kenner 1936, 22) 
Again, the criterion of correspondence between the actual product and the advertised
claim seemed to be the basis for truth. It is also interesting, as an aside, to note the
citation of accountants as role models for professionalism in advertising. The idealized
role of the auditor in this quotation, however, is one that the accounting profession
debated throughout this period and ultimately rejected. 
As early as 1907, the AACA endorsed in principle the use of legislation to penalize false
advertising. However, its early efforts focused more on self-regulation. This came in the
form of codes, statements of principles, and annual conventions that resembled religious
crusades for truth in advertising. At the 1913 convention, the symbolism and ceremony
that had come to characterize the AACA's crusade became almost comical with the adoption
of a truth emblem (see Figure 1) and the official slogan truth in advertising. There was
even a truth trophy awarded that year and for several afterwards to the member club
judged to have done the most work for truth over the preceding year (Kenner 1936, 39).
These efforts were imaginative but not very effective because the association had little
power to enforce truth in advertising. In addition, large numbers of small firms and
individuals still had no enthusiasm for exercising control over the temptation to stretch
the truth. Because of other regulations on antitrust issues that characterized the
framework of government regulation in the United States, the groundwork was laid for
greater future dependence on government regulation (Miracle and Nevett 1988). 
As early as 1911, it was apparent to John Romer, editor of PI, that self-regulation was
not working. Romer had covered the AACA convention that year for PI and recognized that
while the association had aroused sentiment, it had no plan of action. The time has
arrived, he said, when we can do something more than talk about suppression of
objectionable advertising (quoted in Truth and Consequences 1938, 256). Soon afterward,
Romer hired a New York lawyer, Harry Nims, to investigate existing laws against
untruthful advertising (there were two state laws, but neither had ever been used) and to
write a model state law directed at sponsors (rather than publishers). The PI model
statute read in part as follows: 
Any person, firm, corporation or association who... makes, publishes, disseminates,
circulates, or places before the public... an advertisement of any sort regarding
merchandise, securities, service, or anything so offered to the public, which
advertisement contains any assertion, representation or statement of fact which is
untrue, deceptive, or misleading, shall be guilty of a misdemeanor. (Truth and
Consequences 1938, 257, emphasis added) 
The declaration then elaborated on what constituted untrue, deceptive, or misleading by
enumerating several practices, including the following: 
1. false statements or misleading exaggerations; 
2. indirect misrepresentations of a product or service through distortion of details,
either editorially or pictorially; 
3. pseudo-scientific advertising, including claims insufficiently supported by accepted
authority or that distort the true meaning or application of a statement made by
professional or scientific authority. (Editorial 1932, 52) 
Of course, the theme here was the lack of correspondence between actual product
characteristics and those claimed in an advertisement. Words such as exaggeration and
distortion are particularly illustrative. 
The model statute was published in PI on November 11, 1911. Romer offered it to the AACA
with the suggestion that its member clubs undertake the job of making the statute a
working piece of legislation wherever it became enacted into law by watching for
infractions, collecting evidence, and seeing that the cases were pressed. The AACA did
this by forming a national vigilance committee, and in 1913, when the statute was first
passed into law in the state of Ohio, the committee's work began in earnest. Eventually,
forty-three states passed the PI model statute into law, although many added the word
knowingly to require proof of intent to mislead. This seriously weakened the
legislation's effectiveness. The AACA's vigilance committees evolved into the Better
Business Bureaus, and by 1938, there were fifty-six such bureaus guarding the American
public against fraudulent advertising. 
The Canadian counterpart to PI, a trade journal titled Economic Advertising (EA), waited
until March 1913 to voice its support for the PI model statute, but like most in the
industry, it had supported for years the principle of legislation to control untruthful
advertising (Straight Talks 1913). Its endorsement of the PI model statute was backed by
the opinion that such a law would protect the public and create public confidence in
advertising. One year later, the Canadian government created the Fraudulent Advertising
Act, which read, in part, as follows: 
Every person who knowingly publishes or causes to be published any advertisement...
containing false statement or false representation which is of a character likely to or
is intended to enhance the price or value... shall be liable upon summary conviction to a
fine not exceeding two hundred dollars, or to six months imprisonment or to both fine and
imprisonment. (Retailers Would Put Teeth 1921, 190) 
The Canadian government, in passing the Fraudulent Advertising Act, had followed some
U.S. states in implementing a watered-down version of legislation requiring proof of
intent to deceive. This, of course, made it very difficult to obtain convictions. Fifteen
years later, the act had yet to be used and was soundly criticized by a Canadian lawyer
writing in the retitled EA, now called Marketing. It [the Fraudulent Advertising Act]
serves only to bring law into general contempt; for though it proscribes lying in
advertising, lying continues to flourish with impudent impunity (Wilson 1929, 285). 
Meanwhile, the American vigilance committees were not really having much success with the
PI-modeled state legislation either. It was an inefficient way to deal with regional and
national advertisers, and the number of those was growing rapidly. Since many states that
had passed the PI statute had opted for the knowingly clause, prosecution in those states
was almost impossible. When the Federal Trade Commission Act (FCTA) was passed in 1914,
the association saw an important new ally in its fight for truth in advertising. Although
the Federal Trade Commission (FTC) was formed to deal specifically with unfair
competition (specifically section 5 of the FTCA), the AACW saw false advertising as just
that. In 1915, a delegation of six officials from the association met with the FTC in
Washington to see if the new federal legislation could be used against fraudulent
advertisers. 
What the AACW wanted, explained its president, was a ruling or an expression of
willingness to receive from us these interstate cases that are coming up constantly ....
We believe that we are a natural ally to the Federal Trade Commission. Another witness
observed: When it goes out that this Commission has taken the position that dishonest
advertising is unfair competition, that that is the position of the federal government,
there are a lot of these men who are going to stop and say, We had better be a little bit
more careful; while the vigilance committees can make us some trouble, we can handle
them, but we do not care to get mixed up with the federal government. (Tedlow 1981, 47) 
The FTC shifted the focus of regulation from the harm done to consumers by false
advertising to the role of false advertising as unfair competitive practices among firms.
It made no difference to the AACW if the net effect would be to stop false advertising
practice. This approach was undermined in 1938 by the Wheeler-Lea Act that changed the
focus again from the consequences for competition between firms to the material effects
on the consumer by defining false advertising in this way: 
The term false advertisement means an advertisement, other than labeling, which is
misleading in a material respect; and in determining whether any advertisement is
misleading, there shall be taken into account (among other things) not only
representations made or suggested by statement, word, design, device, sound, or any
combination thereof, but also the extent to which the advertisement fails to reveal facts
material in light of such representations or material with respect to consequences which
may result from the use of the commodity to which the advertisement relates under the
conditions prescribed in said advertisement, or under such conditions as are customary or
usual. (Section 15-a, quoted in Tedlow 1981, 53) 
Here, at last, was legislation with teeth. But as Tedlow (1981) observed, after an
initial zeal on the part of the commission, its interest in advertising regulation
degenerated for a variety of reasons. 
The advertising industry's attempts to secure legislation, combined with the industry's
publicity of its codes of ethics, slogans, and emblems, had the public clamoring for
truthful advertising by the 1920s. The version of truth adopted by the industry was one
based on the correspondence between advertised claims and the facts or actual products
and prices offered by advertisers. When the AACA and others during this era used the term
truth, they usually had a fairly broad concept in mind. Their targets included ads
described variously as fraudulent, false, misleading, and deceitful. Even puffery, which
is legal today and has been for centuries, would have been stopped by some participants
in the truth in advertising movement. 
Puffery is advertising which praises the item sold with subjective opinions,
superlatives, or exaggerations, vaguely and generally, stating no specific facts (Preston
1975, 17). It is legal because the law holds that reasonable people will automatically
distrust it and therefore not be deceived by it. In other words, it is considered by the
law to be false but not deceptive. Puffery can coexist with a correspondence version of
the truth because the correspondence criterion leaves subjective opinion and
exaggerations outside the realm of truth claims. Statements of puffery are not subject to
truth claims because they state no specific facts; that is, they make no reference to an
objective object world. It is less clear that puffery would be consistent with truth
claims anchored in pragmatism or coherence theory. 
An advertisement goes beyond puffery when deception occurs. An advertisement is regarded
as deceptive when an individual is injured (materially or physically) by acting on the
claims stated in the advertisement. That stricter interpretation of truthful was clearly
the intention of most of the early legislation in both the United States and Canada. It
was true with the Food and Drug Administration in 1906 and still so in 1938 with the
Wheeler-Lea Act cited above. Nevertheless, all false advertising was considered by most
in the truth movement to be harmful to their aspirations of professional status. Their
reliance on a strict correspondence between advertised claims and the facts left them no
room for error, as this 1927 Canadian trade journal commentary pointed out: 
Honesty may be the best policy, but has anyone fully tried it? I admit that many have, up
to a certain point, and that they have found it profitable. But can 75 per cent of the
truth be called complete honesty? And if 75 per cent honesty is profitable would not 100
per cent be more so? Is the troth, the whole truth, and nothing but the truth in
advertising impracticable?... Can you think of any greater business asset than to have
people believe implicitly, without modification, everything you say in your advertising?
(Smith 1927, 431) 
Despite the extreme position adopted by many, the advertising industry still had
untruthful advertising, and it was no closer to becoming a profession. 
TRUE AND FAIR (FINANCIAL STATEMENTS)
The history of truth in accounting is most clearly played out in the evolution of the
auditor's certificate. The auditor's certificate specifies the standards to which the
auditor may be held responsible and, derivatively, the extent to which others should rely
on the contents of the financial statements that have been audited. F. Whinney (1894,
558-59), founder of one of the major accounting firms, held that no auditor should sign
any balance sheet unless he believed it was true, and he must take all reasonable means
to satisfy himself that it is true. The truth was to be determined by checking the facts.
An auditor should be sure that the figures represent facts, because the whole object of
an audit was to ascertain whether figures were facts. Whinney clearly subscribed to a
correspondence version of truth. 
The importance to the profession of seeking the truth was reinforced in an editorial in
the Canadian Chartered Accountant. The editorial proposed truth as the essential
attribute of the auditor: 
The truth is the only thing that should concern him and on all questions of fact he
should be unwavering .... Confront the accountant with a requirement to present facts in
a light solely or chiefly favourable to a client and you take away from him the very
foundation upon which the growth of the profession and its value to the community are
built. (Editorial 1919, 105-6) 
The version of the truth suggested by Whinney and others early in the profession's
history was not widely accepted. The difficulty was that while a check of the consistency
of the balance sheet to the books was possible, two further issues arose: (1) were the
entries in the books real? and (2) were the results reflective of the expectations of the
public regarding their use of the statements? While the auditors of the day could reject
the suggestion that figures should be fictions (Whinney 1894, 962), they also argued that
the need to use estimates of asset values, the useful lives of assets, and probability of
successful sales of inventories meant that any auditor's certificate was an opinion and
not necessarily true. 
Authors such as Parton (1917) noted the impossibility of auditors attesting to the
correspondence between financial statements and the underlying reality of the firm. His
recommendation is that the auditors limit themselves to those historical facts that could
be verified by the auditors: 
The Auditor is advised to select a few items of importance and compare with the things
themselves. Unfortunately, however, we are none of us possessed of sufficient knowledge
to make such an examination effective... an appraisal being always the result of an
individual opinion while original cost is an undeniable fact. (Parton 1917, 95) 
In practice, accountants and auditors routinely prepared financial statements that varied
from a commonsense or correspondence version of truth. There are two major financial
statements: the balance sheet and the income statement. The balance sheet reports on the
assets and liabilities of the company; it is a representation of the stock of wealth at a
particular point in time. The income statement reports on the change in wealth between
two points in time. The generally accepted accounting principles that are used to create
these statements require the use of historic costs (original costs). There are exceptions
to this rule. Current assets, assets that can be liquidated within a year, for example,
are reported at the lower of cost or market, and long-term assets that have suffered a
permanent loss of value are also written down to reflect this loss. These exceptions
reflected a principle of conservatism that requires that all losses be recognized but no
gains until they are realized. The use of historic cost and conservative valuation
principles results in a distinction between the intended truth value of accounting
reports and the actual truth value of those reports. 
Hatfield (1913, 83), the first professor of accounting in the United States, talks at
length about the economic uses of accounting information but then cautions that 
in all the foregoing discussion it has been assumed that the purpose of accounting is to
present facts fully and without reservation; but argument is sometimes made that the
statement set forth in the balance sheet does not even profess to be true; indeed, that a
variation from truth, provided only that it understates the wealth of the concern, is
really a merit rather than a fault. 
There are alternatives to the commonly accepted approach to reporting financial
information. For example, if the balance sheet is meant to provide a measure of the value
of a company at a particular time, then all numbers can be restated in terms of the
present or market value of assets and liabilities, or when no market exists, the cost to
replace assets can be used. MacNeal ([1939] 1970) was an early proponent of a present
value approach to accounting. He claimed that 
financial statements are undoubtedly the principal means by which investors are informed.
They are relied upon by millions of investors. But they can never become the key to the
solution of the basic problem of protecting the small investor until the faulty
accounting principles underlying their preparation are changed to permit a presentation
of truth as it is instinctively understood by laymen everywhere. (P. 57) 
MacNeal ([1939] 1970, 39) held that truth in an economic sense was the key to the success
of the profession and that the failure of the profession to adopt this version of truth
put the future social standing of auditors at risk. He recognized, however, that the
adoption of present-value accounting or replacement cost accounting requires skills that
the accountant does not possess and opens up the field of auditing and financial
statement preparation to competition from appraisers and engineers, respectively. 
While Hatfield and MacNeal were critical of the principles underlying financial reporting
on theoretical grounds, others were concerned about any attempt to define a set of rules
for accounting. The call for a science of auditing was equated with the de-skilling of
the profession and the replacement of professional judgment with rules. This view was
also reflected in comments in the Canadian Chartered Accountant: 
As the desire for health justifies the existence of the medical profession, the desire
for truth or accuracy in accounts justifies the existence of the accounting profession
.... This truth is so obvious that it is in danger of being overlooked, yet I suggest
that until one has fairly gripped it the whole practice of auditing may degenerate into
the mere observance of certain rules which are sometimes called the principles of
auditing and which have produced so many inferior auditors. (McCall 1924, 105-6) 
These criticisms deny the ability of any set of rules and procedures to grasp the reality
of a firm's financial position. These concerns become even more pronounced as financial
statements became more important in the operation of the capital markets. 
During the speculative boom of the late 1920s, concern was raised about auditors'
certificates becoming associated with public offerings of shares and hence being relied
on as an indication of future performance rather than just as a report on the firms' past
stewardship of resources. The change in focus required that auditors become concerned
with the reliance of third parties on their certificates and hence with a pragmatic test
of truth. 
The self-respecting accountant should constantly apply this touchstone to the circular
[prospectus] and every part of it. Is the picture not only true to the facts but is it
drawn in such a way as to convey a true and reasonably understood story to the
prospective investor? (Dilworth 1928, 146) 
The discussions reviewed above exhibit a curious tension between a desire to claim that
auditors presented the truth behind the financial statements and recognition that they
could not claim to present truth as understood by the layman. Moreover, the tendency of
third parties to impose a pragmatic criterion of truth on the audit certificate
threatened to expose the auditor to legal risks. The need to resolve this tension was
finally brought to a head in the aftermath of the Great Depression. The accounting
profession was called on to help shore up the capital markets by restoring faith in
corporate reporting. The vehicle by which this was to occur was the auditor's
certificate. 
Prior to the U.S. Securities Act of 1933, the auditor's certificate was not standardized.
In negotiations surrounding that act, the profession found itself in the uncomfortable
position of lobbying to ensure that auditors were not required to attest to the truth of
financial statements. The FTC was empowered under the act to regulate the standards of
financial reporting and issued a statement requiring auditors to attest to the truth of
the financial statements. Auditors were successful in lobbying against this construction
of their responsibilities, and on April 7, 1934, the commission announced a change in the
wording of the auditor's certificate. The form adopted, which continues to the present,
is a legally weaker statement that the financial statements truly and fairly reflect the
application of accepted accounting principles to the facts disclosed. Note that there are
two caveats in this statement: (1) the truth is defined by a set of rules on which there
has been previous agreement, and (2) the truth is limited to that which has been
disclosed by management. 
A report to the U.S. Department of Commerce, dated August 2, 1934, captures the essence
of the position adopted: 
Regardless of how conscientiously the statements have been prepared, it will still remain
true that no reader can fully understand them who has not informed himself of the
accounting principles which underlie them. (Gifford, duPont, and Harriman 1934, 112) 
The truth criterion adopted by the profession was thus coherence with a network of a
priori beliefs. The audit profession was in the enviable position of both defining truth
and certifying its presence. Rather than conforming accounting to the expectations of the
public, the version of truth adopted committed the profession to training the public to
understand the truth of financial statements. The potential gap between naive
expectations and the coherence version of truth adopted in financial statements has
resurfaced repeatedly in the history of the profession, most recently during the
recession of the late 1980s. 
Although the coherence version of the truth in accounting was enshrined in the U.S.
Securities Acts of 1934, other approaches continue to appear in the literature. One
construction of that debate is as a conflict between views of auditing as a science or an
art (e.g., Green 1966). The attempt to construct auditing as an art, however, leaves the
truth claims of auditors' reports in a precarious position. As Previts and Merino (1979,
163) note, The artist does not seek fundamental truths but relies instead upon the
independent, informed judgment of the individual in the interpretation of the phenomenon.
Deutsch (1979) argues that artistic truth (i.e., to recognize a true work of art) is not
based in a correspondence theory of truth. A work of art is not simply a copy or
representation of some other object or event. Rather, art is recognized as true when it
is an authentic expression of its own intentionality (Deutsch 1979, 38). In other words,
a true work of art is recognized by its unique expression of a particular vision; it is
judged existentially. Applying this view of artistic truth to audits would require that
the audit be judged as a performance with intrinsic value and not subject to external
norms. Perhaps the artistic concept of an audit's truth value reflects White's (1970,
118) observation: A particular statement (or artwork) could be perfectly true without
containing more than a minute proportion of the whole truth even about a single topic.
Being wholly true is not the same as being the whole truth. 
By the end of the Progressive Era, auditors were well established as one of the modern
professions in North America. In their literature, they wrestled with the truth of their
communications, often using the rhetoric of correspondence theory in claiming to present
nothing but the facts while clearly recognizing that such claims were not defensible. The
literature suggests that accountants believed that a true financial state of the firm
existed and could be apprehended by a professional auditor. In practical terms, however,
the auditor could only rely on a set of common beliefs about the measurement and
disclosure processes (i.e., accounting and auditing principles) that, if followed, would
most likely reveal this true state of affairs. The true professional achievement of the
auditors in this period was to take control of the process by which these principles
would be set and resist legislation that would have locked them into a version of the
truth easily accessible to lay interpretation. 
DISCUSSION
Why did advertisers and auditors take different approaches to truth? Several factors
appear relevant. First, the audiences for advertisers' and auditors' truth claims were
different. Advertisers faced an audience of mass consumers. Compared with auditors,
advertisers had little direct contact with their audience by which to educate and
negotiate a definition of troth. Advertisers were then constrained to use criteria that
had broad intuitive appeal. In addition, false advertising, which misled or deceived
consumers, could and often did lead to serious consequences for those consumers, creating
not only bad press for the advertiser in question but also negative impressions of the
advertising industry in general. That is why truth in advertising was so often justified
on economic grounds. Deception could hurt consumers and thus indirectly hurt the
advertising industry, or so the reasoning went. Legislators were never interested in
truth in advertising for the same masons as advertisers. As Preston (1975, 11) puts it,
the law was not really regulating the message but rather the fate of the consumer, but in
so doing it became an ally for the truth in advertising movement. 
Auditors routinely addressed groups of bankers and creditors who were the key audience
for financial statements during the Progressive Era. These occasions were used to
reinforce the contingent nature of the auditor's truth claims. Consider the following
example: 
You will sometimes come across a statement signed audited and found correct but I would
call your attention to the fact that only an inefficient and unqualified man would give
such a certificate .... No man who understands the risks, who appreciates the importance
of truth and who sets a high value on his signature is going to give such a sweeping
statement as the one mentioned .... A certificate should give exactly the shade of
meaning the auditor is trying to convey. (Gibbs 1928-1929, 298) 
One of the purposes of the 1933-1934 U.S. Securities Acts was to democratize the capital
markets. The stability of the capital markets was to be enhanced through the broad
distribution of shareholdings and by refocusing financial reporting from the needs of
creditors to the needs of investors. In this way, the audience for financial statements
after the Progressive Era became more like the audience for advertisements. It is not
surprising, then, that the auditors' coherence truth claims became problematic. By the
1970s, the conflict between what the average investor thought the auditor's certificate
meant and what the auditor thought it meant had become so severe that it was given a
name: the expectations gap. The accounting profession is still wrestling with this
disruption to their philosophy. 
Second, advertisers and auditors did not face the same consequences for equivalent
statements about their products. For simplicity, imagine that both advertisers and
auditors are reporting on some verifiable claim about a company or its products. There
are three possibilities about the statements made by these groups: they can understate
the claim, provide truthful reports, or overstate the claim. The consequences for the
groups in each situation are different. 
In auditing, the audit firm is expected to provide a conservative report on the company
(i.e., it is required by standards of the profession and social expectations to
understate the quality of the company). Of course, if an audit firm is consistently too
conservative (as defined by management), it will lose business and possibly face legal
liability; if an audit firm overstates the qualities of a company, it will face legal
liability for losses incurred by those who have relied on the statements. The auditor is
thus between Scylla and Charybdis (Gregory 1894, 960). 
In advertising, an agency that systematically understates clients' qualities will most
certainly lose business. The advertising agency also faces legal liability for
overstating the claims of a client, but there appears to be greater leeway for an
advertising agency to emphasize positive qualities. The 1888 PI editorial, cited above,
reminded the advertiser to tell the truth but, while making use of all the address and
skill of which he is possessed, to present his client's case in the most favorable aspect
of bearing... in the strongest and most skillfully arranged light they will bear (quoted
in It's Still Good 1938, 31). Puffery is, perhaps, an extreme example of this. 
Part of the differences in the structure of legal liability facing these groups may stem
from the nature of their discourses. Auditors are expected to use denotative language.
The references made by auditors to the firm's assets and liabilities are expected to
refer to specific things. Advertisers, on the other hand, use connotative language. The
most effective ads tie together consumption with broader social values (e.g., the good
life) and often establish these links through metonymy (i.e., through the juxtaposition
of words and images) rather than through analogy or other more direct techniques. 
Third, the advertising industry was disorganized compared with the accounting profession
and was unable to generate a consistent vision of its craft or the institutional
structures to implement such a vision. The advertising clubs, for example, included
publishers, advertising agents, and sponsors. The interests of these groups were not
always closely aligned. Accountants had worked consistently to bring closure to their
occupation and had well-established training programs and legislative protection of their
titles before they had fully developed their technique. The closure of the accounting
profession facilitated the development of a set of truth claims built around the
profession's own standards. 
One of the roles of the occupations that have successfully claimed professional status in
Western societies is to define appropriate behavior in specific domains. This is
reflected in their claims to collegial control (since laypersons cannot evaluate the
quality of professional practice) and in their exercise of professional powers with
respect to the definition of clients' needs and how they should be handled (Richardson
1997). This role is premised on society's belief in the expertise of the professions,
particularly in the independence and integrity of their judgment. The Progressive Era
nurtured this view of expertise as well as the aspirations of professional status.
Accountants were better positioned than advertisers to draw on these cultural
expectations. 
CONCLUSION
Advertisers and auditors faced the same issue: their texts were used by people to make
decisions and as such were subject to an evaluation of their truthfulness. Through the
Progressive Era, these groups wrestled with the concept of truth and came to different
accommodations. The codes of ethics, standards of practice, and moral suasion used by the
advertising industry to control its own were only partially effective. Many were
truthful; many more were not. The halo of science at that time had two effects on the
advertising industry. Scientific knowledge held much promise for advertising's
professional aspirations. Science also helped define the criteria for truth in
advertising--those criteria reflected a correspondence version of truth. Correspondence
criteria also seemed the easiest to legislate, inasmuch as self-regulation seemed doomed
to only partial success. 
Auditors rejected correspondence criteria as appropriate standards for their work,
adopting instead a coherence concept of truth that held them accountable only to their
own standards. The auditors' version of truth provided the impetus for accountants to
begin standard setting. Initially, this was simply a codification of existing practice,
but ultimately the standard-setting process served to define what would be regarded as
truthful reporting in North America. Recently, this version of the truth has been subject
to severe criticism. A Canadian case, for example, has rejected generally acceptable
accounting principles and generally accepted auditing standards as a sufficient defense
for financial statements that conceal material economic realities (Kripps v. Touche Ross
Co. and Victoria Mortage Ltd. 1999). 
The ontological status of accounting continues to be debated in the literature (e.g.,
Morgan 1988; Shapiro 1997). It has been suggested that accountants have adopted a realist
view of financial reporting, seeing themselves as objective appraisers of reality (Morgan
1988, 477). This view of accountants' engagement with the truth is too narrow. As we have
shown, accountants have debated the truth and adopted a version of the truth that can be
regarded as objective only in reference to a set of a priori commitments about what
exists and how it should be represented. This debate explicitly rejects a naive view of
financial accounts as objective reality. Morgan (1988, 484) suggests that rather than
cling to an outdated concept of objectivity, they should confront the basic subjectivity
of their craft. The historical record suggests that accountants have confronted the
subjectivity of their craft as part of a professionalization project and successfully
resolved the dilemma of constructing truth. 
NOTE
(n1.) Marketing scholars are well acquainted with the following question: What do we say
of something when we say that something is true? Hunt (1990) summarizes the various
challenges to the traditional view of the truth of marketing theories and research that
have been raised by proponents of relativistic views of truth (e.g., Anderson 1988; Peter
and Olson 1983). Against these challenges, Hunt argues that relativistic views of truth
are incoherent and untenable and advocates instead a view of truth based in the
philosophy of scientific realism. That debate, which has enlivened the pages of marketing
journals for nearly two decades, illustrates the extent of the controversy that surrounds
the meaning of truth. This article does not contribute to that debate. Rather, the
concern here is to use three conventional theories of truth to inform understanding of
the persuasive and justificatory appeals uttered by marketing and accounting
practitioners in the period under study. This study makes no claims, either for or
against, any of the three truth theories to which this article refers. 
TABLE 1 COMPETING THEORIES OF TRUTH
Legend for Chart:
A - Truth Theory
B - Defining Attribute
C - Philosophical Root
D - Major Criticism
A B
C
D
Correspondence Correspondence with the independent
object world
Ontological realism
Truth reduces to that which names
a truth
Coherence Coherence with a body of propositions
held to be true
Absolute idealism
Cannot distinguish what is true from
what one is warranted in believing
to be true
Pragmatic Practical value: that which is useful
to believe
Pragmatism
Idiosyncratic to individual holder of
belief; long-term versus short-term
usefulness
PHOTO (BLACK & WHITE): FIGURE 1 EMBLEM OF THE ASSOCIATED ADVERTISING CLUBS OF AMERICA 
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~~~~~~~~ 
By D. G. Brian Jones; Alan J. Richardson and Teri Shearer 
Teri Shearer is an assistant professor in School of Business, Queen's University,
Kingston, Ontario K7L 3N6, Canada. She joined the Queen's faculty in 1997. She holds a
Ph.D. in business from the University of Iowa and researches accounting practice from a
poststructuralist perspective. Her primary interest is the discursive construction of
accountability. 
Copyright of Journal of Macromarketing is the property of Sage Publications Inc. and its
content may not be copied or emailed to multiple sites or posted to a listserv without
the copyright holder's express written permission. However, users may print, download, or
email articles for individual use.
Source: Journal of Macromarketing, Jun2000, Vol. 20 Issue 1, p23, 13p, 1bw.
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