THE AUDITOR’S DUTY

Nelson Evening Mail, Volume LXVI, 28 June 1935, Page 6

THE AUDITOR’S DUTY

BLOODHOUND OR WATCHDOG? “Bloodhound or Watchdog?” is the title of an editorial comment in “The Accountant” (published by the English Institute of Chartered Accountants) on a practice disclosed in a .recent issue of the “Certified Public Accountant” (U.K.A.). The American publication mentions that a very successful certified public accountant with a wide experience is in the habit, on taking up ail audit engagement, of presenting to every major employee of the concern a letter, addressed Lo ilie auditor’s firm, ready for tlie signature of the employee in question . Provision is made for the signature to be attached in the presence of a notary. The letter runs : “This letter, which bears my signature, is to certify under oath that during my term of employment 1 have truthfully accounted for all moneys or goods received and/or disbursed, of whatever form, by proper entries on the books of . . . and to the best of my knowledge and belief the balance sheet and loss and gain statements, which include physical inventories of all merchandise and supplies handled, reflect the true financial position.” The American article claims that the presentation of this letter as the first step in the audit brings immediate signature from honest employees, while tlie “crooks,” being taken unawares, betray the fact by their demeanour. The final result, so it is stated, is that unexpected confessions have been received before the audit lias actually begun. Where the declaration lias been signed and defalcations have afterwards appeared, the crime of perjury is added to the accusation arising. “We have not the slightest, hesitation in saying that the procedure recommended is altogether foreign to tlie British idea of ail .audit,” declares “The Acnuntant.” “It appeal's to us that to ask in advance for a certificate from the officials of a company would immediately create the atmosphere of hostility which is so damaging to tlie real object of an audit. Putting ourselves into the position of the employees for 'a moment, wo should certainly refuse to see the necessity for making any such declaration. The British auditor assumes the honesty of every man until the contrary is indicated, although, when indication appears, his investigation is searching and complete. The watchdog, according to ideas current on this side, positively detracts from his usefulness if, instead of keeping a bright lookout, ho spends his time with his nose to the ground in the attempt to scent out crime.”