Knowledge that Transforms

Abstract The subject of internal auditing is receiving increasing attention because of the recognition given by accounting authorities and governmental regulations to its importance in determining the scope of audit necessary as a basis for an independent accountant's certificate. Sometimes people are inclined to think of accounting and auditing standards as those of large business concerns and forget that the majority of business organizations are relatively small. Most public accounting work is with relatively small business concerns. It is well to look at the highest possible accounting standards that can be developed and what can be done where cost is not a major controlling factor. Yet one must remember that small business enterprises still exist and furnish a problem of what can be done best to meet their needs. Hence one need to consider internal audit and control in the small as well as in the large business. Manifestly, if the independent auditors, in making their examination and tests, find that every feature of the accounting has been subject to a careful and adequate internal audit, the auditors can place much reliance on the internal auditing and correspondingly shorten their own work.

Abstract Reviews two books "Survey of American Listed Corporations," and "Statistics of American listed Corporations."

Abstract In this article the author focuses on the problem of evaluating the progress and achievement of students who take courses in business subjects in collegiate schools of business. The author remarks that too little attention is given to the subject, and yet, no matter how carefully the curriculum may have been planned, if the instructor errs in the evaluation of the achievements of any student by grading him at or above the passing mark when such a mark is not really deserved and earned, an injury has been done to the student, to the college, and to the business community in which the student will later seek employment. Many instructors base their grades solely upon the proportion of the subject matter of the course that the students give evidence of having learned. Students regard the grades they receive as evidence of their attainments. If their grades are high, they rightly consider that they have done well, if low, they consider that something is wrong. It is very important that the instructor, before grading the students at 90, should take into consideration everything that is necessary to enable him to do well in his first employment.

Abstract This article focuses on the recent accounting publications by the U.S. Government. Some of the published books are "Municipal Budget Procedure and Budgetary Accounting," "Work Measurement in the City of Los Angeles Building and Safety Departments," "Governmental Cost Accounting in the Los Angeles Area" and "Cost Accounting and Work Measurement in the Federal Government." Most of the text is devoted to a discussion of budgeting for the general fund. However, budgeting for the other usual municipal funds is treated briefly with a three page discussion being given to capital budgeting in the first book. General fund budgeting is presented in the traditional three phases, namely, preparation, adoption, and execution. In the three chapters devoted to budget preparation the importance of the work program as being the basis of expenditure estimates is well brought out. A model work program is presented in the appendix. Most works on budgeting recommend the "accrual basis." Others advocate the "cash basis." This bulletin not only describes detailed procedures under both of the traditional bases but presents a very practical method of budgeting revenues on a "cash basis" and expenditures on an "accrual basis."

Abstract Reviews the book "Accounting Developments During the Present Century," by Walter A. Staub.

Abstract Reviews the book "Accounting Fundamentals," by Richard E. Strahlem.

Abstract The purpose of this article is to statistically reflect some important elements of auditing. According to the author, the selection of suitable classification subdivisions for complex data always presents a difficult problem. Here the author separated the data to segregate auditing and non-auditing problems. The auditing questions were subdivided on the basis of two distinct methods of approach. One type of question dealt with questions involving definition, purpose, judgment, evaluation, selection, and explanation. The second type pertained mainly to matters of auditing procedure, program, and method. It has been insisted in the article that since auditing is a critical scrutiny of the facts which underlie the accounting statements under study, it is natural that professional examinations should give a prominent place to questions designed to reveal the candidate's knowledge of the traditional ways of making such study. The auditing questions are classified and summarized in the tables presented in the article.

Abstract The term "cartel" is used here to include all kinds of horizontal associations of independent firms with the purpose of influencing market conditions through common action. As long as cartels limit their activities to term-fixing or price-fixing they do not have any accounting problems of their own. The situation is different when they begin to regulate production or sales directly. Although the law does not permit such organizations in the U.S., shortage of materials and the need for allocating their use create problems which in some respect resemble those confronting cartels. A discussion of some cartel accounting questions may, therefore, have more than academic interest. The cartels under consideration may be conveniently grouped into those which merely fix output or sales of their individual members, and those which in addition act as central distributing or selling agencies. For all of them a threefold task in involved, first, to determine the relative participation of the individual member, the quota; second, to decide upon the total volume to be produced within a given period; third, to control production or sales of the members, to take care of deviations from the scheduled volume, and, for syndicates, to distribute the collected receipts among the partners. It is particularly this last function which calls for an elaborate cartel accounting system. Estimates of future demand based on present market conditions and businessmen's experience are the main factors involved.

Abstract This article focuses on inventory valuation in profit and loss accounting. Some limitations of the proposed change in inventory treatment should be made clear. It is apparent that the process of charging opening inventory to cost of sales at market price and pulling out closing inventory at cost eliminates only those fluctuations in value which properly apply to previous periods. Changes in the market value of goods occurring between either the opening inventory date or the date of purchase and the date of sale are not isolated. They are allowed to affect operating results, since they could not be separated satisfactorily from normal operations for the period. The purpose is to isolate the results of operations for this period. In times like the present, when prices are shifting rather rapidly, the proposed change in inventory accounting would offer its greatest service. The balance sheet would be made to give a truer picture of the current position, and the current ratio would be more significant. Furthermore, the operations for each accounting period would be set forth more nearly divorced from those of other periods. The operating statement would thus become a truer index of current operating efficiency.

Abstract Almost all the states at present require examination in the subjects of accounting theory, accounting practice, auditing, and law. In some states separate examinations are given in each subject. In many others accounting theory and practice are combined as one for grading purposes even though the examination is given in two parts. In still other states, subject matter from all these fields is included in the examination given, although not separately listed in the same four divisions. A few states give examinations in these subjects and additional examinations in other subjects. Since forty-six of the fifty-two states and territories use the American Institute of Accountants' examination questions, it may be said that the stated objective with reference to subject matter is now substantially reached. Laws and regulations, however, do not reveal the extent to which uniformity actually exists. Reference to the four general subjects is made either by law or regulation (mainly in the law itself) in forty-six states. Many refer to the combination of accounting theory and practice as one subject; a few refer to the use of American Institute examination questions; some list the four major subjects and also state that other subjects will be covered if deemed necessary or desirable by the board.