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DUTIES »/ AUDITORS 
 
 IN RELATION TO 
 
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 AMALGAMATION 
 
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 The BUSINESS MAN'S PUB 
 LISHINO COMPANY. LTD 
 
 DETROIT. ^^<^<^<^«^« MICHIGAN 
 
LIBRARY OF 
 
 ALLEN KNIGHT 
 
 CERTIFIED PUBLIC ACCOUNTANT 
 502 California Street 
 
 SAN FRANCISCO. CALIFORNIA 
 
DUTIES OF AUDITORS 
 
 IN RELATION TO 
 
 Corporation Amalgamation 
 
 THE INVESTIGATION OF CJtl^ANIES' ACCOUNTS 
 
 WITH A VIEW TOj^Syj^LGAMATION 
 
 HOW TO DO XHfeE^XND WHAT 
 
 THE RBraW SHOULD 
 'AIN. 
 
 ^ 
 
 A Thesis presented before the Institute of Chartered 
 
 Accountants^ at Toronto^ Jaiiuary 
 
 15th, 1902, by 
 
 F. H. MACPHERSON, Chartered Accounianty 
 Windsor, Ontario, 
 
 PRICE, ONE DOLLAR. 
 
 PUBLISHED BY 
 
 The Business Man's Publishing- Company, Ltd 
 
 DETROIT, MICH. 
 

 
 Entered according to Act of Congress in the year 1902. 
 
 By F. H. MACPHERSON, C. A. 
 
 Detroit, Michigan. 
 
 In the Office of the Librarian of Congress. 
 
 All Rights Reserved. 
 
 
 
DUTIES OF AUDITORS. 
 
 It is not my purpose, nor was it the intention of the Council 
 of the Institute in selecting the subject for this evening's 
 paper, that I should enter into a dissertation 
 The Difference upon the merits or demerits, the good or ill 
 Between to the community of "Amalgamations," 
 
 Trusts and otherwise known as "trusts," "combina- 
 
 Amalgamations tions," and "monopolies," or if the terms be 
 used which are applied to them by those 
 more especially and directly interested, then we shall speak 
 of them as "Judicious combinations for the public good," 
 "community of interest," or "community of control." 
 
 Here I may interject that the difference between a Trust 
 and an Amalgamation has been thus described: "The Trust 
 was designated primarily as a weapon of war, aggression and 
 attack; the Amalgamation is primarily a measure of self- 
 defence and peace." 
 
 Whether the objects of Amalgamation are desirable or the 
 reverse, is not wdth us the question; nor yet whether most 
 beneficial to the community or to the individual. There are 
 two sides to this, as to every other question. All will agree, 
 however, that the one ultimate end and aim of those who enter 
 into these combinations, by whatever name they may be known, 
 is a desire to increase profit. This increased profit may be 
 brought about in numerous ways, as by command of the neces- 
 sary capital ; the checking of competition ; the utilization of 
 materials which manufacturers in a small way cannot use, in 
 the manufacture of by-products ; the introduction of new and 
 labor-saving machinery whereby the cost of production is 
 materially lessened ; the saving of energy which comes from 
 the organization of a large business under a single skilled 
 executive head ; better organization ; the ability to retain men 
 of peculiar abilities upon the line of w^ork for which they are 
 specially fitted ; the saving of expense in the selling or disposal 
 
 3 
 
 380318 
 
of the products'; the spetfaKzilig of work — and with all these, 
 as it was^^^tyby;^th'e pr^ident of the Standard Oil Company, 
 is given ^'power to give the public improved products at less 
 prices and still make a profit for the shareholders," and to 
 provide "permanent work and good wages for labor. 
 
 In this age of progress it would seem that combinations 
 have become a necessity. This being admitted, the important 
 question to be considered by accountants is 
 Combinations upon what basis shall these amalgamations 
 a necessity be effected, and upon this subject I shall to- 
 
 of the Age night endeavor to present a few thoughts. 
 
 "The Investigation of Companies' Ac- 
 counts with a view to amalgamation. How to do this and 
 what the Report should contain." 
 
 For the purposes of this paper I shall change the order of 
 the sentence "How to do this and what the report should 
 contain," and make it read : "What the report should contain 
 and how to do this," or, the requirements having first been 
 ascertained, how proceed to obtain the information required. 
 
 The first point to receive consideration is the position of the 
 accountant with respect to the extent of the examination which 
 he is called upon to make. Usually the in- 
 Status of the structions are very general in their terms ; 
 
 Accountant in some instances, however, they are suffi- 
 
 ciently specific as to leave no room for the 
 exercise of any discretion. As an illustration : Recently I 
 was asked to make an investigation of two concerns (about 
 to amalgamate) for the purpose of ascertaining what the rev- 
 enues and expenses of operation of the respective properties 
 had been for a certain period. I was not to concern myself 
 with the matter of assets and liabilities. The value of the 
 former, and the sum of the latter had been arranged as be- 
 tween the parties previous to my being called in and certain 
 statements as to profits had been made. My sole duty was to 
 verify the accuracy of these statements as to profits. 
 
 In "Dicksee on Auditing" it is laid down as an axiom that 
 "an accountant cannot submit his professional discretion to 
 the dictation of his clients without sacrifice 
 (Responsibilities of self-respect, and grave danger to his 
 of the clients' interests." This is a sound principle 
 
 Accountant and one which it is very desirable should be 
 
 adhered to. In the great majority of the 
 
certificates of accountants which are found in the prospectuses 
 of companies forming to effect amalgamations is a bare state- 
 ment as to profits covering a period of years, not of the several 
 companies individually, but in the aggregate. Each time that 
 I see a certificate framed after this, the prevailing fashion, the 
 thought occurs to me that the accountant is probably carrying 
 out his instructions, and is telling the truth in a concrete form. 
 But is the whole truth being told? For it is possible for the 
 accountants to tell the truth and yet not give expression to 
 the whole truth. The question I next ask myself is: What 
 are the responsibilities of the accountant? We are coming to 
 know and to realize, day by day, and year by year, that the 
 investing public are learning to rely more and more upon the 
 certificate of the accountant ; that as much reliance is being 
 placed upon this as upon the names of those who stand 
 sponsor for the projected enterprise, prominent in the financial 
 and commercial world though they may be. It is a recognized 
 fact that the flotation of any scheme, large or small, where 
 public subscriptions are invited is hardly possible in the 
 absence of the certificate of a Chartered Accountant of known 
 and recognized standing in the community. 
 
 Within the past year I have knowledge of three instances 
 of attempts being made to float enterprises which were found 
 impossible in the absence of the certificate of a known and 
 recognized accountant. In every instance the flotation was 
 successful, the accountants certificate having been obtained, 
 the enterprises having been found deserving. 
 
 In this view of the case the responsibility which rests upon 
 the accountant is impressed upon me as being so grave and 
 serious that it cannot be treated lightly. Knowing that upon 
 the strength of statements to which we certify will follow the 
 investment of hundreds of thousands of dollars, the hard earned 
 savings of persons who know little or nothing of business, and 
 who depend upon the word of the accountant as to the possible 
 profixt-earning power of the enterprise in which these savings 
 are being invested, it behooves us as accountants to so prepare 
 our reports and certificates that in case of failure to realize 
 anticipations, the blame may not be placed upon our shoul- 
 ders. We must do this if the profession of accountancy is to 
 be enduring and respected. 
 
 W^hat I desire to impress upon accountants at this early 
 stage in our consideration of this subject is the necessity for 
 
stating the "whole truth." I do not for one 
 Essentials moment wish it to be understood that I feel 
 
 of the or think that failure to do this is from any 
 
 Accountants desire on the part of the accountant to hide 
 
 Report what ought to be revealed, but for the rea- 
 
 son that his instructions limit him to a 
 certain course, and because the telling of the whole facts might 
 be prejudicial to the interests of those who engage his services. 
 
 You ask my definition of the phrase : "the truth, the whole 
 truth, and nothing but the truth/' 
 
 I answer: that to my mind the whole truth would more 
 nearly be told if the certificate of the accountant were to show 
 the revenues and expenditures of the several concerns entering 
 the amalgamation individually, and year by year, and not in 
 the aggregate. If the profits are gradually increasing, the 
 report would, as it should in all fairness, so show ; and on the 
 contrary, if a decline or irregularity in the profit-earning power 
 is apparent, the report should so state, with the particulars 
 and reasons therefor. This as to the profit-earning power. As 
 to the valuation of the assets, the report should show the 
 amount of capital (bona fide) engaged in each business. This 
 point, I will, however, take up a little later. If this be done 
 the facts presented may be perfectly satisfactory, or on the 
 contrary, they may be such as will have the effect of deterring 
 many of those who now do so, from investing in shares of 
 over-capitalized companies. 
 
 It is possible that the accountant who follows the course I 
 attempt to lay down may not receive very much of this par- 
 ticular class of busienss ; but he will be certain to "come into 
 his reward" at a later period, when the liquidator or receiver 
 takes a hand, and an investigation follows for the purpose of 
 fixing the responsibility. This phase of the business will be 
 just as profitable, besides being a good deal more satisfying 
 to the conscience, and the accountant will feel that he has ful- 
 filled well the precept expounded by Polonius for the benefit 
 of his friend Laertes : 
 
 "To thine own self be true 
 And it must follow, as the night the day. 
 Thou canst not then be false to any man." 
 
 For the purposes of this paper I shall assume : 
 
 (i) That two manufacturing concerns in the same line of 
 
business contemplate amalgamation. (2) 
 Scope of the That the report of the accountant is to form 
 
 Investigation the basis of the amalgamation. (3) That 
 
 the accountant's instructions are general and 
 not specific, and include the determining of the assets and 
 liabilities, as well as the earnings. (4) And that he is acting 
 for the purchasers and not for the vendors. 
 
 Accountants differ as to the scope of an investigation. 
 There are those who take the position that the accountant is 
 not expected to make the thorough examination which a reg- 
 ular audit would entail, but that the genuineness of the boks 
 and of the balance sheet should be assumed. Others consider 
 that the accountant pursuing an investigation would wish to 
 analyze the accounts, and that in doing this we would dis- 
 cover fraud, if any had been committeed. 
 
 Regular audits and special investigations have or should 
 have the same end in view: the obtaining of a correct state- 
 ment of facts. The first is for the purpose of verifying the 
 balance sheet put forward as presenting the condition of 
 affairs of the business under review, for the safeguarding of 
 the interests of the shareholders or proprietors. The second 
 (if on behalf of a projected company) is for a similar purpose, 
 viz : the ascertaining the value of the assets, the liabii'ties, and 
 the profit-earning .power. 
 
 For myself, I cannot well see how an accountant can accept 
 and prepare a report from any balance sheet without satisfying 
 himself, by a sufficient analysis, of the regu- 
 Statement of larity of the accounts and of the methods 
 
 Assets and followed to produce the various items which 
 
 Liabilities enter into the* assets of a concern, or which 
 
 Illustrated go to make up the revenue and expenditure 
 
 accounts. 
 
 Leaves from experience are of more practical value than 
 volumes of theory. 
 
 Take the following statement of assets and liabilities pre- 
 sented to me recently for an examination and report. The 
 revenue and expenses were the subject of a second statemnt. 
 
Assets. 
 
 1 Cash an hand and in bank $ 1,345 40 
 
 2 Bills receivable 9j953 42 
 
 3 Advertising due bills 1,521 95 
 
 4 Mdse. on hand.. 10,000 00 
 
 5 Machinery and fixtures 33^204 45 
 
 6 Property and franchises 209,765 82 
 
 7 Accounts receivable 2,260 81 
 
 8 Insurance accrued 166 86 
 
 $268,218 71 
 
 Liabilities. 
 
 9 Bills payable $ 9,029 45 
 
 10 Accounts payable i,447 89 
 
 11 Reserve account 7,74i Z7 
 
 12 Capital account 250,000 00 . 
 
 $268,218 71 
 
 Items I to 5 and 7 and 8 of the assets presented no difficul- 
 ties in the way of verification. Item 6 (property and fran- 
 chises) required investigation and analysis which revealed 
 the fact that it represented nothing but a patent v/ith three 
 years yet to run, and the balance ''water" in the capital ac- 
 count. Shorn of these the resources of the company were 
 $58,452, and the liabilities on trade account $10,477; cash in- 
 vestment of shareholders $40,234, and surplus $7,741 
 
 I mention this case for the purpose of emphasizing my posi- 
 tion that it is rarely, if ever, safe to assume the correctness of 
 the balance sheet, and the accountant who 
 What the will certify, without an examination and 
 
 Accountant's analysis in detail sufficient to satisfy himself 
 
 Report shouldJfci|^^tjiH^rboi^ fides of the items which enter 
 Contain. -- rm^CS^wiiiiWment as assuming a responsi- 
 
 bility from which I, for one, should wish to 
 be excused. 
 
 Statements of the concerns should be included in the report, 
 independently of each other, and based upon the foregoing 
 specifications should contain information as folows: 
 
 (i) Assets as of a given date (the same in each instance) 
 divided as to : 
 
 (a) Realty. 
 • (b) Plant and machinery. 
 
 (c) Merchandise (raw material). 
 
 8 
 
(d) Merchandise (in process). 
 
 (e) Merchandise (finished product), 
 f) Leasehold. 
 
 (g) Good will, 
 (h) Patents. 
 
 (i) Accounts receivable, 
 (j) Bills receivable, 
 (k) Cash on hand and in bank. 
 (1) Bills receivable under discount (Indirect), 
 (m) Accrued interest, insurance, etc. 
 (n) And such other divisions of the assets as the 
 nature of the business might demand. 
 
 (2) Liabilities, as of a given date (the same in each 
 instance), divided as to : 
 
 (a) Bills payable. 
 
 (b) Accounts payable. 
 
 (c) Mortgage indebtedness. 
 
 (d) Bills receivable under discount (Indirect). 
 
 (e) Other indirect liabilities. 
 
 (f) Capital account. 
 
 (g) And such other divisions of the liabilities as the 
 
 nature of the business might demand, 
 
 (3) Revenues and expenses of each business showing earn- 
 ing power of each in a given time (usually three years if the 
 business has been in operation so long) and preferably cover- 
 ing the same period. 
 
 Taking the items in these divisions in their order, the 
 accountant will ordinarily not be called upon to verify items 
 "a" to *'h," the land, buildings, stock-in-trade, leasehold, etc., 
 being specially valued by independent valuers. If not, and 
 these are subject to verification by the auditor, he should in 
 the case of : -"- 
 
 (a) Realty, call for the title deeds and see that the account 
 is not charged up with fictitious increases in value, or with the 
 annual taxes, as I have found in certain instances, and that a 
 sufficient allowance has been made for depreciation in build- 
 ings, etc. 
 
 (b) Plant and machinery, a certified inventory, which 
 should agree with the sum set down in the balance sheet, care 
 being taken to verify extensions and additions, and a compari- 
 son of prices with the original invoices and that due allowance 
 has been made for depreciation, and obsolete plant. 
 
 9 
 
(c), (d), (e) Merchandise, raw, in process, and the finished 
 product, certified inventories, which should be checked both as 
 to quantities and values — an independent appraisement is alto- 
 gether preferable ; comparison of inventory with invoices in the 
 case of raw material ; to see that profits are not anticipated, a 
 careful inspection of cost accounts is required. In case of man- 
 ufactured stock care must be exercised to see that office and 
 selling expenses are not pro-rated, and added to the cost of 
 goods appearing in inventory. Note should be taken of the 
 "dead wood" in the stock and that proper allowance has been 
 made to cover. 
 
 (d) Leasehold, not usually a consideration, but if found to 
 exist, a special valuation to ascertain present value is best; 
 otherwise the original cost, less proportionate reduction for 
 the expired period. 
 
 (g) Good will, this item can only be determined by agree- 
 ment between the parties, and is one which does not seriously 
 concern the accountant, except that if it is put in at an arbi- 
 trary sum by the vendors, he should see to it that the price be 
 set forth separately and distinctly in the "assets" so that the 
 purchasers may know just how much they are expected to pay 
 for the same. 
 
 (h) Patents. See that these are entered at their proper 
 present worth — which will be determined by the remaining 
 life thereof, and the present "state of the art" in that partic- 
 ular connection. 
 
 (i) Accounts receivable. A careful examination should 
 be made to ascertain the condition of these, that they are alive 
 and collectable, and that proper provision has been made for 
 bad and doubtful. Also that secreted in the accounts receiv- 
 able may not be found charges for "goods on consignment" 
 billed out at the usual profit, and going to swell the volume 
 of output thus unduly increasing the earnings, by the "antici- 
 pation of profits." 
 
 (j) Bills receivable. Same examination as in the case of 
 accounts, so far as prospects of realization are concerned. 
 
 (k) Cash on hand and in bank. The same verification as 
 in a regular audit. 
 
 (1) Bills receivable under discount. This is an indirect 
 asset as well as an indirect liability, and it is important in the 
 case of an amalgamation where the liabilities are being as- 
 sumed, that information on this point should be given and it 
 
 10 
 
may be necessary that some allowance should be made in 
 anticipation of "loss upon realization." 
 
 (m) Accrued interest, insurance, etc. That the claim for 
 these is fair and proper. 
 
 Turning next to the question of liabilities, we take up : 
 (a) (b) Bills payable and accounts payable. The verifi- 
 cation will be the same as in a regular audit. In this connec- 
 tion it may be proper to say that there is not much danger of 
 the liabilities being over-stated. The principal danger lies in 
 the understating or not taking to account of the outstanding 
 liabilities, and this must be carefully guarded against if the 
 transfer of the business involves the assuming of all the lia- 
 bilities. 
 
 (c) Mortgage indebtedness. Verification by the obtaining 
 of a statement from the mortgagees, both as to principal and 
 arrears or accrued interest. 
 
 (d) Bills receivable under discount. The remarks under 
 item "L" in assets would more properly come in here, the 
 same being applicable in both cases. 
 
 (e) Other indirect liabilities. These may be in the nature 
 of endorsations (although a strictly improper and illegal pro- 
 ceeding in the case of joint stock companies) claims for dam- 
 ages, disputed accounts for materials, services or commissions. 
 A distinct statement in writing as to the existence or non- 
 existence of these should be obtained from the proper officers 
 of the company. 
 
 (f) The value of the business to the purchasers will be 
 represented by the difference between the assets and liabilities 
 in each case and if profitable should equal the issue of capital 
 stock with an addition to the assets of any undivided profits, 
 which would enhance the value of the equity to be transferred 
 to the amalgamating company. 
 
 The question of revenue and expenses of operation will in 
 all probability more particularly occupy the attention of the 
 accountant, rather than the ascertaining of 
 Verification the value of the assets and liabilities; in 
 
 of Revenue fact, as I have stated before, his instructions 
 
 may limit him to the determining of these 
 without regard to the other. 
 
 Taking the revenue accounts first: the accountant will 
 require to make a careful investigation of the receipts for the 
 period (usually three years) under examination. He will see 
 
 11 
 
that no extraneous revenue has been introduced and that the 
 progress in the revenue account has been consistent and 
 steady,** or otherwise. He must be watchful that the 
 revenue account has not been increased by credits for 
 goods "on consignment'* with an off-setting entry to ac- 
 counts receivable. In a recent case open accounts of 
 $45,000 were, upon investigation, found to contain consign- 
 ments to the extent of over $30,000, upon which gross profits 
 exceeding twenty per cent, had gone to the credit of revenue, 
 thus enhancing that account by over $6,000. This occurred 
 during the last year of the three under examination. Of course 
 a very substantial increase in turnover and profits was shown, 
 which was purely fictitious. Other points which require to be 
 looked into are, that goods "on approval" likely to be returned 
 to stock afterwards, have not found their way into the sales 
 account, that fictitious sales, for the purpose of swelling the 
 revenue have been put through the books, and shipments not 
 made before close of inventory; that incompleted and un- 
 shipped orders have not been credited to sales account, thus 
 inflating revenue by ungained profits ; that rebates and allow- 
 ances are a charge against sales and not an addition to mer- 
 chandise account. In a word, the bona fides of all sales espe- 
 cially near the end of the period should be determined to the 
 satisfaction of the accountant. 
 
 It is the duty of the accountant to see that all the expenses 
 entered are a proper charge against the business and that they 
 are made within the proper period; that 
 Verification of there is ho reduction in expenses toward the 
 Expenditures close of the term under inspection ; that the 
 
 and Profits expenses are regular and consistent and bear 
 
 a steady ratio to the turnover; that proper 
 and reasonable allowances have been made for repairs and 
 renewals, and that these are charged against revenue and not 
 an increase to capital. 
 
 Excessive profits from any particular cause should be noted, 
 as for instance: those which might arise from the making of 
 heavy purchases in anticipation of an upward tendency in 
 prices, and which anticipation had been fulfilled. 
 
 That all profits earned and taken to account are incidental 
 to the business. A sale of real estate not required for the 
 purposes of the business, and made at a substantial profit, 
 forms an example. 
 
 12 
 
On the other hand expenditures of exceptional and unusual 
 character which have gone to reduce the profits below normal 
 should be noted. 
 
 In the consideration of the cost of operation heed should be 
 given to the effect which a limited capital has had upon the 
 expenses of operation. Lack of capital is 
 Cost of naturally followed by increased borrowings, 
 
 Operation and increased borrowings augment the in- 
 
 terest account. Operation is thus charged 
 with a sum, which, had adequate capital been invested, would 
 have been in the nature of a dividend. By way of illustration : 
 I have in mind a business in which every dollar of capital in- 
 vested is borrowed. This may appear an extreme case, but such 
 is, nevertheless, sometimes to be found. The borrowed capital 
 represented $100,000. Upon this sum interest was paid out of 
 the business and charged to operating expenses. I am asked 
 to investigate, and find this condition. In the preparation of 
 the profit and loss account I eliminate the $6,000, interest paid 
 on this sum in order to arrive at the earning power of the busi- 
 ness. It can readily be seen how unfair any other course 
 would have been, and how lack of sufficient capital in any 
 business will impair the earning power and affect the showing 
 as to profits, unless allowance be made therefor. There is room 
 here for the exercise of a display of good judgment on the part 
 of the auditor in determining what the "adequate capital" 
 should be. 
 
 English authorities suggest that it is part of the duty of the 
 
 investigating accountant to ascertain the amount of Capital 
 
 necessary to conduct the business on its 
 
 Trading present lines and report as to the scope 
 
 Percentages offered for increased capital investment. 
 
 The Accountant should so far analyze the 
 accounts as to enable him to furnish information upon the 
 following points : 
 
 (i) Proportion the stock bears year by year to the annual 
 turnover. 
 
 (2) Rate per cent, of gross profit in trading account on 
 cost. 
 
 (3) Rate per cent, of selling expense on cost. 
 
 (4) Rate per cent, of Administration and office charges 00 
 cost. 
 
An analysis sheet covering these and other points of a like 
 nature, in each business, would enhance the value of a report. 
 
 Reports in detail upon each business should be prepared and 
 furnished the principals, and these should form the basis upon 
 which the Amalgamation is carried out. 
 Separate Regard, of course, will also be had to the 
 
 Reports introduction of other interests where more 
 
 extensive operations are contemplated by 
 the Amalgamating Company. 
 
 In addition to the report in detail a certificate is usually pre- 
 pared for use in the prospectus. This certificate is generally 
 barren of all information except as to the revenues, expenses 
 of operation, and profit earning power of the various busi- 
 nesses entering the amalgamation, and these in the aggregate. 
 Indeed, certificates are not uncommon where information is 
 given only as to the profits earned by the several businesses. 
 It is unusual to see any reference to the amount of capital 
 invested. It occurs to me that a model certificate would be 
 one framed somewhat after the following style : 
 
 Certification. 
 
 Gentlemen — I beg to advise that I have examined the rec^ 
 ords of the Brown Manufacturing Company, Limited, and of 
 The Jones Manufacturing Company, Limited, each for a period 
 of three years, and certify to the correctness of the under- 
 written statements, as to Capital, Earnings, Expenses of Op- 
 eration and Net Earnings, covering the period given : 
 
 1898. 
 1899. 
 1900. 
 
 Brown Manufacturing Co., Limited 
 
 Net Capital 
 Employed. 
 
 Earnings. 
 
 Expenses of 
 Operation. 
 
 Net 
 Earnings. 
 
 Total $ $ $. 
 
 Jones Manufacturing Co., Limited. 
 
 1898. 
 1899. 
 1900. 
 
 Net Capital Expenses of Net 
 Employed. Earnings. Operation. Earnings. 
 ? $ $ $ 
 
 Total, 
 
 14 
 
Combined Companies. 
 
 Net Capital Expenses of Net 
 
 Employed. Earnings. Operation. Eaminsrs. 
 
 1808. 
 1899. 
 1900. 
 
 Total $ $ $ 
 
 For further information reference is made to my reports 
 in detail, herewith. 
 
 JOHN THOMPSON, Accountant. 
 
 I fully appreciate that the less detail which appears in the 
 report the better, for the obvious reason that much of it would 
 not be understood by the average individual, and the tendency 
 would be to befog rather than enlighten ; and that this is very 
 undesirable. But I do think that an accountant issuing a cer- 
 tificate framed as above, with a simple qualifying reference to 
 a report for further and detailed information will be placing 
 himself upon safe and sure ground. 
 
 No reflection can fairly be made upon the honesty and integ- 
 rity of the accountant aftervvards, and if such should be sug- 
 gested and an investigation be made as to the reasons for 
 failure, if failure has come upon the enterprise, then the more 
 rigid the examination the brighter and better will appear the 
 position of the accountant. 
 
 In presenting these views, I have departed from the usual 
 course in some respects, with the object, amongst othei things, 
 of eliciting discussion and an interchange of views, as by this 
 means only can these meetings be made to bear fruit to the 
 fullest and best advantage. 
 
 In closing I cannot do better than repeat the words of i\Ir. 
 Fisher, F. C. A., President of the Institute of Chartered Ac- 
 countants in England and Wales, who, in speaking recently 
 upon the subject of Accountants certificates, has said: 
 
 "In a word, let our certificates be plain, clear, and with no 
 uncertain sound, avoiding, as sometimes happens, a crowd of 
 reservations and qualifications, of which it is often difficult to 
 understand the meaning. Let our certificates exclude every- 
 thing that may possibly be construed into, or even approach, 
 the appearance of a possible double or doubtful meaning — let 
 our certificates be not only true and bold, but intelligible and 
 understandable to all who read them. Thus will the certificate 
 
 15 
 
of the Chartered Accountant become more and more valued 
 and relied upon, and the certifying accountant commended for 
 keeping to facts, and not attempting to prophesy, or resorting 
 to the foolish practice of fortune-telling. To so act, wt shall 
 merit, and may I not say, deserve, the confidence to enjoy and 
 to establish upon a firm and, of the general public, which we 
 all desire, lasting basis." 
 
 16 
 
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 380318