Journal Article Advertising Costs and Equilibrium—A Correction Get access Edward H. Chamberlin Edward H. Chamberlin Cambridge, Mass. Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 12, Issue 2, 1944, Pages 116–120, https://doi.org/10.2307/2296097 Published: 01 September 1944

In recording of transactions and preparation of periodical statements, accountants are supposed to be governed by accounting principles and accountants' certificates which usually include an expression to the effect that the statements have been prepared in accordance with generally accepted accounting principles. And yet there is nowhere a compilation or code of accounting principles. Accountants' reports provide ample evidence that accounting is not controlled by a body of principles which result in uniformity of procedure and treatment. In the first place, many rules and procedures of accounting are not of a fundamental nature. In the second place, principles, principles cannot be established in accounting by experimentation or by authoritative pronouncements. In the third place, it is not desirable that accounting procedures should be reduced to a rigid uniformity by any detailed statement of conventions and rules. Accountancy must meet varying requirements of different businesses operating under differing conditions and must be prepared to adjust itself to changes in the economic system.

In both termination and renegotiation the professional accountant may serve very useful purposes. Audit reports of independent certified public accountants, if available, are requested by Price Adjustment Boards in all renegotiation proceedings and many termination proceedings. Such reports lend credence to the financial representations of contractors. Likewise, the professional accountant can render valuable assistance in the orderly and conscientious preparation of data submitted in renegotiation and termination. In all these matters, the professional accountant must maintain his status of unbiased independence, avoiding advocacy, which is fundamentally incompatible with his function as independent certified public accountant. Provision for the renegotiation refund should be included in the balance sheet as a current liability, and in the income statement, preferably, as a specific deduction from sales with the related tax computed accordingly. Obviously, it is imperative that accountants in both private and public practice be thoroughly familiar with requirements relating to renegotiation and termination and that they should clearly comprehend their own responsibility therein.

The article highlights the role and function of internal auditors. The author discusses fundamental factors which have caused industry to promote internal auditing to a key position in the general scheme of internal control. During 1940s, various management aspects were handled by different employees of the firm. Industrial management adopted these and many other new techniques to combat certain basic shortcomings in big business enterprise. With its origin in the accounting field, internal auditing derives its distinctive position in the sphere of managerial control from a series of peculiar characteristics which are not common to other staff departments within the organization or to public accounting staffs. In other words, these qualities make internal auditing a tool for the management in establishing and maintaining enlightened internal control. The first of these inherent characteristics is prejudice, partiality, bias, or loyalty. Compared with the public accountant, the internal auditor is partial toward the company under audit because his client is his employer.