Reviews the book "The Regulation of Industry," by Dudley F. Pegrum

The systems of accounts for public utilities have been revised more or less extensively since 1937. Of the several interesting features embodied in these systems, one particular innovation, the original cost procedure, really deserves more careful attention than accountants have seemed willing to give it. The principal advocate (but not the originator of the idea) of the original cost procedure for utility systems of accounts has been the Committee on Statistics and Accounts of the National Association of Railroad and Utility Commissioners (NARUC). The original cost procedure ingeniously utilizes accounting techniques to isolate and emphasize information which the regulatory authorities have said they must have in order to discharge their regulatory functions adequately. Depreciation is universally prescribed for public utilities in modern uniform systems of accounts. This requirement raises the interesting question of whether the acquisition adjustment account is to be subjected to similar periodic write-off. The system, in fact, does provide that the amounts recorded in this account with respect to each property acquisition shall be depreciated, amortized, or otherwise disposed of, as the Commission may approve or direct.

Distinction between auditing standards and auditing procedures is one that has not been at all clear in minds of many who have used the term. Unfortunately, some accountants have not even been aware that there is any distinction. However, this is not too surprising, it was not until February, 1941 that the word auditing standards became a recognized part of the accountant's language. At that time the short form of accountant's report or certificate recommended by the Committee on Auditing Procedure of the American Institute of Accountants was amended to include the sentence "our examination was made in accordance with generally accepted auditing standards applicable in circumstances and included all procedures which we considered necessary." This amendment to the wording of the report was made to meet the U.S. Securities and Exchange Commission's amendment 3 to its Regulation S-X which, among other things, required the auditor to state whether the audit was made in accordance with generally accepted auditing standards applicable in circumstances and whether the audit made omitted any procedure deemed necessary by the accountant under circumstances of the particular case