Knowledge that Transforms

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

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.

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.

Reviews the book "Credits and Collections in Theory and Practice," by Theodore Beckman.

Reviews the book "Fundamentals of Accounting," by J.F. Sherwood.

This article focuses on the editor's views about the social significance of accounting. Accounting is utilized as one means of exercising social control, that is, control by the government or by governmental agencies over institutions touched with a public interest. The right to inspect the accounts of private business enterprises is illustrative of this point. Bank examining is organized in the public interest, the audits being made for the protection of the depositors. Through the field audits of the U.S. Income Tax Bureau and the Bureau's accounting regulations, the federal government exercises an indirect control over numerous accounting policies. Another illustration is found in the power to prescribe uniform accounts. Usually one is inclined to relate the purpose of bookkeeping and accounting to the individual business enterprise. But here is a plain indication that the effect of poor bookkeeping extends far beyond the individual. Good bookkeeping, it seems, must be of some concern to society since the lack of it is so definitely associated with the great losses which attend bankruptcies.

Reviews the book "A System of Accounting Procedure for Livestock Ranches," by Frederick W. Woodbridge.

This article focuses on the author's view about earned surplus. The author says that the general course of the reasoning which led to the final definition will prove to be of even greater interest than the expected applications of the definition. The Committee on the Definition of Earned Surplus, reappointed hopefully each year by the president of the organization American Institute of Accountants, faced a task of no mean proportions. First was the obstacle that many common terms in use in the world of business, especially terms appearing on financial statements, have no fixed meaning, and can be made intelligible only through the aid of explanatory phrases. Second was the apathy, if not the actual resistance of business itself, toward more exact usages. The astonishing growth of interrelations between business enterprises has prevented the precise formulation of the scientific truths that are presumed to underlie the various manifestations of economic endeavor. Third was the multiplicity of state laws and court decisions bearing on the questions of dividends and maintenance of capital.

Reviews the book "Raw Materials of Industrialism," by Hugh B. Killough and Luch W. Killough.

Reviews the book "Stock Speculation and Business," by George L. Hoxie.