DAIRY COMPANY MATTERS

Waikato Independent, Volume XX, Issue 2303, 9 September 1920, Page 5

DAIRY COMPANY MATTERS

(To the Editor). —Enter Mervyn Wells into the intricacies of Dairy Company business. He is surely an addition to our ranks. Whefi was he initiated? I would remind him that he -is hot now dealing with groceries, drapery and hardware, etc., but with plain, bare, bald facts, and figures, I do not know the gentleman. He is welcome to his opinion. He may threaten if he chooses. I neither court his favour, nor fear his frown. Neither will I give place to Mervyn Wells in defining the wide and varied duties and responsibilities devolving upon the auditor of unlimited liability company, registered under the Companies Act or The Dairy Industry Act. So, sir, I begin, and will deal with the statements of Mervyn Wells, clause by clause, in a reasonable and logical way. Firstly, Mervyn Wells says “The plain facts are that the office work was not any more up-to-date than if ought to have been.” How does he know? That statement covers a lot. Granted it is so. The secretary is appointed by the directors. The auditor comes behind the secretary for the sole purpose of investigation. He is appointed by shareholders ,and is paid by them to do certain work. It does not matter if he receives only one pound for his services. That does not lessen his great responsibility. Now, sir, if the auditor is not satisfied with

the manner in which the books are kept and the information given his course * is perfectly clear if he is conversant with his business. He can refuse to audit the books, and thereupon report to shareholders. Before certification of the balance sheet he should be thoroughly satisfied that the affairs and books company are true and correct. *

Secondly, Mervyn Wells says ‘'That Mr Nicoll took the valuations of the stock tendered to him as correct.” Who informed Mervyn Wells of this? to have more information than the rest of the shareholders. If the statement of Mervyn Wells is a fact, then the auditor plainly placed himself in a very humiliating position indeed. When nearly a quarter of a million of money is involved, it appears on the face of it to show weakness and slackness on the part of the auditor to accept the word of any man being the officer of the company. It is like ask- - ing a man to pass sentence on his own work.’ Thirdly, Mervyn Wells says “No auditor goes to the warehouse to take stock. It is not necessary.” Certainly it should not be necessary. And by the way, we are not dealing with warehouses, but cool stores and freezing works, and limited liability companies stocks. Now, sir, what are the true facts. Every consignment of cheese sent from the factory to cool stores" is graded, and a copy of the number of crates is marked in the books of the company. A “duplicate copy of the

grader's report is sent from cool stores, snowing points hi grading, and the num her of crates in that consignment is marked thereon. This is filed for reference in the office of the company. During the varied process of auditing and investigating, and in- order to ascertain if the total amount of cheese manufactured during the year'has been accounted for, the auditor calls for certain vouchers and certificates to ascertain if the grand total corresponds with the books. On the 31st May (the ■ close of the financial year) there is usually stock in cool stores. It is the -duty of the auditor if he is conversant with his business to call for a certain certificate from the official in the cool stores showing the amount of cheese. The secretary should be in possession of this. Failing this, the auditor will not proceeed further until he gets it. If eheCse is in transit the books will show that the consignment was tailed on a certain day and will be taken into account. Otherwise the total amount of cheese manufactured will not tally out correctly. The same position holds good in connection with the bank balance at the end of the year. A certificate is required from the manager, although the pass book may also show the correct position. Fourthly, Mervyn Wells is careful <We>-Bo says, “I am told there was £II,OOO more stock than was represented." How did that happen? What about the certificate now? Why did the auditor not demand it? How did the shortage tally with the total amount manufactured? Was there a discrepancy? What was the auditor doing? Echo answers “What!"

Fifthly, Mervyn Wells says, “The other item so freely discussed amounts to nothing. The £50,000 item twice repeated is just like a dishonoured cheque presented again. You have no more money, because its amount appears twice in your bank book.’' Well, "■* iiill^aL - lnLllli " l| ' Tlf m °Ti knows

reasoning is almost too absurd to call for a reply. Sir, this item in the balance sheet of the year 1919 is almost as serious an item as the £II,OOO proposition. According to the balance sheet of 1919 I note there is a cheese sales account. Under this heading, all credits for cheese are shown. On the other side or under another heading in the ledger cheese is debited with certain items. Now, if an amount of cheese totalling £54,000 (which is a huge sum) in cash were received it would naturally pass through the bank to the credit of cheese account, and it would also appear in the company’s cash book. Now, sir, what about the

debit side? The balance sheet of 1919 shows that suppliers were paid two shillings and three pence, or thereabout without the fourpence bonus. That statement is not true. Suppliers received about 1/11 per lb. bonus included. How did the £54,000 arrive on the debit side of the ledger? Will Mervyn Wells answer the question? What was the auditor doing? I leave the public to judge.—l am, etc., W. K. WATSON.