The Poverty Bay Herald AND East Coast News Letter. PUBLISHED EVERY EVENING. Saturday, November 1, 1879.

Poverty Bay Herald, Volume VI, Issue 939, 1 November 1879, Page 2

The Poverty Bay Herald AND East Coast News Letter. PUBLISHED EVERY EVENING. Saturday, November 1, 1879.

The Hon. Matthew Holmes has tabled a motion m the Legislative Council, which, if it should pass into law, and there is little doubt but it will during the present session, must have the effect of protecting and conserving the interests of large masses of the people of the Colony. The motion is : — " That m the opinion of this Council it is desirable that the question of auditing accounts of public companies or associations m the Colony should be referred to a Select Committee. The motion was agreed to without a dissenting voice. Mr. Holmes considered such a measure very greatly needed m consequence of the many defalcations of managers, clerks, and treasurers of companies and associations of different kinds. He attributed these defalcations primarily to deficient '.audits. The manner m which the^ auditors was appointed was the worst m the whole system. The plan usually adopted was for the shareholders to appoint auditors, but, generally speaking, the names were submitted by the managers or directors of the companies, when the auditors*wßre elected, as a matter of course. Ther^e was also another

drawback. This was, that m many cases the remuneration was not sufficient to cover the expenses of an efficient audit, and the duties which the auditors performed were of a perfunctory character, and did not touch what should be considered the essence of audit, the auditors invariably taking it for granted the statements which were placed before them. To this Mr. Holmes attributed the failure of a great many companies — to the shareholders not having a thorough knowledge of what was going on from time to time, and to peculations. Were a more efficient audit established, it would be impossible to carry on a system to peculation. In a very short time it would be found that tho3e acts were being perpetrated, and the evil, instead of occasioning a complete collapse, as was the case from time to time with banks and companies of various kinds, would be stopped before it reached a climax, and there wpuld be an avoidance of that loss and misery which so frequently ful : lowed the acts of unfaithful directors and others m charge of the companies. Many instances had occurred within the last year — notably those of the City of Glasgow Bank and the Provincial and Suburban Bank of Melbourne — m which huge losses had been sustained by shareholders. Now, he asked, would this system of fraud have been continued had a proper system of audit been established from the commencement 1 He took it that, instead of the auditors m these cases performing their duties efficiently, they had taken for granted the statements placed before them, and, without counting the coin m the bank, without looking at the securities held by the Bank, or m any other way making themselves acquainted with the internal management of the institution, had certified to the correctness of the accounts \ and the evil went on from year to year until a collapse brought to light the utter failure of the audit. Whac he wished to see was this : that the Government should pass a Bill making it imperative that every auditor should be licensed by the Crown, and should pay a small fee for his license, and give ample security for the due performance of his duties. Although this was apparently a small matter, yet it was really one of large importance, touching as it did nearly all the public companies m the Colony. They heard from the mother-country, where there were large benefit societies and trade unions, that, through mismanagement, or the absconding of the principal manager, most, or the whole, of the funds of some of those societies had been lost, and persons of economical and provident habits, who had been imagining that they had saved a maintenance for the future, had suddenly found themselves penniless. He therefore thought this was a subject which a Committee should take m hand, and with regard to which some measure should be passed making it compulsory on all auditors to have a license from the Government, and to give ample security for the due performance of their functions. Of the necessity of more stringent audits than have been given to public companies and societies there can be no doubt whatever. The thing is apparent, and we trust m a few weeks to find that so important a motion will have been placed on the Statute Books of the Colony.