Knowledge that Transforms

Reviews the book "Accounting Technique," by John N. Myer.

The article presents case studies in internal auditing. The following qualifications appear to be those most needed by an internal auditor; first, he must be an experienced accountant. Many graduates of good accounting and business courses in schools and universities want to step at once into the internal audit department. The recent graduate will do better in the long run by first obtaining considerable experience in clerical, accounting, and operating positions. This seems especially true when thinking of a job like internal auditing, which deals mostly with the things that go wrong, not with those that go right. Second, only a man who can think quickly on the spot and is willing to make decisions on his own will ever be a good internal auditor. Persistence and patience are other necessary qualifications. Finally, the utmost ability to be tactful, diplomatic and personable is needed. An auditor spends much of his time interviewing and questioning all kinds of people. He must get results without antagonizing, and without saying one word that might be harmful to himself, his department, or his company.

Income, as ordinarily computed and reported, arises primarily from two related but to some extent independent sources. There is the margin between selling price and current cost of acquisition and setting-the cost at the time of the sale. There is the so called "gain" or "loss" arising from the change in price between the time of acquisition and the time of sale, or between acquisition and consumption. This has been called "price profit," or "price loss," or "market profit" or "market loss." The effect of changing price levels upon periodic income has created a problem that accountants should solve now. If it is at all possible, action should be taken before the issuance of the 1948 annual corporate reports. The problem is so important that its solution cannot be deferred until a stable price level would make it practicable for business as a whole to make the change at the same time. Most of the methods used to determine cost of goods sold on a current cost basis do not yield accurate results because not all of the elements of cost are so computed.

The Third or 1948 statement of accounting principles underlying corporate financial statements is a worthy successor to previous editions by the American Accounting Association. Written in concise and generally clear style, it has restated the principal concepts of accounting in the light of the economic developments of the past seven years. Especially commendable are the emphatic and clear pronouncements on those post-war accounting practices which have tended to distort the significance of income for the period. These statements of concepts and standards provide, reserves may not be created by charges to revenue except in recognition of expense, the income statement for a period should provide an exhibit of all revenue and expense given accounting recognition during the period, reserves created from retained income should be returned undiminished to retained, income when the need for such reserves has passed, the balance sheet should contain no special section for reserves and a permanent distinction should be maintained between paid-in capital and retained income. Perhaps no committee could write a statement of accounting principles without some differences of opinion. Origins, uses and implications of accounting data are much too broad to expect unanimity of opinion.

Reviews the book "Fiftieth Anniversary,1898-1948."

The article discusses contemporary theories of corporate profit recording. Every substantial rise in prices brings with it many problems and many suggestions of economic reform. After World War I there was a strong movement for the stabilization of the dollar. The fluctuating dollar was the culprit, and legislation was proposed to stabilize prices by varying the gold content of the dollar. Since World War II accounting seems to be the chief culprit, and many stimulating articles have been written to this effect. Accounting is said to contribute to price inflation in two ways: (1) by providing misleading information upon which wage demands are based, and (2) by creating false optimism on the part of business men. One of the most recent criticisms of conventional accounting methods that has come to this writer's attention is that of Roy A. Foulke in his pamphlet, A Study of the Corporate Theory of Profits.' Mr. Foulke believes that accounting should account for economic values and for real profits. MacNeal recognizes that the term economic value is synonymous with market value when he states:".. . the economic value of a thing is its market price and that alone." At the other extreme is the only adequate method yet suggested for reporting real income, that presented by Sweeney in his book Stabilized Accounting.

Reviews the book "Principles and Practices of Money and Banking," by Charles R. Whittlesey.

Reviews the book "Accounting Principles and Practice," R.G.H. Smails.

The Committee on the Uniform CPA Examination was appointed February 28, 1948, in response to a request in 1947 from the Board of Examiners of the American Institute of Accountants. The board suggested the appointment of an Association committee to undertake a study of the examinations of recent years, with a view to suggestions that might improve future examinations. The commitment from Institute's President was interpreted broadly to include coverage of the board's examination procedures, the content of the uniform CPA examinations, timings, weightings, grading, and any other items, which the committee might deem pertinent. The committee wishes to acknowledge the fullest cooperation on the part of the board of examiners of the American Institute of Accountants and especially of its chairman, J. William Hope. It believes the board has made a sincere effort to better its examinations and procedures and no better evidence is needed than the request of the board for a survey by an independent organization. The comments, opinions, suggestions, and recommendations in this report are in no way offered in a spirit of derogation or fault finding, but rather in the hope some helpful and progressive ideas are incorporated herein.

Reviews the book "Consolidated Statements," by George Hillis Newlove.