PROTECTING INVESTORS

Evening Post, Volume CXVIII, Issue 36, 11 August 1934, Page 13

PROTECTING INVESTORS

AUDITORS' CERTIFICATES

Mr. G. O. May, chairman of the American Institute of Accountants, has given a reminder to "The Accountant '' (published by the English Instituto of Chartered Accountants) that an important advance has boon made iatcly in U.S.A. for the better protection of investors in public companies.

"It is felt in America," romarks My. May, "that it is very desirablo to bring home to investors the fact that accounts are not simple statements of fact, but represent tho result of the application of judgment and accounting principles to facts, and also to bring about a better understanding of the nature of tho accounting principle commonly accepted and of the necessary limitations in tho significance of accounts resulting from their appreciation. ' -

'' Tho underlying idea may havo been in the minds of those who drafted the English form of report, but it is certainly not brought home to shareholders by the words, 'as shown by the books of the corfipany.'

"The Federal Trade Commission acting under powers eonferreu by the Securities Act of 1933 has recently revised the form" of certificate prescribed by it .for use in relation to balaneo-sheets and profit and loss statements filed in compliance with the Act. Whereas previously it had required a certificate that the statements were true, it now uses the phrase 'truly and fairly reflect tho application of accepted accounting principles to tho facts disclosed by our investigation.'- The change has been regarded by accountants as an important step in tho right direction.

"The language adopted in the report. is to somo extent experimental, but suoh modifications of the form of report as may seem desirable can doubtless bo brought about without difficulty by tho methods by which the present form has boon evolved.

"The profession in America is fortunate in that the New York Stock Exchange has recognised (and recognised beforo the banking inquiry and the subsequent wave of reform) an obligation to do what has been in its power to secure for investors and traders in securities fuller and more authentic information regarding the position and operations of companies whose securities aro listed by it."