Knowledge that Transforms

Reviews the book "Mortality in Retail Trade."

Reviews the book "Certified Public Accountant Laws of the United States," compiled by the American Institute of Accountants.

Abstract The article presents an interview with the author on the teaching of cost accounting. The article also presents comments of scholar Gould L. Harris on answers given by the author. In response to a query about the future use of cost accounting by students, the author replied that during the last ten year I have made a practice of asking my cost accounting students whether or not they expected to work in a factory after graduating. Less than five percent replied in the affirmative. This percentage is all the more important because most of my students have been residents of Washington and Baltimore. Therefore, it can be stated that the main purpose of the Cost Accounting course is not to directly prepare students for future work in factories. Indirect uses students will make of cost accounting seem to be chief reasons for giving the course. All students will use ideas that are given of, accounting controls, systems of internal check, computing costs according to suitable bases, departmentalization of expenses, detailed interlocking of paper work, adaptation of paper work and accounting routine to meet local company's condition, preparation and use of budgets, use of budgetary reserves and preparation and use of accounting reports.

Abstract The decision given by judge Cardozo in a case of Ultramares Corp. v. Fred Stern & Co. Inc. brings up the question whether certificates in their present form have any real significance. In the Stern certificate auditors certified to two things, the agreement of the balance sheet with books and their opinion of the correctness of the balance sheet. Concerning the former, it should be recognized that in the U.S. practice there is no demand for a statement of the correspondence between books and published balance sheets. The correspondence is implied by the acceptance of the statement, if the management has no confidence in it and refuses to accept it, outsiders will certainly never see it. In English practice, with auditors appointed by and responsible to stockholders, a definite reason for certifying to the correspondence exists. This half of the certificate might well have been omitted without subtracting from the worth of the whole. As to the opinion of correctness, the very vagueness of terms certify and opinion ought now to condemn their use. Judge Cardozo made no attempt to analyze their meanings, he was content, quite properly, to infer that auditors put forth the balance sheet as a correct statement of financial condition.

Reviews the book "Walton Federal Income Tax Course."

Abstract In approaching the problem of changes in monetary values of fixed assets and what the accountant's attitude should be thereto, it must be considered as affecting both the profit-and-loss statement and the balance sheet. That leads one, at once, into a very fundamental question, what is it that the accountant wants to show in the statement of profit and loss and in the balance sheet, or, what should he show, in these statements, when he is faced with the fact that properties used for the production and sale of commodities are worth more, or less, in terms of price, than the values indicated by the fixed asset accounts? To say, as some do, that the accountant should entirely ignore changes in monetary value, is the equivalent of saying that the tide rises, but the extent of its rise is of no consequence to anybody. Monetary values do change, and they are of consequence. Their consequences should be recognized, measured and expressed, because business is conducted in terms of present monetary values. There is no other way for business to express itself. Yet the orthodox accountant wants business transactions expressed in terms of both past and present monetary values, and he believes that net worth, at any time, can also be properly expressed in such variable terms.

Reviews the book "Principles of Accounting," by Eric L. Kohler and Paul L. Morrison.

Reviews the book "How to Audit: A Manual of Procedure."

Abstract Opinions as to what the profession demands of, and offers to its practitioners can easily be bad in conversation and even in advertisements. One think there is need for a careful and impartial survey of the facts as found in the experience of a large number of individuals of all ranks in public accountancy. Only facts can provide a permanently satisfactory approach to the problems of personnel which affect every public accounting firm and its present and prospective employees, as well as the educational side of the profession. Moreover, instructors are aware that leaders among practicing accountants are also coming to recognize that the internship problem in accountancy is far from being as adequately solved as in law or medicine, as evidenced by editorials' and formal articles in the professional literature, by the creation and activities of committees on education in a number of state societies of certified public accountants, and by the activity of, and diversity of judgment concerning the Placement Bureau of the American Institute of Accountants.

Abstract The article focuses on protection for auditors. Montgomery says, wisely, that an auditor is forced to assume that in any case the balance sheet may be submitted to credit grantor. Perhaps it is a fortunate thing that such an assumption must be made. Otherwise a good many auditors would lose sight of the fact that the term "public accountant" if it means anything at all connotes responsibilities to third persons. The realization of his responsibility to the public is the auditor's best protection against personal liability for negligence. It has been urged that accountants carry insurance or incorporate and thus limit their liability. No worse contravention of their duties to third persons could be conceived. Another suggestion has been made that in certifying to balance sheets, the phrase "we hereby certify to you" be employed. This is even worse, if the auditor must limit or deny altogether his responsibility to persons other than his employee he would do better to label himself private accountant and issue no certificate.