ABSTRACT
Railroads played a major role in the development of the nineteenth-century American and British economies, and their contribution to the development of accounting and auditing has attracted considerable scholarly attention.1 The first important aspect of railroad accounting is related to the way they were founded – as joint stock companies, a type of business organisation that created agency problems and the need for governance. Because railroads accomplished many objectives, they grew, and with growth came the need for accounting and auditing. Since corporate financial reporting (see Chapter 8) and corporate auditing (see Chapter 10) were not well developed in the mid-nineteenth century, the railroads had to devise effective practices to operate their businesses. The procedures that they developed were later adopted by industrial corporations. As a result, the railroad industry can be looked to for an explanation of the formulation of many accounting techniques.
