In this article the author stimulates interest in a co-operative effort through the facilities of the American Institute of Accountants, of the American Accounting Association, to improve the manner of audit reporting. According to the author these organizations have had a profound influence in developing accounting and auditing standards and techniques. The author considers the questions such as how best to indicate clearly the auditor's responsibility, what information should be included in the report, and how should the information be presented? He states that the auditor should prepare his report so that no one need be deceived in any case. In any discussion of the accountant's responsibility it should not be assumed that the client has no responsibility for the representations in his own financial statements which have been audited by a certified public accountant. In order to clarify his responsibility the accountant may give a disclaimer of an opinion. This means that the scope of his work was not sufficient for him to express an over-all opinion on the financial statements taken as a whole, or that some other circumstance prevented the expression of such an opinion.

From a tax standpoint, the concept of business income as it exists as a part of the "generally accepted" principles of accounting has some notable weaknesses. The defects are associated primarily with the entity concept, the going concern postulate, and the period convention. To a lesser extent, there are faults connected with the manner in which the realization concept, the "rule of conservatism," and the "maintenance of dollar capital principle" are applied. Most of these deficiencies might be absent or minimal if taxable profit was conceived as an individual matter and considered to arise only after there had been a recovery of the money (or equivalent) that an individual had invested in a profit seeking venture of any sort. The manner of calculating profit, unrecovered investment, or loss would depend, in part, upon the type or nature of the investment. The concept embraces the idea that the tax on profits arising after a short recovery period should be larger than the levy on profits realized after an extended period of investment recovery. There is reason to suggest that a number of desirable consequences might attend the use of such a method of measuring profit for tax purposes. There might be greater equity in taxation in several respects, less risk to investors, and resulting stimulation to the national economy. The danger of inequity in certain other cases, and the possibility that the use of such a method might tend to impede the movement of capital funds are the major negative potentials. In spite of these defects, it is contended that the nation would benefit if means could be found to effect a transition to an investment-recovery-first basis of measuring profit for tax purposes. At the least, the concept might have value as a standard or viewpoint to use in the analysis of the prevailing tax requirements, and in the evaluation of proposed reforms in the tax system.

This article is concerned with the change in objectives and the expansion of activities described as internal auditing. So sweeping has been this change that current definitions of internal auditing bear little resemblance to those in vogue ten or fifteen years ago. Internal auditing fulfils an economic need quite separate and distinct from the services rendered by independent public accountants. Internal auditing is now regarded as an appraisal activity, employed to aid the top management of a large corporation in the efficient administration of the enterprise. It is characterized as a staff function, independent of accounting and operating processes, and responsible to a member of top management, most commonly the controller. Regardless of the size of the client's business, the certified public accountant must always bear a major responsibility to stockholders, creditors, bankers, government and to the general public which reads the financial reports he certifies. In fulfilling the strenuous requirements of his profession, he is automatically barred from performing the full time continuous research into the detailed operations of a single corporation which management needs in order to do its job with maximum effectiveness.

The justification for the adoption of standard cost should include the point that a proper or objective cost, however defined, can exist independent of subjective or incurred cost, at least temporarily. Standard cost for control purposes usually takes into account, or at least rationalizes, all expected expenditures and charges related to the manufacturing process. If competent factory engineers and superintendents are given a free hand in designing a factory for a stated rate of output of a product, there will be one combination of production factors which will be the most economical combination. Any deviation from this combination will yield a higher unit cost of output. Presumably the word objective can be used to describe such a unit cost. The isolation of this non-essential element from manufacturing cost, as ordinarily arrived at, might not be a difficult matter under all circumstances. If production is fairly standardized, it is likely that the rate of production is increased by exactly duplicating previously acquired combinations of factors of production, assuming stable conditions, and that it is decreased by ignoring similar combinations of factors of production.