Knowledge that Transforms

Reviews the book "Professional Ethics of Public Accounting," by John L. Carey.

The modern collegiate school of business is in a unique position to meet the education requirements of accountants that will combine cultural and technical training, for it is so constituted as to maintain the proper balance between the liberal arts tradition and the specific requirements of preparation for a professional career in any of the various phases of business activity. In terms of types of curriculum structure for such a school, the paper argues for the "diagonal" plan, wherein the student begins his studies with a program containing a preponderance of subjects in the liberal arts division and a sprinkling of business subjects. As he continues through his collegiate career the trend is reversed so that, in his senior year, the student is pursuing a heavy concentration in his specialization group together with a light general elective program. The general advantages of this plan are (1) the problem of articulation between high school and college is thereby minimized; (2) the student is introduced to business in broad terms through a general survey of business structure, organization, procedures, and laws-all of which are basically related to the accounting process; (3) the general business subjects are appropriately introduced before specialization is begun; and (4) the choice of a specialty is deferred until such a time as the student has surveyed generally the various fields of business endeavor. From the specific viewpoint of education for public accountancy, this form of curriculum design (i.e., the "diagonal" type) permits the accountancy student to defer his decision to prepare for this particular phase of the field until he has virtually completed his specialization group and has been "exposed" to the various areas of possible professional interest in the general field of accountancy.

Reviews two books by Sidney G. Winter. "C.P.A. Review"; "C.P.A. Review. Answers to Questions and Solutions to Problems."

In this article the author discusses notable strides in the field of accounting for public funds during the past fifteen years, as of July 1947. A logical inference is that a large measure of this improvement is an outgrowth of the taxpayers' genuine concern over the expenditure of vast sums of public funds and a widespread belief that substantial retrenchments on a voluntary basis may not be expected from the offices and agencies concerned, in some quarters expansion continues to be the order of the day. Recent budget requests of many state and local governments in the U.S. have assumed proportions of surprising magnitude, resulting largely, it must be admitted, from withdrawals of financial aid by the U.S. government and from insistent public demands for more or better service, and from public-employee demands for standards of remuneration comparable to those enjoyed by persons in non-governmental employment. The law-making body of one midwestern state, sitting in the first quarter of 1947, found itself figuratively engulfed in a flood of bills calling for more public money, the requests covering practically the whole range of governmental activity from the township justice of the peace on one hand to departments and agencies of the state on the other.

Accounting has been defined as "the act of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof." Accounting is an art, not a science. It has two major functions: to record and classify events and transactions which are, in part at least, of a financial character, and to summarize, analyze, and interpret the records. A more significant definition would be of inestimable value to students and laymen alike—perhaps to accountants themselves. Unfortunately, it is not possible to reduce a complex subject to simple terms. Accountants use many common words, such as profit, loss, income, expense, and capital, with a variety of meanings, and with meanings that frequently differ from those of every-day life. The accountant's attempt to give common words a chosen meaning—neither more nor less—is not always successful, and it is therefore important to take heed. But accounting is nevertheless an act, and its terms, no matter how common, have meaning with reference to accounting operations.

The method used for calculating price and quantity variances in standard cost procedure deserves more explanation than is given it in cost accounting textbooks and current accounting literature, as of July 1947. The student in a standard-cost accounting course is likely to be perplexed by the glibness of the instructor in arriving at the amount of variation attributable to price on one hand and quantity on the other. The formula used in commercial practice demands a reasonable explanation since it is mathematically questionable. The purpose of this article is to justify the current practice, and to point out the theoretical issues that are involved. Some accountants, aware of the mathematical biases in calculating price and quantity variations, compute only the total amount of variation, and do not attempt to calculate the amounts of the individual variations attributable to price and quantity. But if the amounts of the individual variations are sufficiently significant to require administrative attention, this expedient will not, of course, prove satisfactory.

Reviews the book "Mathematics of Investment," 3rd ed., by William L. Hart.

Reviews the book "Audit Practice Case," by Arthur W. Holmes and Francis E. Moore.

The article presents an introduction to the art of accounting. The art of accounting has long been the subject matter of study by those who would become accounting technicians-controllers, auditors, public accountants, cost accountants and the like. For the purposes of this type of study, objectives have been formulated, teaching methods have been devised and a substantial body of text and other material has been developed. As a result the education of accounting technicians goes forward on a reasonably adequate basis although by no means without numerous possibilities of betterment. At the same time popular education in the art of accounting has been woefully neglected. For many of those who are not interested in becoming accounting technicians only inadequate inducement has been offered and only inadequate reasons have been given, for the study of accounting; for those who have evinced an interest in the art, despite their lack of desire to become technicians, the opportunities for study have, for the most part, been limited to the courses and procedures available for prospective technicians.

The article focuses on the importance of professional ethics in accounting. Many accounting teachers have recognized the desirability of including professional ethics as part of the subject matter of instruction of students who are preparing for the professional practice of public accounting. However not much has been done about it. It is good form to talk about the importance of ethics but subconsciously many practitioners and some teachers too are disposed to consider the subject of little practical significance. There is a disposition to relegate ethics, as a subject for active study and discussion, to that pigeonhole reserved for the abstractions which it is diverting to talk about in leisure time, but which are of no immediate concern in the daily business of life. This is a sad mistake. Leaders of the profession recognize and are saying with increasing frequency, that the future opportunities of public accountants depend on maintenance of public confidence. There is much more talk about public relations and public information but the codes of professional ethics and their enforcement are an essential part of the foundation for good public relations.