PROTECTING INVESTORS

Evening Star, Issue 21819, 7 September 1934, Page 5

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 Institute of Chartered Accountants) that an important advance has been made lately in the United States for the better protection of investors in public companies. “ It is felt in America,” remarks Mr May, “ that it is very desirable to bring homo to investors the fact that accounts are not simple statements of fact, but represent the 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 the significance of accounts resulting from their appreciation. “ The underlying idea may have been in the minds of those who drafted the English form of report, but it is certainly not brought home to shareholders by tho words 4 as shown by the books of the company.’ “ The Federal Trade Commission, acting under powers conferred by the Securities Act of 1933, has recently revised the form of certificate prescribed bi r it for use in relation to balancesheets 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 4 truly and fairly reflect the application of accepted accounting principles to the facts disclosed by our investigation.’ The change has been regarded by accountants as an important step in the right direction. 44 The language adopted in the report is to some extent experimental, but such modifications of the form of report as may seem desirable can doubtless be brought about without difficulty by the methods by which the present form has been evolved. 44 Tho profession in America is fortunate in that the New York Stock Exchange has recognised (and recognised before 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 are listed by it.”