Escolar Documentos
Profissional Documentos
Cultura Documentos
AUDITING
PRINCIPLES
OF
ACCOUNTS.
ADVANCED
N.
988
gilt,
7s.
pp.,
ACCOUNTANCY.
6"L
cloth
8vo,
318
gilt,
Them.
2s.
COMPANY
the
derny
8vo,
cloth
5s.
in
40
so
OF
as
PHILLIPS,
In
it
relates
By
W.
8vo,
P.
PIXLEY,
demy
Fellow
8vo,
152
cloth
21s.
Fellow
Royal
257
in
B.
A.C.I.S.
net.
Edition.
pp.,
In
net.
ASSETS,
Annual
the
Law
RESPONSIBILITIES
pp.,
F.C.A.,
the
WILLIAM
Eleventh
732
gilt,
cloth
net.
Final),
5".
pp.,
WASTING
of
of
and
AND
Computing
LEAKE,
By
5s.
By
Inter,
F.C.A.
gilt,
in
D.
gilt,
8vo,
forms,
Summary
DUTIES
cloth
demy
Accounts.
gilt,
AND
Directors,
In
to
cloth
DEPRECIATION
Treatment
By
cloth
ADMINISTRATORS
(Hons.
THEIR
F.
COSTS.
Practice.
In
prepared
With
8vo,
AUDITORS:
In
net.
8vo,
and
EXECUTORS,
A.C.A.
demy
demy
6d.
demy
F.C.A.
TRUSTEES.
far
and
F.C.I.S.
F.C.A.
AND
In
Manual
COLES,
7s.
pp.,
Principle
specially
ACCOUNTS
AND
Balance
Companies
COMINS,
356
RIDGWAY,
with
etc.
net.
CLIFFORD
gilt,
Limited
F.C.I.S.
ACCOUNTS
A.
inset
ARTHUR
BOOK-KEEPING
pp.,
S.,
Practical
CHARLES
gilt,
JOHNSON,
COST
26
complete
in
by
MANUFACTURING
120
demy
Accountancy
F.C.I.
with
By
Preface
GEORGE
Understand
and
pp.,
officials
Students.
a
and
TOVEV,
of
use
With
In
net.
Advanced
By
85
cloth,
F.C.A.
Read
to
ACCOUNTS.
for
cloth
8vo,
net.
PHILIP
By
8vo,
Sheets,
8s.
Commercial
for
etc.
Foolscap
PIXLEV,
How
Guide
Students,
W.
pp.,
SHEETS.
BALANCE
demy
net.
F.
By
Accounting
on
In
ROGER
by
Lecturer
Manchester.
of
University
the
at
Accountants,
Edited
Men.
F.C.A.,
M.Com.,
CARTER,
for
Business
Advanced
of
Accountancy
and
Book-keepers
Manual
and
Book-keeping
THE
PUBLISHERS.
SAME
THE
FROM
and
Profit
of
the
8d.
Loss
Institute
Statistical
12s.
their
and
Society
net.
of
EcC
""3p
PRINCIPLES
THE
OF
AUDITING
MANUAL
PRACTICAL
PRACTITIONERS
AND
STUDENTS
FOR
BY
R.
F.
(OF
THE
FELLOW
M.
FIRM
OF
SOCIETY
OF
THE
TO
LECTURER
DE
OF
DE
PAULA,
INSTITUTE
CHARTERED
LONDON
ECONOMICS
LAKE
TURNER,
OF
THE
O.B.E.
PAULA,
CHARTERED
ACCOUNTANTS
AND
THE
POLITICAL
STUDENTS*
ACCOUNTANTS
AND
CO.) "
AND
LONDON
SCHOOL
OF
SCIENCE
33.
LONDON
BATH,
SIR
ISAAC
MELBOURNE,
PITMAN
TORONTO
"
AND
SONS,
NEW
LTD.
YORK
10
PRINTED
BY
ISAAC
SIR
LONDON,
TORONTO
"
PITMAN
LTD.,
SONS,
MELBOURNE,
BATH,
NEW
AND
YORK
PREFACE
subject
THE
works,
of
books,
and
therein
has
of
of
intended
providing
cost, that
will
have
familiar
of
classes
of
various
discuss
audit.
Acts
of
Parliament
been
be
run
that
the
to
that
of
purpose
for
these
one
with
will
testing
examinations.
work
ground-
ing
underlyowing
hand,
For
the
which
but
1908,
all
reason
have
at
of
the
which
every
examination
text
of
ciples
prin-
sections
with
to
been
root
auditors
the
had
have
same
if
included.
hundred
the
would
as
for
have
important
been
prove
their
it
to
such
investigations
would
be
must
reasons
other
the
to
have
contains
in order
and
that
omitted,
familiar,
the
of
auditing
book
(Consolidation) Act,
appendix
preparing
to
every
must
thought
and
whole
to
which
the
reasonable
specialised subjects,
apply
refer, have
to
the
the
considerably,
so
Companies
is
at
whole
of
On
audits
included,
were
that
The
object
the
stepping-stone
the
omitted
impossible adequately
auditor
book
general principles
principles
with.
I have
space,
condensed
times
the
student
the
explain
to
different
the
size, and
cover
every
subject dealt
all these
be
This
with
students,
form
so
to
which
and
each
the
all
and
endeavoured
with
lack
with
;
contained
matter
works.
larger
I
audit
every
for
of convenient
deal
the
practitioners only.
primarily
book
of
standard
cumbersome
and
lengthy
part
for
written
been
govern
considerable
the
that
vast,
so
somewhat
necessity, are
is
is
Auditing
of the
value
knowledge
tions,
ques-
book,
to
with
and
students
a
view
it
for
to
PREFACE
Va
would
this
take
Mr.
Herbert
Jacobs,
W.
Coates,
M.A.,
that
assistance
readers,
from
acquire
B.A.,
and
hope
for
afforded
greatly
whom
thorough
A.C.A.,
have
they
thanking
Mr.
and
the
David
valuable
very
me.
suggestions
any
this
practical
sincerely
most
Barrister-at-Law,
LL.B.,
appreciate
shall
of
opportunity
little
or
book
knowledge
may
of
the
opinions
assist
principles
auditing.
of
F.
17
COLEMAN
STREET,
LONDON,
E.C.2
R.
M.
DE
PAULA.
to
CONTENTS
CHAPTER
INTRODUCTORY
PAGE
BETWEEN
DIFFERENCE
ACCOUNTANCY
AND
AUDITING
.
OF
MEANING
AUDIT
AUDIT
AN
......
BOTH
EMBRACES
BALANCE
PROFIT
AND
LOSS
ACCOUNT
AND
SHEET
......
MAIN
OBJECTS
AUDIT
OF
DETECTION
OF
ERRORS
AND
FRAUD
....
DIFFERENT
CLASSES
ERRORS
OF
OF
ERRORS
THEIR
AND
DISCOVERY
COMMISSION
......
ERRORS
OF
OMISSION
......
ERRORS
PRINCIPLE
OF
......
DIFFERENT
CLASSES
FRAUD
OF
MISAPPROPRIATION
OF
AND
CASH
THEIR
OR
DETECTION
GOODS
...
FALSIFICATION
OF
ACCOUNTS
.....
ROUTINE
CHECKING
.......
EXTENT
AUDITORS*
OF
INVESTIGATIONS
...
INTERNAL
CHECKS
AUDITORS'
THE
AND
POSITION
IN
THERETO
REGARD
.....
COMMENCEMENT
OF
NEW
.11
AUDIT
.
AUDIT
PROGRAMME
NOTES
DURING
12.13
AUDIT
.
METHOD
OF
WORK
CONTINUOUS
TICKS,
AND
PERIODICAL
CALLING
.13
BACK
BETWEEN
APPOINTED
THE
UNDER
INDIVIDUALS
OR
.15
AUDITS
.
DIFFERENCE
POSITION
STATUTE,
OF
AND
AUDITORS
BY
PRIVATE
16
FIRMS.
.....
PARTIAL
18
AUDITS
QUALIFICATIONS
BY
REQUIRED
AN
CHAPTER
ROUTINE
CHECKING
CASH
AND
II
CHECKING
CASTINGS
.19
AUDITOR
AND
VOUCHING
POSTINGS
22
BOOK
........
SALES
AND
BOUGHT
DAY
23
BOOKS
.
RETURNS
AND
ALLOWANCES
CASH
.23
BOOKS
.
PETTY
23
BOOK
......
POSTAGE
.23
BOOK
.
vii
CONTENTS
viii
PAOB
23
JOURNAL
JOURNAL
TRANSFER
BOOKS
SALARIES
AND
WAGES
SHEETS
STOCK
BOOKS
BILL
AND
SALES
LEDGERS
BOUGHT
PRIVATE
AND
IMPERSONAL
AND
BOOKS,
26
THEREOF
DETECTION
OF
BALANCING
THE
IN
DIFFERENCES
LEDGER
..""""
29
VOUCHING
.....
BOOK
CASH
BANKERS'
BOOK
PASS
SIDE
DEBIT
VOUCHING
"
BOOK
PAYING-IN
BOOKS
RECEIPT
CASH
RECEIVED
CASH
SALES
DEBTORS
FROM
RECEIPTS
MISCELLANEOUS
RECEIVABLE
RENTS
INTEREST
AND
INTEREST
ON
DEPOSIT
RECEIVED
.....
INVESTMENTS
OF
OF
SALES
....
.37
SIDE
RECEIPTS,
ETC,
ACCOUNTS
SETTLED
OF
BY
BOUGHT
CONTRA
LEDGER
39
ACCOUNT
39
ACCOUNTS
40
CHEQUES
CAPITAL
POLICY
INSURANCE
....
CREDIT
ENDORSED
....
UNDER
RECEIVED
SUBSCRIPTIONS
PAYMENT
37
ASSETS
SUNDRY
AMOUNTS
VOUCHING
AGENTS
LOANS
ON
RECEIVABLE
SALES
FROM
RECEIVED
INTEREST
BILLS
"
DIVIDENDS
COMMISSIONS
AMOUNTS
......
40
EXPENDITURE
41
WAGES
.........
43
SALARIES
.........
TRAVELLERS'
PETTY
COMMISSIONS
AND
EXPENSES
43
...
43
CASH
POSTAGE
44
BOOK
CHAPTER
VOUCHING
BOUGHT
DAY
BOOK
BOUGHT
DAY
BOOK
III
(CONTINUED)
46
.......
RETURNS
AND
49
ALLOWANCES
.
SALES
DAY
BOOK
.
49
CONTENTS
IX
PAGE
DAY
SALES
BOOK
RETURNS
ALLOWANCES
AND
51
.
.
BILLS
RECEIVABLE
BILLS
PAYABLE
51
BOOK
52
BOOK
......
52
JOURNAL
..........
LEDGERS
BOUGHT
53
.......
LEDGERS
SALES
CHAPTER
THE
IV
AND
PROFIT
LOSS
BALANCE
ITEMS
GROUPING
AND
SHEET
58
IN
GOVERNING
TRADING
PREPARATION
ACCOUNT
PROFIT
59
ACCOUNTS
.....
PRINCIPLES
THE
ACCOUNT
LEDGER
IMPERSONAL
AND
54
OF
61
......
62
ACCOUNT
LOSS
APPROPRIATION
.....
62
ACCOUNT
.....
OF
ADJUSTMENT
PROVISION
NOMINAL
FOR
PAYMENTS
IN
SUNDRY
ACCOUNTS
OUTSTANDING
LIABILITIES,
ADVANCE
AMOUNTS
"
ETC.
PRINCIPLES
GOVERNING
BALANCE
DEFINITION
MAIN
OF
OBJECT
OF
FIXED
OF
BALANCE
66
....
67
SHEET
....
70
.......
70
......
POSITION
AS
REGARDS
VALUATION
OF
73
ASSETS
CHAPTER
VALUATION
VALUATION
CASH
AND
IN
BANK
THE
65
SHEET
ASSETS
AUDITOR'S
PREPARATION
ASSETS
ASSETS
FLOATING
.65
......
BALANCE
OF
VALUATION
THE
SHEET
63
65
......
RECEIVABLE
.
THE
AND
VERIFICATION
VERIFICATION
OF
OF
VARIOUS
ASSETS
ASSETS
77
HAND
77
BALANCES
INVESTMENTS
INSCRIBED
DEBENTURES
DEBENTURE
80
STOCKS
AND
BONDS
......
REGISTERED
AND
SHARES
SHARE
WARRANTS
IN
COMPANIES
TO
BEARER
81
81
CONTENTS
PAOB
BOOK
DEBTS
BILLS
RECEIVABLE
....
STOCK-IN-TRADE
CONSIGNMENT
ON
GOODS
WORK
PROGRESS
IN
MACHINERY
PLANT
AND
LOOSE
TOOLS,
ETC.
FITTINGS
AND
FIXTURES
FURNITURE,
HORSES
VANS
AND
CARTS
HARNESS
...
BUILDINGS
LOANS
AND
LAND
LEASEHOLD
AND
COPYHOLD,
FREEHOLD,
....
....
PATENTS
.....
COPYRIGHTS
....
.101
GOODWILL
VI
CHAPTER
DEPRECIATION,
AND
RESERVES,
SINKING
FUNDS
DEPRECIATION
FLUCTUATIONS
THE
IN
FLUCTUATIONS
THE
IN
ASSETS
OF
OBSOLESCENCE
AND
ESTIMATION
OF
OF
OF
PROVIDING
FLOATING
.105
FOR
OF
106
DEPRECIATION
LIFE
OF
REGISTER
COST
OF
METHODS
FOR
FIXED
MAINTENANCE
WRITING
INSTALMENT
AND
MAINTENANCE
OFF
DEPRECIATION
INSTALMENT
DEPRECIATION
INSURANCE
POLICY
ANNUITY
.108
.
SYSTEM
.109
110
RESERVES
.111
.111
.112
113
SYSTEM
SYSTEM
RE-VALUATION
THE
SYSTEM
FUND
AND
SYSTEM
.
REDUCING
107
PLANT
MACHINERY
PLANT
.105
TIME
.
WORKING
104
ASSETS
FIXED
ASSETS
EFFLUXION
THE
OF
VALUES
WASTING
OBJECT
MAIN
VALUES
MARKET
DEPRECIATION
THE
MARKET
113
.
AUDITOR'S
DUTIES
AS
REGARDS
.114
115
DEPRECIATION
.
RESERVES
SPECIFIC
GENERAL
RESERVE
RESERVES
...
116
...
117
RESERVES
FUNDS
\\Q
...
INVESTMENT
OF
GENERAL
SURPLUS
OF
ASSETS
RESERVE
..
REPRESENTING
xi
CONTENTS
PAGE
.120
FUNDS
SINKING
122
SECTIONS
1908,
POWERS
LIST
ANNUAL
AND
.136
ON
COMMISSIONS
138
DURING
SHAREHOLDERS
TO
INTEREST
OF
.139
.
BOOKS
STATUTORY
(1) REGISTER
(2) MINUTE
(3) REGISTER
(4) REGISTER
141
MEMBERS
OF
141
BOOK
.142
DIRECTORS
OF
SPECIAL
POINTS
IN
MEMORANDUM
ARTICLES
OF
1908
OF
OF
143
AUDIT
THE
THE
TO
PRIOR
OF
145
COMPANY
.145
CAPITAL
OF
1917
.....
COMMENCEMENT
SHARE
OF
COMPANIES
DOCUMENTS
LEGAL
OF
TO
AUDIT
THE
.144
ASSOCIATION
EXAMINATION
WITH
THE
ASSOCIATION
OF
VIII
UNDER
ACTS,
.142
CHARGES
CONNECTION
COMPANIES
AND
MORTGAGES
OF
CHAPTER
AUDIT
AND
CONSTRUCTION
ISSUE
SHARES
PLACING
PAYMENT
REPORT
COMMISSIONS
UNDERWRITING
.134
.
MEETING
STATUTORY
THE
.125
.129
SUMMARY
AND
AUDITORS
OF
AUDITORS
OF
AUDITORS
AFFECTING
REMUNERATION
DUTIES
AND
(CONSOLIDATION)
PARTICULARLY
AND
VII
COMPANIES
THE
OF
.122
RESERVES
REGARDS
AS
POSITION
APPOINTMENT
CHAPTER
ACT,
....
AUDITOR'S
THE
RESERVES
SECRET
.146
SHARES
THE
BOOKS
SHARE
TRANSFER
AUDIT
TRANSFER
FEES
UPON
AN
ISSUE
OF
SHARES
147
.
.149
.
.150
150
DEBENTURES
DEBENTURES
ISSUED
PRELIMINARY
PROFITS
AS
TO
THE
.154
EXPENSES
PRIOR
.153
SECURITY
COLLATERAL
.
DATE
OF
INCORPORATION
155
.
CONTENTS
xii
PAGE
156
ARREAR
CALLS
IN
CALLS
PAID
157
ADVANCE
IN
SHARES
FORFEITED
DIRECTORS'
FEES
DIRECTORS'
EXPENSES
DIRECTOR'S
MANAGING
BOOKS
MINUTE
REMUNERATION
DIVIDENDS
DIVIDENDS
INTERIM
SHARES
PREFERENCE
ON
DIVIDENDS
DIVIDENDS
VOUCHING
DIVIDENDS
UNPAID
DIVIDENDS
PREFERENCE
CUMULATIVE
OF
ARREARS
IX
CHAPTER
PROFITS
AVAILABLE
CAPITAL
PROFITS
WASTING
DIVIDEND
FOR
....
ASSETS
DEPRECIATION
CAPITAL
PLANT
OF
LOSSES
MACHINERY
AND
....
CONCLUSIONS
THE
DIVIDEND
FOR
AVAILABLE
PROFITS
.......
INTERESTS
POSITION
CREDITORS
OF
THE
OF
AUDITOR
174
QUESTION
THIS
REGARDS
AS
1 75
SUMMARY
CHAPTER
THE
THE
POSITION
LEGAL
OF
AUDITOR'S
AN
POSITION
AUDITOR
POSITION
TO
UNDER
AUDITORS
OF
THE
PRIVATE
FIRM
COMPANIES
176
AUDITOR'S
LIABILITY
FOR
AUDITOR'S
LIABILITY
AS
REGARDS
THIRD
ESTATE
LONDON
AND
.178
.
BUILDING,
GENERAL
ETC.,
BANK
SOCIETY
V.
WOOLLEN
OIL
KINGSTON
CO.
STORAGE
COTTON
V.
179
SHEPHARD
.179
CASE
.
THE
PARTIES
DECISIONS
LEEDS
LONDON
.178
NEGLECT
.
IRISH
1908
ACTS,
1917
TO
LEGAL
.176
182
TYSON
CO.
V.
MILLS
SEEAR
CASE
HASLUCK
.
AND
CO.
183
183
CONTENTS
Xlll
PACK
BOLIVIA
OF
REPUBLIC
DUMBELL'S
EXPLORATION
BANKING
.187
LTD.
co.,
WILDE
AND
OTHERS
V.
CAPE
186
LTD.
SYNDICATE,
AND
.187
DALGLEISH
.
.188
CONCLUSIONS
.
APPENDIX
EXAMINATION
.191
QUESTIONS
.
INDEX
203
TABLE
OF
CASES
WITH
REFERENCES
PACK
Galloway
Schill,
v.
Seebohm
K.B.
(1912,
Neuchatel
v.
41
135
Co.
1)
Ch.
General
v.
354)
Asphalte
(1889,
Corner
167
Commercial
"
(1894,
Ltd.
Co.,
"
Ch.
Trust
239)
170
.
Guinness
v.
(1883,
Le
Lievre
22
(1893,
Leeds
Estate
Irish
Woollen
Oil
v.
Shephard
179
Bank
Case
682)
179
Tyson
v.
L.R.,
13)
1900,
Storage
Co.
182
Seear
v.
L.R.,1904,
(Acct.
Society
787)
Ch.
Co.
(Acct.
179
etc.,
Ch.
General
(1895,
174
491)
Building,
and
Ireland
Gould
v.
36
of
349)
Q.B.
(1887,
/^Jfcondon
Ch.
Dennes
"
....
Corporation
Land
31,
Hasluck
Co.
"
1)
183
.
Kingston
(1896,
Republic
of
Ch.
Bolivia
(1914,
Dumbell's
Mills
Cotton
Ch.
(Acct.
331)
183
Exploration
Banking
Case
Syndicate,
Ltd.
139)
L.R.,
186
Ltd.
Co.,
1900,
181)
187
....
Wilde
"
Others
(Times,
v.
Cape
28th
"
May,
Dalgleish
1897)
.187
.
and
Accountancy
between
Difference
AUDITING
OF
PRINCIPLES
THE
Auditing.
former
In
preparationof
"
agreement of
the
of account,
part of
between
clearlyunderstood
that if accounts
by
is far from
merely
being the
to
would
involved
thereafter
check
and
to
in any
correct
in
doing
point
out
Sheet
as
proper
Sheet
the
being correct,
at
is
does
all,but
together with
thereto
of
the
in such
himself
satisfy
books,
and
and
the
be
not
was
Sheet
Accountants,
figuresin
be
as
this
particularly
clients that
cannot
conducted
have
they
apart from
accountancy"
Sheet
that
the
Balance
prepared by others,
and
accounts
the
wider, namely,
much
something
of the business.
preparation of
Balance
manner,
Sheet
of the transactions
denotes
examination
Balance
they should
unless
entail
not
would
as
would
deal with
to
they
quite distinct
would
he
books.
their
And
the
; he
far
as
the
expert
an
the
so,
to
audit.
by
as
auditor
an
work
and
Account
Balance, and
called upon
when
an
Loss
as
way
positionshown
often
acting simply
be
with
carryingout
an
Trial Balanc"
accordance
to
audit
agreeingthe
say would
but
An
of books, the
all he could
experts, are
careful
set
Trial
the
is instructed
accountant
an
themselves, except
agree
the
certifythat
way,
not
the books
necessary
was
would
thought
This, however,
accuracy.
Profit and
He
is not
accountant,
professional
from
of
preparingthe
accountant,
not
If
case.
be that
Sheet.
Balance
to
then-
accounts
prepare
it being
business men,
many
preparedby
are
auditing
and
accountancy
guarantees
necessarily
he
be described
may
difference
The
the
but
Work/'
Accountancy
as
Balance, and
Trial
the
; in fact to what
accounts
in books
of transactions
detailed records
of the
accuracy
arithmetical
of the
checking
the
chieflyto
confined
was
accountants
professional
of
work
the
years
vouchers
auditor
may
honestlycertifythat, in
his
relating
be
able
opinion,
INTRODUCTORY
such
Balance
true
and
is
Sheet
audit of
Loss
be included
must
it entails
Balance
The
company,
is often
in
of
set
auditor's
an
all the
books
balance
upon
nominal
accounts
Profit
have
latter account.
of
positionof
Sheet
may
be
the
and
ascertainingwhether
true
In
and
or
and
certify
;
the
accounts,
not
qua
but it must
the
of
and
is to
his
Balance
do prepare
duties
check
and
as
financial
Sheet
the
there
view
Sheet
after
there-
they
preparing
is additional
the
concern.
and
accountant
The
to
shows
that, when
auditor.
report upon
Balance
is that
accounts
this work
that
this
business
the Balance
acting qua
the
the combined
audit
positionof
is
date
to
whole
the
be observed
accountant
it
marised
sum-
after
transfer
by
an
Account, which
auditor, and
quite outside
auditor
Loss
often
in
be reflected in the
such
not
case
given
an
all-
which
to
Account,
and
primary object of
the
the
is the
contains
of account,
should
in
entry, includingthe
Loss
transactions
concern,
item
of the transactions
in its books
all such
Sheet
closed
been
account
which, in the
to
double
and
former, and
every
appearing at
and
whole
The
should be recorded
effect
balances
kept by
the
of that
Balance
the
verification of
the
Sheet, however,
one
books.
the
in the
of
is the
and
by
other
examination
important document,
of
shown
the balance
or
of
information
involves
form
some
detailed
as
affairs
the
the
to
as
Sheet
Account,
in
Sheet.
Balance
him, and
to
of
to exhibit
as
so
up
state
according
Balance
of the
view
correct
particularconcern,
explanationsgiven
An
properlydrawn
and
to
of
duty
completed
an
work
of others.
Main
Objects
Errors
and
of
an
Audit"
diction
of
of
Fraud.
of
The^^^Ppp^purposes
and
Detection
errors
and
an
audit
fraud.
are
Errors
the
prevention
may
consist
simple to discover,
of
entail
may
This work
if
make
that
considerable
be
may
is
There
at
seen
checking
revealed
the
working
in the
Sales
in the
in the
account
Sales
be affected.
not
part of
be
to
calculations
should
an
ascertain
and
he should
in order
carried
with
to
some
all
are
business
whose
that
than
the
errors
of
agreement
are
far
the
Trial
as
more
the
the
will
considered
whole
of the
Books, but
he
here
is
he
auditing,
and
internal check
such
interest
commission,
of
the
accounts
the
will
independentlychecked
Important calculations
omission
while
Balance
it is not
of the calculations
Trial
the
check
to
in the
eventually
Bought Day
depreciation,reserves,
Errors
mi
of the customer's
debit
so
duty
these
satisfyhimself
out.
affect
not
Sales Account,
ordinary way,
Sales and
that
test
and
be
be ext"
amount
hence
the
to
Ledger,
auditor's
of the
and
of the
posted
In the
by
credit
the
will be
amount
same
will
example, if by
wrong
Day Book,
the
to
prices,the
will not
Day
of
casting up
of
out
for
occur.
except by
often
mistakes
the
by
it
discrepancies
the
in calculations
Errors
errors
errors,
postingsuntil
castingsand
the
discovered.
are
exactly locatingthe
of
way
no
checking.
in this way
as
ledgers the
which
in
once
books
the
large businesses
in
introduced,
various
the
in
be
thus
detail
of
amount
ledgers are
self-balancing
of
agreement
will
presence
considerablyreduced
be
can
the
difference
total
the
up
affect
detection
actual
their
and
Balance,
Trial
the
casting will
postingand
in
mistakes
will
calculations
postings,castings,and
incorrect
included
be
checking
this head
Under
disclose them.
should
books
of the
tively
compara-
are
ordinary routine
the
as
omission, and
of
or
commission
of
principle.Errors
of
errors
of commission
either
of clerical errors,
AUDITING
OF
PRINCIPLES
THE
be
on
is
being
dealing
those
as
there,
capital, loans,
checked.
difficult to
former
Balance;
discover
will not
such
errors
affect
will
INTRODUCTORY
omission
the
include
to
invoices
enter
of sales from
salaries
omissions, which
point
forms
later on,
in the
falsification of such
of
the other
through lack
of assets
preparation of
that
of
the
it must
between
an
upon
of routine
be
borne
Errors
will be
The
very
may
of
have
should
as
of
errors
make
enormous
an
errors,
allocation
tion
valua-
the
revenue,
inadequate
the
In
an
make
such
incorrect
debts.
that,
business.
is to discover
capitaland
in mind
of
should
accountancy, and
bad
principles
the
this
rule, no
tion
connec-
amount
principle
"
these
research.
difference
in
probably
small.
detection
auditor's
quiteunintentionally
may
or
considerably;
enquiry and
only by intelligent
of this nature
the accounts,
purposely
auditor
be discovered
made
fraudulent
accounts
an
and
provisionfor depreciation
can
arise
knowledge
correct
expenditure as
such
the accounts
by
accounts
will
which
of
most
and
to falsification of accounts,
if he
thorough investigation
most
of
the
knowledge
extensive
complete
committed
be
amount
it is necessary
Hence
part of his
of omission
constitute
affect
may
of
the
governing
Errors
so
principlemay
if intentional,they may
on
such
accounts.
accidentally,and
but,
out,
considerably, and
Errors
such
in the business
is
programme
discovered.
be
intentionally,
may
very
the
length
some
of this
carried
efficiently
and
should
omissions
other
at
checks
performance
his audit
If, however,
thoroughly
is
with
the internal
upon
duty.
and
discovery of
the
dealt
Day Book,
certain extent
will be
Bought Day
very
auditor, yet in
to
Although
accounts.
Sales
the
in the
of
errors
is
feel confident
very
the
important part
proprietorsof
are
accurate,
of
an
business
and
that
PRINCIPLES
THE
affairs is
positionof
the
important part
more
AUDITING
OF
clearlyshown
by far
but
the
is,the detection
of the moral
check
preventionby means
This is the main
audit.
for
created by a periodical
reason
his appointment in the majorityof cases
; for instance, the
Companies (Consolidation)Act, 1908, provides that every
of
fraud, and
its
shall
company
Sheet
Balance
is not
reason
directors
of
preparing
business
body
as
is
being
their
position of
have
carried
and
on
to them
whatever
positionof
checked
were
on
of
behalf
object
that
or
that
of the
of his
auditor
is
he
accounts
is to
adopt
of his audit
things,he
to
duty
should
ascertain
to
show
accounts
The
satisfythe
acts
directors
the
be
not
attitude
an
main
shareholders
of
; in fact he should
thought
suspicion
endeavour
mistrust
between
staff of the
company.
Above
be tactful.
that
the hands
such
audits.
shareholders.
is absolutely
independent
It must
should
the
conduct
appointed, who
of the business.
auditor
to
employees
himself
this
unless
by either
an
the
financial
accounts
being committed
to avoid
there
the
is
all
an
the
in
entirely
make
shareholders,and
whose
be
they chose,
appointment
fraud
no
the
affairs
that
reason
directors
the
could
independentlyon
It is for this
is the
directors,who
the
by
shareholders,therefore,would
directors, who
that
the
ascertaininghow
what
representativesof
the
but
except by reference
The
the
The
of
means
no
business
of
shareholders.
accounts,
the
as
every
necessarilysuspect
fraudulent
company,
submitted
accounts
the
shareholders
the
shall audit
auditor, who
an
is laid before
that
that
shareholders
the
appoint
His
everything
positionis
is in
that
he is
order, that
it is
his
appointed
him
to
see
for himself
that
the
accounts
INTRODUCTORY
correct
he must
one,
is the
positionshown
the
agreeing that
not
state
and
true
report,giving his
reasons.
Fraud
of
cash
either of the
may
goods,
or
falsification of
the
or
misappropriation
the
accounts
of
unaccompanied by misappropriation.Misappropriation
be concealed either by omittingto enter receipts,
cash may
or
the
the auditor
first,
Book
Cash
discovered
by
stock
records
are
it is almost
in use,
of
taking place
Fictitious
is
losses
That
itself. The
fraud
invoices,
this
nature.
of stock
by fluctuations
falsification
in
be
be
will
of vouchers,
of
such
can
more
this nature.
may
Book
payments
evidence
direct
other
of goods
Misappropriation
accurate
men's
till books, sales-
as
Cash
examination
careful
sheets, and
wages
in the
receiptsshown
the
for in the
revealed.
discrepanciesbe
discover
to
accounted
cash
the
etc.
order
diaries,counterfoil receiptbooks,
books, cash
agents' returns,
with
check
must
originalrecords, such
with
desk
are
In
of accounts,
are
the
locate
panied
unaccom-
difficult to
directors
managers
by actual
or
fictitious
by showing
obtain
who
further
wish
in
profits
credit,
to
bolster up
to
order
increase
to
pay
the
concern
dividends,
commissions
due
to
to
or
only
discover
care
and
and
with
such
skill,and
research.
view
frauds
to the
by
by making
the
exercise
most
of considerable
exhaustive
enquiries
Checking.
Routine
observed
be
It must
must
go to the foundations
he must
In
built up.
been
is made
in order
work
be
cannot
becoming submerged
of
audit.
take
not
himself
bearing
in mind
or
Although
important
purely of
what
checking is
the
but
errors
be
may
of the
audit
routine
must
routine
work
he
must
"
tick
which
discover
the
are
audit
an
of the
is
In
and
interesting,
be
clever
audit
consists
this routine
in
audit
apt
done
work
fact, represents
is built
up
to
become
out
the
how
this
takes
likelyerrors
these
way
if the
in the whole
frauds
or
work
junior has
any
become
natural
upon
checking
plan
of the
that
might
be detected
will
and
should
they
part the
latter would
the
it is
devolves
staff,and
exactly what
very
but
thoroughly
often
of the auditor's
engaged upon
place,and
likely
up
it should
think
are
keeping
book-
most
are
work,"
the
of
will be discovered.
that
to
audit, what
checking.
impossibleto
of principle
if
is backed
juniormembers
they
fraud
or
importance, and,
checking in
essential
endeavour
take
it
outset
auditor
detail and
errors
upon
This part
intelligently.
that
an
and, consequently,somniferous
monotonous
the
the
at
must
intelligent
plan,constantly
called
utmost
most
have
auditor
an
it is
foundations
if the
The
weak
the
respect of which
occur.
fraud
fact,
endeavour
constantly vigilant;
definite and
upon
in
to
which
in the
be
must
in
in all cases
s;i
things for granted, but must
on
point by making proper enquiries. He
every
work
must
He
examine
books
the
avoid
an
which
upon
to
too
and
of account
lines upon
the
show
to
auditor
these, the
followingchapters, an
the
principle
enquiries;
intelligent
make
originalrecords, and
of
of
simple
very
errors
discover
to
checking
and
errors
reveal
actual books
the
behind
go
clerical
order
In
frauds.
clever
or
routine
mere
if ever,
will seldom,
frauds, and
the
that
disclose
only
audit will
an
AUDITING
OF
PRINCIPLES
THE
by
far
the
more
aptitude,he
10
of
auditor
behind
investigations
occasional
to
continuous
by
internal audit
carried
the work
of each
of which
means
checked
allowed
be
keep, or
entry
have
any
should
account
no
on
control
checking
checking
take
place except
fraud
make
and, therefore,
auditor
should
the
^checking
checks
are
here
and
one,
an
as
books
carried
pay
also
out, and
may
have
time
more
important parts
The
internal
he should
extent
to
checks
of the
of the
they make
much
it
greater,
check.
The
when
to
his
by checking
this
system is
efficient
an
considerable
detail
work, and
attention
omit
auditor
an
to check
entries,depends entirelyupon
of the
not
to
extent
thus
the
will
more
audit.
which
and
do
system, and
test
If the
devote
to
between
checks
moral
whole
rely thereon
as
of
there, haphazard.
auditor
for
fraud
extensive
but
valuable
tillsfor
efficient system
an
of detection
investigatethe
should
he
points ;
act
valuable
very
to
self-
of
system
automatic
means,
any
chance
the
allowed
be
Internal
staff.
the
impossibleby
difficult and
more
of first
books
result of collusion
the
as
of
members
various
not
is
there
Where
wages.
ledgers should
time-recording clocks
receipts,and
cash
For
form
to
dently
indepen-
staff.
also may
as
is
the
cashier
the
made
be
staff itself,
the
of
ledgers.
the
over
practically
make
to
means
individual
example, the
themselves
by
on
members
other
by
books
the
internal check
An
tests.
checking, and
of detail
considerable amount
limit his
thus
AUDITING
OF
PRINCIPLES
THE
particularcase,
the
and
may
the
whole
whole
this
of
of the
the
detail
stances
circum-
questionmust
be
decided
of
efficiency
skill with
which
his audit
he
will
deals with
depend largelyupon
this
question.
the
11
INTRODUCTORY
of
Commencement
commencing
Before
received
from
He
with
familiar
statute,
should
of the
nature
exact
to
details
of the
This
complete
essentials much
he
saw
The
of account,
which
of
system
and
In any
His
is
that
recorded
that
should
should
every
transaction
or
fraudulent
no
also
study
such
concern,
as
case
will
or
appreciate the
be
the
of
books
charge of each,
that
settlement
he
to
whole
if any,
will
see
decide
may
and
cover,
how
the
that
the
far,
internal
system
any
case
in the
become
be made.
documents
Articles of
company,
if
case
therefore, consider
does
can
legal
Acts in the
others,special
the
more
properly
books, that there is no possibility
altered purposelyor accidentally,
entries
any
the
be
partnership,the Memorandum
in the
much
rely upon
can
endeavour
being omitted
and
process,
detail involved
must,
system, in order
in the financial
of items
and
auditor
directions, he
check.
such
in the
labour involved.
clerks in
of the
whole
what
over
must
ground his investigations
in
the
would
be to obtain
the
counting-house.
names
and
carefullythe
what
shown
should
he
enormous,
and
the
of
thoroughly investigatethe
book-keeping and the internal checks,
in vogue.
be
the
step should
next
after
than
tions.
transac-
recorded
are
will
he
readilythan
more
further
no
affairs, and
of
grasp
be
exercise
to
himself
appreciatewhat
roughly
him
the
accounts
to
and
see
with
various
machinery,materials,and
will enable
knowledge
ask
of
scope
make
the
that
will understand
he
the nature
should
transactions
of the
books, and
audit
he will
in this way
nature
himself
of the
is to
example, he
be possiblehe
is the
should
instructions
the
business, and
particular
If, for
if it
factory-,
the factory,as
from
or
acquaint
next
technical
the
auditor
an
the
employing him, precisely
those
his duties.
audit,
new
ascertain,by reference
Audit.
New
The
.governing
Partnershipin
and
case
the
the
of
case
Articles of Association
with
contracts
of
auditor
vendors
and
Parliamentarycompanies,
of
trust.
He
should
12
make
during
the
Programme.
Audit
the
annual
one,
auditor
should
prepare,
audit
recorded
exact
that
the
may
initial
persons
it will be
and
as
that
seen
clerk,maps
if,in future
audit, they
perform,
and
remains
to be
method
is
hands
of
the
audit
will
their
the
required
are
control, and
will be
very
to
not
upon
the
skill and
upon
in
much
of
efficiency
depend,
competency
of the
competency
is
one
is, that
clerks in
the
and
responsibility,
It
manner.
audit
to
of the staff in
There
that
the
of
but
principals,
member
that
In
done.
adopted,
the
of the
reference
are
work
large amount
very
they
staff
further, the
part of the
what
of the
by
see
can
the
ground,
of the necessary
work
what
of
certain that
be
members
different
in the
audit
whole
then
may
the whole
years,
exactly
programme
He
case.
cover
the
engaged upon
the
programme
is to
set
the
lose
may
work
in
them,
is the
upon
out
carrying out
to recommend
basis
that
the
they
same,
additions
must
and
and
of
sense
automatic
an
impressed upon
conducted, and
be
encouraged
be
charge
out
carry
should
when
intelligence
be
be
of the
scheme
the exact
out
staff will
the audit
be
of the
circumstances
to
first
should
performed by
being provided in order
his staff,columns
and
the auditor
programme,
of
course
supervisethe
or
in which
preparationof, an
the
the
during
an
If the audit is to be
and
be familiar
he must
audit.
of the
course
the
affect
likelyto
are
of which
and
accounts,
that
clauses
of the
notes
AUDITING
OF
PRINCIPLES
THE
therefore,
which
use
they
the
their
should
improvements
13
INTRODUCTORY
the
that
it is
serious
important
The
question as
during the
mistakes
should
of all
the
would
in
be
performed,
It must
be
probably
some
Method
thereof ; but
notes
are
be
auditor
considerable
of
the
for accountants
might
explanationsand
latter
were
appreciatedlater,
liabilities is considered.
should
after
he
anything go
the
who
work
wrong,
actually
was
actually
were
that, if proper
find himself
in
in
records
position
difficulty.
Work.
regards
conducting
perhaps those
longer available, so
kept, the
In
work
what
these
whom
when
no
drafts
the
exactly
by
auditor
years
be
to
in the
show
that
been
not
have
that
of this will be
an
have
missing
appertaining thereto.
schedules
importance
of all
also should
kept, as
received, and
it will
as
be made
visit to another.
remembered,
performed,
not
notes
questionsarise
question of
the
is
there
occur,
he
which
make
they
all matters
and
position to
given. The
charge
the
what
information
when
adjusted
should
be filed and
and
should
one
should
this way,
As
verbal
from
of accounts,
were
of all
adjusted,
should
the
All
make
to
upon
remembered
papers
one
settled and
necessary
and
this reason,
reconsider
auditor
an
is
audit
an
management.
settled
notes
opinion.
be
important
vouchers,
of
of
made
be
what
of
should
it is not
and
date,
to
up
on,
time.
to
to
course
difference
some
principalsshould
goes
Audit.
during
Notes
time
as
kept constantly
develop. For
may
the
time
important,
be
flaws
that
from
programme
by
should
scheme
otherwise
as
for it is most
scheme,
the
in
the
work
to
actual
of
methods
an
to
audit, the
adopt specialand
be
adopted
common
distinctive
when
practiceis
ticks for
14
AUDITING
OF
PRINCIPLES
THE
that
checked, such
are
forwards,
specialticks for castings,cross castings,carry
ticks should
These
vouchers, pass book, contras.
postings,
be made
rule should
and
a
be as distinctive as possible,
as
ticks
similar
that
accounts
whose
concern
clients
or
On
themselves
to
with
work
there
any
are
which
be
drawn
into
weak
points
concealing frauds.
for the
each
periodstand
be
in the
auditors
Many
discussingtheir
whose
audit,
of
purpose
different coloured
use
the
entries of
the
clearly.
out
When
whether
of the
scheme
in this way
periods,as
they
accounts
ascertain
to
advantage of for
different
inks
audit.
the firm
object may
taken
be
may
account
the
auditing,as
are
no
Naturally,the
be explained to
not
should junioraudit
employees of
the
staff of the
the
by
ticks should
their clerks.
allow
clerks
used
under
are
various
of the
meaning
be
to
not
are
be
careful
most
easily be
speak clearly, as otherwise mistakes may
passed. For example, "70 6s. 3d. may be posted "76 3s.,
to
and, in order
"
ty
"
to
should
be
emphasised thus,
should
this amount
six-three"
All
bad
should
in
with
erasures
it should
knife
be
or
specialtick
seen
in the
afterwards
after the
items
whether
altered
indistinct
and
Whenever
checking the
up
for
the
figuresthat
should
be
the correct
until
they
period, and
are
entered
completed
at
Some
on
in
one
On
no
account
pencil. Each
invariable
that
adopt
it may
before
made
for
side of any
at the
this often
been
same
account
auditors
so
be
good plan is
figurein
should
the
no
an
were
Another
have
should
that
seen
alterations
figure,as
auditor
possible,
an
books
be
made.
ticked.
were
to write
Seventy pounds-
of altered items,
case
the auditor
"
as,
be allowed, and
be
the
thre'
Seventy-six-
castingand posting.
callingback,
when
"
alterations
figures and
and
both
back
called
be
carefullyexamined,
figureis taken
this mistake
avoid
mistakes.
saves
refuse to
commence
completelywritten
should
he
check
if possible;
sitting,
for
example.
15
INTRODUCTORY
if
Cash
checkingthe
should
checked
be
vouchers
meantime,
has
of the
of the
should
work
of
incomplete,and
clients'
the
missing
staff
in
the
books
time
whole
in
checking
the
are
of his audit.
with
being tampered
be borne
which
pointsto
the exact
during the
always
all
of
is left
auditor
made
notes
hands
being kept of
been
risk
the
most
off, and
in
are
for
vouchers
otherwise, if the
"
books
the
Book
during
The
audit
the
taken.
After
postings of
the
should
same
should
scanned
accurately done.
It is
extremely
when
plan
is to
cover
until
after
the
is almost
Audits
audit
is
total
the
total
has
and
be
may
one
continuous
audit
is
where
one
of the
period
of the
checking is effected at
The advantages of a
discovered
can
being
when
be rectified
in mind.
the
The
auditor
frequentattendances
mistakes
taken, and
good
column
the
In this way
at.
attends
at
it
continuous
regular intervals
monthly
say
quarterly,
periodical
or
possible. A
as
does
not
accounts, when
until the
attend
the
whole
of the
time.
one
continuous
after
soon
pass
periodical.A
or
auditor
the
to
Audits.
auditor
the
carefullyand
missed.
be
to
errors
task,
be
casting up
Periodical
where
is
arrived
they
these
mechanical
easy
care
when
been
impossiblefor
Continuous
are
items, and
unticked
for
checked, the
been
investigated.
carefully
checking of additions is a very
is important that
this should
it
end
have
be
The
but
be
book
any
they
audit
have
been
are, that
mistakes
committed, when
attends
act
as
at
a
short
valuable
intervals, and
moral
his
check, and
16
AUDITING
OF
PRINCIPLES
THE
Again,
book-keepers up to date with their work.
before it
fraud take place,it should be discovered
the
keep
should
is not
auditor
the
large proportions. As
attained
has
detailed
more
pressedfor time, he can carry out a much
has to
the whole of the work
when
audit than is possible
At the end of the period,
time.
be accomplishedat one
will have
greater part of the detail checking
the
as
are
auditor
audit, the
is the
points, than
As
year.
will
the
suit
probably
than
at
one
time.
The
chief
the
auditor's
checked
has
the
going
on,
important
only
the
once
it
year,
arrangement
work
the
items
is that
disadvantage
auditor
overlook
own
of
whole
the
is
is
the
if he has
better
after
work
with
touch
attends, say,
if he
case
soon
continuous
of what
likelyto
is less
and, therefore, he
of
prepared. By means
is kept in constant
obtaining a knowledge
business, thus
auditor
completed,the
been
be
may
this
and
them,
perform
to
al4
danger
specialprecautions taken, as
suggested previously,such as special ticks for altered
items, and the checking completely through of each part
recognised and
should
be
of the
work.
the
case
the
as
of
This
book-keepersgenerallyhave
that
be
avoided
and
The
it is
the
books
quitepossible
dangers
These
made.
complete,
to
to
access
auditor, when
auditor
between
only
can
adopting systematicmethods,
the
Appointed
under
Individuals
or
is under
private individual
example,
an
Auditors
of
Position
Statute,
and
by
Private
Firms.
difference between
appointment
For
be
days
being constantlyvigilant.
Difference
by
might
the
by
of the
in
entirely eliminated
is not
danger
the
positionof
statute, and
or
auditor
an
where
firm, should
be
appointed under
auditor
is
whose
appointed
noted carefully.
the Companies
he
18
PRINCIPLES
THE
do, and
no
outside
responsibility
out
the
any
limitations,
he
terms
in
be
may
he
for what
exactly
show
responsible.In order
for a partialaudit,
not
was
clients often
arrange
appreciatethat
employee
the
and
seek
contracted
the fraud
he contracted
in all
will be
should
he
he
rightlymay
do
that
word
in
he
other.
had
arrangement
arisen, as
have
could
be
in
the
they
do
not
ingly.
accord-
they
blame
may
whether
to
be
this
or
what
he
not
Having regard
discovered
he have
is not
in
writing,the
understanding
received
instructions
it will be
thus
of
case
to
one
writing,
exact
ascertained
the
that
ground, whereas,
particular
never
But
been
expense,
for instan
"
as
will say
against the
could
do,
the
that
say
save
very
cover
and
was
responsible.Now,
do, should
to
probabilityhis clients
that
was
to
the
depend entirelyupon
originalcontract
If the
accountant
he
but
years,
were
reduced
"
him
questionwill
responsible.The
to the work
hold
to
it will
circumstances,
the accountant
is
defrauding them
been
has
accountant
in such
what
to
in after
questionsarise
if
that
emphasising
of the
terms
actual
the
made,
arrangements
positionto
his instructions.
by
the
so
accept
can
commencing
before
and
Thereafter,
covered
work
the
he
that
them
explainto
should
to
he
AUDITING
OF
scope
at
once,
such
no
difficulty
work
of the
reference
by
taken
underthe
to
correspondence.
Some
firms
of
case
of
partnerships,to
Sheet, in which
and
been,
or
been
the Balance
as
"The
write
attention
also to the
has
Sheet
make
accountants
is drawn
fact that
our
to
the
any
reference is made
report of such
Sheet
and
every
and
Balance
to this
is to be
such
in the
tance,
pointsof impor-
Balance
only partly,audited,
a
custom,
report with
foregoing Balance
with
it
the
foot
of
report, such
read
date."
in
junction
con-
There
19
INTRODUCTORY
this
are
procedure,as accounts
constantly being produced to third partiesfor various
is much
recommend
to
such
purposes,
Accounts
purchasers of
or
have
entered
with
the
or
the
the
accountants
the
case
third
above
to his
of
understands
he
has
Loss
and
many
deal with
to
upon
the technical
whose
concern
knowledge
not
of
make
to
beginners seem
agrees,
only
Account
to
and
them
subject,and
of circumstances.
set
the
business
is called upon
he
competent
is
essential,but
distinct from
to think
such
bu31'n^gQ,
practical
accounts
tancy.
accoun-
provided they
book-keepingand that the
everything must
check
his
details and
and
how
check
any
accountancy
a
different
exactly
prepared, he cannot
of
complete master
auditor
are
an
is called
Trial Balance
and
have
must
thoroughly understand
will
Many
are
be
to grasp
alone
auditor
an
of any
audit.
science
be
must
be able
that
unless
to
He
to
with
without
accounts
must
be able
methods
principalsor
the
upon
of time
course
should
therefore,he
and
all,he
in
businesses, and
accounts
his
absolutely complete
knowledge of book-keeping and accountancy, /
different
many
thus
arisingwith
Auditor.
of
First of
auditor
an
be
not
adopted invariably,
in
absolutelysecure
be
required by
qualifications
andj"orough
as
have
qualifyingreport.
Qualifications
varied.
professional
were
acted
relations
be informed
may
in
course
have
partieswho
The
they
position would
of difficulties
reference
which
who
seriously misled
bearing
accounts
others
to
business
be
may
intending
to
way
into
enter
by him, whereas,
If the
case.
this
advances.
or
business, and
persons
and
name,
audited
to
of
production
accountant's
been
Such
in
the
propose
firm.
the
by
furnished
often
are
partners
as
that,
be in
order, and
the
preparation
Balance
Sheet, and
of
to
the
the
Profit
sign
his
THE
report. The
agreement
be
all its
; he must
do
may
find himself
opposed to
his
regardlessof
the
long
the
run,
integritywill
it may
reputationhe
of far
in
considerable
whole
the
first
the
must
never
and
is
he
must
he
has
be
pass
for
the
than
auditor
any
be
must
endowed
be
of the
much
In
for absolute
him
to
work
is
it is essential
that
carefullydone.
He
it is in order
exhaustive
its nature
if he
is not,
enquiries until
One
of affairs.
state
He
his client
unless he understands
exact
be
must
himself.
must
but
nature,
and
intelligent
ascertained
he
he
duty faithfully,
gain
An
case.
absolutelysatisfied that
make
will thus
influenced
to
upon
thoroughly and
item
any
his
out
possess
circumstances
in such
and
mechanical
knowledge,
pressure.
duty
have
perseverance,
should
his
greater value
aintakin,
somewhat
indirect
to carry
effects
prove
loss
temporary
duty is,
his
interests,and
own
the courage
have
he must
proves
books.
the
and
easilyled
be
not
spiteof direct or
when
in positions
it in
to
of
of
of affairs, and
man
what
knowing
but
able
with
Balance
his scientific
to
things a
all
character
by others,
the
Trial
addition
In
above
be
tact and
is
the
r^L""f
bearings.
must
he
of
auditor
must
AUDITING
arithmetical accuracy
OF
PRINCIPLES
20
of the
information, for
should
he
If
he
fail,ask
affect
to
ascertain
cannot
for the
possess
necessary
knowledge
will be
be
far
the
case
instance,technical
experience.
An
more
will make
mistakes
inevitably
damaging to his reputation than
if he
asked
details of which
auditor
must
for
professionaladvice, must
requirements and circumstances
avoid
making
for information
recommendations
he has not
be
upon,
had
practical, and
appreciate
of the
the
previous
if asked
practical
business, and
which,
though
for
thus
perhaps
21
INTRODUCTORY
theoretically
perfect,
of
it
that
it
is
is
of
part
no
asked
for,
insist
cannot
if,
But
deficient
state
In
describe
questions
it
is
be
duty
recommendations
the
impossible
bound
to
to
is
generally
he
carried
out.
book-keeping
of
be
accurate
prepare
report
unless
however,
being
system
noted,
advice
advice
tactfully
given
be
must
give
to
his
practice
is
it
stances
circum-
the
the
upon
so
accounts,
unsatisfactory
affairs.
the
length
his
example,
would
of
which
it
if
upon
that
he
then
for
in
though
to
But
auditor's
an
appreciated
much
business.
particular
the
unfitted
entirely
are
an
foregoing
audit
in
the
and
chapter
should
the
be
the
based
subsequent
detail
work
difficulties
general
been
have
chapters
of
that
an
principles
audit,
constantly
set
it
is
and
arise
out
upon
at
some
proposed
the
in
various
practice.
to
II
CHAPTER
THE
of
checking
of
part
and
it is very
will
auditor
the
upon
take
In
vogue.
the
internal
should
postings
auditor
is
often
do
to
this
part of
and
requested
of
case
and
castings
proportion
deciding
of the
this
what
but
do
and
particular case
lay
to
assuming
the
that
would
carried
should
Ledgers
BOOK.
be
are
in
use,
an
by
are
not
to
hard
and
check
be remembered
In
efficient
by
out
whole
but
the
if
of
an
the
22
Book
the
by checking
is
that
outline
whole
of
in
necessary
circumstances
it is
rules.
the
of
sible
impos-
However,
books
the
have
checking
auditor.
castings
self-balancingSales
Cash
of
tested
do, the
cautious
inf
staff
the
the
the
fast
and
is
often
he
check
to
judgment
following is
The
checked,
These
what
internal
balanced,
CASH
is
usual
or
practice
of
not
are
accountant.
qua
and,
balancing
accounts
it must
there
some
any
been
be
in
the
too,
probability,
being all-important,and
down
proper
the
balanced
postings.
to
The
is
castings
books,
purpose.
where
are
the
in
there
cases,
in all
of
checks
the
necessary
acting
necessary
only,
these
the
depends
where
of
balance
work, and
is
he
books
and
internal
whole
carefully
which
to
and
duties, though
so,
the
this
be
direction,
in
preparation
out
it is not
concern,
the
for
somewhat
this
the
to
found
large business,
check,
does
extent
checked"
be
the
to carry
if he
that
will
auditor's
an
The
businesses,
check,
be
checking
books
the
small
instructed
consequently, it
it should
book-keeping
of
is
that
in
checking
case
practicallyno
and
of
out.
considerable
work
this
important
his
system
postings forms
though
intelligentlycarried
and
Postings.
and
castings
audit,
an
mechanical,
and
Castings
Checking
VOUCHING
AND
CHECKING
ROUTINE
and
and
postings
Bought
being provided
with
CHECKING
ROUTINE
AND
it may
be
Bought Ledger
cash
analysiscolumns
and
postingschecked
Personal
whole
the
of
to the
items
the
that
checked
are
of the
proportion only
detail
But
Ledgers.
auditor
the
been
have
checking
The
sufficient if
invariably
Impersonal Ledger postingsshould be|
checked, in order
these
23
VOUCHING
posted
the
latter items
of these
ascertain
may
to
correct
should
all
that
accounts.
done
be
never
is satisfied
properlydealt
SALES
check
with
same
kept, and
in
are
The
BOOKS.
auditor
Impersonal Ledger
proportion
order, and
are
books.
DAY
the
in the
BOUGHT
AND
accounts,
and
that
and
of the
should
to the
detail
total
castings
postings.
RETURNS
checked
be
ALLOWANCES
AND
and
accounts,
the
to
PETTY
be
CASH
The
postings should
be
checked,
Cash
the
Petty
the
to
Petty
Cash
Book
whole
the
totals
and
should
the
to
detail
total
castingsand
being scrutinised.
of
both
the
Cash
to
the
item
checked, each
BOOK.
Book
The
Impersonal Ledger
largeproportion of
postings should
BOOKS.
the
castings
postings
and
Book,
Impersonal
from
those
and
the
from
Personal
and
Ledgers.
POSTAGE
will be
BOOK.
If there
sufficient if
petty cash
into
castingsof
find
defalcations
small
times, and
checked,
no
that
same
the
TRANSFER
item
the
not
JOURNAL.
drawn
It is very
with
and
common
from
the
to
postages, and,
be lost
a
castings
in every
The
check, it
Postage Book,
the
is correct
internal
amounts
in connection
should
All
proper
checked.
JOURNAL.
the
occasionally
checked
are
is
postings
the
auditor
should
be
is satisfied
particular.
totals
should
be
checked
to
24
postingsshould
and
WAGES
castingsof
the
is satisfied that
RECEIVABLE
BILLS
postings
total
the
completely
and
particularconcern,
is
double
no
as
entry check
be
can
BOOKS.
PAYABLE
AND
to
there
that
All
totals.
these
upon
castings
the auditor
unless
checked
been
staff of the
the
be remembered
it must
the
SHEETS.
STOCK
AND,
be checked,
have
they
independently by
and
BOOKS
should
these
proportionof
checked.
be
SALARIES
AND
and
(ifany)
AUDITING
OF
PRINCIPLES
THE
of the
totals
the
"
The
castings
being checked
if the
ledgersare
kept
LEDGERS.
The
or
accounts
detail
the
upon
self-balancingsystem.
SALES
BOUGHT
AND
proportion
checked, and
schedules
the
of
the
all the
ledgers are
as
the
time
same
unticked
and
one
certain
be
that
further
The
must
should
be
All
be
the
cas
the
checked, wi-
carefullyscanned
for
is the
In
case.
unticked
any
items,
event, notes
as
in the
should
of
event
first
be
the balances
should be most
such
is
an
Personal
control.
to
with
the
not
there
Book,
of
such
of any
books
that
LEDGERS.
ledgersshould
account
items, which
made
the
each
agree
if
and
that
seen
the
carefully
investigated,
ticked as having been passed accidentally
account
no
of the audit staff,unless the auditor
is absolutely
on
by
of these
to
on
of the accounts,
be
be
accounts.
PRIVATE
AND
balances
date
lists of balances
respectivetotal
IMPERSONAL
and
at the
should
be checked
it should
self-balancing,
should
able
consider-
balances
of balances
whole
entry
exercise
all under
are
If this
carried
that
is not
the
further, and
his
separate and
case,
the
judgment
and
and
Cash
books
independent
checking
in this connection
the
will have
the
experience, but
auditor
it is
26
Accountants
instructed
often
are
this is sometimes
cases
the
errors
are
of
these
discovered.
But
details
to
check
and
Trial Balance
castings of
the
should the
it should
the
be
in fact do
account
is not
the
checked
alreadyand
scanned
for unticked
first
checked
the
All
entry.
and
of
may
be
an
item
be
may
ledgerson
and
of debtors
the
the
should
be
the
to
creditors.
Balance
Trial
and
the
difference
exact
ledger balances,
checked,
two
errors
the
also
as
time
same
sides of each
are
also should
as
of the
of
books
the
figuresshould be refrom
sometimes
possible,
doubtful
It is
difference,to gather
probable nature
forward.
things to do would
totals of the
and
the
carry
far
At
clear.
of the
amount
the
be
checking
items,
bad
made
is
to
easilypassed if this
been
of the postingshave
the whole
should be
ticked, each ledgeraccount
agree
If
case.
which
merely
task
the
of the balances.
the
that
seen
in
once
necessary
various
the
accounts
bringingdown
the
upon
this system
where
the
When
kept
at
seen
checked, when
be
ascertained.
will be
be
schedules
the
should
been
been
have
particularledgers until
castings of
Thereafter, the
schedules
of
balances
the
have
of the first
One
troublesome.
more
the
wider, and
books
where
is
method
and
care
it will be
lie,and
ledgersdifferences
task, in the
laborious
considerable
books, and
balance
to
and
arduous
an
AUDITING
OF
PRINCIPLES
THE
For
same.
probably
an
If the
difference
posted to
the wrong
idea
some
example,
in
error
is divisible
side of
difference
to
as
casting
or
by two,
it
ledgeraccount,
for
amount
instead
"7
of the
therefore, be
are
4s.
2d.
credit of
scanned
often caused
columns, such
having
as
an
been
account.
for items
of
posted
to
The
books
this
posted
as
debit
should,
ences
Differ-
amount.
by figuresbeing entered
5s. 4d.
the
in the wrong
"5 4s., in
which
case
CHECKING
ROUTINE
there would
posted
arise
mistake
such
Any
will
item
such
any
is
there
only
they
"4
18s. 8d. ;
be
calculated
of the
amount
in
practice,the
time
short
any
and, if
error,
so,
should
difference
singleentry
or
debit, as the
be
for which
case
may
cuts
is time
and
wasted,
checking until
continue
is to
way
"
these
by
6s. 3d.
whether
represent
may
"170
or
be looked
correspondingcredit
no
difference
give the
27
VOUCHING
exactly equallingthe
as
Often
be.
of
It should
should
amounts
checked,
difference
3s.
"176
as
AND
the
the
errors
are
revealed.
After
balances
the
above, it is sometimes
possiblyalso
and
Ledgers,
detail, it may
be, is not great. If the
thereafter to
discovered, it will be necessary
It is well to have
Ledgers.
of first
if this
has
agreed with
been
check
to
unnecessary
the
postings of
is
call
to
first
brought
back
the
on
to
as
well
schedules
to
of the
accounted
for
by
light. Some
from
checking
the
check
the
error
in
Book,
of the
each
When
is
the
crepancy
dis-
prefer
accountants
books
the
to
be
check
to
of
ledger account,
castings and
balance
the
checking balances,
with
opening balances
previous period,as
an
the books
it may
cause
ledger
the
of balances.
schedule
the
to
the
the
difference
the
will have
Ledgers, until
to
Cash
Book,
castings. If
completelychecking
time
same
Pass
the
turn
of the
case
accountant
postings
entry, thus
at
it is
Sales
the
in the
is not
error
castingsof
the
Private
Ledger, in which
Bought
the
the
Sales
suggested
completely
as
castings and
the
checked
been
have
difference
the
bringingdown
the
the
may
be
commencing
balances.
As
the
ledgers,in
arises,and
analysing
upon
each
order
to
discover
also in what
ledger
necessary
in which
ledger the
direction it lies.
account
under
ruled analysispaper.
specially
to
various
For
This
analyse
ence
differmeans
headings,
example, in
the
28
of
case
be
Sales
follows
as
the columns
Ledger
balance
debited
Goods
Transfers
Total
headings
items
Sundry
the
on
"
Opening
and
AUDITING
OF
PRINCIPLES
THE
the
on
be"
credited ;
Cash
Discounts
and
Allowances
Debts
Bad
Returns
Transfers
Sundry
off ;
written
Bills Receivable
Items
ClosingBalance
Total.
The
of each
cast
cross
will prove
sheet
arithmetically
that
with
list of the
the
debited
Sales
should
agree
Books
Day
with
errors
in
of the
posting or
analysingthe
credited
the Sales
to
according
time
and
cases,
at
once
as,
not
a
the
labour
and
to
difference,it
casting. In
Book,
the
same
debts
can
the
total
cash
can
analysis of
be
must
way,
bad
Ledger
shown
as
be
with
ledger.
the
by
represent
the
while
to
the
Owing
checking
the
totals
to
the
extreme
commence
totals
discounts
the
agreed. By
and
agreed
goods
so, it is not
better
is
on
certain
for
to
whether
this way,
Cash
total sales
the
if there is
"
total of the
ledger,and
instance,that
in
it is in the
certain
book
posting of
of
the
in
prime entry
sales,in which
CHECKING
ROUTINE
postings of
the
event,
until the
29
VOUCHING
AND
the
checked
be
to
is found.
error
Vouching.
is the
Vouching
of
success
audit
an
thoroughness with
Vouching does not
Cash
the
every
transaction
and
auditor
that
means
and
traces
alone
himself
various
to
the
entries
ascertain
who
the
does
vouching.
the
to
base
In
most
in
appear
confines
books
the
entries in the
facts
true
can
his
audit
by vouching,
part of
audit
should
An
of
books
show
is blindfold
auditor
frauds
with
conducted
be
possibly
auditor
efficient
and
only
can
it is essential that
that
so
therefore, only by
thorough
on
clever
cases
"
an
of affairs.
discovered
an
if he
to
book-keeper chooses
tentionally
be purposely or uninmay
evidence
real state
not
for
stances
circum-
the
as
external
meaning and
incomplete,and he may
importance,which affect the
information
such
of account
it is in this way
and
By
will be
utmost
contrary
examining
they
as
information
disclose,and
full
the
properly
books.
the
books
the
source,
materially. The
very
in
transactions
his information
such
behind
goes
the
accounts
correctlyrecorded
of the
of
satisfy an
validity to
is in
ascertain
can
matters
only
sufficient
entries to their
he
examination
the
of
is
is done.
work
inspectionof receipts
includes
but
auditor
the
the
whole
the
intelligenceand
the
part of the
merely
of
account,
pass
this
transaction
such
the
that
upon
mean
of
authorised, and
this
depends
which
evidence
other
of
Book,
with
auditing,and
essence
very
great
care
be
this
and
intelligence.
When
rubber
checking vouchers,
should
stamp,
inspected,and
distinctive,as
be
this cancellation
the
of the
produced again
in
denote, by the
place where
the
support of another
the
voucher
may
same
should
be
not
be
It is well to
item.
voucher
is
marked,
the
30
invoice
when
receipted,
should
ticked
be
correspondingvoucher
Whilst
careful
will
attention
subsidiary
Such
has
have
will
contracts,
be
inspected. When
made
have
various
by
the
of any
be
to
further
information
may
of
information
documents
minutes
or
and
such
have
for rent,
outstandings
end
noted, such
or
of the
the
as
to
rates,
period
scrutinised,and
be
any
documents.
salaries,etc., the
for at the
be
which
to
the
vouchers
should
apportionments
the
auditor, he
the
additional
when
examining
provided
when
way
matters
when
payment
entry in
paid subsequently,or
insurance, commissions,
covered
The
before
are
Articles of Association,
as
taxes,
Book.
from
authority is required,or
subsequently,if
and,
derivable
include
when
once
accepted.
of
be
to
example, an
auditor,
distinctive
been
note
information
cases
in
for
as,
the
to
originalvouchers
the
make
should
twice
the
books
taken,
been
produced
be
may
vouching
the
it has
for which
purpose
AUDITING
OF
PRINCIPLES
THE
notes
will
that
period. Other
purchase pricesof
thereby
CASH
the
BOOK.
Cash
Before
Book,
is
an
his
settling
auditor
should
regard
lines upon
thereto.
which
(1) Has
books
documents
obviated, and
ti;
saved.
the whole
with
of
the
The
such
of first entry ?
in this
vouching
enquire carefullyinto
(ifany) that is in force
followingsuggestions show
enquiriesshould
cashier
for
programme
control
If so,
made
be
of any
of the
specialcare
should
opportunitiesfor
the
"
ledgersor
be taken
fraud
are
cheques
and
postal
opens
orders
bankers, and
(3)
Who
the
letters,and
are
immediately crossed
also marked
enters
the
"
account
cheques
and
all
to
payee
moneys
the
only
clients'
"
received
into
CHECKING
ROUTINE
bank
all
(5) Who
makes
(6) What
the
books
current
(7) Is
Cash
with
Book
(11) How
and passed
which
for
are
prior
only
payee
"
up
Book
agreed
as
regards
to
collect debts
cash
records
internal checks
and
do
returns
are
such
and
received, checked
accounts
payment
draws
the
drawn
in
cheques
Are
of
payment
"not
the
cheques
crossed
accounts
negotiable"
"account
and
letters ?
(14) Who
checks
Book, and
makes
despatch of
(16) Who
writes
who
there
are
If so, to what
what
controls
(15) Who
and
agents allowed
invoices
(13) Who
covering
Cash
only when
is the Cash
income
or
signature
to
kept,
checks
agents make
are
(12) Who
completely
Book
concern
or
issued
receiptbooks?
key, and
by whom,
travellers
the
receiptsfor
the
internal
(10) Are
to
Cash
miscellaneous
sales and
off
unused
upon
and
up
often, and
(9) What
due
used
are
Pass
the
kept
lock
under
Books
(8) How
sends
rough
daily?
and
out
control is
they kept
the
into
actuallypays
who
receiptsbanked
received
moneys
Are
31
VOUCHING
(4) Are
the
and
paying-in book,
the
AND
despatchingof
the
the
how
receiptsfiled
such
are
the
debtors
entries
ledgers?
Upon the completion of
and
statements,
to
same
posts the
cheques
receiptsfor payments
out
the
the
from
with
and
the
controls
who
the
Book
Cash
to
the
will draw
up
the
scheme
paying specialattention
and
all
this
investigation,the
of his audit
to
any
of the
Cash
auditor
Book,
weak
his
found.
He
should
point
out
32
it is
objects of
strengthened. There
and
improved
the
no
advise
be
in the
weaknesses
to
AUDITING
OF
PRINCIPLES
THE
such
of
receipts
all
from
business
the
first is to
The
system.
main
two
are
sources
all
that
ensure
accounted
are
that
ensure
that
a
in
recorded
received
actuallyhas
BANKER'S
Cash
the
Banker's
both
should
should
Book
that
and
The
through
and
which
audit
Pass
takes
period,and
the Pass
When
Pass
order
into
Pass
the
it may
that
fide transactions
placesome
there
are
the
Book, it should
in the Pass
committed
of moneys,
period
and
and
Pass
drawn,
date
Book
be
of
the
for
that
seen
which
time
after the
do
the
such
appear
outstandingsthat
of
side of the
be
that
seen
the
Book
by
debit
for
the
the
few
days
"
still not
are
case
Book,
checking
in the
the
through
bond
are
in
the
at
in
of the
Book
paid
with
same
being ticked,
end
the
Book
Pass
the
appear
succeeding period,in
outstandings
payee
Pass
entries
both
cheques,
not
traced
is
vouching
items
the
checked, thus
be
in the
with
at
accounts,
should
back
reconciliation statement
are
the
the
individual
The
Book
balances.
that
checking of
the
Pass
be
and
is properly
called
be
Book
Cash
the
the
be
Book.
Pass
Book
Cash
and
account,
One
should
Book
the
made,
are
the amount.
BOOK.
PASS
payments
of
is to
second
properly authorised
been
expense,
books
the
fraudulent
or
has
payment
fidebusiness
bond
and
improper
no
every
misappropriated. The
be
receiptsto
for the
as
Cash
may
because
to the
Book
dates
through
with
agree
not
many
reasons.
"
the
except
be credited
frauds
are
34
with
concerned
entries that
the
back
is thrown
the
possibility
consequently,he
checks, and
internal
the
upon
with
as
appear,
omitted
been
receiptshave
that
AUDITING
OF
PRINCIPLES
THE
indirect
evidence.
initialled
been
have
Books
should
counterfoils
such
received
moneys
also
and
of cheques
splitting
The
have
cheques
that
whole
the
promptly,
splitimproperly.
may
of
bank
the
been
not
Book
Cash
the
the
that
into
paid
been
has
Paying-in
proportionof
with
ascertain
this is to
of
object
the
bank,
the
by
checked
be
of the
counterfoils
If the
BOOK.
PAYING-IN
payment
by
Book
Ledger.
and
order
to
C.
D.
A.
B.
the
Co.
"
of
paid
to
of time
accounts
counterfoils
into
be
may
of the
in the
Cash
and
when
initialling
for
thus
manipulated.
latter case,
with
is
the
the
counterfoils
Book
Cash
bank
and
these
RECEIPT
be
tested
the
he
been
should
check
BOOKS.
The
Cash
the
with
counterfoils
Book,
the
Cash
Book
"
for this
of
reason
to
obtain
its
bank
agree
fraud
from
possession,
Book.
Receipt Books
though
may
length
in which
where
to
Cash
the
cases
endeavour
In
cashier.
to the
made
been
is
reveal this
may
omitted
have
may
way,
comparison
originalpaying-in slipsin
should
with
the
auditor
suspected,the
the
by
in has
this
certain
Paying-in Book
paying
as
defalcation
the
debtor,
Book
In
bank.
the
and
account
new
another
Co.
is closed
account
transferred
the
is
from
cheque
"
C. D.
"100
Co.'s
"
and
"50,
cheque
of the
later
"
B.
A.
this up,
cover
payment,
immediately. Therefore, in
be discovered
would
the fraud
attention
to A. B.
being made
application
on
time
unliquidatedaccount,
to be directed to this
be bound
would
Sales
in the
Co.'s account
A. B. "
or
if this
make
may
check
them
Receipt Books
is
agree
with
CHECKING
ROUTINE
impressionsare
carbon
system,
blank
prevent
to
the
should
books
CASH
RECEIVED
example,
statements
account
open
receipt of
he
CASH
SALES.
not
should
make
desk
out
cashier,
bank, and
by
upon
those
who
control
way
in
the
if, for
respect of every
the
as
cash
debtor,
once
draw
attention
given
for the
payment
of Cash
Salesmen's
with
the
the
way
cash
sales.
auditor
to
vouch
he should
disclaim
efficient
all
the
and
cash
point this
out
sales
If there
is
faulty,it
sales, and
to his
in
responsibility
paid
should
no
is
the
summaries
the desk
auditor
pay
in
use,
Books, and
with
of cash
the
same
Desk
agreed
total
is in
daily
prepare
taken
takings
such
system
cash,
should
customer
record
such
and
the
impressionsbeing
should
the
the cash
the salesmen
receive
to
who
should
with
largeshops
account
bill,carbon
When
in the
In
is
If automatic
be tested
staff
and
should
auditor
Sales, an
system in vogue.
any
be checked
proportion of
and
that
discovered,
been
not
check
misappropriation of
upon
sales from
cash
summaries,
an
for
statements
will at
case
on
a
Book.
Cash
totals should
what
best
no
the
be
to
the
allowed
be
counting-house
the
monthly
this head.
automatically,and
Desk
in
sent
the
In
for under
accounted
The
of
tills are
to
collecting
accounted
is to arrange
statement,
largelydependent upon
but
In
made.
has
should
and
out
credit has
fact that
books
can
certain
the
obtained.
cash
ledgers,any
the
on
being
cash
are
is almost
received
to the
the
taken
Book.
debtors
sending
preparation or
the
DEBTORS.
from
handle
collect and
with
FROM
received
the cash
forms
in
manipulate
precautions are
receipt
Cash
the
according to
them
on
tested
be
that
counterfoil
the
difficult to
seen
receipt
3"
VOUCHING
preferredto
more
travellers'
way,
same
are
also be
It must
this way.
be
to
former
the
as
AND
of
these
cashier's
into
the
check
system,
if
or
impossiblefor
in such
stances
circum-
principalsin writing,
this connection
until
an
36
check, and
difficult to
somewhat
of the
vouch
should
with
the
the
due
is
The
kept.
checked
be
to the
should
arrears
receivable
are
(ifany) and
collected by agents.
in
book
which
the
received.
amounts
call
occasionally
each
agents'
All
tenant
empties
In the
case
has
rent
collector enters
and
initials for
In
the
auditor
for
that
see
with
rent-roll
such
cases,
production of
the
therein have
DIVIDENDS.
Interest
the
should
books, and
such
entered
one
Book
Cash
the
to
carefullyenquiredinto.
be
The
rent-roll,if
the
to
sometimes
weekly properties,
of
ascertained.
according
received
rents
if the rents
accounts,
and
amounts
be checked
should
auditor
an
The
will then
amounts
by which
"
tenants
exact
following are
The
items.
are
required
evidence
the
methods
the
RECEIVABLE.
RENTS
way
same
Receipts
Miscellaneous
RECEIPTS.
MISCELLANEOUS
AUDITING
OF
PRINCIPLES
THE
accounted
been
for.
INTEREST
received
AND
from
investments
should
covering
bonds
by
themselves
the
have
of the
that
been
be
have
received.
The
auditor
must
accounted
INTEREST
vouched
with
COMMISSIONS
vouched
AMOUNTS
from
with
the
If the
bonds
bankers
see
are
in the
will be
all the
that
investment
have
seen
interest
what
collectingthe
Book
the
or
it will be
off
torn
the
of bonds, the
case
been
with
warrants,
inspected,and
voucher.
checked
be
dividend
cheques. In
should
coupons
should
when
the
dividends
and
hands
coupons
sufficient
dividends
been
or
received
for.
DEPOSIT.
ON
the
RECEIVED.
the
Interest
Commission
RECEIVED
FROM
Accounts
with
will
be
Book.
Commissions
AGENTS.
Deposit
on
received
will be
rendered.
Amounts
the accounts
received
rendered
by
CHECKING
ROUTINE
agents, which
the
the
passed by
INTEREST
being
LOANS.
ON
agreement
loan
should
whatever
or
inspected,it
be
provided for
interest there
the
The
RECEIVABLE.
BILLS
PROCEEDS
SALE
THE
OF
been
has
being
be
that
seen
for.
Proceeds
with
checked
be
will show
note, which
contract
should
INVESTMENTS.
OF
should
sale of investments
it
Book,
accounted
been
have
received
amounts
Bills Receivable
the
to
the
and
for.
accounted
checked
checked
been
have
loan
The
is of the
there
that
seen
should
accounts
37
VOUCHING
management.
evidence
other
AND
the
the
net
of
broker's
stockto
amount
received.
be
PROCEEDS
sale of
In the
should
received
a
of
therewith
Such
the insurance
or
society should
and
with
in connection
Cash
The
ETC.
with
the
and
compare
Book.
this way
the
He
when
should
by
it may
be
payee
the
found
club
or
receiptbooks,
SIDE
the documents
of the
examining these,
note
spondence
corre-
of subscribers.
vouching
of the
name
to
insurance
the
by,
produced
credit
side
invoices, and
Book, will consist of receipts,
accounts,
order
POLICY.
of
counterfoil
majority of
the
in
means
rendered
CREDIT
VOUCHING
RECEIPTS,
by
with
publishedlist
the
in
companies.
checked
be
spondence,
corre-
documents
INSURANCE
Subscriptionsreceived
SUBSCRIPTIONS.
the
cases,
other
AN
accounts
account
price.
checked
be
with, and
brokers
sale
amount
auctioneer's
examined,
be
UNDER
should
amounts
by auction, the
any
of
evidence
whatever
other
sale, and
RECEIVED
with
the
In
of the
with
must
Proceeds
ASSETS.
sale
catalogue.
contract
connection
of
case
checked
be
marked
SUNDRY
OF
will be checked
sundry assets
is available.
and
SALE
OF
with
dates
that
the
upon
accounts
receipted
auditor
an
should
in the Cash
name
the
of the
account,
that
should
for in
have
38
charged
been
Account
the
year
under
case
taken
that
mistake
be
that
thus
in
payments
view
to
succeeding
ascertainingthat
name
should
in the
the
of each
in
amount
having
no
case
should
of
that
it should
terms,
be
person'saccount
checked
form
of
as
Book,
bearing the
an
with
that
any
seen
in
with
has
books.
the
initialled
been
the
invoices
of
the
that
In
creditor
state
it is very,
creditors'
or
receiptsfor amounts
account
of
should
be
simple for
the
bond
cashier
"2
stamp,
are
fideinvoices
; for
this
far better
over
should
bear
to
reason
and
merely receiptedin
and
with
scrutinised
printed receiptforms,
creditor's rubber
invoice
being
compared
fraudulentlyreceipted by
receiptsupon
it
be
and
in the
official
should
receipts,if
especialcare,
than
addressed
paid through
are
that
properly dealt
enquiry. Receipted
be
voucher
see
account
only
other
been
been
the proper
that
to
are
therefore,
"
are
in order
occurs
Cash
the
have
auditor
the
accounts
busi:
proper
business
the
whom
is debited
amount
vouchers
of individuals
benefit of trade
the
dates should
The
privateaccounts
sometimes
amount
discounts
as
If
past, and
books.
s^The
The
charged
obtain
may
that
seen
the
in the
are
and
be examined.
vidual
same
privateaccounts
to
has
there
scrutinised,with
be
the
party
business, as
the
should
to
or,
of goods
particulars
The
the
support of fraudulent
in
years.
rendered
services
suppliedor
the
that
to
being produced
years
future
in the
suppressionof accounts
have been inflated.
profits
the
the
precautionsare
discovered
be
hand, it may
On
accidental, in
proper
made
are
previous
review.
fraudulent
been
of
that
seen
of the
been
have
may
mistakes
such
no
other
the
by
borne
it should
which
on
Loss
such
hand,
one
being
are
year
AUDITING
OF
PRINCIPLES
THE
those
evidence
ink.
a
All
penny
ROUTINE
stamp, and
auditor
the
stamped, though
so
receipt upon
with
evidence
of
and
this
he
this
satisfied
the
should
point out
only,
ground
voucher,
and
payment
that
is not
affected
businesses
send
the
by
if otherwise
auditor
he
is
requiresis
is in order,
transaction
the
not
are
accept such
to
all the
as
that
any
refuse
cannot
39
VOUCHING
AND
CHECKING
non-stamping of
mere
receipt.
Some
be
receiptto
there is
of these
returned
such
the
that
is considerable
payee
has
should
that
particularsand
be
receiptprinted
attached,
verify that
the
amount,
as
there
be
may
is
fraud
extremely
receiptsare produced, the
correspondinginvoices or
such
the
the
receipt forms
such
such
insist that
should
accounts
and
no
received
completed fraudulently,and
auditor
payees,
of
are
given
particulars
and
they are not good
as
payment,
Where
of
form
own
In both
cheque forms.
unsatisfactoryones
very
of the
difficult to detect.
the
by
form
receiptsare
danger
their
of the
point of view,
nature
evidence
have
the back
upon
auditor's
the
to
as
or
cases
an
and
completed
growing practiceto
at the foot
from
with remittances
he
that
so
see
may
the
is in accordance
payment
therewith.
CONTRA
should
ACCOUNTS.
be
traced, the
of account
statement
PAYMENT
of
payments
invoices
best
which
confirms
LEDGER
in settlement
of
will
have
been
by
contra
being
voucher
BOUGHT
OF
settled
Accounts
account
subsequent
settlement.
the
In
ACCOUNTS.
the
case
the
vouching
the
examined
when
being sufficient.
receipts
that
debited
are
receiptsare
the
to
production of invoices
are
contracts, and
and
transaction, so
in order
case
of
payments
not
of the
same
In the
must
accounts,
that
he
insist upon
giving full
may
mere
see
that
ticulars
parthe
40
part of
payments requiresgreat
Book
In such
the
where
cases
auditor, in lieu of
of the
has
payee
received
the
is it
nor
amount,
cannot
often
are
be
all
found,
produced
should
these
An
in
evidence
which
be
not
to
as
that
endorsement
the
as
to
endorsed
good evidence
circumstance
only
The
forged.
be
payment,
of
made
cases.
acceptedas vouchers, except in special
cheque is not a legalreceipt,it affords no
the nature
Cash
the
duplicatesbeing obtained.
receipt,but
be
these
cheques
endorsed
the
cases,
should
insist upon
should
auditor
the
in
and
missing vouchers,
of
care.
Notes
CHEQUES.
ENDORSED
vouching
the
This
payments.
such
AUDITING
OF
PRINCIPLES
THE
the
may
endorsed
evidence
there is other
it is in
that
order, and
examples being,
should
be
it has
directors'
obtained, if
been
duly authorised,
fees, salaries,and
partners'
that
in such
Even
drawings.
of the payment,
to the nature
as
cases,
however,
receipts
proper
it is advisable, with
and
possible,
to
initial the
same.
CAPITAL
most
EXPENDITURE.
vouched,
carefully
payments
The
Capitalexpenditureshould
in
are
questionas
upon
the
examples
order, and
view to
are
of
the
ascertainingthat
will be
payment.
the
capitalcharges.
required depends
proper
documents
to what
nature
The
following
are
"
PLANT,
MACHINERY,
Invoices
and
be made
in order
maintenance
FURNITURE,
receiptswill
are
AND
ascertain
and
that
added
to
BUILDINGS.
solicitor's statement,
payable should
be
be
to
capital charges,
LAND
with
be
seen.
FIXTURES,
required,and
that
no
the
The
showing
If the
the
enquiry
items
repairs
and
are
ETC.
should
bona
fide
of
expenses
capitalaccount.
contract
the
of
sale and
the
purchase consideration
buildingsare
being erected,
42
preparationand checking of
the
for what
In
they
the
and
back
taken
entered
in to the
handed
should
of the
being entered
week, the particulars
end
the
Wages Book
and
be
in
up
independentlychecked
as
in the
should
be
handed
should
cashier, who
have
and
cash
case
week's
wages.
due
each
to
cash
sorted
thus
should
should
who
responsibleofficial,
person
Book,
which
or
the
should
the
pay
the
who
know
The
thereafter
bearing
the
Book
Wages
to
some
workpeople as
the employees
cashier
and
initial the
returned
be
the
amount
handed
be
should
wages
of
exact
can
or
name
little bag
proceed to
amount
exact
place the
then
in
wage-earner
individual's
the
should
He
the
to
actual
the
over
should
cashier
for
cheque
control
no
The
Book
When
the
Wages
to
the
office.
wages
The
above
is but
basis upon
that
the
cash, and
the
the
business
brief sketch
system, but
wages
of
payment
and
the same,
the
the
should
wages,
independentcontrol.
should
watch
take
the
under
be
The
principals
system carefully,
wages
part in
of the
handling
watch
or
the
actual
of the hands.
payment
the system,
investigating
an
efficient one,
as
follows
Check
checking of
either
occasionally
After
of
every
in the
entirelyseparate
of the
which
records
Wages Book,
and
wages
time-workers.
of the
the
office at
sheets
or
and
be
the
the
out
upon
initialled
cards
given
particularsshould
foreman,
the
by
is
work
the
as
piece-workers,
of
initialling
Wages Book
the
done.
have
case
AUDITING
OF
PRINCIPLES
THE
the
auditor
should
and
assuming
check
that
it is
the
Wages Book
the
calculations;
"
the
castingsand
proportion of
CHECKING
ROUTINE
Check
the
cheque
drawn
See
Wages
the
that
taking part
and
with
these
weekly
clerk should
in which
should
auditor
check
All
director.
alterations
in the
be confirmed
should
the
In
be
monthly
some
travelling,but
actual
be
receipt can
adopted,
checked
the
by
the
should
should
entered
in
these
be
books
according
travellers' books,
seeingthat
all
into account
CASH.
PETTY
end
at the
which
for the
which
the
the
end
ensuing week
of this
the
Cash
and
and
are
should
been
the
receipted,
brought
are
be
kept
upon
the
month,
period, the
with
Book,
period.
to be sufficient to
or
is
traveller's
the
expenses
of the financial
cash
is estimated
method
travellers
Petty
Imprest system, by
sum
to
commissions
unpaid
no
auditor
The
receiptedby him.
far as possible,
and vouch
the
as
cheques drawn,
that
be
for all
carefullywatched
the
should
and
be
their
for which
latter
this
for
charge
to
insisted upon
be
Where
expenses.
fixed amount
as
book
be entered
and
When
should
or
should
should
management.
book, which
partner
payable
allowed
are
should
obtained.
amounts
check
allowed
are
vouchers
expenses
the
by
The
Salaries
the
EXPENSES.
AND
they
except such
expenses,
paid,
where
expenses,
with
for commissions
travellers
cases,
with
way.
due
amounts
ruled
entered.
salaries
the
the
official and
be
are
traveller,in which
for each
kept
should
initialled
be
in
same
checking
in which
salaried
payments
COMMISSIONS
TRAVELLERS'
kept
cheques drawn
latter should
which
Book,
be
book
The
the
time
the
and
week,
of every
actual
the
all
by
should
Book
entered.
be
initialled
Wages Book.
monthly salary
or
columns
Salaries
SALARIES.
the
been
for
cards
with
by callingfor
system
piece-work
Book
has
stages
the
Occasionallytest
records
Book
various
in the
Cash
the
by
shown
as
Book
Wages
totals of the
weekly
43
VOUCHING
AND
as
the
cover
case
petty cashier
his expenses
may
should
be.
At
balance
44
Petty Cash
The
in
analysis columns,
with
impersonal
postings to
for
insisted upon
it is
where
cases
be made
should
than
other
the
On
cash.
balances
obtain
initialled
On
money.
petty cashier,have
last
the
in hand
of the
day
should
say,
of
should
be
5s., and
in
should
to the
access
allowed
be
not
number
account
no
ruled
receipts,dockets
of the expenditure,
and
by the person actually
giving details
be
be
Vouchers
accounts.
impossibleto
should
clerks
and
save
above,
out,
the
expending
to
all payments
should
dockets
such
should
Book
order
petty cashier
the
total disbursements
of the
amount
exact
check
should
cashier, who
the
to
vouch
and
produce it
and
his book
AUDITING
OF
PRINCIPLES
THE
petty cash,
borrow
to
financial
anyone,
from
petty
period,all
cash
be
sums
for
specially
be
this purpose
into
paid
should
petty cash
cheques
"
bank
the
be the
and
drawn
receiptsshould
passed through
Cash
the
Book.
The
auditor
should
the
from
should
check
heads
the
end
the
auditor
the
is not
then
should
balance
to
the
counted
POSTAGE
at
been
proportion of
the
and
that
by
the
at
which
he
with
He
If the
in hand
balance
the
and
attends, and
Petty
he
the
the
at
bank,
it
agree
Book.
book
at
and
payments,
paid into
the
should
vouchers,
Petty Cash
balancing,the
of
checked
cash
should
the
date
date
been
not
He
Book.
analysed.
the
count
shown
of the
nature
they are
period has
of the
at
balance
Petty Cash
initialled by
which
done
checked
has
system of
cheques drawn
the
into the
least
at
into the
faulty.
or
postings,and
observing the
under
with
Book
the book
time
same
report if it is weak
castings and
the Cash
that
see
carefully
enquire
If this
should
the
Cash
be
balance
Book
date.
BOOK.
The
auditor
should
see
that
there
ROUTINE
is
he
should
check
drawn
amounts
Postage
the
internal
efficient
an
amount
Book,
is
AND
CHECKING
this
from
and
large.
check
book
the
counting
45
VOUCHING
the
upon
occasionally,
Cash
Petty
the
balance
and
postages,
checking
Book
into
in
hand,
the
the
if
III
CHAPTER
(continued)
VOUCHING
whole
THE
system
auditor,
the
opportunities
direction, the
whether
question
depends
is
exhaustively
the
can
if there
is
this
The
be
evolved
no
system,
considerable
exercise
Books
Day
Bought
in
great.
very
system
should
auditor
an
one,
exercised
are
available, and
staff
check
and
care,
bad
fraud
for
investigated
be
is not
effective
really
the
upon
there
or
should
control
if strict
as,
goods, checking
ordering
regards
as
authorising payment,
and
invoices,
by
Book.
Day
Bought
and
Ledgers.
All
order
numbered
with
should
orders
head
the
by
of
countersigned
Goods
the
with
and
duplicated
and
out
requiring
inr
and
goods,
the
as
partner
being
should
be
Book
checked
After
with
being
the
services
placed
head
were
kept
and
the
the
to
entrance
and
quantities
particulars
these
and
checked
Goods
the
and
weights
the
upon
by
checked
the
ordered.
thus,
"
entered
invoice
department
Having
invoice
by
been
The
to
should
whom
as
to
these
prices should
previous
or
clerk,
Book,
references
invoice.
the
46
the
Inwards
quotations, estimates,
of
at
Book.
particulars, quantities
books
be
delivered,
are
checked,
Inwards
Order
should
goods
be
invoices
the
Book
as
should
Goods
the
The
by
is
Inwards
works,
weights
be
Books~prtwided
issued
made
be
and
director.
or
in
Order
order
department
the
by
in
every
should
specially printed
on
up
that
so
Orders
automatically.
out
bound
forms
leaves,
carbon
made
be
be
the
checked,
invoices.
initialled
goods
or
initialled
47
VOUCHING
entered in the
filed in the
and
order
clerks in
The
account
no
on
particularsof
passed, the
and
should
to
the
anything
do
with
cheques in payment
No
Ledger
been
has
official should
prior
forward
for
be
authorise
so
he
should
unless
Book,
Day
efficient
very
examine
should
internal
should
the
prevent
place
same
and
his
Inwards
with
put
which
checks
audit
stamp
of
cases
Books
in the
should
he
case
invoice, the
each
it, so
upon
as
second
be called
to
time.
Order
suspicion,the
should
tested
Bought
the
is in force
there
he
items
the
paid
invoices
but
agree.
being produced
one
Goods
the
check, in
in
Occasionally,especially
Books
same
As
accounts
creditors' accounts
is satisfiedthat
proportion.
auditor
he
cheques,
the
the
the
responsible
of the
compare
the
check
until
payment
drawing
the
with
payment
auditor
of the
drawing
the
date, and
to
up
for
passed
posted
doing
to
should
Books
of accounts.
should
accounts
be
Day Book.
in the
Bought Day
to
should
and
entries
of the
charge
have
they
of the
invoices
the
for, and
therewith.
should
invoice, specialattention
be
followingpoints
(1) That
"
the
of
name
creditor
the
with
agrees
the
the
invoice
is addressed
the
date
and
falls within
auditor's
the
to
clients.
(3) That
Day Book,
(4) That
all trade
(5) That
the
net
with
agrees
the
discounts
amount
that
in
the
period under
have
agrees
been
with
Bought
review.
deducted.
the
Day
Book
entry.
(6) That
been
checked
(7) That
account.
the
invoice
in every
the item
is
has
been
initialled
as
having
way.
analysedto
the proper
impersonal
48
particularsit
the
from
(8) That
AUDITING
OF
PRINCIPLES
THE
be
to
appears
business charge.
proper
any
is debited
capitalcharge, and
proper
are
personalaccounts.
invoice charged to capitalappears
to their
charged
are
to
the correct
to
account.
Profits
invoices
in
should
be
In
order
invoices
charged
that
at
the
sent
to
every
auditor
creditor
who
Ledger, requestinghim
owing,
and
due
notices should
such
no
of these
bear
If all these
the
date
it is
agree,
invoices have
which
statements
should
regards
been
omitted.
seeing
financial
the
proof that
as
the
nothing
accounts,
the books
with
agree
is
auditor, who
on
be
Bought
showing
These
effect.
arrange
in the
if there
or
all
should
notice
statement
to the
of
satisfied that
Bought Ledger
the
date,
that
to
creditors' books
any
dates
the
any
account
an
produced
statements
period ends.
has
that
at
be
with
them
compare
that
him
to
Sheet
to furnish
notification
Balance
of the
the
review.
be
may
come
file for
been
date
have
whether
see
periodunder
to the
the
that
have
balance
be
may
into the
trace
invoice
The
weeks.
few
therein examined, to
the invoices
and
Book
all
of the
Inwards
ask
should
suppression of
period the auditor
the
easily by
inflated
be
can
the
vidual
indi-
of the auditor's
these
accounts,
at
with
Day
Book,
very
credited.
are
drawn,
in
each
In due
one
course
being
misappropriated. Both
creditor's
account,
the
the
case
and
sent
at different
to
the
cheques
balance
account
being
dates, two
cheques
creditor's
upon
creditor
are
which
and
debited
the
to
will agree
other
the
with
50
AUDITING
OF
PRINCIPLES
THE
invoices
despatched immediately. The
of carbon
should be press copied,or duplicatedby means
leaves, and from these copies of the actual invoices,the
and
prepared
should
works
the
should
Day Book
Sales
in
recorded
The
against are
the
In
the
same.
omits
cash
the
such
In
items.
could
this fraud
the
Sales
Book
Day
duplicateinvoices,
only
with
Order
quently,
conse-
by comparing
with
the
as
Outwards
Books, Goods
of
of these
originalrecords
such
appropriate
mis-
to
all,and,
detected
be
if he
in payment
at
The
etc.
books
in the
him
records
no
the
of books,
set
circumstances,
will appear
transactions
where
business,
possiblefor
be
guard
inflation of the
cheques remitted
or
these
should
the
whole
the
sales, it may
enter
to
gate-keeper,and
auditor
an
small
over
goods leaving
Book.
that
of
control
clerk has
head
by
of sales and
omission
case
All
up.
out
Outwards
points
main
two
checked
be
Goods
written
be
Books.
object of
the
auditor
be
may
satisfied that
bond
fide transactions.
Day
Book
should
ordinary way,
In
be
where
is
fact that
invoices
creates
auditor
the
and
check
elect to
spend
seem
to
Book
postings,which,
and
be
proved by
far
better
the
exhaustively,but
a
test
reliable system
a
Order
their time
it may
be, have
in
testing
internal
the entries.
auditors
Many
the
Sales
checked
been
entries
Day
already
their time
the
the
occasionally,
checking
client's staff,whereas
occupied
Sales
Books, duplicate
Books
great value.
are
in
of
proportion of
Outwards
of
sales entered
suspicion, the
Goods
moral
of
cases
checked
there
all the
would
with
the
originalrecords.
When
checking
be careful
charged
to
out
see
the
Sales
that, if any
through
the
Day Book,
the
old assets
have
Day Book,
these
auditor
been
amounts
should
sold and
have
51
VOUCHING
been
but
have
with
met
with
agrees
in
method,
management,
Sales
acts
as
cash
received
in the
Cash
Book.
of the
most
check
In
effective
sales
the
upon
debtors
has
for
means
the
the
upon
entered
as
that
the
in
whole
accounted
been
is
fraud
where
cases
the
by
for
suspected,one
detecting discrepanciesis
of such
sending out
statements,
repliesreceived.
the
Sales
Day
system
up
Books
and
Returns
as
enquired into, as it
be passed through
be
credits may
cover
all
to
Sheet,
check
is also evidence
from
should
sent
Balance
of the
valuable
most
Books, and
Day
of the
The
be
to
properly controlled
when
to be
proves
debts, it
and
date
the
is sometimes
which
statement
account.
book
for
at
concern
sales
the
upon
practice,is
asset
particular
the
to
check
of the
debtors
the
credited
been
excellent
An
included
not
misappropriationsof
should
is
Allowances.
Sales
the
to
possible that
in
this
received
cash
improper
in
way,
Ledgers
order
from
debtors.
authority
require the
to
of
notes,
examine
documents,
the
correspondence, Goods
credits made
Inwards
amounts
make
the
more
are
to
by
Balance
should
the
Profit
and
are
credit
The
etc.
be examined
in order
Loss
held
to
Account
back
until
Sheet.
Book.
will
book
particularsas
they
of the
Receivable
this
copy
considerable, as sometimes,
results shown
In
are
as
Books,
if the
Bills
such
when
disposed of.
be
entered
the
The
all bills
same
auditor
become
should
received, and
due, and
see
that
how
the
52
proceeds of
bill
every
accounted
are
amount
debtor's account
in the Sales
and
Book,
Pass
accounted
make
Ledger,
the
in
balance
the
and
Cash
the
and
date
the
and
of
should
be
bill will be
every
details
the
shows
been
Book
at
hand,
in this way,
"
Bill Book
The
for.
up
auditor
the
inspectedby
into
in
be
particular
to the
still current
are
should
Sheet
Balance
the
that
those
bill is
Ledger.
will be traced
discounted
or
if
for, or,
thereof is debited
dishonoured, the
met
AUDITING
OF
PRINCIPLES
THE
that
Account
the Bills Receivable
upon
be seen
in
that
these are
it should
agreement.
Book.
Payable
Bills
they
bills that
and
they should
met
are
It should
be
Account
in the
the
by
shown
that
seen
the
Bills
Payable
in the
Book,
vouchers.
as
the Bills
upon
as
Those
Cash
produced
be
balance
is in
Ledger
book, and
off therein.
will appear
bills should
returned
the
marked
be
paid
been
have
in this
be entered
Payable
as
Book.
Journal.
Journal,of
The
Bill Books,
for
etc.,
as
all
shares
for
entries
opening
various
there
the
no
are
appearing
vouched
be
in the
many
on
other
the
of
capital, entries
miscellaneous
they affect
and
that
correcting errors,
sale
the
that
of
these
of
are
to
the
as
provision
bad
debts,
etc., and
writing
capitalassets,
of this nature.
they
the
as
for
items, such
of
varied
fully,
care-
extraordinary
specialbooks of first
Journal will be such
outstandings, depreciation,reserves
interest
most
all
will pass
Journal
entries ; for
from
assets
and
the
for which
The
the
parts, should
are
through
transactions
entry.
which
From
items
are
and
above
the
of
off
very
great importance,as
considerable
extent.
It
53
VOUCHING
depend
upon
should
auditor
the
evidence
the
that
transaction.
of the
nature
require will
will
auditor
the
In
of
see
that
the
entries.
of
the
To
vouch
this
whole
it may
way
opinion of
off.
bad
doubtful
and
The
of the whole
The
found
in
will be
great
debts
should
The
few
the
or
with
to
the
Payable Book,
and
of the
entries to be
rough
idea
of
how
matters
Journal, and
the
at
exercise
should
auditor
Ledgers
the
balances
checked
case
of creditors
of the
auditor
period have
enquiriesshould
upon
the
be
and
Journal, will
castingsof
check
Ledgers.
Later, these
an
Bought
The
the
regularly,
end
inspection
an
in the Sales
for
what
large
able
be
to
Ledgers.
postings
In the
been
reserved
experiencehe needs to
his work efficiently.
tested.
and
In
in the
not,
or
amount
examples
it is that
of
cussion
dis-
by
more
skill and
inspected.
depreciationhas
case
management.
whether
vouched.
vouching
Bought
the
contained
be
in
when
of
amount
of
Journal, together
important
care
in the
checked
only be verified
by
can
only a
dealt with
how
once
adequacy
are
of them
some
ascertained
of the accounts
above
with
auditor, sufficient
written
and
correctlyin
be
to
be
only
question
be
the
under
contract,
of shares
depreciationcan
of the
case
tion
prospectus, directors' minutes, applica-
the
for
allotment
the
assets
effect to
given
are
an
letters,contracts,
Provisions
inspectsuch
must
thereof
terms
company,
auditor
the
contract,
vouch
thoroughlyevery
The
that
from
should
been
made.
the
to
schedule
goods
whom
see
that
credited
The
Bought Ledger
balances
purchased
are
most
is the
checked,
of creditors.
invoices
and
checked
be
up
to the account
best
Books,
been
have
Cash
the
Allowances
Ledgers should
the
on
from
to
the
; if not,
valuable
production
54
of creditors' statements,
in
are
in
goods
date
the
see
Book
these
be
found
may
therefore,the
in the
claims
agreed
should
claim
to
of
way
be
to
for all
made
by
in
included
being referred
note, otherwise
he
in these
provision is
under
made
this head,
satisfied with
in the
Any
debit
balances
examined,
carefully
are
bond
should
for him
with
fide amounts
allowances,
possiblebad
Sales
The
should
that
see
or
spondence
corre-
are
auditor
the
large,upon
by
mat
subject
the
are
such
Sheet
Balance
refer to the
the
been
not
ample
likelyliability
that
see
If he
will be
matter
deal with
is not
in his
one
report.
of such
to
be
ascertainingthat they
for
example,
for
debit balances
are
go into them
adequate
doubtful
the
have
for any
to
view
owing
If any
etc.
the
circumstances,
accounts,
in the
to
accounts
upon
It
that
the
provision made,
it will be necessary
that
the
dispute,and,
includingthe legalcharges.
the
cases,
adequateprovision
outstandingliabilities. If
see
the
he should
and
made,
his audit
of
of
in stock.
in
are
involved
amounts
not
may
such
and
"
as
before
or
goods through
creditor which
for
provided
or
least
"
accounts
insist,if the
at
disagree
be examined
been
have
on
books
the
such
accounts
Of
agree,
goods
such
been
not
enquiries should
should
is made
have
statements
careful
most
not
creditor
in
accounts
creditors.
the
may
the
by
the
followingperiod. In
certain
that
of
confirmingthe dates
"
goods
that
that
statements
trace
carefully
should
Inwards
Goods
books
credited
and
received
auditor
prove
Sheet, but
these
debited
Balance
of the
been
have
such
been
have
may
AUDITING
the
cases
some
as
with
agreement
course,
OF
PRINCIPLES
THE
with
of
long
responsible
is made
reserve
returns,
for
any
debts.
Ledgers.
postings,castingsand
be
checked
in the
same
balances
way
of the Sales
as
in the
case
Ledgers
of the
55
VOUCHING
Ledgers,
Bought
balances, each
but
should
account
ascertainingwhether
to
doubtful
first for
provide
to
necessary
should
make
all accounts
auditor
the
view
bad
and
ask
should
debts, and
certificate
is
management,
Ledger Accounts,
to
auditor
the
list of
the
upon
balances,
doubtful, and
be
list of bad
in the
for
same.
him
to
appear
included
not
are
that
for the
of, or query
note
The
one.
Ledger
with
reserve
opinionof
the Sales
examining
the
doubtful
and
that, in the
reserve
When
sufficient
Sales
the
scrutinised
be
not
or
to the
as
is
debts
checking
when
doubtful
and
which
debts
(if
has
posted
all accounts
good
Balance
that
whose
accounts
take
advantage
discounts.
of cash
occur
(1) Where
where
payments
made
cheques
(4) Where
bills
(5) Where
the
beyond
Account
unknown,"
hand, he
other
of
following
the
account
small
where
to
appears
is about
done
bills have
the
been
the
same
be
as
has
the
dishonoured,
account.
constantly being
debt
notes
been
renewed.
for
owing
credit which
period of
appear
"in
time
is
siderably
con-
customary
"
upon
the
in solicitor's
such
account,
hands,"
"
as
in bankruptcy,"
address
etc.
queried accounts,
the
the
trade
to
are
stopped,"
or
upon
invariably
particulartrade.
(6) Where
All
who
or
irregular,
are
on
or
"
all debtors
past.
(3) Where
in the
good
the
any
of the
account.
on
the balance
(2) Where
although the
increasing,
in the
On
date
as
"
cash
are
as
period
will pass
since the
paid
paid regularly,and
all accounts
circumstances
payments
been
have
are
query
auditor
ledger,the
the
to
Sheet, and
should
received
list of bad
or
and
such
of them
doubtful
debts
as
do
not
appear
suppliedto
the
56
auditor, should
and
his
the
list
"
the
"
good,"
columns
should
whole
the
will be
based
and
be
from
about
doubtful
of the
be
that
good,
will be
Reserves
for
sometimes
by
method
is not
auditor
should
to
only
the
of
that
the
that
way
of
sufficiency
the
circumstances
This
is
most
cases
considerable
the
which
be
bad
the various
the
sum,
of
total
and
of
total
circumstances
further
vision
pro-
estimated
are
certain
debts
to
calculated
are
t{ietotal
on
been
sufficient
opinion
for bad
book
and
all doubtful
of
the
by
been
formed
doubtful
and
as
debts
enquiring
looking accounts.
an
book
debts
of the
the
one.
be
can
debtors' accounts,
the amount
positionshown
not
is
reserve
important part
have
supplied,
for the
reliable
should
percentage
reserve
into
Such
examining
affects
the
doubtful
turnover
is by
many
upon
to be
prove
and
way
satisfyhimself
The
doubtful.
be
large
probably from 1
sufficient provisionunder this head.
bad
the
upon
or
from
as
proportionwill
5 per cent,
debts
bad, and
the
cover
50
depends
that
seen
information
the
addition, there
be
be
to
to
to
probably
completion,the
in
to
In
40
be extended
is sufficient to
debts
is
debt
each
that
it should
upon
this
debts, but
case.
headed
column, and, if
Upon
estimated
those
"
amount
estimated
debts
proportion
might
the
noted.
be
doubtful
and
of
to
cast, and
be
of the
proportion
As
doubtful
or
as
should
for bad
reserve
columns
with
"remarks."
"
bad,"
ruled
it should
official,
responsible
the
will be
for.
for
column
with
discussed
per
further
into
as
responsibleofficial,
good plan is to have
with
into
gone
explanationsasked
of queried accounts
(1) balance
and
be
AUDITING
OF
PRINCIPLES
THE
reserve
accounts.
credited to
amounts
to
materially
The
debtors
Trading Account,
if,in fact, part of
IV
CHAPTER
THE
AND
PROFIT
checked
must
General
Ledger,
Book
Bill
and
Books,
of each
checked
on
that
he
and
balance,
the
the
Profit
the
built
and
up,
of the
this
is
so
auditor
detail
the
Impersonal
bear
checking
of
indirectlyaffects
and
either
Every
were,
the
to
him,
they
Loss
the
and
will
find
Account
exact
58
are
correct
; and
whether
accurately and
engaged
and
Impersonal
the
these
item
kept.
An
upon
the
directly
and, therefore,
recorded
classified
their
or
the
from
are
and
been
every
as
Sheet
that
true
has
when
accounts,
are
and
in
mind,
final
that
way
Ledger
out
material
see
how
On
exercised,
concern
upon
making
carried
be
of the
satisfy
properly
Balance
to
exhibit
audit, that
an
the
Profit
account
alive
in
details
in such
affairs
duty
be
account.
the
and
largely depends
not
the
to
as
of the
should
that
Account
auditor's
so
up,
state
or
correctly
Loss
balances
may
be
of
most
the
now
in order,
must
the
Books,
details
work
the
contains
it is the
drawn
properly
view
and
of
of
should
auditor
are
intelligence
Impersonal Ledger
which
see
keen
and
particular
the
part
from
account
the
items
in
this
but
that
such
described
mechanically,
Each
or
is
Day
the
sufficientlythe
that
should
account
order
which
verified, andthe
be
Balance.
checked
has
classified, and
no
Trial
the
to
from
checked,
been
should
account
of
postings
totals
the
have
carefully,in
himself
up
will
etc.,
detail
the
Impersonal
checking
The
and
Ledgers,
the
to
exhaustive
the
Journal,
castings
examined
SHEET
Bought
attention
importance.
utmost
Cash
his
turn
and
Sales
the
auditor
the
BALANCE
Ledger.
Impersonal
HAVING
AND
ACCOUNT
LOSS
he
place
nature
of
in
Sheet.
Balance
should
must
correctly,
correct
Ledger
or
be,
all the
as
it
detail
PROFIT
THE
making
items
should
59
ETC.
ACCOUNT,
balance
the
up
LOSS
AND
appreciatedand
be
understood.
Profit and
The
summaries,
therein
amounts,
and
details and
items
of
individual
of the auditor
must
like nature
items
separate
to examine
summarising
the
of
number
are
and
see
such
grouping
only
that
of
actions
trans-
grouped together,
heading given fairlydescribes every
the
item ;
component
duty
correctly.He
items
is, that
of
Sheet
Balance
of the
most
say,
that
see
and
Account
composed
are
is done
and
that
is to
it is the
to
Accounts.
Loss
that
included
the
in
Items
Grouping
are
classification,
incorrect
otherwise, by
be made
to be
by the accounts
may
absolutelymisleading. For example, this will be the case
results shown
the
if
charges
revenue
and,
take
to
are
included
the
term
extreme
an
under
contained
above
do
assets
in the
not
resultingin
debit
the
The
which
be
exact
exact
the
in which
should
only
such
Ledgers,
owing
as
amounts
forward
all,and
Profit
Loss
and
be included
should
should
Account
and
Balance
opinion,
and
in
be
appear
Sheet,
are
respect of which
not
are
spent,
tancy,
accoun-
Sheet
until
Such
Account.
liquidassets,
described clearly,
so
be appreciated.
separatelyand
positionof affairs may
items
Balance
in the
stated
form
items
the
but
sense,
not
book
trade
whereas
at
For
Debtors."
cover
concern,
Sales
off to
transactions
the
Sundry
Account,
represent moneys
of
balances, which, as a matter
carried
be
should
that
"
represent moneys
items, therefore,should
but
heading
in the
written
are
"
Loss
and
Profit
case,
the
ordinary
must
they
as
Sundry Debtors
payable to the
and
owing
debts
"
such
with
the
headings under
and
classified,
in the
Profit
all matters
of
the
order
and
Loss
personal
opinions differ.
The
60
reflection of the
of
items
like nature
and
intelligible,
that
clear and
must
to
make
there
is
the
only
and
clear
accounts
is
there
suppressionof
no
true
that
see
grouped together,that
are
sub-division
sufficient
is
He
of affairs.
state
questions, provided
these
the accounts
by
positionshown
the
that
with
concerned
is not
auditor
AUDITING
OF
PRINCIPLES
THE
material
facts.
final accounts
The
it may
disclose
and
indication
accounts
"
examining
the
the
details
and
appreciated,and
be
all such
and
accounts
result of
the
trading
positionat
date
the
in order, and
giving
results of the
The
period of
the
the
of
accuracy
therefore,
are
summaries,
correct
are
actions
trans-
is
not
nature
of affairs,
the
can
be verified.
the summaries
during
out
transactions
various
carried
from,
accounts
business
been
have
such
as
combined
the
that
the
be, thousands
merely give an
built up
summaries
mere
are
for
period, and
the
the accounts
of
fair indication
the
financial
the
Sheet.
Balance
of the
that
the
Principles Governing
and
Trading, Profit
Loss,
of
Preparation
and
tion
Appropria-
Accounts.
Auditors
are
the
have
drawn
up
accounts,
form
criticise the
to
further,they often
give
to
or
advice
are
in
in which
requested to
this
of
the
placeto
auditing,it
Sheet, before
the audit
an
accounts
passing to
must
should
tancy
accoun-
is
thereof.
auditor
to
consider
preparationof
prepare
connection, and,
accounts
For
have
be
the
Loss
Account
detailed work
and
connected
correct
drawn
up,
knowledge
in order
Balance
as
that
to
with
criticising,
how
such
all necessary
information
understood.
Accountants
accounts
not
are
should
accounts
Trading
and
Account,
non-trading
is the
and
The
depends
but
the
account
various
be
from
the
object of
This
the
given
ascertained.
carried out
of
sources
of
disclose the
to
as
income, and
in
companies
earning
the
use
or
term
Loss
Account.
merchant
or
trader,
goods
been
have
purchase price of
"
the
gross
difference
various
the
total
is called
difference
be
up
is to show
for which
the
may
of Profit and
this account
period, and
the
but
during
transactions
case
called
Expenditure Account
drawn
In the
of
case
is
into
losses incurred
instead
and
Some
ACCOUNT.
TRADING
the
results of the
the
group
entered
so
and
same.
Account
Revenue
to
of the
nature
expenses
the
In
Loss
Income
an
should
received
obtaining
the
the
upon
amounts
the
of
form
exact
Profit and
the
profitor loss
final
the
turer
manufac-
or
Expenditure Account,
transactions
that
the
three
as
namely,
same,
revenue
period,so
merchant
corresponding account
into
such
concerns
for
that, therefore,
AppropriationAccount.
the
object
of
Manufacturing Account,
or
but
their
simple as possible.
as
generallydivided
is
easily
that
forget
to
accountants,
Account
Loss
will be
that
be made
Profit and
The
for
61
ETC.
form
apt
are
prepared
the
of
information
ACCOUNT,
disclosed in
be
may
LOSS
AND
PROFIT
THE
sold
during
such
profitor
between
goods.
loss," and,
bujdng
the
prices.
selling
In the
case
be debited
of
with
the cost
carriage thereon,
in order
sold.
are
only
with
The
and
to convert
that
included
the
should
The
of the
the
such
materials
direct costs
as
materials, includingthe
manufacturing
Trading
be such
raw
of
vary
expended
wages
Account
should
production,and
directlywith
will
will have
be
debited
the
items
the turnover.
to
be
brought
62
into
for
Trading Account,
the
AUDITING
OF
PRINCIPLES
THE
against
sales of
the
the
in the
order
sold.
been
have
taken
be
must
Therefore, in
close of
the
at
is
period,and thus the Trading Account
debited with the opening stock at cost price,that is,with
the cost of goods purchased during previousperiods but
sold during the periodunder review, and credited with the
closingstock, that is,with the goods purchased during the
current
period but not sold, and which must, therefore,
to the next
be charged on
period during which, in the
financial
each
the
ordinary course,
of the chief
One
is to
Account
profitbears
objectsof
ascertain
and
another
auditor, and
the
as
strictly
enquire most
PROFIT
Trading
which
Loss
AND
Account
latter
that
those
obtained
in the
is the
business
to the
from
balance
Profit and
with
It should
the
upon
Loss
Account,
miscellaneous
any
sales, such
rents, interest,
as
be debited
and
profitor
loss upon
transactions
for such
period.
to the
a
Trading Account,
net
APPROPRIATION
of
The
with
every
expense,
case
carefullyby
reasons.
is credited
account
the
between
as
watched
be
ACCOUNT.
carried
the
to
siderable
con-
or
is carried
than
this percentage
should
gross
is of
proprietorsof
the
to
Trading
the
this information
in
if the rise
the
that
percentage
value
variations
The
period
one
the
sold.
preparationof
the
sales, as
the
to
commercial
business.
will be
same
ACCOUNT.
The
partnership,shows
loss between
the
partnership.
the
case
of
company,
balance
which
loss
account,
of such
with
the
thus
of the
whole
profit or
division
partners in accordance
In the
the
net
AppropriationAccount,
the
is
in the
profitor
the terms
of the
Appropriation
the
includes
Account
the balance
transfers
general reserve
shareholders,
the
amongst
any
iinal
for distribution
deficit,as
the
case
be.
may
Accounts.
Nominal
of
Adjustment
Trading, Profit
The
Accounts
from
built up
are
and
Impersonal Ledger,
closed
by
former
All
accounts.
carefullyby
all the
auditor,
the
classified and
included
in
charges and
that
losses
have
been
review, and
under
due
amounts
that
The
auditor
should
Provision
RENT,
ETC.
for
RATES,
The
each
should
with
regard
Liabilities,
seeing
the date
included
WAGES.
should
The
be
date
that
any
of the Balance
the amount
in the
previous year,
to
up
etc.
WATER,
AND
demand
inspectledger accounts,
the
period
and
accrued
Sheet
debited
is
been
to
that
all the
by
covered
unpaid
provided
to such
corresponding nominal
see
that
each.
to
GAS, ELECTRICITY
should
paid
with
TAXES,
also compare
those
for the
"
accounts
the methods
and
already,
Outstanding
and
payment
period
sundry
and
Bought Ledger
receipts,carefullynoting
proportion to
He
adopt
auditor
notes, and
expenses,
the
in advance
than
dealt with
been
into
this
"
have
In
outstanding
brought
payments
liabilities,other
which
correctly
been
have
into account.
checked
been
have
three
satisfied that
be
may
all
see
be
must
final accounts.
the
must
being
to the
thereon
business
the
connection, he
he
contained
accounts
accounts
that
so
of
transactions
nominal
all such
nominal
Appropriation
accounts
of the balances
transfer
the
and
Loss,
the nominal
in the
an
final
the
or
period,
the
paid,
available
amount
the
period,and
dividends
and
representingthe
for
loss
the last
from
63
ETC.
ACCOUNT,
profit or
net
forward
brought
to
balance
LOSS
AND
PROFIT
THE
for.
account
account
rents, rates
and
included.
which
ascertained, and
the
wages
if there
are
have
any
been
days
64
financial year,
close of the
the
and
date
that
between
AUDITING
OF
PRINCIPLES
THE
week's
wages
inspect
the
Salaries
the dates
up
paid, and
been
salaries have
outstanding
any
note
Books
of the financial
periodbut unpaid at
for ; ascertain
the
whether
there
the
auditor
so
and
arrangements
FEE.
AUDIT
The
should
accounts
INTEREST
amounts
be
fee
SUNDRY
should
If there
to
as
; if
this head
under
in the accounts.
period
are
covered
the
by
All
the
is
all the
accounts
various
included
been
interest
provided for.
nominal
other
be
the
that
see
Sheet
EXPENSES.
loans, mortgages,
any
to
and
made
for.
provided.
PAYABLE.
to the
and
the
for
provided
account.
be
included
into
owing
are
end
to the
regardsexpenses,
should
should
various
date, are
brought
amounts
any
these
that
see
are
auditor
the
earned
that
as
Enquiries
CHARGES.
LEGAL
any
outstandings are
any
of
commissions
see
that
The
EXPENSES.
AND
Commission
inspect the
that
for
made
amounts.
travellers,and
see
to which
provisionis
that
see
COMMISSIONS
TRAVELLERS'
should
and
Salaries Book,
and
Account
should
auditor
The
SALARIES.
expenses
these will
"
amounts
by
of the
amounts
up
to which
such
dates
may
also
Cash
been
debited
and
run,
of the end
entries
invoice
received, the
and
discloses items
In
some
amounts
cases,
an
invoices
dates
where
no
accounts
to
be
period.
the
He
of the
examination
files for
for which
will have
of
making enquirieswhere
of the financial
books, and
made.
items
outstanding
trace
receiptsand
of the
inspect order
often
to
other
invoices
fall short
able
be
may
examination
an
such
Book
period
auditor
The
expense.
many
succeeding
provisionhas
have
estimated.
not
been
66
to
what
exactly a Balance
to
show
of
purpose
"
"
sheet
showing
but
merely
the
appearing in
balances^
nominal
Profit
Loss
and
balance
the
not
Loss
form, the
whole
items
For
other.
Profit
Loss
and
Sheet, but
asset."
Again,
discount
neither
is
over
must
appear
such
items
balance
an
forfeited,and
must
but
"
cannot
not
what
are
off to
Sheet.
funds,
left-hand
are
commonly
the
on
of
case
side
of
the
"
termed
be
an
preliminary
as
advertising,
Profit
Loss
and
carried forward
the
other
paid
amounts
Profit and
on
the
On
the
nor
balance
the balance
years,
credit balance
upon
one
issue of debentures,
Balance
reserve
appear
shares
on
Loss
side of the
Account,
Sheet,
Balance
understood
by
hand,
the
term
liabilities."
For
the
should
not
for if the
that
at
period of
as
the
debit
it includes
cases
expenditure,such
upon
in the
is the
as
in classified
right-hand
the
books,
in the
this
when
Sheet,
Balance
The
the
to
including
Sheet
merely shows,
if there
appear
Balance
transfer
by
Balance
are
Account,
must
company,
expenses,
which
example
all the
jxxdcs,afty
of
sides
both
on
of all
closed.
liabilities of the
and
thought,
balances
of the
been
have
accounts
is not
Sheet
classified summary
account
Account, but
and
Balance
rinsed
the
"
actual
an
latter account.
the
on
therefore,is
Profit
Account
set
been
have
accounts
and
meaning
true
as is commonly
liabilities,
and
of assets
statement
importance that
the
SHEET.
BALANCE
OF
purports
Sheet.
Balance
it
what
utmost
understand
should
DEFINITION
a
is,and
Sheet
auditor
every
AUDITING
OF
PRINCIPLES
THE
concern,
have
"
is headed
item underneath
whereas,
as
is
an
"
liabilities and
"
assets
"
asset, and
total value
explainedabove,
of the
often
Sheet
Balance
therefore, a
right-hand side
every
the
foregoingreasons,
"
assets,"
it must
that
mean
total
the
assets
of the
this is not
the
It is very
case.
result
the
it
The
in which
form
is
to them
this false
from
were
to
in the
accountancy
formed
Sheet
"
quite
is,looking upon
of assets
statement
fession,
pro-
Sheet
Balance
Balance
the
if
past, and
the
themselves
ask
adopted
even
67
ETC.
liabilities.
and
been
has
presented
down
and
them
those
they
strong
see
who
seriously why
exactly what
would
probably they
them
they
have
and
imply,
discontinuing
mean
for
reasons
use
practice.
the
Balance
Sheet
sides,and,
"
to what
as
as
ACCOUNT,
the
that
ideas
erroneous
common,
LOSS
to head
with
AND
PROFIT
THE
Cr."
it is not
as
should
"
and
"
By
should
not
have
headings
no
should
nor
appear,
be
signs
the
account,
an
the
the
two
Dr."
and
to
"
"
terms
it
implies,
is
"
To
merely a
of balances.
sheet
If
true
concern,
and
all the
assets
items
described
the
will
particular
in
state
of the
show
exactlythe
that
the
auditor's
Sheet
is
and
principles,
to
whole
duty
positionmay
is to
show
affairs
it will often
but
liabilities,
and
so
An
Balance
of
should
of
nature
include
as
clear.
view
correct
Sheet
the
of
other
be
clearly
perfectly
be
satisfy himself
that
the
the foregoing
properly drawn
up upon
report accordinglyto those employing
him.
MAIN
with
OBJECT
which
profitor
BALANCE
OF
Sheet
Balance
loss of the
concern
SHEET.
The
is drawn
during
up
a
main
object
is to ascertain
the
given period,though,
in
how
the
excess
debit
such
capitalis invested.
of assets
balances
over
carried
preliminaryexpenses,
The
capitalrepresents
liabilities,
though for this purpose,
forward
upon
such
advertising suspense,
accounts
etc.,
as
are
68
included
assets
this must
that
mean
profithas
Sheet
last Balance
of the
be
during
to, the
added
the withdrawals
loss
the
amplifies
Sheet, the
have
any
the
the
valuation
ascertain
of the
decrease
or
will have
fix their
exact
which
to
is carried
estimate
business
and
that
be
claims
until
is, the
on,
the
is
over
surplus
the
which
total
the
case
estimated
such
such
tainment
ascer-
the
on
assets
as
the
by
land and
valuation
are
to
But
the
of which
the
Even
held
not
be
up.
of such
personal opinion.
cases
buildings,plant and
never
finallywound
use
other
easilybe
sold.
are
the
are
under
liability
but,
assets
meantime,
of such
seen
as
assets
value
assets, that
business
the
profit or
assets
ascertained, it is
until
such
absolutelydependenlupon
It is possible,
assets.
as
rule, to
a
of the liabilitiesexactly,
except in the
such
contingent liabilities,
to
Balance
loss is
profitor
the amount
this head
view
merely
the
by
surplus of
the
increase
subject of dispute,in
fixed
from, and
Account
the
as
of the
of
the
at
capital invested
Loss
case
drawals
with-
to arrive
deducted
disclosed
capital represents
and
liabilities,
the
been
paid
arisen.
loss has
As
been
in
and
information
former
this purpose,
the resulting
closingcapital,
the opening capital and
closing
disprofitmay be said to be an
Profit
business.
the
But, in
capitalhas
be
decrease
should
incurred.
If so, in order
must
date
since the
hand,
been
there
additions
loss, the
profitor
made
other
further
any
period.
the
for
closingcapital,
and
whether
or
been
have
must
during
the
on
whether
seen
business,
the
increased
liabilitieshas
over
surplus of
given period,
assets.
the
with
AUDITING
OF
PRINCIPLES
THE
with
sold unless
and
Consequently,
assets
if
is
matter
in
of
expert valuers
LOSS
AND
PROFIT
THE
employed, probably
were
the
result
same
instance, in the
for
"
valuers
two
no
69
ETC.
ACCOUNT,
arrive
would
of
case
at
factory
immediate
estimate
necessary
to
guarantee
that
VALUATION
in
Balance
based
the value
upon
for
purpose
Again,
there
therefore, if any
of
before
good
impossible to
the
working
total
For
to
such
at
exactly,and
results
the
life of
are
assets
values
the
realised and
ore
is, the
as
will
As
going
for
proprietor
be
the
seen
valuing
when
profitunless
additions
in which
such
part of such
or
must
arrived
at.
for
mine, and
in
be made
But
example,
machinery,
or
it is
will
be
is the
what
how
capital
consumed
are
wastage
be
original
the
thereto, is intact
preciselywhat,
in
be
Sheet.
true
plant and
should
realise if sold,
adopted
are
assets
reasons,
it will be
profitsor
actual
losses of
to
absolute
it is
precision.
impossible
continuing
true
business, and
it is
that
seen
profitis seldom
absolutelydependent upon
of the
with
them.
for
ore.
the above
arrive
requires
profitcan
true
state
quantity of
extract
the
sidered
con-
assets
that
the business
to
wasting nature,
is
it
be
to
of
would
to
earning revenue,
the
question
assets
assets
any
of the
of
are
course
such
no
with
less
or
exact.
the valuation
Balance
be
can
capital,together
is invested
in
be
to
valuation
the
methods
these
more
though
exchangeable values,
he
for inclusion
assets
the
Another
of such
which
alter, both
will prove
that
concern,
to
And,
is,whether
or
debts, and
value, it is impossible to
that it is estimated
amount
or
market
upon
same
their
with
Sheet purposes
view
the
cash.
ASSETS.
connection
degree,
into
valuations
such
OF
with
held
are
conversion
lesser
stock-in-trade,book
of
which
assets
In
pounds.
valuation
the
appliesto
other
of
appreciatedby accountants,
The
ascertained.
the
valuation
impossible to
These
business
facts
who
of
fix such
must
should
be
make
70
these
lead
not
into
belief that
the
be
certaintycan
clients,whom
to their
clear
principles
root
AUDITING
OF
PRINCIPLES
THE
absolute
they
must
exactitude
and
periodicalaccounts
achieved
in
purposes,
the assets
the
of
their businesses.
For commercial
and
estimates
leave
margin
"
of
means
servative
con-
concerns
in valuation, and
contingencies.
Balance
divided
arrived
accurate
well conducted
reserves,
to
for unforeseen
For
and
near
sufficiently
and, by
purposes,
ordinary business
for
according
profitor loss
the
is considered
in this way
at
rules,and
conventional
to certain
valued
are
Sheet
under
the
purposes,
of
assets
two
business
"
are
"
Assets
and
FloatingAssets."
FIXED
of
assets
by
for the
the
with
the
and
same,
of re-sale.
purpose
a
same
such
For
for the
period of
whole
assets
example,
with
view
those
are
acquired by
are
factoryis held
plant.
Floatingassets
Assets
for
earning profits
to
of the
use
machinery of
view
Fixed
which
nature
permanent
undertakingwith
years
ASSETS.
FLOATING
AND
period of
not
held
plant
and
are
the
an
manufacturing
to
the
working
life of
such
acquired by
held
trading,and
with
view
as
are
as
possible. Examples
trade, work
seen
that
and
their
opposed
these
assets
of
book
those
stages of
fixed
assets, which
trades, and
which
are
into
debts
conversion
view
to
the
soon
stock-init will be
trades,
trader
with
or
assets
as
into
those
are
such
and
for
or
cash
are
in which
held with
not
and
floatingassets
various
to
of
course
conversion
and
are
the
produced
are
consist of cash
to
in progress,
which
assets
undertaking in
an
of its
purpose
those
are
cash,
as
which
he
conversion
into cash.
Fixed
such
assets
assets
in most
cases
over
are
valued
are
of
the
wasting nature,
is written
the
upon
off to revenue,
period
of the
basis
of cost, and
originalcost
the
by
estimated
means
of
if
price
ciation
depre-
working life
of
such
At
asset.
in the
Balance
written
depreciation(if any)
the
71
ETC.
ACCOUNT,
intermediate
any
will appear
fixed assets
LOSS
AND
PROFIT
THE
Sheet
off
cost, less
at
date, and
to
this
Current
business.
do
disregarded,as these
assets
the particular
that
amount
the
realised
be
would
case
where
are
not
valued
to
upon
their
values
is
there
that
be
fixed
If
asset.
errors
of
value
in market
asset
more
made,
On
the
they do
which
not
such
originalcost
results shown
add
assets
has
by
to
or
of the
which
will
earn
been
written
the
accounts
the
assets
their
upon
words,
their
upon
such
"
working life
loss will
profitor
tion
hand, the fluctuadoes
fixed asset
reduce
in
hypothetical,and
it is impossibleto
the
other
less than
or
Fixed
not
affect
not
the
asset's life,when
it
priceof the
of the original
the
case
the cost
one.
for
be
may
for
are
proprietor,
except at the end
have
to be replaced,in
may
new
less
or
the
hammer,
in other
"
that
therefore, that
seen,
of error,
immediately.
affected
the
and
profits,
more
in
amount
down.
business
be
are
if sold
is the
certainty,the period of
fix,with absolute
of
"
sale under
the
earn
likelihood
of
represents
their
ability to
"
value
produce
is closed
business
upon
Sheet
Balance
forced
value._ It will
intrinsic
working lives
the
Market
would
proprietorof
the
value
"
break-up value
by
the
the
are
"*
asset
"
value
break-up
and
affect
not
all.
at
an
market, and
open
value
are
immaterial,
absolutelyaccurate.
the
basis of
Floating assets should be valued upon
is the
either cost or market
price,ac^or^ng_tp_jwhich
purposes,
lower
at
the
date
market
of the
assets
Sheet
Balance
are
held
with
such
"
the
view
being"
reason
to
re-sale,if
fall is not
mere
72
fluctuation,but
represent
to
appears
in effect
fall,then
AUDITING
OF
PRINCIPLES
THE
loss has
more
less permanent
or
made
been
the
on
the
for at
should
account
no
date
Balance
of the
provided
in which
year
the
for
"500,
valued
be
take
to
into account
profit. For
and
Sheet, when
remain
said that
if
certain
unsold
market
the
above
at
value
the
of the
is
same
purchased
are
be
unrealised
and
purely fictitious
goods
the
floatingassets
would
effect
the
price,as
cost
fall upon
be
purchased.
were
On
then
profit,
should
and
once,
goods
at
be
it cannot
be
mere
paper
one.
The
the
in
foregoingreasoning might
necessityof
where
cases
J\
be
made
for
that
this
that
But,
the
on
be
values
prepared
estimated
an
estimate
upon
loss,and
it
in
profit,no
to
value
of
floatingassets
But
cost.
basis
the
against
argue
below
are
that
for if
losses
provision is
subsequently transpires
incorrect, and
was
resulted
that,
harm
in
will
fact, the
been
have
the
the other
profitmay
the
used
anticipated,but profitsnever,
transaction
done, and
market
the
should
accounts
should
writing down
be
have
business, and
same
been
upon
it
paid
is
realised,then
away
being
found
to
the
such
taken
estimated
proprietorsof
the
subsequentlythat this'
74
most
has
considerably
for
assume
does
not
mis-stated
only
harm
and
OF
prepared
carefully
the
Great
PRINCIPLES
THE
cannot
can
an
be
and
the
done
audited
possibly
AUDITING
to
audited
real
the
Balance
possess.
Balance
position
profession
Sheet
virtues
Sheet
of
if
affairs.
tants
accoun-
that
it
CHAPTER
VALUATION
IN
values
be
of the
more
less
based
Balance
the
valuation
It
of
be
shown
But
it must
who
be
far
he
as
position
in any
can,
At
shown
the
of
the
Sheet, and
to
appear
be
ought
be
to
in the
satisfyhimself
at
were
the
free
and
properly
are
that
date
from
of
all
the
to
practice,
thereto.
the
concern,
and
assets,
of the
Balance
duties
out
correctlyvalued.
from
of the
Balance
were
concern,
however,
Sheet.
the
of
assets
of account,
in
thus
Balance
the
this is not
But
what
he
actually in
those
the
all those
books
Sheet, and
charges except
75
the
that
The
that
see
as
regards
as
books
the
that
valuations
the
cannot,
clearly set
assets
results
valuations
he
from
possession
such
in
regard
discussed.
be
found
matter
of various
actual
testing
correct
duty
the
upon
satisfying himself
ascertained
auditor's
with
of such
way
also
all
certain
the
with
met
the
auditor's
will
assets
in
recognised
that
officials of
or
accuracy
time, the
will be
it is the
disclosed
that
to
be
to
be
valuation
the
mind
this
appears
same
business
and
in
not
to
duties
is confined
guarantee
verification
a
and
are
upon
so
care,
with
proprietors
duty
way
utmost
practical knowledge
auditor's
an
in
bound
therefore, this
that,
auditor's
borne
are
but
it must
hand,
constantly
are
the
the
by
have
values,
and
deal
to
they
the
purposes
absolutely dependent
the
which
explain
made
that
accurate
sufficiently
assets
to
is
with
proposed
and
and
that
out
Sheet
valuations
such
other
assets,
into
be
now
common
are
the
Sheet
the
gone
may
is
On
pointed
for Balance
market
the
upon
ASSETS
OF
been
business
approximate,
accepted rules.
must
it has
estimated, that
or
cases
of
assets
be
to
that
VERIFICATION
preceding chapter
the
have
AND
that
assets
then
must
its possession
the
disclosed
same
in
the
76
is
This
books.
asset
assets
evidence
actuallyin
method
securities of
produced
to
by
the
the
bonds
not
produced
in the
auditor
are
to
his examination.
keys
securities
are
of
he
has
of
of
noted
took
fifty,it
the
perpetrated for
at
that
whole
of the
that
control
the
strong
handed
these
he
completed
and
room
to
should
the
succession,
retain
his examination
all remain
time
safes, where
in
his
of the
bills,
securities
this is to
at
when
of freehold
of the
auditor
were
of fraud
certificates,bonds,
the
be
upon
Therefore,
time, and
one
in
title deeds
the
be
away,
bonds
same
years
defalcations.
as
one
would
form
fact,this particular
him
these
that
an
fiftyproduced
In
see
as
bonds
these
ensure
must
kept,
and
until
batch
property, share
his entire
all the
more
considerable
to
been
auditor
produced
under
or
verification will
batch
one
auditor
serious
leasehold
etc., the
that
holding
all
thereafter
another
twice.
up
unless
had
examining securities,such
and
and
who
the
produced,
past has
covering
If
company
time, the
manager,
impossible,unless
bonds
same
produced
then
of
debenture
the
at
for if the
"
care
of securities is not
investments.
case
bearer
"50
him
and
the
certain
produced
useless
are
investment
are
such
assets
purpose,
batch
one
verify both
instance, suppose
hundred
this
for
securities
like nature,
to
is not
care
such
that
at
verifying the
be
must
say,
attend
inspectionof
that
his clients.
possessionof
the
examining
When
entails the
at
concern
of
purpose
satisfythe auditor
will
as
the
This
date.
at that
as
is to
period for
of the
close
the
the
at all that
auditor, therefore,should
The
date.
subsequent
original
the
evidence
no
possessionof
still in the
was
is
auditor's
an
vouched
have
may
purchase, that
the
upon
of
important part
most
AUDITING
OF
PRINCIPLES
THE
the
of
have
the
mencement,
com-
possession
securities.
VALUATION
VERIFICATION
AND
Further, he should
conduct
in Hand.
Cash
of business
the
comparing
and
in
produced at
or
the
and
vouch
then
attend
cannot
bank
good plan
the
upon
drawn
upon
Unless
be
not
last
necessity for
balances
of
the
counting
date, and
to
the balances
with
same
Pass
Book
agreed by
direct from
the
their
at
balances
the cash
accounts.
automatically counted
saved
is thus
should
make
and
their
of the
Cash
The
as
largecash
balances
if cash
from
show
Book
should
tendency
enquiriesas
actual
existence, and
should
as
to
obtained
the
close of business
seen
that
balance
upon
to
the business.
be
reconciliation
be
to
careful
of
principals
of the
means
Sheet, it being
balances
checked
previouslydescribed, and
bankers,
the
all cash
that
are
Balance
the
auditor
the
books
the
upon
of
purpose
to re-open
balances
them
Balances.
the
of
out
task.
allowed, and
Bank
prevent
absolutelynecessary,
bring the
with
day
for, and
the
arrange
financial
invidious
somewhat
is to
all cash
accounted
and
as
he
followingday
the
this way
In
to
immediately
period for
comparing
close of each
the
the
to
books.
the
very
hand,
should
cash
up
the cash,
by
shown
in
another.
financial
the
count
of the
being made
the
the
on
balances, such
time, in order
same
or
according
cash
more
close
the
at
Sheet,
balances
the
account
auditor
the
close of the
at
and
one
belonging to
If
possible
balances
one
shortages upon
all cash
count
two
are
attend
Balance
of the
with
same
If there
books.
cash
little as
as
should
auditor
date
the
upon
followingmorning,
be
staff,and
own
examination
the
by
of the
whole
the
77
ASSETS
OF
the
two
statement.
by the auditor
according to
the
this balance
date
agrees
of the
with
78
"
balance
the
Deposit
upon
"
Account
should
is to
investments
actual
have
If shares
cost.
concern
services, should
account,
debentures
outlay,an
account
debentures,
and
the
profitor
will be
thus
and
written
date
of each
investment, the
each
Ledger, and
market
prices.
For
market
fluctuations
time
the
in
of
purpose
date
audit
markets
the
necessary
but
the
have
to value
price
should
be
should
to
should
be
such
on
the
to
current
upon
valuation,
this
porary
tem-
for
disregarded ;
Sheet
war
basis of such
included
the
realisation
all markets
the
subsided
not
abnormal
taken.
as
which,
scare,
figure
to
according
Balance
exceptional circumstances
investment
at this
schedule
be
may
of
in
appears
is
upon
fair average
placed in
were
and
the
the
for such
off.
date, based
at
or
such
no
be
loss upon
thereof
cost
fair valuation
example, if upon
by
the
such
shares
opened
remains
Sheet,
Balance
of
be
investment
every
particularaccount,
the
with
the amount
ascertained
to
are
should
at the actual
there
amount
no
issued
rendered, then
of the
cost
should
In this way
column.
the books
but
the
particularinvestment
If, however,
shares
being
been
in connection
received.
or
debited
have
the
to
in the
opened
services
incurred
debited
expenses
the cost
for
deal with
to
way
amount
debentures
or
been
be
best
as
or
the
consideration
as
outlay has
whatever
be
verified in
be
account
separate
investment,
for each
Ledger
the
possible,
When
Investments.
At
produced. Any
way.
same
the
Book
Pass
the
according to
balance
the
AUDITING
OF
PRINCIPLES
THE
the
list at
prices,
But,
except
above,
the
be
each
market
price.
In the
not
be
case
quoted,
of
the
holdingsin companies
Balance
inspected, and
Sheets
fair value
of such
whose
shares
are
companies should
placed upon
such
shares
the
information
that
The
should
added, and
be
exceeds
or
if the
of the
re-valuation
should-be-made..
Any
such
Profit and
Loss
Account,
from
this is
be
Balance
the
Sheet
for
in
some
years,
during
which
may
fluctuate
between
very
wide
is to deal with
make
In
to
reserve
at cost, with
value
at
In
all
"
as
Balance
to
"
market
item
investments
investments
Consols
and
prices,"or
investments
Sheet
their nature
"
the
of the
be
may
market
loss arises.
as
values
The
as
to
realisation.
in the
shown
best
whole, and
upon
Balance
to the
in such
"
that
"
way
"
at cost
be
that
is to say, there
in the
should
to whether
should
Balance
market
be
stated
the valuation
less
reserve,"
sub- divided
fair idea is
should
Sheet, which
given
be
not
in
one
includes
of
valuation
be
can
date
the
at
note
there
are
basis of the
the
cases
cost,"
at
but
date.
the Balance
upon
depreciationin
likelylosses
investments
a
adopt,though
must
invariably
investments
any
it is
company,
to
time
profitor
the
cover
the
cases
some
Sheet
is
actual
finallysold, no
investments.
investments
cases
Sheet
course
value
for many
method
of
the
to
Balance
the
investments
held
are
debited
be
of
case
market
the
to
if the total
price,a., reserve,
estimated
shrinkage
in the
wise
very
whole
cost
shown
that
thought
down
written
be
the
total cost
in
as
at cost, but
to
questionthat
not
Sheet
value, will be
it must
investments
the
and
the
question whether,
legallynecessary
no
equals
to
deduction
and
cost
is less than
in value.
The
in the Balance
appear
value,
the
should
as
the market
two
other
any
obtained.
be
can
79
ASSETS
OF
disclosed, and
positionthus
upon
based
VERIFICATION
AND
VALUATION
only
should
be
is not
given, holdings of
a,
these
80
PRINCIPLES
THE
AUDITING
OF
should
"
"
which
So
far
list with
adequate
an
If
that
see
being
as
he
heavy,
estimated
but
estimated
an
at
As
of
case
and
follows
as
INSCRIBED
"
An
applicationbeing
must
be
signed by
given
the
to
as
the
in which
names
certified,and
who,
for this
must
also be
The
with
audit
cost, such
Profit
and
Loss
for what
is
supposed
penny
to
where
made
the
whom
the
certified form
accompanied by
the
the
or
records
as
the
his
correct, and
same
the
purchaser is given
When
year.
a
it is to be
is to
auditor.
be
by
the
for verification.
ticulars
par-
if found
to
inscribed stocks
certificate
form
the
it as
returns
sent,
The
compares
have
held,
amount
books, and
applicationwill
the
inscribed,
prescribedfee
then
agent
in
to
forms, which
stock, the
be
banker
sent
should
purpose,
each
is
stock
official
upon
of the
nature
be
purposes,
way
above
applicationmust
of the
one
investments
"
such
be
matter
piecewith whi
dividend
could be paid.
of investments, the procedure
agent's office
or
to
the
profit,such
paper
STOCKS.
banker
the
distinctly
will be
the
upon
refer to
value
"
company,
the
should
he
are
should
credited
being
made,
appears
to
account
no
if this is done
as
value
it necessary
Sheet
Balance
increase
Account,
is
investments
the
On
report.
in the
appear
check
consider
may
in his audit
at
with
reserve
market
the
that
or
"
what
greater.
the
such
no
to
as
Sheet,
Balance
stated
note
what
is
reserve
realisation.
upon
check
and
Ledger,
the
much
concerned, he should
is
auditor
the
as
Sheet
be
are
banker
to
directed.
made
in
bought,
or
agent
82
of the
tjiedate
auditor, and
Balance
Sheet
should
compare
he
Book, and
Receivable
the balance
with
upon
should
He
Ledger.
completed
and
not
with
should
the
with
same
total of the
Bills Receivable
the
they
and
that
should
be
list agrees
overdue.
not
are
Pass
and
Book,
and
will thus
renewed
should
for these
the cash
and
official,
responsible
the
(if any)
reserve
The
cases,
considerable, and,
total amount
satisfyhimself
adequate
-fIf any
bills
should
discount
shown
should
become
way
due
of
made
regard to
the
at
time
the
list of these
the
bills receivable
with
of
sufficiency
this
provided under
been
is
of the
the
to
as
provided
is, in many
auditor
the
good asset,
discount
for
and
must
that
an
possiblelosses
The
total amount
as
note
upon
as
to
whether
to
the
such
entries
the
of
bills,and
in the
the
Bills
bills under
contingent liability,
being
the Balance
any
of the
anticipatedbad
Stock-in-Trade.
require a list of
list with
appear
as
at the
this
since the
dishonoured, and
for any
been
should
Book.
be
With
therefore,
same
under
are
should
by
the
compare
Receivable
debts.
debts.
to
of the
has
reserve
bad
through
that
necessary
has
head.
careful
case
reserve
enquire
that
or
the
to
through
go
Book
dishonoured
which
stillcurrent
are
should
been
in
discovered,
bills that
of the
is
matured,
have
that
any
be
be traced
as
enquiry should be made
provide against possiblebad
balance
audit
some
in the
bills
they
in the hands
Bills
the
actuallyin
properly made out,
be
to
appear
the
to
Account
all the
examine
then
completed until
produced
the
stamped,
be
that
collection,the bank
auditor
AUDITING
see
OF
PRINCIPLES
THE
reserve
Sheet.
Enquiry
bills that
Sheet
necessary
have
to
have
been
provide
debts.
Stock-in-trade
is
floatingasset
that
AND
VALUATION
with
is held
view
should
lower
date
at the
stock
and
materials
sold
and
the
either
they
cost
is
loss has
which
in the
subsequent
goods
fall in market
used
question
no
consists
state
same
valuation
the
and
is the
less
or
made
should
lower, for if
a
mere
fall,
permanent
purchase, and
if, owing to the
For
and
purchased,
prices,it
be
the
on
were
of
that
as
fall is not
such
more
been
the
be
the
basis
correct
business
whose
high priceat
will be
the
can
price,whichever
a
period under
actuallysold.
in effect
there
purchased,
represents
profit is
succeeding period,
"
sellingthem
are
fluctuation, but
then
stock
account
the
to
it
likelythat
appears
will be
at
fall upon
should
and
the
Stock-in-trade
purchased.
succeeding period at
fair chance
of
materials
raw
sellingat
and
of
which
should
be
profit.
manufacturer
goods partlymade
and
charges, such
goods
to
factory,and
the
the
invoice
prices,less
The
market
prices are,
dealingwith
in the
case
the
as
raw
of
hops in
the
cost
should
As
be
cases,
raw
cost
plus
of such
be
allowances.
disregarded when
for manufacture,
brewery.
regards
price figureshould
and
the
period
that
finished.
discounts
in certain
give
were
to
on
freight,carriage,etc.,
all trade
materials
goods
will include
direct
the
charged
will
price that
stock-in-trade
The
in
year
be realised.*"*""
the
to
is the
no
unsold, which
or
under
or
on
never
may
period; therefore,
market
or
market
the
merchant,
and
and
which
to
if so,
as
is to credit
to
on
such
of
cost,
re-sale ;
of valuation
basis
the
Sheet, and
been
stock
is, cost
case
which
Balance
not
latter
in the
buying goods
the
is that
goods unused
profituntil
In
in
has
charge
for valuation
a
less immediate
or
valued above
be
object of taking
review,
of
rule
of the
anticipatedwhich
The
more
83
ASSETS
according
^be_cost_orjnai^et.j^icfi#-
should
or
to
general
therefore, the
OF
VERIFICATION
as, for
instance,
are
not
84
with
purchased
previousyear
stock
into
had
cost
lower
year's brew,
next
materials
Raw
which
is
originalform,
but
fair basis
there
has
of valuation
been
materials
loss, owing
materials
that
the
cases
cost
be written
bad
the
enable
will result in
or
manufactured
the
charged
are
will
for
should
to
of
purpose
facture,
manu-
p:
for
resulted
has
prices obtainable
raw
re-sale in
to
But if
stocktakingpurposes.
price of raw
heavy fall in the market
materials, which
view
actual
the
loss thereon.
profitor
with
year'sBrewing
that
are
of
largerprofitout
matter
quite another
that
so
held
not
are
subsequent
actual gross
the
the
at
loss, but
charged with
be
must
consumed,
show
may
made
year
of the materials
Account
their
next
purchased
be taken
brewery
hops fell,it
made
have
have
would
prices,they
therefore,the
cost
and
waited
in the
after the
price of
brewery
the
of the
cost
purchased
were
market
the
hops
that
had
if they
same
to
year'sbrew,
next
actual
the
"
its
not
mean,
that
the
at
the
not.
or
purchased
would
the
used, whether
materials
will not
but
year,
therefore, in order
charged with
be
must
account
that
one
loss upon
profitor
the
position,therefore,is,that
The
following year
until the
used
be
for
but
hops,
as
purchased in
been
hops have
these
re-sale
to
beer.
brewing
of
purpose
view
AUDITING
OF
PRINCIPLES
THE
down,
buying,
to
the
year
to
on
that
is
fall in the
goods,
then
the
probable
anticipated,and the
so
the
that
ensuing
year
manufacture
at
at
price
fair
profit.
In
the
of unfinished
case
goods, the
basis of valuation
materials, and
them
to
is added
charges
"
yardmen,
the
direct
date
to
this
such
as
and
should
be the cost
manufacturing
of the
a
completely manufactured
and
Balance
Sheet.
percentage
the
mechanics
of
wages
;
labour
to
to
raw
on
there
establishment
foremen,
consumed
Sometimes
cover
fuel, power,
of the
store-keepers,
heating, lighting,
reasonable
extent
this
VERIFICATION
AND
VALUATION
permissible.However,
is
its
merits, and
own
added
to
low
as
and
never
for
each
interest, staff
commission
and
that
added
for
may
be valued
at
account
found
the
course,
Sheet
considerable
Account
Loss
himself
and
Balance
which
in
be
not
stock
goods
can
be
it
of manufacture
cost
circumstances, of
such
not
similar
for Balance
adopted
regards
of such
freehold
auditor
to
"
in
any
of the
rely very
in
fraudu-.
the
is
other
the
by
in the
as
ments,
balances, invest-
this asset
assets
not
of the
means
properties,etc.
largelyupon
upon
certain
no
do
date
the
at
of this asset,
over
unless
of account
hand, bank
leasehold
connection, and
management
books
existence
less control
practicallyover
Profit
the
stock, and
the
in hand
be
cash
and
has
is bound
value
kept, the
should
as
Sheet, and
often
frequentlyeffected
it is impossible
for the auditor
Further, there
assets
both
one
is most
But
verifythe
can
is
involved
amounts
Balance
accounts
stock
stock-in-trade
materiallyaffect
the
been
Sheet.
he
in this
of
have
disclose what
the
should
newly-startedworks,
actual
take, inspect,or
to
books
case
of
the
and
of the stock.
means
stock
that
case
position as
lent falsification
by
the
for the
great difficulty,
very
and
into
taken
circumstances,
no
at which
price could
cost
auditor's
very
are
Under
salaries,
taxes, etc.
be
they
fees,
purposes.
The
of
but
that
sellingprice, and
the
and
as
only,
directors'
as
should
purposes,
figureabove
is sometimes
exceeds
kept
partly~or~
completely manufactured
purchased, for, in
be
he
latter expenses
these
be
salaries, travellers'
stocktaking purposes.
Eowever,
such
on
percentage
expenses
expenses,
for cost
account
works
cover
expenses,
debenture
the
charges should
should
administration
It is true
be considered
stocktaking purposes
possible,and
85
ASSETS
must
case
establishment
cover
OF
of
the
he
fact,
has
business, and
internal checks
certificates
than
In
given by
of
an
the
auditor's
greatest difficulties.
The
errors
principal
that
have
to
be
guarded against,all
86
PRINCIPLES
THE
of which
follows"
as
are
committed,
purposelyor unintentionally
be
may
AUDITING
OF
calculations.
and
Incorrect
additions
Incorrect
pricesand valuations.
inclusion of
The
have
the
passed through
inclusion of goods in
been
not
The
entered
sold and
been
as
for which
in
goods
purchases.
stock
that
already
have
Sheet.
Balance
The
in warehouse,
of agents, at docks,
in the hands
of stock
omission
etc.
The
of
great assistance
stock, and
the
any
of
largedifferences
shown
most
Before
should
carefullyenquire
entering, pricing
basis
exact
and
into
stock
it has
should
be
auditor
the
system of taking,
and
find
As
valued.
the
out
many
the stocktaking,
engaged upon
and
each
step should be independently checked.
Further, responsible officials should supervisethe work,
persons
possible should
been
quantities
sheets
checking,
whole
the
the
between
checking stock,
which
upon
the
actual
the
commencing
of ch"
to the auditor
as
juniors often
as
is
what
its valuation.
stocktakingshould
the
done, and
in all
that
the
the
or
fair and
case
of
represents
In
stock
at cost
cases
in
Each
stock, and
sheets
an
has
principles
part in
takes
for what
he
managing
been
correctlytaken,
that
valuation
has
director
over-riding certificate
under, and
proper
as
concerning
the
who
person
initial the
give
ideas
erroneous
such
responsibleofficial,
partner, should
effect
quite
rightly included
governing
or
have
be
to
the
is valued
manufacturing business,
the
auditor
VALUATION
should
make
careful
most
partly-made and
the
through twenty
they
materials
finished
completed, and
are
ordinary
there
course,
that
the cost
cost
accounts
as
is the
comparison
of
and
at
will
be
Sheet, in the
Balance
goods
stage, and
every
Unless proper
should
be
to
management,
checks
except
possible,
of the
percentages shown
to the
with
exact
In
by
of each
the accounts
of other
comparison
conclusive, but
that
of
independent
the
conclusion
the
hands
the
records, and
not
are
cost
event,
any
no
practically
are
the
cost
considerably in
cost
latter
the
show
very
there
as
these
valuations
of manufacture.
stock
the
records
records, which
even
pass
impossible
kept, it is practically
accuratelyto value partly manufactured
auditor
of checking that an
has
only means
goods,
and
may
been
have
the
plicated
com-
it
Therefore,
of the
will be
most
stage, wages
in each
correctly and
date
the
whole"
the
to
as
in each
being expended.
are
at
the
and
of
stages of manufacture
distinct
more
or
appreciatedthat
auditor
goods,
valuation
the
to
this, in many
cases,
some
factories, goods
In
matter.
before
enquiriesas
87
ASSETS
OF
dealing with
for
system
VERIFICATION
AND
the stock
years
only
may
valuations
unsatisfactory.
are
should
and
internal
the
check
and
should
be
Check
bearing
upon
as
with
which
mind
system of stocktaking,
regard thereto,
stock
the
sheets
he should
as
carry
far
his
the
as
auditor
possible,
investigations
"
castings,or
that
considerable
there
is
no
portion thereof,
double
entry check
totals.
these
Check
test
follows
the
in
checks
whole
the
proportionof
the
calculations,selectingthe
larger items.
Compare the stock sheets with those of the previous
/year,
especiallyas regards pricesand quantities,making
/
Icareful
and
of the
stock
be
In
the
case
"Examine
weeks
of
raw
Trace
last few
the
into Stock
largeitems
leave
not
Balance
Sheet,
included
in stock.
the
the
test
that
If there
reasonable.
particularsare
that
Test
these
are
items
far
as
as
Book
Cost
the
been
records, and
charges
Books,
Cost
no
certified
are
of
not
establishment
to how
given as
these
the
for
additions
any
and
with
have
sales
completely manufactured
partly and
same
date
the
goods
period
of these
if any
after
these
that
see
of
case
until
works
the
of the
end
the
Book, and
Outwards
see
all
for
goods,
purchased goods,
and market
prices.
Book
Inwards
trace
thus
may
and
invoice
recent
period,and
of the
In
materials
Goods
the
into
did
obsolete.
priceswith
compare
and
or
of date
out
long periods,and
for
in hand
been
has
AUDITING
OF
PRINCIPLES
THE
by
arrived at,
offi"ial.
prominent
possiblewith
full
that
see
are
figures
the
are
available
any
evidence.
Books
If Stock
Sthe
1!
Stock
Book
with
any
important differences.
In
businesses
some
checked
the
for
easily,as,
example,
and
Bought
Sales
merchant,
the
ruled
sold
with
during
stock
There
will be
Enquiry
always small
should
When
that
no
When
may
in
be
made
examining
been
the
of
case
coal
should
Books
thus
from
the
be
tonnage
in
to
omitted
stock
owing
whether
of agents, at the
have
the
be
can
Day
period, deducted
at the commencement,
should
the
stock
quantitiesin
there
docks,
from
sheets
to waste.
the
or
are
any
warehouse,
stock sheets.
it should
be
seen
90
legalrequirements in
strict
the
be
to
appear
may
AUDITING
OF
PRINCIPLES
THE
this
direction.
Goods
it should
and
verified,
carefully
in each
that
and
due
with
from
sales received
that
the gross
profitor loss
latter comprising
Consignment Account
If at
stock
date
the
have
showing
sheets
and
have
The
to
see
Consignment
to the
agent's
the
that
debited
to the
agent'saccount.
Sheet
the
to
whole
the
in .hand at
goods
the
accounts
checked,
be
of
the
send certified
that
been
credited
Balance
compared
ensure
agent, and
the
to
be
price.
credited
been
of the
been
not
to
as
so
cost
at
commission
and
expenses
being
the
should
notes
agent should
sales have
debited
and
Account
goods
debit
the
the
Account
agent.
debited
been
have
is to say,
that
the
Consignment Account,
the
goods
the
by
or
duplicatesof
The
to
very
accounts
Consignment
showing
a
Trading Account
practically
the particular
consignment, and the
upon
amounts
be
that proper
seen
be
with
Account
Personal
should
asset
consignment,
should
there
case
be
to each
reference
with
kept
are
This
Consignment.
on
date, and
that
should
auditor
the
if
goods
stock
valuation
upon
the
incurred
off to
be
will be
Profit and
stock
the
Loss
down
The
brought
in
down
to
as
and
the
figurein
the Balance
in hand
at
in
scrutiny,especially
been
but
not
order
anticipated in respect
yet sold
that
any
account
no
Consignment
should
represent
fair valuation.
have
Consignment Accounts
suggested above, these transactions
has
the
Sheet
If the
careful
on
been
written
be
must
must
upon
balance
loss has
date, it
balance
debit
if
Account, and
The
damaged.
been
or
Account,
goods sold
the
upon
Account.
deteriorated
Consignment
brought
only
have
of
to
will
see
goods
losses to date
kept
been
not
require
that
sent
upon
no
to
as
very
profit
agents,
goods
sold
written
been
have
due
commissions
from
agents
Sheet, and
Balance
the
fair value
are
not
are
is
all expenses
that
into
brought
and
been
agents have
to
due
balances
that
at
91
ASSETS
unsold
stock
off ; that
Sheet
Balance
the
OF
VERIFICATION
AND
VALUATION
Debtors.
been
have
reserves
make
should
auditor
The
enquiriesto see
provided for possiblebad
agents, are
Work
and
is, for
businesses
by
under
work
the
Sheet
for
should
in progress
and
materials
valued
be
direct
at
percentage added
of the
and
to
business, such
taxes,
as
yardmen,
to
etc.
oncost," that
various
indirect
such
as
and
such
expenses,
as
directors'
and
though
wiser
the
to
omit
work
to
period,and
no
If, however,
incurred
reduced,
upon
so
for Balance
these
latter.
date
is carried
forward
credit
purposes
the
to
for in
contract,
such
loss is
then
the
provided
cost
for.
rates
it is
actual cost
the
of
succeeding
respect thereof.
anticipatedthat eventuallya
any
that
Sheet
In this way,
profitis taken
it is
keepers,
store-
etc.,
rates
machinery,
of foremen,
those
is,
charges
fees, debenture
taxes,
date,
to
supervision,factory, rent,
administration
cover
work
depreciationof plant
power,
the
of
case
is that
thereon
"
for
sum
cover
the
like businesses.
that
charges expended
in
general rule
"
have
present purposes
such
cost
care
Stock-in-Trade,
contracts,
the
purposes,
goods
of
head
in progress
example, uncompleted
Balance
default
to the
transactions.
these
and
builders,engineers,shipbuilders,
For
sellinggoods
times, owing
dealing with
when
above
is meant
what
carefully
most
in
dealt with
been
of
case
be
the
upon
very
be exercised
should
the
the losses at
in this way,
abroad
of
In
into.
enquired
should
Accounts
agent'sor Consignment
debts, and,
balances
debit
long-standing
therefore, any
ample
that
loss will be
figuremust
be
92
In
shown
as
separateitem, and
In
is sometimes
profit
practice,
this
theoretically,
in
which
circumstances
proper
well-known
auditor
an
adopted
individual
the
where
contractors,
and although,
anticipated,
correct, it is
is not
practiceis commonly
This
account
on
deducted.
be
thereof should
received
cash
any
be
should
in progress
Balance
the
AUDITING
OF
PRINCIPLES
THE
in
the
custom
pass.
may
of
case
extend
often
contracts
large
with
result that
the
Profit and
the
Loss
would
Account
in another
but
large profit,
year, though there
contracts
running,
might be several large and profitable
show
and
in
received
been
been
have
bear
considerable
show
loss.
the
Therefore,
borne
and
in
in mind
this
that
for
having
contract
to
might
accounts
done, very
is
great
profit,and
contingencies,for it
care
ample
must
be
normally,
progressing
considerable profitwill
be
may
be
Account
the results,profits
are
average
estimatingsuch
made
be
must
to
where
exercised
reserves
Loss
might
contracts
period, and,
anticipated. But,
be
Profit and
have
the
actuallycompleted during
to
of cash
sums
few
yet very
account,
on
therefore,owing
must
considerable
respect of which
contingency
may
arise,
as
of
tunnel, failure
to
complete in
showing
Profits
so
considerable
should
far advanced
estimated, and
be
may
the
fines, and
contract
many
time
other
and
such
eventually
loss.
is
anticipatedonly when the contract
that the cost to complete can
fairlybe
thus the probable eventual
profitarrived
VALUATION
Therefore, all
at.
should
the
be
taken
been
sufficient
in the
the
shareholders,
result of such
the
this
in
been,
and
in
small
capital,it
upon
that
is
contracts
to
very
careful
complete the
auditor
in progress
should
Cost
the
been
kept,
they
have
such
case
these
been
they
not
cash
all cases,
working
result
serious
sufficient
being
Large
contracts.
into the
whole
be
may
financial
funds
in
require
contracts
will afford
upon
of
Balance
Sheet
Cost
Books
efficient internal
very
If, however,
should
the
work
have
if
great assistance, especially
an
a
question of
the
If proper
Books.
subject to
auditor
being included
go
will be
in progress.
the
have
anticipateprofit
the
and
of
reason
small
to
carefully,comparing
most
figureswith
by
carefullyin
all,as
not
be that
be lost
Books,
at
created, there
partners, the
to
profit,must
policy
cipated,
anti-
paid
are
profitsthat
most
unsound
cash
no
Therefore, the
the
hand
work
very
uncompleted
The
of
cash.
considered
is
dividends
position thus
never
in
the actual
profitis
is reduced
concern
withdrawal
fact, received
be
which
or
the
the contract
there
if
future, then
of
important
under
date, and
of dividend
payment
position should
pleted
com-
one-third,,
is less than
out
anticipationand
about
the
anticipationof profit,
profitspaid
working capitalof
work
the
to
reserve
example,
most
received
to
strength
or
heavy
for
Another
the
work
immediate
upon
to
for.
warrant
the
results of
the
the cash
to
93
early stage
When
cost.
payable
an
calculated, and
credit
upon
in
are
profit,according
be
to whether
expenditure
ASSETS
contingencies;
be
profitshould
point is,as
for
final
date, should
only being
has
for
the
at
OF
reasonably estimated,
deducted
proportion of
of such
be
can
be
to
that
contracts
invariablyvalued
contract
should
VERIFICATION
AND
work
valuable
there
insist
are
upon
in progress
check,
check
no
upon
as
in
the
reliable Cost
full
particulars
sheets, showing
94
PRINCIPLES
THE
exactly
check
should
he
far
as
The
of the
sheets,
He
made.
added.
in progress
The
includes
point out
auditor
endeavour
he
should
partners, as the
of
fraud, but
sufficient
careful
lead
to
valuation
results
audit,
an
of
effect, the
may
thereupon
may
result
Plant
valued
of
;
is
institute
to
other
earning capacity,and
that
if
insist
work
the
do
they
not,
of
he
figuresas
far
shareholders
work
in progress
as
or
has
managing director,
whole
the
ordinary
extent
of this
that
the
unsatisfactory,and
that
the
much
facts
the
the
if,therefore,he reports
fuller
case
of
to
company,
which
investigation,
being ascertained.
Plant
and
upon
value
is
machinery
particularbusiness
words, the
not
be
conclusion
to
its value
in
auditor
Machinery.
the
upon
the
should
intelligentinvestigationmay
asset
true
he
the
to
shareholders, in the
in the
and
and
investigatethe
impossible, in
reasonable, and
not
are
be
discover
to
the
this
will
"
oncost
absolutelysatisfied,
If the
be.
may
probabilityit
course
concern
case
is not
effect
that
to
"
in the
the
test
falsified deliberately
by, say, the
all
basis
if he
and
report
and
been
has
any
fact
with
by
Balance
in the
into
much
very
dealing
check
to
reasonablycan,
be
to
whole
carefullyenquire
anticipatedprofit;
this important fact in
when
he
been
as
valuation
such
disclose the
is bound
management
should
which
upon
should
accounts
he should
should
If
the
is certified
carefullyenquire
should
figuresmost
that
basis
the
been
auditor
The
the
test
latter have
the
Sheet, and
that
see
in progress
official.
responsible
this
these
evidence
whatever
castings and
the
taken
have
work
the
that
check
should
auditor
calculations
in
possiblewith
as
at, and
is available.
there
the
arrived
been
results have
the
how
AUDITING
OF
is based
as
upon
not
the
going
its
The
the
periodof
estimated
and
period,and
almost
entirelyin
market
The
working
is, of
for the
such
unaffected
by
portion
held
of the
with
plant and
small
very
has
been
hand," and
the
this
also
the
is
period
prices. The
disregarded,for
to re-sale.
j
.*"
considerable
as
rule, very
proportion of originalcost.
for
other
New
concern.
realisable value
is
Again,
patent process
machinery
"
solely
for
same
market
regarded,
dis-
be
may
value to any
no
with
are
machinery speciallymanufactured
be of
be
must
is held
machinery has,
; for
factor,
engineer.
the
view
The
engineer to
an
machinery
realisable values
is not
will realise
in
over
asset.
auditor
working life,and
fluctuations
or
of
manufacturer
"
scrap
unknown
respect the
manufacturing
that
"
revenue
life of the
the
of the
plant of
of
"
this asset
might
off to
course,
similar
of
asset's
of
up
this
hands
the
the
purpose
break
in
values
for
whole
life
working
fix this
"
estimated
the
written
be
it
95
ASSETS
cost
or
OF
VERIFICATION
AND
VALUATION
second
considerablyless
than
cost.
All these
provided
circumstances, therefore,are
that
the
price is
cost
written
disregarded,and,
off to
of
means
in
appearing
the
absolutelycorrect
upon
which
ones,
Balance
to
of the
lost upon
the
year
some
are
withheld
plant,which
expirationof
cases,
for Balance
valuations
should
practiceis
very
plant and
be
uncommon.
to
the
and
retained
has
machinery
in which
produced
to
the
However,
in
sunk
been
life of the
Sheet purposes,
are
years
the
in the
would
capitalotherwise
the
balances
accepted rules
of
prepared. By means
purchase
In
intermediate
according
Sheets
depreciation,
profits are
business
of
accounts
by
working
revenue
be
asset.
is re-valued
the certified
case,
auditor, but
it is
each
very
this
good
.1
96
plan indeed
of
amounts
the
that
have
to
it must
For
roughly checked.
AUDITING
OF
PRINCIPLES
THE
in mind
borne
it is
that
some
item
of the
other
periodof
the
also must
be
that
Plant
to
in the
ordinary
all additions
items
such
during
vouched, careful
be thus
that
see
fide additions
represent bond
the
payments
should
the accounts
the
etc., and
invoices,receipts,
with
individual
purchase of
the
will vouch
the
Upon
assets.
do, in fact,
capital. Replacements
to
Account
the
is debited
asset
new
taining
ascer-
of
out
in its
place.
There
should
the auditor
he
be
roughly
can
In
the
should
the
count
round
ask to be shown
of
case
the
machinery abroad,
plant and
require that
the
local
the
of
auditor
should
fully with
to
ascertain
estimates
the
and
upon
proper
value
or
the
basis
discuss
the
which
provisions,and
advice.
estimate
the
It is
to
whole
management,
upon
as
whether
Balance
a
proper
of
adequacy
ciation
question of depre-
and
they
the
auditor
furnish
engineer should
and also
working efficiency,
provisionsfor depreciation.
The
the
thus
the plant as
date of each
at the
report upon
is in
the same
Sheet, reporting as to whether
state
boilers,
as
plant and
thus
endeavour
have
based
they
have
their
acted
to
do
98
PRINCIPLES
THE
working life of
average
for
is
when
five
about
in
working
horses
six
or
reduced
be
each
horse
age,
value
off
written
realised upon
the sale of the carcase
resultingdebit balance should be
any
death
loss.
sales.
or
making
up
Ledger,
and
by
as
the
The
balance
should
should
and
also
see,
and
same
extent
means
way
Account
compared
in the
in
the
therewith
lightof
actual
life appears
working
should
vans
details
the
to
be dealt with
depreciationof
initial cost
should
be
as
small.
be
may
is
But
the
engines
Harness
each
complete
fixed
value, such
new
and
should
of
set
fixed amount
very
into
by
with
in
being
valuation
simple and
effective
in
each
low
the
same
practicesometimes
is valued
fixed
the
the
auditor.
the
dealt
all valued
are
vans,
be
harness
of motor
case
re-valued, and
old sets
figure. Provided
latter is
is
considerable, the
loose tools,and
as
in the
enquired
carefully
Harness.
and
and
show
in the
way
Carts
Vans.
made
Horse
the
upon
whether
the estimated
experience,
be working out correctly.
Carts
being
profits
Registerwill
examined
be
of
event
credited
be
Horse
auditor, who
the
In the
should
sales, these
upon
the
amount
live animal,
or
of
registerany
years.
the
year
city
be
being given
cost
should
horse
be
estimated, which,
be
and
description
each
of cart
then
Register should
is entered
AUDITING
should
horse
Horse
OF
at
average
the
same
is low
of
way
year
at
value,
average
enough, this
dealing with
this asset.
should
appear
in
Leasehold
Balance
Land
Sheet
at
and
cost
Buildings.
price,and
AND
VALUATION
should
which
of land upon
with
view
re-sale,and
to
in value
is
to be
correct, if and
other
hand, should
when
earning capacity of
the
unless
will be occasioned
will
depend
of
state
of
case
upon
repair;
works
is not
the
burden
nature
but
although
Loss
the
will
the
place. Land,
off
fore,
there-
should
land,
written
loss
no
certain
"
building,its
the
rate
age,
and
length of life,in
the
long, yet
is inevitable
certain
from
time
be
the
amount
time,
to
year
have
renewals
will create
in which
be
to
borne
by
that
considerable
the
year's Profit
and
Account.
The
of leasehold
cost
Profit and
end
at the
the
for
of such
cost
upon
whole
Loss
Account
over
of
case
the
that
auditor
gives
must
to
appear
property.
the
the
be
period
written
be
may
off to
lease, for
of the
lessor.
to the
also
made
be
made
upon
the
lease.
in
regards verification,
same
must
dilapidationclaims
As
property
of this
expirationof
the
figure,for
wise
should, therefore, be provided for in advance, other-
and
In
the
affected, and
freehold
of the
the
renewals
it is not
Sheet.
be
prove
the
Balance
"'
increase
On
this
buildings upon
held
not
price, and
of the
not
unless
any
may
Sheet
sale takes
cost
case
be sold.
may
Balance
first-class building,is
structural
of
or
the
made
been
going down,
depreciation should
of
amount
of
case
stand, it is
may
land
be
neighbourhood
meantime,
the
generallyappears at
stated clearlyon
the face
In the
In the
values
the
profithas
such
to reduce
general custom
works
estimate, which
mere
99
ASSETS
increasing,for, in
no
land is sold.
until such
and
values
factory or
OF
though
even
up,
improving and
be
may
written
be
not
VERIFICATION
the
of freehold
case
He
should
dates
and
seeing that
such
conveyance
is in to
order, and
in
inspect the
parties to
conveyances
the
name
refer
to
abstract
the
are
and
property,
that
see
the
the
particular
of title which
various
there, and
of his clients.
conveyances,
that
An
the
last
auditor
100
to
that
see
in order
deeds
the
all he
do
can
is
be
to
appear
refer to
points,he should
any
upon
good
possession and
in
are
if in doubt
title is
the
guarantee that
cannot
AUDITING
OF
PRINCIPLES
THE
client's solicitors.
the
In
the
deeds, and
of the
Lord
of the
Roll
noted, and
and
rent
receiptsfor
the
policiesshould
these
If
possessionof
of
payment
and
date
the
that
the
mortgagees
should
or
apply
interest
which
to
has
will be
title deeds
solicitors,
and,
their
direct to them
as
ground
ascertain
to
certificate that
property
be
fire insurance
the current
mortgaged, the
the auditor
in this case,
should
arrear.
in the
of
inspectionof
an
of which
be
in
not
are
last
the
title
no
Manor.
terms
the
be
certified copy
Leasehold
the
will
there
should
auditor
the
Court
the
copyhold land,
of
case
been
for
part
of whi"
should
be
mortgage,
the
paid
specified.
In
Loans.
that
seen
valuation
of advances
case
of the
advance, such
inspected,and it should
been
paid to date. If a
interest has
the
property
valuation
upon
will be
title deeds
and
mortgage
be
the
made
were
should
time
the
at
of the
been
lodged ;
regularlypaid,
and
bad
debts.
In the
the
articles
give
the
directors'
have
the
advances
auditor
should
also
see
sufficient
of
case
to
power
made
should
that
minute
separatelyupon
should
he
be
company,
make
individual
he
should
in his audit
loans
see
and
is
for
that
inspect
If directors
same.
if
interest
is made
reserve
members
insist upon
such
the Balance
Sheet ;
the
advances,
authorising the
to
that
board,
of the
being
they
report.
are
shown
not, he
life of
The
Patents.
written
should
the
receiptfor
has
been
paid
to
Copyrights.
Account.
patents,
each
he
last renewal
the
be
fees
all renewal
all the
list of
should
same
Loss
and
years,
of
giving particulars
Profit
to
call for
should
auditor
The
of
direct
debited
be
acquiringthe
period. The cost of
this
over
cost
101
ASSETS
OF
VERIFICATION
AND
VALUATION
fee, to
that
see
the
same
date.
copyright lasts
lifetime
for the
of
the
plus seven
years, or for a period of 42 years from
the date of publication,
according to which period is the
cannot, however, be written
longer. The cost of publication
of this period,as in the majority of
the whole
off over
author,
value
the
cases
before
expires long
The
to be
re-valued
each
is
document
There
no
for the
has
the
fixed
been
not
from
at cost
appear
difference
at
between
Sheet
"
total
are
often
written
wise
considered
asset
such
"
of
as
course
a
assets
inseparablefrom
as
plant
and
the
assets
over
in the Balance
appear
to
described
be
as
to
legalor
the
depreciation
whether
it is
it*
when
liabilities taken
asset, and
this
undoubtedly
to
case.
raised
off
very
purchase,
should
at
in
asset
an
be
point
of
case
Goodwill
as
appear
less any
Questions
should
not
agreed valuations,
as
to
appears
the
the vendors.
being
should
Goodwill
should
should
auditor
this asset
that
see
first
fair value.
Goodwill.
Balance
proof of
copyrights
year.
time.
of the
end
the
although
adopt,
from
is
it cannot
very
business, and
machinery, etc.,
is
be
accountancy
an
a
this
peculiar
it is unlike
in that
it does
102
to be renewed
have
not
words, the
other
its
Sheet
Balance
or, in
expended in its acquisition,
of capitalthat has been invested
been
has
that
amount
in
goodwillappears
show
depreciated
earning income.
of
course
to
purport
not
it is not
and
replaced,
or
figureat which
The
does
in the
out
worn
or
AUDITING
OF
PRINCIPLES
THE
amount
asset.
particular
in this
present value
The
If the
increasing,and
large and
profitsare
part thereof
goodwill,its value
will in realitybe increasing,whereas, if the profitsarc
small, or losses are being incurred, it will be impossible
the goodwill,the value of which, in this
to write down
be decreasing. Again, a business that is doing
case, would
goodwillmay not be worth
very badly to-day,and whose
cost pricewhich
anything like the original
appears in the
is used
write
to
Balance
management,
new
valuable
very
Goodwill
a
is
sound
very
available, and
capitalof
but
the value
down
business
to
matter
decide
with
down
that
ensure
it
and
is,therefore,
if
profitsare
whole
the
of
the
representedby tangibleassets ;
entirelyfor the proprietorsof the
for
is
themselves, and
interfere,though he may
do
through
flourishingconcern,
goodwill.
a
asset,
very intangible
policyto write the cost
business
be converted,
may
most
in this way
the
this is
into
of the
give advice
auditor
an
if
cannot
asked
specially
to
so.
The
auditor should
Goodwill
Account
the actual
cost
thereto.
He
Balance
Sheet
from
this he
exactly how
see
is made
up,
only,no improper
should
and
is not
see
that
described
and
it does
that
items
it is
as
the balance
having
upon
represent
debited
been
separatelystated
being
"
at
cost."
Sheet
the
in the
Apart
showing
this
upon
in
the
this
effect,
The
but,
in
of
be
latter
more
is
the
clearly
goodwill
down
created,
clear
capital.
and,
that
unless,
provide
should
arrived
Sheet.
better
out
moreover,
additions
In
to
course
in
shown
of
the
profits,
the
are
this
to
no
on
adopt,
Balance
being
the
effect
made
for
position
writing
by
secret
is
reserve
does
to
this
many,
exact
Sheet
same
disclosed
of
Sheet,
Balance
be
the
reserves,
as
to
working
the
way,
of
is
otherwise
opinion
the
in
profits
Exactly
creation
the
by
would
increased.
is
at
in
of
out
that
and,
concern
Balance
the
upon
it
can
the
goodwill
profits
distribution,
for
capital
down
writing
business
the
profits,
goodwill
hand,
other
the
of
up.
of
effect
available
result
written
be
retain
on
cannot
specially
articles
the
company,
out
insist
He
affairs.
down
103
ASSETS
OF
of
written
being
of
case
position
the
asset
account
is
is
what
clearly
VERIFICATION
AND
VALUATION
not
the
make
working
VI
CHAPTER
AND
RESERVES
DEPRECIATION,
FUNDS
SINKING
Depreciation
THE
subject
and
at
the
auditor
depreciation is
of
has
deal
to
points
that
in
impossible
it is
paid
this
to
should
auditor
In
in
also the
FLUCTUATIONS
IN
Fluctuations
in
for
for
fluctuations
affecting
way
of land
in
this
merely
to
which
upon
erect
business.
value
the
asset
for
the
the
The
of
is not
the
factory
in
the
of
this
providing
asset
104
of
the
for
are,
buin
factors
in the
market
no
actual
the
or
example,
for
of
generally
case
tions
fluctua-
properly disregarded,
are
market
results
out
ASSETS.
not
are
capacity
necessary
trading
used
values,
FIXED
OF
is built, the
land
such
every
wearing
the
by
For
assets.
future,
market
in
by outside
earning
In-
vali:
the
accounts
the
buildings
of
in
assets
caused
purpose
earning capacity
of fixed
of such
in the
commonly
is
VALUES
are
will
business.
in the
preparing
either
earnings
revenue
for
when
"
caused
MARKET
value
are
governing priii-
fluctuations
use
THE
the
provided
these
in all the
in value
its
to
students
therefore,
"
covering decreases
shrinkage
with
world
past
it is
completely
attention
commercial
the
But
more
depreciation
outside
owing
asset
an
"
term
by
deal
this
important
the
all accountant
in
case
sense,
caused
to
an
discuss
to
auditor
an
exhaustively
well versed
be
wide
very
and
the
practice, the
assets
of
been
has
than
the
question by
of
by
considerably
that
thought
it
study
to
which
with
some
available
subject, and
strongly advised
for
out
important,
most
matters,
in mind
borne
space
of this
whole
the
the
point
to
be
must
the
therefore, it is proposed
and
question here,
difficult
time
same
of
one
the
the
sale, but
space
is held
which
upon
of
purposes
and
concern,
therefore,
in
no
the
the
way
106
that
used
are
seeking to
of
course
harness,
OBJECT
MAIN
THE
and
vans,
copyrights,etc.
PROVIDING
OF
DEPRECIATION.
FOR
of wasting
objectof providingfor the depreciation
As part of the capital
is to keep the capitalintact.
main
The
assets
of the
have
working life
this
therefore, when
earning capacity of
the
valueless
become
for
these
the
Hence, in order
lost.
been
to
comes
assets
end, and
an
business, and
acquisition will
the
to
is invested
be
will
they
ceases,
in
their
these
period,
of
part thereof
intact, if any
limited
purposes
originalcapitalsunk
the
purchase of
in the
invested
been
has
concern
assets, which
of
and
examples
income,
earn
in the
exhausted
or
up
AUDITING
OF
PRINCIPLES
THE
in
the
held back
by
have
business
purchase
of
means
produce
to
use
of
the
the finished
goods
machinery
manufacture
is
just
are
the
as
certain
and
that
goods
machine
the
cost
of
The
had
cost
been
of the
producing
the
for in order
to
used
wages,
up
machine
to
wages.
alone
the
production, which
used, the
If
purchased at
one
and
in the
is
goods
convert
the
raw
as
be
cost
much
the
the
tured,
manufac-
charged
be
of
cost
of
the
machine
part of the
into
the
manufacture.
materials
materials
working
in this case,
to
of the
course
sary,
neces-
ment
commence-
goods
have
the
just as
finished
the
was
the
only,then,
would
cost
the
machine
one
the
charge against
and
materials
which
was
materials
was
much
as
sold, it is necessary
are
machinery,and
and
materials, labour
raw
profits earned
when
that
and
the
cost
of
wages,
saleable
RESERVES
DEPRECIATION,
In
necessary.
are
machine, and
.he
this
sale of the
the
upon
loss of
would
not
goods, there
is held
if this
been
would
be
back
the
of
cost
is
purchase
by
manufacture,
the
and
available
the
reduced
permanently
simplecase,
realised
amount
not
were
materials
and
in its
provided for,
business
the
capitalsunk
the
capital,directlycaused
have
capital of
of the
way,
107
FUNDS
labour
the
out
thus
replaced; whereas,
be that
and
machine
the
articles,both
SINKING
AND
same
if the
as
The
of
cost
foregoing is, of
exactlythe same
principles
apply where the machinery lasts for a period of years ;
and so, as the plant will continue to be used for a number
of years, its cost has to be spread over
this period. In
this way,
during the life of the machinery, out of the
very
course,
income
earned
of the
cost
wasting
for
will be
replacement of
In all cases,
is
wasting nature,
be
for
provided
assets
the
as
the
most
year,
charges,such
have
the
case
in
machines
old
spread over
EFFLUXION
effect
and
of
OF
exhausting
that
and
new
"
"
of
should
but
of
such
it is
one
periodof
years,
all exhausted
of
factors
Other
value
and
in
revenue
of
assets
improved machinery
better, cheaper,
therefore, if these
in the
scrapped
assets
Obsolescence, in
will manufacture
widely adopted
be
the
of time.
greater quantities,and,
must
TIME.
of
cost
majority
the
effluxion
invented, which
plant
not
are
with
case
plant,means
are
the
the
causes
assets
charge,
revenue
has to be
such
as
the
or
direct
fixed
For
revenue.
direct
is the
obsolescence
has been
of the
one
as
are
of
of
out
for
or
asset.
arisingtherefrom
OBSOLESCENCE
which
business,
the
gradually to consume
of
the depreciation
cases,
benefits
one
of
worn-out
is, in fact, a
that, in
original
the
therefore,where
earning revenue
a
thus
purposes
the
the
capitalinvested in this
replaced,such capitalbeing available
and
general
the
thereby, there
same,
asset
but
particulartrade,
the
new
new
the
machines
108
installed,as
otherwise
AUDITING
OF
PRINCIPLES
THE
will not
particularbusiness
the
be
able
to
life,this eventualityshould
fixed should
will
cost
and
to
fixed
in such
factor
The
ceases.
capitalisedvalue
of
leasehold
place,
its
of
Effluxion
of
end
at the
lease
in
paid
rent
and
advance,
must,
period of the
the cost of any buildingserected upon
also must
land, and any improvements effected by the
off to
therefore,be written
lease,as
for
paid
amount
hold
to
leases,where
as
the
and
quantities,
markets.
the
periodthe
manufacture
to
business
that
of .the
purposes
in sufficient
the
cases
the
able
be
successfullyin
compete
is
time
will enable
that
for
suitable
be
period
the
it is estimated
periodduring which
be the
machinery
the
considered, and
be
the
over
revenue
lessor.
ESTIMATION
of
depreciation
the
such
assets
working lifehas
to be
as
plant and
PLANT
OF
in dealing with
difficulty
The
MACHINERY.
LIFE
WORKING
THE
OF
AND
questionof
the
is that
machinery
estimated, and
is
there
no
certain
way
of
arrivingat
will
be
different
accessories
In the
of the
accuracy
light of
after
have
may
above
can
years.
of
number
a
belting will
as
and
such
like
years,
but
fast-
example, boilers
last for
depreciationis
of which
for
this
very
short
have
to
life
be
and
only,
renewed
stantly.
con-
matter
mere
only
be
If, then,
proved
as
is
of
guess-work,
the
disprovedin the
probable,it is
very
or
RESERVES
DEPRECIATION,
evil
the
will
been
have
been
many
cases
been
found
lost
been
for
of
kept
the
"
Plant
should
machinery
the
in
have
bankruptcy,
it has
as
capital that
Register,"in
machine.
each
capitalof
has
,
only reallysatisfactorymethod
depreciationof plant and machinery
special
such
The
REGISTER.
keep
profits
circumstances
of
cause
that
to the
dealing with
is to
Such
owing
PLANT
chief
the
estimated,
under-
if, furthermore,
part of the
lost.
been
been
in
done,
and
withdrawn,
will have
concern
been
overstated,
been
profitshave
will have
109
FUNDS
depreciationhas
the
subsequentlythat
found
SINKING
AND
into
splitup
be
of
whole
The
which
plant
the
classes, so
is
record
and
only
that
with
in
provided
be
"
"
value
scrap
estimated
columns
written
should
be
is written
life of
each
for
provided
In
the cost
that
light
the
be
of
actual
of
from
of
in
off, and
Machinery
adjusted
of
the
to
agree
machine, the
register,and
upon
The
in the
Accounts
with
any
At
be
total
the
debit
prepared
class
Plant
balance
be
written
and
should
Upon
should
end
the
depreciation
The
summaries.
far
as
realised
amount
that
Impersonal Ledger
such
"
assets'
the
so
should
closing balance.
the
value
experience,these
attained.
written
of
equal
an
scrap
constantly revised,
registersshowing
the
of
amounts
be
period
be
number
"
less the
is
possibleabsolute accuracy
financial period,summaries
each
as
should
should
The
cost.
annual
the
estimated
the
over
should
estimates
the
register,and
in the
so
year,
life.
entered
depreciation,which
for
off
be
working
the
entered
each
working
and
and
off
amount*
should
which
sale
the
credited
off
as
be
in
loss
sale.
foregoing method
but
once
the
may
appear
registerhas
been
to
be
unduly
written
up,
plicated,
com-
it will
110
be
PRINCIPLES
THE
only
necessary
entail
date, and
to
of labour.
amount
great
it up
keep
to
AUDITING
OF
On
the
hand,
other
it
machines
various
be
can
great assistance
very
of
Cost
of
cost
should
to
Maintenance
be
plan
to
create
and
Maintenance
annual
period of
charge
to
to
charge under
should
be arrived
available,expert advice
Loss
should
amount
average
Account, and
Account.
should
As
be
credited
repairs take
the
charged direct
Account, and
if the
balance
this account
upon
these
separate item
a
debit
credit
Account
should
the
Balance
upon
provisions have
balance
been
not
should
Account, and
has
this
to
accumulate,
the
that
account
Maintenance
Reserve
be
credit
Sheet.
tenance
Main-
forward
If this
that
mean
provide
the
upon
carried
off
as
account
annual
the
Profit and
to
It
before the
actual
charges
and
the
Loss
annual
be, however,
may
has
reserve
had
time
outweigh
may
the
circumstances, if it is reasonably
into
Reserve
sufficient to
credits
in
thereof
cost
correct, the
the
forward, but,
this
Profit and
year
balance
written
years,
the
material
be
sought, and
question reconsidered,
long
to
be
would
effect
over
Maintenance
provision accordinglyincreased.
that
To
be
been
should
charges. The
Reserve
shows
estimate
that
so
if such
place, the
the
to
good
very
equal.
each
the
to
charges
or,
should
be debited
this head
at,
renewals,
Account,
be
may
The
if these
it is
year,
Reserve
revenue
small
of
be
Reserves.
and
revenue,
year
annual
years
to
will
which
repairs and
as
Maintenance
this,the average
for
management.
charged direct
considerablyfrom
is not
the
maintenance, such
vary
the
accumulated,
in the
case,
next
this item
few
will
years
might
would
be
have
bring
carried
to
be
RESERVES
DEPRECIATION,
separately stated
and
However,
Sheet.
AND
as
allowed
upon
for
Methods
follows
as
in
SYSTEM.
INSTALMENT
percentage, calculated
estimated
be
to
would
year
10
Plant
Register
effective
most
method
This
the
REDUCING
fixed
the
That
is
life is known
percentage is written
is
the
exactly.
off each
system
calculated
year,
the asset
upon
written
being
this
Under
off
asset
an
account.
costing
in the
third
it will be
10
year
It will be
each
year,
10
seen
and
"1,000, that
cent,
per
per
that
it is
cent,
the
on
on
"900="90
"810
amount
"81,
written
suggested that,
and
and
case
will
second
in
the
so
on.
off becomes
in the
upon
is, "100
year
of
cost
be
on
can
calculation.
of
first year
cent,
author, it is
off in the
per
if
it
question of additions,
no
brought down
cent,
make
to
writing off
SYSTEM.
INSTALMENT
is,if 10 per
method
for
used
there
case
reducing balance
each
in connection
of the
opinion
accurate
commonly
periodof
used
suggested above,
as
is
it is necessary
in the
and
leases,in which
short
and
is
depreciation charge
commonly
kept,
of which
in
is
system
originalcost priceof
example, in the case
"1,000, that
machinery, as
"
this
working life
on
is not
for
the
cent,
per
separate calculation
"
year
years,
method
plant and
with
the
upon
off each
ten
be
This
annum.
never
Account.
Under
asset
an
should
practicefor
balance
"
FIXED
fixed
Balance
the
except in very
Reserve
Off
Writing
used
methods
debit
Maintenance
in
111
FUNDS
clearlydescribed
exceptionalcircumstances,
be
SINKING
less
of such
assets
as
author's
of
opinion,it is
repairs apart from
far better
to
deal with
depreciation,
by
the
the
question
creation
of
'112
maintenance
commonly
most
one
as
it is
be
made
have
not
the
The
great weakness
to
write
very
high
time
long
unless
burden
if an, asset
be
system,
of
balance
"1,000 off
"14
over
the
periodof
Account,
this increased
figure.
it takes
is, that
as
very
approximately nil,
to
latter
For
the
case
example,
is
end
upon
the Plant
is excessive.
years
at the
of additions,
used, in which
costing "1,000
this
is
rate
tions
separate calcula-
case
upon
down
asset
an
opening
the
upon
under
in the
of this system
with
in connection
used
and
of
simple,and
the balance
increase
additions
such
to
AUDITING
method
This
reserves.
is the
OF
PRINCIPLES
THE
asset
ten
and
account,
the
years,
write
to
will have
rate
to
"60
what
an
and
charge
enormous
two, and
ninth year
the
is
"25
it will be
that
so
"
first year
the
placed uppn
seen
or
that
see
the
down
asset
is
rate
per
cent,
during
the
period of
sufficient
to
write
its estimated
the
working
life.
DEPRECIATION
during
equal
the
period
Loss
Account
be invested
and
an
by
the
and
the
Account
in
giltedged
Investment
Account
investments, as
credited
to
the
at
from
"
for
year
being debited,
;
this
life of the
off each
is withdrawn
"
Under
estimated
being credited
of cash
amount
of
SYSTEM.
is written
amount
Profit and
Fund
FUND
the
the
and
an
Depreciation
a
similar
business, and
should
time
same
The
received, will be
DepreciationFund
asset,
depreciation,
cash
securities,
debited.
system,
credited
being
interest
debited
Account
yielded
to
at
cash
the
114
cases
where
to
be
retained
in
tables
From
charge for
Loss
Account,
to Profit and
The
the
but
year,
for this
is,that the
amounts
adding to
are
business, and
as
the
earning income
be
taken
a
the
first year,
For
will be
each
same
less each
The
year.
reason
for
year
using
these
and
sums
question of interest is
example,
years
Account.
depreciation
working capitalof the
available
business
period of twenty
each
aside each
set
therewith, the
into account.
for
the
the
to
net
heavier
interest)grows
Loss
taken
interest
year,
account
debited
be
depreciationis
off for
written
amount
annual
The
and
account
nil at
to
the
upon
down
life.
taking
reducing
the
asset
ciation
depre-
after
upon
estimated
calculated
the asset
the
account.
off for
sum,
rate
the
upon
into
written
period of its
will be
depreciation
debited
and
agreed
an
of the
end
the
taken
ascertained, which
at
depreciationarc
interest
be
be
to
of the
balance
is
year
interest
for
credit
is to
asset
fixed amount
each
business, and
the
in the
capitalinvested
for
charged
amounts
the
in
AUDITING
OF
PRINCIPLES
THE
in the
of
case
lease
and
in
"10,000 is locked
is provided each
up in this lease, but as the depreciation
and, for instance, during the
year, this capitalis replaced,
last year
the
nearly"10,000 has
this amount
the
capitalto
amount
been
of
providedout
of
revenue"
of
forming additional working capital,
business
has
the
increasingcharges
use
in the
meantime.
which
Therefore, the
for
inishing
caused
depreciation,
by the diminterest taken
into account, are
compensated for
of depreciation
by the earnings of the accumulations
which
are
increasingthe working capital. This system
is seldom
sometimes
of
used
in
life is known
exactly, and
there
is
no
to which
the
it is
period
question
of
additions.
RE-VALUATION.
Under
this
system
the
assets
are
RESERVES
DEPRECIATION,
re-
valued
to
adopt
year, and
each
with
such
work
this is the
assets
copyrights,and other
almost
impossible to
115
FUNDS
method
only satisfactory
as
of this nature,
assets
fix rates
accurately, since
out
SINKING
AND
of
because
it is
will
depreciation that
these
assets
constantly
are
changing.
AUDITOR'S
THE
has
to
DUTIES
DEPRECIATION.
REGARDS
As
consequently,he
this
that
whose
have
been
advice
If he
think
no
be
of those
this
question
not
has
considered, the
either
in
profits,then
he
reppcLjthat
sufficient.
discuss
stated
to
write
to
assets
should
it
of
been
he
properly
though he
larger amounts,
has
expert
no
satisfied
having
with
But,
view
that
the
on
sufficient
finds
that
honestly
been
fixed,
inflating
to
definitelyin his
taking
or
and
opinions
knowledge.
such
state
such
as
or
to
even
off
amounts
manner,
before
honestly
be
should
is not
ascertain
end
accept the
have
that*""
audit
provisions
this course,
he
are
should
whole
hearing their
refuse
he
However,
the
he
wise
and
haphazard
and
sufficient
are
palpable that
being provided for, or he
been
not
adequately and
rates
see
been
question has
concern,
who
should
depreciation
the
by
further
should
hand,
depreciation is
this
of such
that, therefore, he
other
nil
to
off
appreciate that
must
knowledge
conclusions
the
has
it would
auditor
technical
and
he
off for
written
rates
finds that
considered, he
an
written
particular assets
the
periods.
for
been
the
are
properly considered,
applied. He should
the amounts
that
that
amounts
estimated, and
reduce
the
depreciation,but
been
subject has
upon
may
for
have
principles
correct
estimate
cannot
provide
to
necessary
the
AS
is still not
alter the
above.
and
satisfied,
accounts,
he
the
directors
should
then
or
partners
report
as
116
OF
PRINCIPLES
THE
AUDITING
Reserves.
"
"
word
The
with
in connection
generalpublic.
is
there
subject. The
has
very
the
widely different
in
result that
in the
mind
of
with
this
"
the term
"
reserve
and
senses,
ceptions
miscon-
profession,
connection
opinion in
of
loosely
somewhat
accountancy
to
describe
of affairs.
diverse states
Reserves
with
in the
Even
reason
used
been
used
regard thereto
with
difference
some
been
accounts,
arisen
have
the
has
reserve
under
sub-divided
be
may
following
the
headings
"
Funds
SpecificReserves
Reserve
General
Sinking Funds
Reserves
Secret
and
it is
proposed
Reserves
of these
brieflyeach
consider
to
now
sub-divisions.
SPECIFIC
reserve
specific
represents a
contint
to provide for a known
chargedagainst profits
the exact
and
bad
RESERVES.
of
amount
which, however,
has, therefore, to be
assets
exact
for
debts, discounts
of
means
should
reserve
deducted
Sheet.
and
of such
In the
repairs and
it
depreciation,
case
renewals, and
to Profit and
is known
that
and
these
Loss
the
provided
cases,
Account,
the
and
will arise,but
liability
the
exact
thereof cannot
amount
estimated
and
debited
this latter
case
the
amount
Balance
that
liability
had
has
reserves
heads, but
these
In
of
case
charged
the
ascertained, and
the
specificreserves.
be
from
In
loss under
subjectto
are
amount
by
and
etc.
for
reserves
as
for bad
the
be ascertained,
cannot
estimated, such
sum
to
to
Profit
and
provided
Sheet, and
be estimated.
has
amount
Loss
Account.
to
be
be
In
the
will appear
upon
is in effect
merely
RESERVES
DEPRECIATION,
SINKING
AND
117
FUNDS
and must
reserves
are
a charge against revenue,
Specific
the Profit and Loss Account
shows
be providedfor whether
a
important
profitor a loss. In fact, if a loss,it is more
under
that
than
ever
ample provisionshould be made
be seen
these heads, in order that it may
exactlyto what
has been lost.
extent
the capitalof the concern
In the
"
"
has
reserve
other
some
use
above
"
"
is
reserve
be
"
term, such
as
"
such
as
disputedclaims," so that
clearlyappreciated.
GENERAL
RESERVES.
it would
and
"
provision;
used, it should
explanatory words,
of
badly used,
been
always
for bad
the
be
term
be better
if the word
but
followed
debts,"
"
in
with
respect
circumstances
exact
generalreserve
to
may
represents sums
future
to provide against unknown
of profits,
contingencies,to increase the working capital,to equalise
set
aside
out
dividends,
of the
and
merely
or
concern.
is
strengthen
general reserve
to
the
financial
pre-supposes
appropriationof profits.In
retained
general reserve
represents profits
which
in
ear-marked
fact, these
Sheet
Balance
be
must
for any
"
as
business,
and,
purposes,
described
in
the
undistributed
represented by
is created
be
words,
in the
of the above
might well
reserves
capitaland
over
other
an
are
position
a
profit
liabilities,
and, therefore, as
general
it must,
profits,
in its turn, be representedby a correspondingsurplusof
In fact, it is of the essence
of a generalreserve
assets.
that it should
consist of such a surplus of assets.
The
reserve
credit balance
appears
upon
merely the
surplusof
the
upon
General
the
such
gauge
assets
is
which
that
the
Sheet, represents
the
measures
are. withheld
business.
Account, which
Reserve
proprietorsof
of the
by retainingpart of
The
from
the
distribution
continued
absolutelydependent upon
existence of the correspondingsurplusof
if,for example, in the succeedingyear the
reserve
of
amount
the
to
existence
continued
assets,
business
so
that
makes
118
trading,equal to
loss in
then
such
In
these
upon
the
loss.
credit balance
the
therefore, the
circumstances,
should
Account
Reserve
General
sequent
sub-
Profit
the
upon
Account.
Loss
and
of the
amount
previous year'sprofits,
of the
off
written
be
has
assets
the
automaticallydisappeared,as
of the
disappearedby reason
has
reserve
surplusof
exceeding
or
generalreserve
AUDITING
OF
PRINCIPLES
THE
In
non-existent.
other
has
assets
and
to
the
Balance
the
the
of the
extent
Sheet
the
excess
will
of
the generalreserves,
inflating
effect of
the
over-valuation
the
way,
same
shown
reserve
upon
be
non-existent.
A
FUNDS.
RESERVE
the
should
investments
definition is not
it is
suggested that
the
to
whenever
A
on
Those
"
seen
fund
"
conveys
distinct fund
senting
repre-
into
cash
Loss
converted
be
can
is created
fund
creditinga Reserve
time
same
invested.
held
senting
repre-
required.
reserve
in the
is
there
"
word
authorities,but
all the
of the
use
that
reserve,
Account, and
the
the
as
assets
giltedged
or
accepted by
general publicthat
the
"
be firstclass
This
same
is invested
reserve
is the
surplus of
the
except that
general reserve,
fund
reserve
These
Balance
account
INVESTMENT
investments
Sheet, and
of the
OF
GENERAL
RESERVE.
place from
time
reserve
SURPLUS
to time
should
be
separatelystated
described
as
being
fund.
OF
ASSETS
Considerable
as
at
and
is withdrawn
be
should
and
Account,
of cash
equal amount
an
Fund
to whether
REPRESENTING
discussion
the
has
surplusof
taken
assets
AND
RESERVES
DEPRECIATION,
should
a generalreserve
representing
outside
which
is
objectwith
If the
good
use
surplusof
this is
cases
which
successful
business.
adopt,
to
which
interest
no
is
small
and
beginningsby withholding profits,
additional
an
capitalwhich,
increasingand expanding
be
seen
no
concern,
and
that
most
from
up
providing
thus
Therefore, it will
business.
which
has
dictate the
shall make
business
auditor
an
cannot
accountants
a
fact,
necessity,is requiredby
of
question with
of
proprietors
the
that
this is
business,
the
built
been
have
concerns
many
additional
In
payable.
and
that
cern.
con-
created
In
as
to extend
large
the
the
has been
reserve
course
available with
becomes
capital
upon
wise
very
the
left in the
be
must
assets
of
proprietors
policy
in
be found
can
of business
matter
119
FUNDS
invariablyinvested
be
of the
which
provide additional
is to
and
this is
the hands
entirelyin
SINKING
use
funds
of the
of their business.
On
the
providing
to
hand, if
other
the
contingencies and
the
future, then
the
business, so
realisable into
used
be
funds
with
it is wise
locked
in such
machinery, which
into
cash
are
theoretically
point
of view
surplus
"
reserve
The
general
fund
readily
will
funds
these
debts,
reserve
is invested
should
investment
reserve
"
of
be
a
are
should
outside
are
plant
or
business.
positions
practical
these two
which
but
the same,
the
from
are
"
is
that
immediately converted
be
cannot
surplusassets representinga
the
that
distinction between
which
term
form
seriouslydisturbing the
to draw
the
in
stock, book
as
in
surplus outside
the
found
be
assets
and
"
suddenly arise
may
unknown
meet
invest
be
view
surplus assets
working capital,and when
arises,it may
In order
to
with
Otherwise, the
cash.
without
to
it may
that
emergency
up
which
liabilities that
additional
as
is created
reserve
the
the
used, but
where
business, the
adopted.
surplus representing
term
reserve
120
OF
PRINCIPLES
THE
does
AUDITING
and
not
fix the
cannot
existence
the
may
the
of the
off
written
fund
reserve
and
disappears entirely,
be
reduced,
still in existence.
be
investments
amount
is also
this extent
to
reserve
is
which
reserve,
is
loss
reserve
should
thereon
and
the
equal to
investments
of the concern,
incurred, the
loss ; the
againstthe
If
credit balance
the
though
even
are
then
required
are
to
SINKING
FUNDS.
sinkingfund
reserve
is very
it is created
similar
for
the
to
definite
of
"
"
"
"
manner.
In the
the
case
of
sinkingfund' created
periodicaldebits
to
Profit and
to redeem
Loss
Account
liability,
represent
appropriationsof profits,
has been
and, after the liability
paid off, a credit balance is left upon the Sinking Fund
Account, which
out
case
of
repayable
then
of divisible
company
at
the
profits. For
having
end
of ten
example,
debenture
years,
and
debt
lated
accumu-
suppose
of
the
"10,000,
it is decided
to
122
AUDITING
OF
PRINCIPLES
THE
representingdivisible profitsthat
which
business, and
used
been
have
left in
been
have
to
off
pay
the
capital
liability.
sinking
or
fund
depreciation
created
is built
up in the
completion,the debit balance upon
wasting
asset
same
the
replacea
to
but, upon
way,
old
of the
account
now
the
In this case,
Loss
annual
as
they represent
chargeagainst profits,
of the wasting asset.
the depreciation
are
for
SECRET
RESERVES.
disclosed
not
secret
Secret
reserves
can
shareholders
the
be
and
or
that
reserve
is
fin
the
that
so
provision
than
are
equalisingdividends,
heavy losses
Sheet,
Balance
in the
is
reserve
the
Account
provide a
to
without
met,
fund
of which
out
disclosingthe
some
fact to
cases,
avoid
information
to trade rivals.
disclosing
Secret reserves
created by writing down
are
assets, such
as
stock, book debts, plant and machinery, and premises,
below their true value, by making excessive provisions
for
and by charging capitalitems, such
outstanding liabilities,
additions
to plant and
as
machinery, to Profit and Loss
to
Account.
The
of
case
these
the
Auditor's
Position
specificreserves,
most
with
carefully,
provisionsmade
these
reserves,
are
such
as
auditor
is not
been
that
the
reserves
are
the
auditor
the
must
enquire
into
satisfyinghimself that
sufficient. His duties as regards
view
been
must
do
to
bad
concerned
except that he
properlytaken, and
reserves,
In
regards Reserves.
as
discussed
with
see
show
clearlyand
already.
the creation
that
a
the
bond
of
accounts
general
have
fidesurplus,and
properly stated
in the
If the
Sheet.
Balance
of
provisionfor depreciationand
bad
deal
must
with
If the accounts
is
of
case
for
provide
his
of
creation
practice,auditors
these
auditor
an
profits,
reserves
asked
in
the
specially
in
however,
advise
to
that
as
province, except
auditor
an
report.
general reserves,
such
often
are
Again,
matters.
of
audit
his
when
the
in
auditor
the
debts, then
disclose
the creation
company
and
entirelyoutside
matter
question
in order
are
insist upon
cannot
whole
the
123
FUNDS
fictitious,
owing, for
are
reserves
over-valuation
the
example, to
SINKING
AND
RESERVES
DEPRECIATION,
regards
as
insist upon
cannot
the
being invested
surplus assets representinga general reserve
to seeing
outside
the business, his duty being confined
In
the
same
the
he
way,
to redeem
be created
in
positionof
the true
that
of
case
affairs is disclosed
be
no
said
be
view
correct
of
But, in the
of
in
that
the
of
case
of
state
invariablyrefer
the
of
practicalvalue
in their
such
of
partnerships, secret
reserves
the
concern.
these
that
audit
reserves
and
true
reserves
they
do
practice, auditors
in
not
be
In the
the number
of shareholders
in the
of the
hands
In
necessary.
are
entitled
therefore, if
been
shows
affairs
the
to
of the fact.
aware
where
not
case
Sheet
are
not
reports.
not
are
common,
are
in the
auditor
the
considerable
such
circumstances
such
made
provided
so
of issue.
terms
Balance
the
report that
cannot
In
debentures, except
it may
are
sinking fund
auditor's
The
one
the
as
it is
when
company,
that
such
liability,
Articles of Association, or
is
demand
cannot
in the accounts.
created
secret
by
to
such
see
reserves,
the
of
case
privatecompanies,
is small, and
public, secret
the accounts
reserves
the
full
to
be
should
holders
share-
positionof affairs,and,
any
directors, the
material
auditor
extent, have
should
make
124
PRINCIPLES
THE
this
fact
accounts
the
upon
therefore, often
disclosing to
such
create
these
whole
body,
the
in
the
the
secret
is in the
accounts
interests
may
that
they
losses without
have
they
the
companies,
so
reserves,
that
of the
public credit
the
consider
Such
concern.
world
in this way
as
for
competitors
to
This
reverses.
of
the
disclosed
credit
the
and
great importance
very
able to meet
be
may
available
creditors
the
as
information
that
have
of
matter
well
circumstances
the
thus
are
customers,
as
company,
But
entirelydifferent, for
are
published, and
are
AUDITING
report.
with
as
OF
with
met
shareholders
of the
concern
is maintained.
On
the
unscrupulous
example,
to
cover
the
of
the
company,
be
influenced
fluctuate
created
an
the
that
are
the
secret
are
without
reference
some
auditors
make
value
the
auditor
these
matter
but
not
is not
showing
fullyin
his
report
he
that
its amount.
should
to
secret
reserves
as
without
the
that
whole
the
ascertaining
the
company,
fidepurposes
of the
fact
absolutelysatisfied
transactions, he
accounts
only.
safelypass
may
in these
though
general
may
the
to
of
in his report,
thereby disclosingthe
reserve,
case,
shares
important
view
for bond
this is the
report that
by
interests
the
fur
of its shares
is most
with
used
the
carefullyinto
most
in
being
is satisfied that
circumstances
value
results shown
reserves,
by
purposes,
manipulation of
enquire
necessary
they
audit
market
the
used
i"zojuircs transactions,
Therefore, it
past.
of the
matter
their
for the
should
improper
most
be
private speculation in
by making
in the
they
If he
of
might
reserves
losses upon
improperly by
question
and
for
up
purpose
auditor
that
secret
directors
for
or
hand,
other
statement
is understated,
assets
is
there
secret
If, however,
to
the
bond
fail deal
shareholders.
in
the
fides of
with
the
VII
CHAPTER
1908,
ACT,
that
to
possible to
deal
The
and
for in Section
Act, 1908,
"
Every
will
auditor's
observed
private companies
The
appointment
and
the
the
accounts
of
be
is made
in
though,
into
appointed
on
proprietors of
to
behalf
the
act
as
of
them
true
upon
for the
and
125
the
audit
merely
whose
fact
mind
by
is
he
work
directors, who
for
the
them
accounts.
at
all.
directors, and
who
directors
benefit of the
correct
to
for
in
shareholders,
the
business, that
undertaking honestly
to
check
body,
This
his
the
acting
are
borne
of
with
is not
thought.
as
and
to
that
so
is often
business.
course
contact
business, yet he
the
render
the
refers
Act,
behalf
and
the
(1).)
their agent
the
on
carry
until
office
112
as
as
whose
on
general meeting
themselves
thoroughly appreciated
ensure
are
(Consolidation)
shareholders
the
by
directors, who
the
constantly brought
is
auditors
this
exempted,
not
are
shareholders,
auditor, for
conduct
of
Sub-section
registered under
directors
the
(Sec.
is,therefore, acting
auditor
agents of the
must
Auditors.
hold
to
above
the
that
company
benefit
of
annual
auditors
or
"
and
1908
the
an
Companies
general meeting."
"
every
of the
shall at each
auditor
an
be
remuneration
112
company
annual
next
the
only
follows"
as
appoint
to
of
from
Remuneration
and
appointment
provided
He
it is
sections
few
the
Companies
the
available
space
particular importance
Appointment
an
the
briefly with
of
are
of
of view.
point
It
in
with
familiar
be
provisions
the
1917, but
Acts, 1908
that
of
AUDITORS
should
auditor
an
whole
practicallythe
Act
AFFECTING
PARTICULARLY
is necessary
IT
(CONSOLIDATION)
COMPANIES
THE
OF
SECTIONS
are
the
carry
on
shareholders,
"
126
PRINCIPLES
THE
AUDITING
OF
at an
appointment of auditors is not made
annual
general meeting, the Board of Trade may, on
of any member
of the company,
the application
appoint
"If
an
of the
auditor
an
remuneration
fix the
auditor
behalf of the
acts
"
member
director
this way
it is
In
had
he does
and
be
of the
auditor
the
of
in
Trade,
shall not
company
the
be
not
ment,
appoint-
appointed at the
act specially
on
not
auditor
provided that
secretary,he would
As
the
the
been
officer of the
would
independent,as
company
the
by
and
year,
makes
of Trade
if he
who
or
(Sec. 112
current
him
paid to
the
as
on
the
as
exactlythe same
way
annual
generalmeeting,
but
be
to
In this case,
the
for
company
be
company."
shall be
quite
case
also
were
of
servant
appointed auditor.
the directors,subject
to
in
firm
of
of accountants
and
company,
although
acting as
another
serious
the
such
director
partner acting as
the
Act
does
the
to
would
between
arose
arise
one
of very
independence,as
"
person,
it
be
not
always should
other
than
of
an
and
directors
the
partners of the
The
would
position of
of
one
the
disinterested
be.
retiringauditor,
advisable.
there
as
great difficulty,
directlyconflictinginterests.
this,
this Subsection,
spiritof
questions
be
forbid
not
firm
secretary
auditor, and
or
at
intention
an
to
shall not
annual
nominate
be
general
that
(CONSOLIDATION)
COMPANIES,
THE
office of auditor
to the
person
not
shareholder to the company
before
shall send
copy
advertisement
by
general meeting
"
thereof
auditor
an
is called for
given within
by
thereof, and
the
at the
given
or
time
the
past it
the
carried
was
their
out
nominating
person,
unless due
and
of
to
than
other
notice
the
case
to nominate
expedient
an
before
of
meeting, and
the
fixingthe
by
The
the
the
given
sent
or
given
sent
auditors
in
who
consequence,
directors, were
the
to
by
appointment,
the
of 1907,
Act
given
the
both
to
thus
has
cannot
date
the
less than
so
that
no
appointed
shareholders
the
opportunity
an
The
second
notice of intention
be frustrated
the
by
the
annual
fourteen
simple
general
days
from
notice.
of the company
be
shareholders.
a
without
Therefore, these
anyone.
provides,that
receiptof
first auditors
or
immediately summoning
date of the
"
auditor
or
sent
provision,be
retiringauditor, can
been
days
with
conflict
retiringauditor, who
his
laying
has
being
conscientious
else for
the
the
be
properly, and,
duties
introduced
provisionswere
annual
an
fourteen
to
this
as
that
notice beforehand
giving any
date
to
found
someone
intention
given,
so
of
instead
not
annual
the
of the
notice
time
same
into
occasionallycame
the
required by
general meeting."
In
by
the
may,
company
within
have
to
been
time
the
deemed
purposes
been
has
shall be
allowed
before
days
if,after notice
that
general meeting
not
company
"
Provided
nominate
days
auditor,
retiring
mode
other
seven
the
shareholders, either
the
to
in any
or
less than
Articles, not
fourteen
less than
notice to the
such
give notice
shall
and
of any
127
given by
been
has
annual
the
1908
ACT,
may
be
appointed
if
so
128
by
meeting, unless previouslyremoved
the shareholders in general meeting, in
shareholders
in this
should
first
they
and
auditor
such
remove
not
directors
office of
this case,
such
shareholders.
This
as
the
for
the
appointed
were
in
the
continues,
vacancy
auditors, if any,
shareholders,
for the
not
but
that
mean
of
auditors
the
the company
not
the
during
thought by students,
must
when
agent of the
the
auditors
as
auditor, who
an
by
does
act
may
in all cases,
is,as
is sometimes
appoint
may
and
vacancy
or
act
Sub-section
themselves
vacancy,
the
be
of
but
that
director
company
generalmeeting, except
auditors appointed before
in
that
the remuneration
the
may
The
remuneration
appointment,
where,
for the
to
casual
fill any
may
appointan
appointed,the
directors
agents for
(Sec.112(6).)
and
or
if he
as
way
act."
may
the
body,
place,
making
directors,acts
the
they
same
as
to
power
his
in
another
met
yet
may
shareholders.
the
"The
In
exactlythe
in
the
directors, when
have
merely acting as
have
shareholders, who
by
auditors."
statutory meeting,
the
appoint
The
it.
desire
appointment, are
direct
the
case
directors
the
shareholders
the
case
that
seen
prior to
first auditor
appoint the
even
it will be
clause
this
but
which
appoint
may
of
resolution
(5).)
(Sec. 112
From
meeting
that
at
general
hold
appointed shall
AUDITING
OF
PRINCIPLES
THE
the
as
of the
rests
mere
auditors, in the
entirelywith
matter
shareholders
of any
of
in the
statutory meeting,
the
same
way
as
their
shareholders, except
of the
and
where
act
appointment prior
a
casual
vacancy
130
PRINCIPLES
THE
of
their tenure
in
the company
laid before
Sheet
AUDITING
OF
generalmeeting during
fa) Whether
the
required;
have
explanationsthey
and
information
all
obtained
have
they
not
or
state-
and
in
(b) Whether,
in the
referred to
exhibit
to
company's
affairs
information
and
noted
It will be
view
according
to
auditors
the
that
Sheet
report is addressed
such
If the
directors.
the
there
points,or
of the
submitted
his
and
accounts,
way
any
that, in his
dealing with
to
the
true
the
facts before
matter
the
any
to
In
shareholders.
opinion,
qualify
clear
the
prepare
in
accounts
report, and
is confined
thus
the
to
any
matters
point,his duty
in his
that
not
must
alter such
cannot
; if dissatisfied upon
shareholders
satisfied upon
is not
information
auditor
the
report
of office,and
It is the
shareholders, and
the
auditor
the
be
therein.
of
make
to
to
their tenure
to
is any
have
should
as
of the
state
best
the
so
generalmeeting during
in
Sheet
the
the
Balance
every
upon
by
shown
as
correct
and
true
opinion,the Balance
report is properly drawn
up
their
laying
same
way,
if the
be
cannot
prepared,then,
in such
circumstances,
he should
as
auditor
"
The
board
there
is
there
matters.
Balance
by
auditor's
or
such
on
two
only
Sheet
of
one
the
shall be
directors
signed on
of
the
to
the
Balance
to
the
report, and
in
the
if
or
company,
reference
of the
director, and
director, by that
behalf
the
Sheet,
Sheet
general meeting
and
shall be open
COMPANIES
THE
inspection by
to
shall be
entitled
Balance
Sheet
(CONSOLIDATION)
ACT,
1908
shareholder.
Any
shareholder
any
furnished
be
to
and
auditor's
Balance
is not
to the
be
The
the
report
form
from
course
read
at
any
is
there
the
being held
the auditor
is
from
hesitation
in
given
on
it
Balance
other
but
Sheet,
.
as
the
the auditor's
Sheet
to
appears
as
be
confidential
Balance
meeting,
Sheet
Sheet
Balance
the
is open
which
freer hand,
the
often is.
has
in the
There
is
no
he may
report
doubt
Sheet,
the Balance
as
have
shareholders
be
be
that
so
copy,
to
inspection,
to
contained
publishedwith
much
inspection.
to
upon
the shareholders.
made
no
any
clear to
Sheet, and
insert
separate document,
information
not
19
Section
the
reporting fully to
the
to
whether
duty
Balance
is entitled to demand
risk of the
matters
to
shareholders'
back
appear
the
to
shareholder
no
must
published Balance
looked
be
this
in
Messrs
open
decide
of
publishedbroadcast,
report referred
but
is necessary,
above
is
the
to
is to make
The
of
the
on
rightto
intention
auditor
the
foot
the
"
meeting,and
report should
the
is not
the
The
day of
the
it
Balance
at
there
specialwording
the
have
but
the better
the
(Sec.
the
to
It is the directors'
Sheet
the shareholders
at the
directors
them.
not
this is done.
that
see
separate document,
no
good
to
is dated
will be read
and
to
Company's auditors,
which
one
charge
directors,but
the
generallyappears
report.
followingis
that
the
words."
either attached
it
or
hundred
signed by
at the
reference
be
case
it may
thereof, or
event
duty
must
report
Sheet, in which
The
of
copy
at
report
every
be
must
auditor's
the
auditor's
the
(3).)
112
The
with
131
thus
reaches
creditors,customers
the
and
hands
of
the
competitors
132
; should
of the business
credit
shareholders
to
AUDITING
of
to
the
report adversely
only,so
made
be
the auditor
that
be
might
concern
seriouslyaffected.
'LL^ accessible
OF
the
matters,
any
upon
-
PRINCIPLES
THE
be
may
no
way
confusion, and
Sheet
Balance
the
bearing
the
referred
to
document,
in
report.
they
the
report is
If the
actually
one
separate
initial the
particular
are
report, and
Sheet
Balance
be
not
should
auditors
otherwise
or
shareholders, though
the
to
should
date
the
fact in the
of the
submitted
the
by mistake
that
proper
Sheet
Balance
danger
no
this
copy
of
is to
Balance
Sheet,
documents
made
and
two
safer course,
are
copiesof
merely
reference
REPORT
the
by
in
Accountants
have
Limited,
dated
"
or
us,"
We
we
have
have
In
our
Council
"
of the
Wales
and
copy
set
is annexed
obtained
all the
has
of
of
Institute
of
"
THE
the
and
of
forth," or
of which
form
the
TO
Sheet
day
above
shareholders
LIMITED.
Balance
the
"
or,
the
of which
copy
the
does
course
to the
OF
audited
it as
identify
the
AUDITORS
SHAREHOLDERS
We
report
following is
England
THE
OF
the
sending
The
""
at
without
thereto.
report recommended
Chartered
Sheet
Balance
such
so
the
inseparable.This
not
write
be
"
within
hereto
been
and
contained,"
initialled
initialled
information and
(here
by
us
by
").
explanations
required.
opinion such
Balance
Sheet
is
properlydrawn
THE
(CONSOLIDATION)
COMPANIES
to exhibit
and
up
so
the
company's affairsaccording to
as
and
the books
"
of
If any
true
the
company.
of
mation
infor-
our
shown
as
which
133
the state
of
and
us
Sheet
Balance
of
the best
explanationsgiven
of
view
correct
the
copy
1908
ACT,
has
by
been
not
published without
auditor's
Section, the
fine not
penalty if
"
In
the
be
of
copy
containing
or
this
director, manager,
every
ingly
is know-
who
company
be liable
conviction
on
(Sec.113 (4).)
that
seen
of this Section
case
fifteenth
the
it will
required by
exceeding fiftypounds."
terms
the
and
is
as
default, shall
to the
this Sub-section
From
report
having
thereto
officer of the
other
party
that
to
company,
secretary, or
to
report attached
reference
such
either
heavy
carried out.
not
are
is
there
registeredafter
banking company
and
of August, eighteen hundred
day
seventy-nine
"
(a) If
limits
as
the
of
allowed
books
the
been
in the
and
United
it shall be
to
three
directors
those
directors, and
three
"
Holders
company
inspect
the
as
have
company
be
signedby
where
there
by
company
when
there
are
secretary
not
than
more
least
at
are
the
of
three
than
more
(Sec.113 (5).)
by all the directors."
refers only to banking companies.
of
shall
the
preferenceshares
have
the
Balance
holders
(Sec.114(1).)
of
and
of
other
ordinary
and
debentures
right
same
Sheets
by
branch
from
directors
Sub-section
This
and
of the
auditor
extracts
office of the
the
; and
Sheet must
(ifany)
beyond
if the
and
such
any
head
the
Kingdom
Balance
manager
of
accounts
sufficient
copies of
such
to
access
transmitted
(b) the
or
Europe,
banks
branch
has
company
the
to
and
company
reports
shares
receive
in
as
the
is
of
and
the
possessed
company."
134
THE
"This
July
This
and
holders
Sheets
of
the
and
1907
before
registered
List
Section
provides
every
containing various
capitalof the company,
each
contained
be
must
and
members,
in
copy,
be forwarded
must
Sub-section
"
is
The
to
date
form
of
as
be
Balance
auditors, and
assets, and
arrived
statement
In
many
company
provided
be
annual
how
also
at, but
of
the
is filed to
it
sufficient,and
paid
unpaid,
and
summary
registerof
values
follows
the
made
by
the
giving
such
of those
Sheet
in the
company's
need
capital,
as
particulars
liabilities and
Balance
to
up
statement,
of its share
summary
"
the company
statement,
in
specified
profitand
cases
that
include
gene'ralnature
the
share
and
list and
(except where
Sheet, audited
the
calls
providesas
its assets,
of
su"
regards the
called up
amount
containing a
and
liabilities,
of the company,
or
signedby the manager
secretary,
the Registrarof Companies.
must
may
least in every
at
once
amount
3 of this Section
summary
such
into force.
came
privatecompany)
its
the
This
particulars.
other
privatecompanies
Act
particularsas
total
share, the
various
the
Act, 1908,
Companies (Consolidation)
list
on
the
and
company,
of
shall
company
list of all the members
that
the
Summary.
of the
26
make
year
and
by
receive and
Annual
introduced
preference shareholders
privatecompany,
the first day of
which
were
Balance
inspect the
to
innovation
an
debenture
apply
and
hundred
important
Companies Act, 1907, by
was
AUDITING
registeredbefore
company
nineteen
OF
shall not
section
to
nor
PRINCIPLES
not
been
have
include
loss."
last audited
Balance
Sheet
of
the
(CONSOLIDATION)
COMPANIES
THE
certifythe
audit
or
Sheet
is
condensed,
auditors
then
the
they
have
done
providedfor
or
will have
in the
Act, and
the
statement
that
to the
in
with
accordance
of certificate
they
Sheet,
it has
the
audited
have
Balance
of their information
best
in
prepared
of
filing,
will be sufficient
effect that
form
for
certifythat
specialform
no
memorandum
to the
the
it and
135
Balance
audited
prepared
audit
to
is
There
so.
is
specialone
the auditors
signed by
But, if the
same.
1908
ACT,
been
and
properly
of
requirements
the
Section.
As
regards
how
to
these
say,
"
being
of the
values
the
"
have
same
should
assets
cost,"
at
the
the
Trade
Goodwill,
Fixtures
Marks
taken
were
with
different parts of
that
valued
in different ways
values
of
those
Section
include
not
provides that
to
the
Section, and
submit
set out
of
"
the
it to
only the
the
less
Sheet
assets
on
and
the
held
was
loss
"
did
total the
directors
to
prepare
auditors
for the
not
Loss
been
separate
that
this
statement
purposes
the
of the
need
not
Account,
requiredby
sides.
two
it
therefore, it is
liabilitiesas
to
the
Sheet
Profit and
then
ciation."
depre-
had
assets
Balance
profitand
of
statement
but
duty
Machinery,
cost
state
not
Further, it
they
Section, because
fixed
the
which
at
tangibleand
usual
and
Sheet
Balance
The
the Goodwill
at
the
did
and
parts.
and
that the
"
Furniture
sum
and
total, thus
this Balance
that
of
case
Sheet, this
one
"
the
requirementsof
the
in
valued
were
held
was
Balance
assets
Company,"
the
Fixtures
It
comply
by
over
of
Machinery,
at
valued
as
connection, the
5d.," statingthat
valued
were
and
Furniture
stated
16s.
as
form
the
Marks,
"100,007
Trade
6-
included
company
"
in
statement
"
or
depreciation,"
this
is
at, that
described
be
case
show
must
arrived
been
in each
less
at cost
statement
It is the
and
of audit.
to
136
THE
The
Statutory
providesthat
"
from
shall
month
nor
at
which
the
business, hold
commence
of
members
the
Report.
one
date
the
AUDITING
and
company
every
less than
not
OF
Meeting
of the
65
Section
PRINCIPLES
than
more
months
is entitled
company
which
shall be
to
of
the
called
the
general meeting
company,
three
statutory meeting."
directors shall,at least
The
the
meeting, forward
to every
member
certified
by
days
seven
the
of
day
of the company,
directors,and
the
before
this
report has
thereof
copy
to be
has
be
to
filed with
follows
"
the
"
The
than
two
less than
and
(a) The
otherwise
total number
they
have
"
in either
been
in
company
the
(c) an
account
of its
and
date
within
seven
exhibiting under
the
company
of
cash
all
the
amount
from
of
case
they
so
are
for which
of the
from
made
of
distinctive
shares
by
the
allotted,
shares
receiptsof
payments
days
received
capital,whether
of the
which
up
respect of
abstract
to
the
the consideration
distinguishedas aforesaid
"
partly paid
stating in
extent
case
allotted
total
(b) the
manager,
guishing
allotted, distin-
fullyor
as
in cash, and
partlypaid up
up, and
of shares
allotted
than
paid
are
"
shares
shares
there
two
shall state
"
where
or,
less
not
the
the
shares
or
date
of
the
debentures
the
on
tures,
deben-
thereout, up
headings
and
company
to
report,
receiptsof
and
other
138
PRINCIPLES
THE
Commissions
provided that
authorised
agreed to
the
by
in lieu of
the
paid,is disclosed
be
prospectus,
or
for shares,
subscriptions
exceed
not
persons
in
whole
the
of
the
"1
shares
to the
the
shares,
not.
if the
"
the
that
them
must
case
mark
the
the
auditors
cent,
underwriters
to
persons
person
would
and
thus
have
always been
check
have
between
is for
them
public,
company,
the
scribe
sub-
take
who
up
to
any
by
the
they
written
shares under-
the
the
the
up
The
rata.
pro
examine
the
the
commission
shares
or
Articles, and
also
must
has
inspect
see
if the
shares
placingshares
subscribers, in which
the
marked
up
it is
mission
underwriting com-
for
commission
of
take
remaining
introduce
entitled to pay
take
to
60,000
say,
underwriter, and
each
Commissions
claimingthe
writing
under-
an
that
with
application letter
should
upon
to
see
underwritingcontract
paid
to the
the
entitled
were
prospectus
issue is under-subscribed.
are
Underwriting
underwriters, will
properly authorised
disclosed in the
the
does
subscribing for
they actuallyhave
auditors
is
been
shares
paid to
The
who
underwriters
payable whether
with
public not
of 5 per
remaining 40,000
commission
"
For example,
remainingshares.
of a company
making an issue of 100,000
public,the whole issue being underwritten
commission
each
paid
amount
issue of shares
contracts
inviting
the
individuals
by
the
statement
notice
or
authorised.
an
of the
take up
case
by various
that
the
for and
suppose
and
into
prospectus, or
circular
rate
or
enter
event
in the
any
that, upon
means
certain
that
the amount
"
shares
Shares.
of the
89
commissions
shares,
and
Placing
on
gives a company
and
AUDITING
Commissions
Underwriting
Section
OF
should
initial
subscriber, and
or
the
applicationletters
payable. Companies
brokerage upon
shares.
is,an
that
(CONSOLIDATION)
COMPANIES
THE
payable
amount
agents whose
clients subscribe
should
be
only
stamp, and
brokers'
brokerage
"
Where
in
commission
allowed
respect of any
thereof
Section
of shares
is not
The
the
spread over
shown
as
appliesif
same
total
must
be
the
that
see
at
discounts
upon
debentures
must
in the
terms
of this
not
Interest
of
these
Shareholders
to
missions
com-
be included
but
heading of preliminaryexpenses,
Sheet.
in the Balance
separately
Payment
treated
the
shown
Sheet.
discount
or
once,
forward
Balance
issued
must
respect
at
carried
in the
are
discount
auditors
The
way.
Section
are
debentures
in
Account
amount
separate item
whole
total amount
the
Loss
period,the
of the
amount
same
under
or
(Sec.90.)
commissions
and
of
way
until the
paid, and
Profit
off to
89.
off,shall be stated
off."
if any
are
of
respect of any
allowed, or so
or
company
written
that
debentures
or
be
must
of the
been
provides
written
is
Sheet
in
written
been
not
thereof has
amount
but
has
as
the
debentures,
or
paid
so
by
sums
of discount
way
bear
payments
any
shares
total amount
Balance
in every
This
by
sums
any
debentures, the
much
These
paid
has
company
brokerages
provisionsof Section
the
subject to
not
are
and
therefore, examine
must,
application forms.
stamped
the
Such
applicationletters
auditor
the
139
stockbrokers
to
for shares.
if the
paid
share
per
1908
ACT,
must
be
During
Construction.
Section
91
of the
gives power,
in certain
shareholders
during construction,
circumstances,
Where
purpose
of
construction
of
any
reads
shares
of
raisingmoney
of any
works
as
to
or
follows
pay
of
out
company
to
may
capital. The
issued for the
are
expenses
of the
provision
for a
profitable
buildingsor
made
to
"
defray the
be
interest
pay
the
interest
on
so
140
PRINCIPLES
THE
of that
much
AUDITING
is for the
capitalas
share
period and
for the
up
OF
subject
time
conditions
the
to
being paid
mentioned, and
and
charge
may
of
capitalas part of the cost of construction
the work
or
building,or the provisionsof plant."
formed
to
Suppose, for example, the case of a company
carry on a manufacturing business, the factory having to
be
the
erected
first. Until
factory is completed, the
trade
and
cannot
can
no
earn
profits,and,
company
be no
of paying dividends
therefore, there can
possibility
stances,
their capital. In such circumto the shareholders
upon
it is considered
only fair that, upon the capital
advanced
by the shareholders speciallyfor this purpose,
struction,
they should receive interest during the period of conand this can
be paid provided that the term
this Section are complied with.
The interest thus paid is
paid out of capitaland is debited to the BuildingAccount,
The provisionsthat
as
part of the cost of construction.
follows"
have
to be complied with are
as
the
to
same
(1)
"
No
such
is authorised
(2)
"
No
Articles
the
authorised
payment, whether
by specialresolution,shall be made
or
"
Before
of Trade
the
at
of the case,
require
(4)
"
period
and
The
as
of
which
the
completed or
(5)
determined
The
in
the
rate
or
be
by
no
appoint
the
ment,
appoint-
enquiry
shall
made
the
only
the
buildings
have
for
such
of Trade
Board
extend
case
the
after
half-yearnext
works
to
making
without
stances
the circum-
to
as
the
the Board
company,
to them
before
may,
of the
period shall
the
"
costs
be
report
by
payment
of the
company
payment
may
such
close
the
of the
payment
and
of Trade
such
expense
enquire and
to
Board
sanctioningany
may,
person
of the
same
resolution
by special
or
such
previoussanction
(3)
the Articles
by
unless the
shall be made
payment
beyond
the
half-year during
been
actually
plantprovided;
of interest
shall in
no
case
exceed
four
cent,
per
time
"
as
annum
per
The
of the
respect of which
"
(7)
The
it is
paid
for the
may
shall
not
operate
in
shares
the
on
up
paid;
shall show
of the company
accounts
as
141
in Council;
interest
amount
1908
ACT,
rate
Order
of the
payment
reduction
lower
such
or
prescribedby
be
being
(6)
(CONSOLIDATION)
COMPANIES
THE
which,
at
period
the
the share
interest
has
which
the
to
relate."
accounts
It will be
from
seen
the above
there
that
are
stringent
very
registeredunder
company
1917,
to
keep
must
(1) Register of
the
Members
addresses, and
the
the
company,
"
numbers, and
paid
as
person
any
a
such
on
was
person
the
held
shares
ceased
be
The
any
and
has
Register of Members
member
person
on
gratis,and
payment
of
be
to
date
the
the
each
which
at
in
Section
26
the
annual
entered.
inspectionof
inspectionof any other
is open
to
to be
of
considered
which
at
Register of Members,
summary
the
members
Under
member.
entered
distinguishing
the
dates
the
and
register,
list of members
also
in the
to
of all the
by each,
Companies
be
must
paid or agreed
amount
entered
which
occupations
shares
Companies Acts,
the
followingbooks
(Sec. 25 of the
(Consolidation)Act, 1908), in
names,
been
have
Books.
Statutory
1908
auditor
an
with.
complied
Every
all the
that
see
is
interest
where
cases
fee not
to
the
exceeding
Companies
Is. for
each
(Consolidation) Act,
1908.)
(2) Minute
Book
Act, 1908), in
which
be
entered
minutes
of
all
142
proceedings
at
directors
(3)
or
name
(if
and
and
names
occupations.
the
Registrar
(4)
of
the
is
fee
the
in
the
mortgagees
open
not
and
Mortgages
to
Act,
exceeding
usual
has
origin
residence;
be
to
of
case
sent
Is.
for
each
any
this
to
or
in
charge,
the
each
on
or
and
of
names
The
thereto.
inspection.
affecting
mortgaged
bearer)
person
100,
register
giving,
mortgage
entitled
of
entered,
to
(Sec.
specifically
property
securities
persons
inspection
the
the
In
1908).
be
of
of
amount
or
the
of
Charges
charge
or
must
company
description
the
name
nationality
register
mortgage
every
short
charged,
(except
such
Christian
Christian
nationality);
(Consolidation)
property
ing
follow-
the
present
former
any
nationality
of
of
of
entered
to
as
Companies.
Register
particulars
be
director
dation)
(Consoli-
(Particulars
must
present
copy
of
Companies
case,
which
surname
the
Companies
75,
Companies
and
company.
each
surname
than
other
in
shareholders
the
(Sec.
respecting
names
or
the
and
1917),
particulars
of
Directors
1908
Act,
Directors)
of
of
Register
AUDITING
OF
meeting
every
managers
Act,
or
PRINCIPLES
THE
payment
register
of
CHAPTER
POINTS
SPECIAL
IN
CONNECTION
THE
COMPANIES_^UNDER
WITH
COMPANIES
with
connection
1908
1917,
to
dealt
be
such
with
there
here,
are
preponderantly
audit
the
some
of these
concerns.
Memorandum
of
Every
of
(1) The
forms
companies
audit
the
would
auditing
on
less detailed
or
must
reference
shares
by
have
must
Association, stating
"
of
in its
the
with
company,
"limited"
as
name.
situation
(2) The
more
limited
name
last word
book
no
Acts,
which
of
in
but
Association.
company
Memorandum
the
that
without
complete
of these
large proportion
practices of accountants,
be
audit
J9j7_
TO
Companies
the
specialpoints
some
the
as
1908
OF
all audits,
to
under
companies
AUDIT
THE
ACTS,
THE
to
VIII
of
the
registered
offices
of
the
company.
(3) The
(4)
That
the
is No.
for
of the
that
does
This
clause
not
provisions
The
terms
come
is
must
no
within
the
and
enter
enter
as
which
the
auditor's
an
set
must
is
the
division
to
into
terms
wide
company
point
out
carry
any
of its
on,
does
the
and
transaction
objects clause.
possible,but
as
of
exactly
and
formed,
it is intended
to
the
of the
from
power
that
with
amount.
company
that
made
thereof
fixed
the
always
see
capital
objects clause
which
business
has
company
is limited.
members
registered, and
be
of these
3, for the
purposes
auditor
of
shares
important
most
nature
a
into
the
share
to
proposes
thereof
view
of
amount
company
company.
of
liability
the
(5) The
The
of the
objects
not
break
an
the
Memorandum
cannot
143
be altered, except
144
PRINCIPLES
THE
OF
provisionsin
placed in the
certain
by complying with
considerable
restrictions
are
alterations.
Important
ones,
and
holders
interest
and
business
relations with
Articles
of
the company,
of
require
by
the
tions,
altera-
before
the
Court.
be said to govern
may
and
clause
every
all persons
to
such
reduction
views
company,
importance
of
way
affected
be
may
place their
affairs of
external
as
Act, and
the
shareholders, debenture
of Association
Memorandum
The
and
creditors,who
entitled to
are
the
Court
of the
sanction
the
such
objectsof
alteration of the
or
capital,
AUDITING
is of
entering
into
company.
Association.
the
specialset of Articles,and
Act, 1908, contains a model
Companies (Consolidation)
set
of Articles known
need
company
for which
But, upon
must
own
regulationsthat
of the
are
at
time
any
by
Table
A,
and
complied
by
followingare
the
The
Calls
The
with.
rightsof shareholders
on
govern
auditor
Articles
panies
com-
up.
whole
the
substitute
auditor
An
with
the
been
exact
particular
company.
The
must
the
see
internal
that
Articles
of matters
examples
of the
terms
exclude
familiar
special resolution
drawn
been
be
the
an
all
govern
not
may
or
must
govern
company,
thereof
have
company
Articles of Association
The
The
excluded, for he
thus
A, which
whether
see
Table
as
formation,
its
therefor
specialArticles
parts of the
or
have
not
of
be
can
the
that
the
affairs
terms
altered
shareholders.
are
governed
"
inter
se.
shares.
forfeiture of shares
on
of the
account
of calls.
Alterations
of
The
capital.
appointment of a managing
The
appointment
The
powers
and
director.
of directors.
duties of directors.
non-payment
146
is any
there
return
Articles
The
ordinaryshares.
the
on
AUDITING
OF
PRINCIPLES
THE
rights to dividend
shareholders'
non-cumulative
or
of there
event
cumulative, it
being
not
cumulative
such
in
that
means
profitsin
sufficient
preferencedividend,
the
pay
if
either
be
may
any
year
to
to
be
have
arrears
the
sufficient,
are
profits
the
dividend
be
and
there
no
thus
can
paid upon
the preferenceshares
ordinary until all such arrears
upon
holders
been paid. If non-cumulative, the preferencesharehave
of the profits
out
entitled to a fixed dividend
are
made
future
in any
up
of each
and
year,
right to make
if such
unless
then
insufficient,
are
of
shortages out
up
All
years.
Articles
the
future
the
when
years
no
surplusprofitsof
the
preference shares
speciallyprovide
is
there
cumulative,
are
they shall be
that
non-cumulative.
Issue
Shares.
of
In
ordinary
the
capitalis
share
for
with
by
direct
deposit,the
These
receipt therefor.
entered
in
course
shares
prospectus
considered
are
for than
are
directors
make
applicants.
being
notice
selection
of this
of what
same
issued
time
fact
is known
the
raising of
being advertised
in
and
stockbrokers
through
in
interested
or
have
the
be
to
company.
in
sent
on
panied
company's bankers, accombanker
sending the applicant a
and
applicationsare numbered
the
Application
an
to the
means
to
step in the
tions
prospectus invitingapplica-
for shares
rule, applications
special forms
the
of
circulated
and
connected
others
due
such
shares,
newspapers,
As
issue
the
first
the
course,
and
by
If
the
Allotment
directors, who
according
and
"
as
to
the
sent
to
Letter, of
deposit paid
then
in
allot
applied
been
prospectus, the
certain of the
refuse
being
have
shares
more
and
Book,
the
tions,
applica-
applicant by
Regret,"
is returned.
In
and
at
other
COMPANIES
OF
AUDIT
where
cases,
UNDER
is
there
COMPANIES
THE
the
over-subscription,
an
amount
in reduction
minute
"
allotment
The
shares.
Allotment
the
the
upon
in
specified
when
the
and
directors
minute
notices
when
the
is
of
The
paid
in
"
been
balance
certain
which
making
made
and
as
up
In
an
shares
on
up
is called
or
board
have
issued
banker's
the
be
all shareholders.
to
are
number
money
the
passing a
applicant
each
to
to
prospectus,
certificates
share
has
passed by
respect of the
allotment.
on
require the
sent
are
shareholder, these
letter and
the
in
directors
the
sending
either
shares
dates
case
by
due
amount
is reduced
rule,being applied
allotted and
due
is made
of
accordingly, the
due
amounts
effect,and
this
to
made
application,as
further
of the
number
subscribers
shares
147
ACTS
latter
call,
the
due
course,
for each
out
in
receiptsfor
the instalments
paid
to
date.
Audit
of
the
Share
an
Issue
upon
The
should
audit
be
and
conducted
as
the Share
(3) Check
amounts
Book
(4) Check
Allotment
(5) Check
Books
follows
of shares
"
to the
Cash
Book
with
received
with
from
Applicationand
the
Application
minutes
Pass
Book.
subscribers
of allotment
with
from
the
Book.
Allotment
Applicationand
Book.
"
letters of
regret
"
or
with
issue
an
upon
Book.
(2) Check
Cash
Shares.
letters
application
the
Allotment
of
Share
of the
(1) Check
Books
the
distinctive
the
Application and
press
Book,
copies thereof
and
that
see
returned.
number
given
to
each
block
of shares.
(7) Check
Share
Ledger, seeingthat
Allotment
all details
are
Book
entered
to
the
correctly.
148
AUDITING
OF
PRINCIPLES
THE
do
issued
exceed
not
the
for.
in the financial
the
(10) Vouch
books.
cash,
them,
(13) If
ascertain
such
that
issue
underwritten,
been
has
adopting
been
the
see
rule, have
for
sign applications
to
if
"
Underwriters,
underwriters.
the
to
the
inspect
so,
tracts
con-
fully
allottingthe balance
directors' minutes
underwrite
number
these.
as
of shares
Vouch
the
entries.
and
brokeragesare paid,
applistamped or marked cation
(14) If placingcommissions
check
other
have
contracts
the
shares
Journal
total
the
minutes
the
Registrar of Companies.
subscribed, the
they
and
the
with
of the
with
to the
the contracts
see
and
filed with
been
have
shares
total agrees
Ledger
issued.
of shares
number
Share
the
on
paid with
forms.
Inspectthe receiptsfrom persons receiving
and
such commissions
brokerages.
(15) As a rule,the auditors are requestedto check and
initial the share certificates before they are
signed and
sealed
the
amounts
by
(16) Upon
due
will be
in the
directors.
the
Applicationand
will be checked
with
the
Book, and
(17) If
returned
be checked
in the
directors'
to the
the
allotment
with
same
the
way
minute,
Share
share
Book, and
Allotment
as
the
these
entries
Book
and
is,
Pass
Ledger.
certificates have
letters and
Share
bankers'
Ledger.
been
issued, the
receiptsshould
AUDIT
COMPANIES
OF
auditor
shares, and
must
audit
when
calls
satisfyhimself
accounted
that
being
necessary
Auditors
which
at
the
is
transfer
be
check
duplicatecopiesof
enquire as
transfers
transfers
with
have
and
capital.
audits,
fraudulent
is in
system
notices
such
to whether
the
with
any
force,
to the Transfer
objectionshave
the
Transfer
Register,seeing
properly signed,witnessed
been
check
into the
shares
distinctive
the
auditor's
audit
transfers
the
the transfer
stamp.
entries
transferor's
the
transferee's
(7) Check
balance
in Transfer
sold
entries
account
and
the
in
account
shares, and
(6) Check
not
previous
transfers,and
thereafter
certificates.
(5) Check
he has
the
applicationletters.
or
(4) Check
cancel
and
of
numbers
has
seen
received.
stamped,
the
Ledger
"
in this way
If this
detected.
be
(2) Check
that
Share
transfer
out
follows
that
may
been
are
immediately,so
Register,and
been
it is not
total issued
the
carry
as
transfers
the
has
of
transfers
notified
to
may
balances, it being
with
instructed
due
the
upon
list of
he
however,
transfer
issue of
an
that
money
years,
balances
a
upon
in order
of the
out
audit should
(1) When
be
149
ACTS
the auditor
made,
agrees
matter
are
to
on
often
are
this
but
that
total thereof
the
that
carry
checked
be
share
subsequent
to
books
the
whole
the
In
for.
COMPANIES
THE
Audit.
Transfer
An
UNDER
Share
checking
in
whole
the
Transfer
in Share
initial
Register to
distinctive
Register
to
of
that
numbers.
to
debit
of
Ledger.
certificates issued
credit
Ledger, seeing
and
certificates,
new
the
him.
if transferor
and
initial
150
subsequent audits,
(8) At
passing
minute
Fees.
Transfer
Count
transfers,and
of
number
the
of the
directors'
the
see
previouslychecked.
transfers
the
AUDITING
OF
PRINCIPLES
THE
accounted
been
that
see
the
whole
for.
Debentures.
Upon
.checked
in
exactly the
auditor
The
must
same
debenture
the
exact
further
trust
or
be
deed
that
seen
Articles
the
should
be
give
and
exercisingthat
of the
terms
allotment
an
in this way,
money
directors' minute
the
as
way
that
see
to borrow
power
issue of
an
directors
the
he should
examine
The
power.
that
It must
debentures
the
charge given by
actual
in order
examined,
be ascertained.
issue may
the
of shares.
upon
assets
of the
entries
in
if debentures
amount
that
is the
actual
be
repaid,and
to
separate
Profit and
forward
Sheet,
issued
comply
should
shown
as
with
be
if
the
particularcompany,
the
discount
debentures.
were
Shares
will have
to
written
the
an
The
1908.
off to
auditor
never
could
off
carried
be issued
Balance
in the
of
90
discount
as
the
raise
over
off to
amount
revenue
provisions of
written
can
is written
Section
of
terms
be debited
must
separate item
the
but, subject to
possible,
the
that
liability
period,the
Companies (Consolidation)Act,
debentures
as
of the discount
over
checked,
Account,
If this discount
Account
be
Debenture
the
to
should
of the
amount
account.
be
at
credited
the amount
Loss
must
to
are
be
must
financial books
the
upon
soon
Articles
as
of
objection,
no
the
at
the
period
a
of
discount,
COMPANIES
OF
AUDIT
debentures
but
debentures
be credited to
at
and
shares
the
in
of the
Debentures
on
in which
exactly the
premium
fixed
assets
the
premium
case
but,
the
on
be utilised
Acts
Companies
Profit
and
unsound
Loss
Account.
adopt,
to
course
as
available
for
amount
to
return
premiums
for dividend
this fact
end
of
period at
the books
with
a
of
and
that
premium.
The
deferred
revenue
the whole
to
debentures
created
to
and
are
the
case
then
of the
should
Account
for the
include
of
If
the
that
see
repayable
they
should
will have
If
of the
a
company
premium.
with
for
out
be
fund
of
charged
is
the
being
debentures,
illustrate
debentures
at
otherwise
in which
of the
To
date
payment
as
year
sinking
redemption
the
of
to
in
amount,
certain
debentures,
the
at
appear
provided
be
premium
redeemed.
provide
it should
suppose
Loss
of
available
made
and
par
should
period
of the
amount
Profit
the
then
the
it would
subscribed.
interest,and
over
made
the Balance
on
note
at
premium,
thus
quite clear.
issued
are
were
dividend
as
were
auditor
an
an
sums
paid
had
an
not
are
and
shareholders
debentures
or
in the
is, however,
were
themselves
they
If debentures
dividend
in this way,
made
accounts
premiums
Account,
the
to
shares
on
such
are
credited
being
latter
any
there
nothing
This
Loss
dividend, if
which
amounts
and
Profit
to
or
reserve,
in effect, if such
is
premiums
prevent such
to
to
unless
hand,
other
additional
as
goodwill,or
Articles,there
the
Premiums
way.
preliminary expenses,
provisions in
express
to
down
write
to
must
Shares
the
to
Account.
same
should
debentures
credited
be
must
amount
premium,
be dealt with
should
the
nominal
the
premium,
again
Premium
issued
be
at
debentures
Account, and
Debenture
upon
issued
are
of the
amount
may
provisionsof
the
to
151
ACTS
of Association.
Articles
If
subject
can,
COMPANIES
THE
UNDER
of
this,
"10,000
152
Sheet
Balance
cent., the
period being
of ten
end
the
repayable at
follows
as
at
years
the
at
of 5 per
premium
of
commencement
the
"
SHEET
BALANCE
15,000
Capital
AUDITING
OF
PRINCIPLES
THE
Assets
Sundry
25,000
(repayable
Debentures
at
the end
at
105)
of ten
years
10,000
....
"25,000
is created
sinkingfund
required,and
would
be
follows
as
Sheet
Balance
the
provide"10,500.the
to
SHEET
"
15.000
Capital
.
Debenture
"500,
the
investments
to
debentures
follows
the
of
at
should
now
premium
Sinking
the
(now
of the
Fund
exact
the
be
credited
required to
sum
be
would
Fund
It will be
Fund
pay
would
be
SHEET
Sundry
.25
Assets
fooo
Account
general reserve
company)
the
the
produced,
Sheet
Balance
with
amount
If
Account.
10,000
/25.0;""
"25,000
over
10,500
"
15,000
a
account
Fund
payable, this
premium,
repayment,
on
Sinking
25.000
"35,500
BALANCE
Capital
Sinking
merits
of the
amount
being debited
off the
Account
Assets
Sundry
10,500
"35,500
The
10,0"'
....
Fund
Sinking
period
"
BALANCE
Debentures
of the
end
the
at
amount
seen
Account
after the
remains
repayment
upon
of
the
the
provided
Sinking
debentures.
154
correctlyin
that
of
PRINCIPLES
THE
Sheet.
Balance
the
debentures
these
been
have
formation
the
obtaining of
the
with
to
bear
the
so,
he
must
that
see
that
they
formation
the
auditor
An
to
part of these
any
the
the
liminary
Pre-
refer
and, if
bear
not
to
have
they
expenses,
does
company
to
should
whether
see
and
debited
are
to
are
Account.
with
various
are
any
are
debited
items
the
Registrar
the
there
company
vendors
the
or
auditor
The
Account.
whole
that
expenses
Register
whether
to
as
filed with
capital,that
share
Expenses
contract
of
in connection
initial expenses
the
enquire
in the
Expenses.
Preliminary
Upon
also ascertain
should
entered
been
particularshave
Companies.
necessary
of
He
Charges, and
and
Mortgages
AUDITING
OF
charge
proper
Under
and
this
to
vouch
the
satisfy himself
thus
PreliminaryExpenses
will
heading
and
included
be
the
following
"
LEGAL
CHARGES
Memorandum
the
and
and
the
vouched
be
in connection
of
Articles
with
contracts
by
with
the
preparation of
Association, the
vendors, and
of the
production
the
the
pectus
pros-
will
these
solicitors' receipted
bill of costs.
COSTS
PRINTING
OF
Association, and
by
the
vouched
done
with
through
STAMP
appear
by
an
which
the
an
DUTIES
will
be
examination
REPORTS
duties
FROM
will
the
agent, with
payable
prospectus,
the
the
his
costs.
will
which
newspapers,
be
or,
registration,which
solicitors,and
The
amount
of the certificate of
are
vouched
be
if
receiptedaccount.
upon
bill of costs.
paid
Articles of
printers'receiptedbill of
receipts from
paid by
in their
the
the
ADVERTISING
OF
and
prospectus, which
the
production of
COSTS
Memorandum
the
bably
pro-
will, therefore,
can
be
verified
incorporation,
upon
stated.
ENGINEERS,
ACCOUNTANTS,
ETC., for
AUDIT
COMPANIES
OF
prospectus
balance
debit
written
generallythree
provisionsto
Profits
the
is to
at
certain
actual
from
basis
of
the
formation
time, and
received
the
until
of the
certificate
December
available
these
the
as
the
to
whether
of
purchasing
to
belong
increased
the
the
vendors
31st
company
the
if, as
the
terms'
example,
business
upon
December,
the
from
take
the
new
date,
that
little
some
be
not
of March.
In
such
profits,from
the
31st
The
dividend.
taken
the
is that
In
belong
to
fixing
the fact
into account
31st
not
are
reason
purchase price.
to
the
shall take
incorporationmight
will have
over
figures
of the
For
might
profitsbetween
the
of the
one
profitsas
in the
incorporationare
to
over
company
as
be
may
included
profitsare
date
1st
in the
being priorto
date.
intermediate
for distribution
price,the
to
the
nothing
company
new
circumstances, the
years,
there
company,
of
of
basis
date
such
to take
to
should
Incorporation.
the
the
at
The
to
agreed
the
being entitled
company
but
that
Sheet
Balance
of
new
be formed
might
company
the
or
Articles.
contract
agreed date,
profits as
the
is
there
completed upon
incorporationof
contract
being
of the
but
is formed
be
with
comply
period
short
Date
existingbusiness, the
purchase
as
over
to
separate
Account
to
company
the
debentures.
upon
five years,
to
Prior
When
with
underwriting
Preliminary Expenses
revenue
Acts
to
for
paid
discounts
upon
off to
Companies
155
(Consolidation)Act, 1908,
Companies
or
as
appear
in order
commissions
placing shares,
an
should
Sheet, and
the
include
not
must
of
90
vouched
be
ACTS
of costs.
Balance
in the
Section
be
will
preliminaryexpenses
The
COMPANIES
THE
which
purposes,
receiptedbills
item
UNDER
and
December
them
or
the
to
in this illustration,they
are
been
profitshave
been
accordingly. Therefore,
these
156
company,
capitalof
share
received, such
it would
amount
the
profit were
to
return
new
paid
to
the
themselves
of
shareholders
of the
out
if, when
dividend,
as
away
AUDITING
OF
PRINCIPLES
THE
contributed.
is
If, as
of
customary,
incorporation
it
accounts
no
is
taken
are
difficult to
always
at
the
arrive
at
date
the
that have
to be treated as capital.
profits
were
If, for example, in the case above, the next accounts
31st December, the better method
preparedat the following
would
be to apportionthe full year'sprofitsbetween
the
two
periods,before and after the 1st March, on the basis
for these two
of the turnover
method
periods. Another
amount
of the
is to
apportion on
that
case,
the
months
two
out
twelve
of the
therefore, one-sixth
incorporation;
is to say, in this
of
are
the
prior to
full year's
prior to
the
date
Loss
of
any
interest
should
incorporation
be
for the
debited
period
Profit
to
after
and
Account.
In
the
date, and
that
the
whole
prior
to
facts
the
accurately
dividend
Galls
or
appear
as
an
auditor
mos^t carefully,and
date
see
of
incorporationare
possible,and are not made
used
for
revenue
should
that
examine
the
profits
ascertained
as
available
for
balance
will
purposes.
Arrear.
in
If any
circumstances,
above
calls have
upon
the
not
been
Call Account
paid,
in the
debit
Impersonal Ledger,
and
details
the
reference
by
be
should
brought
should
from
deduction
notice
that
see
These
Ledger.
the
to
total
issued
the
calls
unpaid
directors
of the
the
157
ACTS
will be ascertained
this balance
up
Share
the
to
auditor, who
as
making
COMPANIES
THE
UNDER
COMPANIES
OF
AUDIT
thereof
capitalin
the
by
is shown
Balance
the
Sheet.
Any
a
Advance.
Paid
in
calls
paid
Galls
specialaccount,
and
auditor
the
total
paid in
calls
shares
where
carried
out
proper
notices.
shares
record
been
the
give
in
have
transaction, and
forfeited
and
and
debit
the
represent the
be
Account
credited
balances
calls
written
; the
equalling and
which
can
If these
done
these
will then
already paid
shareholder, any
such
Shares
the
upon
discount
does
shares
be
which
Shares
upon
up
re-issued at
discount
credit balance
paid
amount
should
has
unpaid,
Forfeited
show
the
to
Account
but
shares
debit of the
provided
Ledger
Call Accounts,
upon
are
books
the
called up upon
Share
to
Capital
amount
the
shares
been
that
seen
Share
the
upon
off to the
power,
forfeiting
financial
debited
representingthe
forfeited.
amount
due
be
Forfeited
latter account
shares
be
to
it must
that
be
must
this
directors
the
The
auditor
an
in the
made
been
adjusted accordingly.
shares
in the Articles.
defaulting shareholder
the
of
minute
calls, if
of
directors
the
and
inspected,
be
Account
the
separate item
non-payment
provisionsof
the
The
must
this
should
the
up
total of the
are
regards giving
as
entries
correct
is contained
effect
the Articles
that
see
this
to
power
the
as
appear
forfeited for
be
may
cases
must
should
making
The
Ledger.
Accounts,
Shares.
Shares
In
Share
the
to
details
verify the
Call
upon
Sheet.
Forfeited
express
should
credit of
to the
appear
credit balances
as
advance
Balance
the
or
reference
by
should
in advance
the
discount,
not
by
debited
exceed
the
to
old
the
158
THE
Shares
Forfeited
shows
fixed
used
or
if, thereafter,this
profitshould
the forfeiture,which
reserve,
and
Account,
But
assets.
down
write
to
is
there
be transferred
preliminary
nothing
in the
to
subject, of
Account,
in the
Articles
of the
Balance
auditor
the
Forfeited
be
On
paid by
the
attendances
of each
the
who
then
and
been
re-issued,
the
upon
separate item
in
paid
amounts
as
up
be
shareholders
hand,
case
counted.
Register of Directors
the
that
directors
director
each
to him.
of
Receipts should
should
Managers,
and
to
to
he
the amount
be obtained,
of
number
only
endorsed
if the
Directors'
company,
receives
times
some-
auditor
and
the
should
are
the
The
the
vote
minute
the
the
by
to
directors
inspected,and
director
Ai
the
fixed
be
may
the shareholders'
other
must
are
see
properly due
often
provided
balance
"
attendance, in which
Book
ascertain
left to the
the
Attendance
also examine
fees
the
latter case
in which
examined.
should
and
provisionsthereof carefully
the
of
amount
Articles,or it may
be
Loss
the
inspectedand
The
amount,
Profit
Fees.
be
noted.
Acts
not
as
or
forfeited."
regards
should
is shown
Account
expenses
credit
the
that
see
have
general
Companies
particular
company.
Directors'
As
to
to
restrictions
any
Shares
shares
upon
to
course,
of the
should
Balance
the
account
credit
AUDITING
OF
PRINCIPLES
auditor,
the
be
though
considered
sufficient.
If the
paid by
the
Income
the
fees when
directors
are
Tax
upon
such
company,
paying
the
the
directors'
tax
must
generally assessed
The
Income
has
deducted
been
from
be
fees
Tax
for Income
case
upon
the
Tax
company
directors'
direct in
pa\
fees must
AUDIT
COMPANIES
OF
borne
be
never
voted
have
by
is within
accrued
Sheet,
waive
in the
accounts
or
voted
have
their
fees
of the
fee,
(ifany) provided
for the
under
to
upon
and
therefore,see
to
seal with
accounts
director
claim
requirements
auditor
been
have
to
an
signed
has not
who
which
otherwise,
The
necessary.
these
that
included
either
formally all
renounce
to
the
signed a minute, by
each
be
agreed
have
being
in his
of the
period
would
minute
fees
years,
circumstances
these
such
Balance
the
in bad
directors
in
referred
of
date
Sometimes,
the
even
mutually agree
agreement
the
that
insist upon
must
all
fee
the
at
provided for.
fees, but
auditor
they
unpaid
is informed
their
directors
but
be
must
auditor
an
total
the
maximum
the
shareholders
the
Articles.
the
Fees
unless
company,
the
the
by
159
ACTS
COMPANIES
THE
UNDER
must,
complied
with.
If
directors
the
profits,the
should
auditor
also
Directors'
board
are
provisions of
the
entitled to their
not
meetings,
upon
the
they
should
should
them
the
Expenses.
Directors
attend
such
of
percentage
calculated.
percentage is correctly
that the
see
to
inspect the
of which
Articles,by virtue
he should
entitled
are
unless
and
produce vouchers,
passed
the
board
inspect
the
the
to
the
by
if travelling
in this latter
the
at
allowed
expenses
and
company,
expressly
entitled to proper
of the
be
travelling
expenses
case
paid
amounts
The
meetings.
receipts and
appear
expenses
to
the
to
be
reasonable.
Managing
The
Articles must
director,and
who
Director's
such
Remuneration.
give
power
to
appoint
is generallyvested
power
payable.
Articles, and
managing
in the directors,
The
the
auditor
minute
must,
of
the
160
PRINCIPLES
THE
AUDITING
OF
paid is in
therewith.
is
there
directors' and
minutes
auditor
an
that
shareholders'
the
such
accounts,
as
minute
inspectboth
books, for the
of the transactions
many
matters
that
provided for
in connection
pending litigation
in the
becomes
aware
important
should
are
should
auditor
an
the
are
company,
managing
inspected.
be
important
It is most
of
the
Books.
Minute
the
with
contract
accordance
be
with
disputed claims.
The
examples of matters
the authority
are
following are
shareholders'
Passing
minutes
Transfers
the
accounts.
of dividends.
Appointment
and
remuneration
of directors.
Appointment
and
remuneration
of auditors.
The
which
alteration of the
following
Articles.
examples
are
directors' minutes
The
the
general reserve.
to
Declaration
The
which
"
adoption of
and
for
issue of share
Allotment
are
of
matters,
necessary
to
authorise
"
capital.
of shares.
Calls.
The
forfeiture of shares.
of contracts.
Adoption
Appointment
Declaration
the
and
of officials.
remuneration
of interim
dividends
and, if authorised
by
Appointment
and
remuneration
of
managing director.
Dividends.
The
declaration
of
except in the
some
cases
the
dividends
case
dividends
is vested
of interim
upon
in
the
holders,
share-
dividends, and
preference shares, in
in
both
162
precautionto
every
use
If
dividends.
OF
PRINCIPLES
THE
the accounts
that
see
is
there
AUDITING
such
no
justifysuch
in
power
express
ordinary shares,
the gross
case,
and
Profit
credited
will have
The
company.
dividend
the
credited
to
Balance
Sheet.
declared
date
The
and
until
time
any
the
various
and
be
holders
share-
receipted
are
Sheet
insist upon
dividend
the
are
is
of such
No
arise
there
have
be express
must
do
Loss
of
prevent
future, and,
declared either
terms
cumulative
should
company
note, but
until
If
preference
be stated
an
the directors
upon
auditor
at
the
or
by
of the Articles.
the
cannot
date, and
sufficient
further, until
by
dividends
DIVIDENDS.
exists
liability
and
claim
can
Account.
upon
from
years
although,subject
PREFERENCE
arrears
become
not
shareholder
to
be
been
not
period. Forfeited
and
actual
the
should
them
separatelyon the
fix a period after
dividends
nothing
unless
according to
but
general reserve,
in the form
this.
will
liability
in
"
of dividend
arrears
to
CUMULATIVE
OF
to
dividends
the
this
Profit
to
due
be
cannot
expiration of twenty
within
Articles, there
ARREARS
made
upon
made
shown
if such
the
be transferred
creditingthem
there
that
Articles sometimes
declaration, and
of
at
the
to
tax
shareholders
and
specialaccount,
barred
statute
to
be debited
against the
returned
the
should
unless
must
the
to
If certain
expirationof which,
them
paid
deducted
tax
assessment
with
DIVIDENDS.
the
the
warrants.
UNPAID
the
the
paid
vouched
total
the
must
Account,
amounts
be
can
Tax
paid under
been
inspect
deducted
be
dividend
and
Account,
Income
the
to
that
must
shareholders.
the
must
see
the
upon
of the
amount
Loss
Tax
"
is declared
dividend
the
Income
therewith.
agrees
and
dividend
declaringthe
minute
by
auditor
The
DIVIDENDS.
VOUCHING
declared
be
only
can
the
no
profitsare
arrears
of
the shareholders,
It will be
AUDIT
therefore,
seen,
and
the
ordinary
the
auditor
of
the
Balance
whole,
to
for
be
cannot
and
see
Sheet
distribution
diiferent
classes
that
the
of
arrears
how
this
view
correct
of
reveals
only
in
of
the
be
will
then
the
of
state
profits
future
shareholders.
of
served
which
will
may
be
the
show
not
stated,
become
divided
note
for
the
as
company
by
of
meantime,
unless
the
to
duty
the
does
is
position
purpose
in
affairs
dividend
will
dividend
be
Sheet
If
arrears
any
But,
done.
Balance
the
first
the
is
preference
the
it
future.
the
these
can
there
and
that
said
whereas,
show
before
shareholders,
to
made,
are
163
ACTS
of
question
profits
up
COMPANIES
THE
is
this
that
made
be
to
true
UNDER
sufficient
when
have
it
COMPANIES
OF
such
is
note
available
between
the
IX
CHAPTER
AVAILABLE
PROFITS
IN
the
of
case
directors, in whom
the
dividends
before
and,
auditor
the
upon
that
is
It
follows
In
Chapter
of
profits
in
surplus
most
absolute
be
it is necessary
in
profit is
such
capital
in
wasting
has
value
nature,
or
unless
;
of
in
of
rules.
in
assets
fact
process
of
that
that
being
true
in
impossible
all the
be
assets,
estimated
Further,
if
therefore,
the
increase
it is
should
the
164
true
original capital,plus
the
intact
reason
value
accepted
sible
impos-
dependent
concern.
as
to
have
ascertaining
corresponding
thereof
invested
are
exact
value
at
been
by
the
certain
is
thereto,
by
the
for
question.
it is
cases
be
has
should
he
profits are
of
assets
at
the
arrived
not
additions
with
most
liabilities,but
over
arrive
that
accordance
the
constantly
in
such
represented
to
cases
because
I'lit-
available
are
that
exactitude
of
of assets
in
that
as
entirely
complicated
most
affairs,
therefore, it will
auditor
this
shown,
business,
profit should
the
it is
valuation
the
upon
of
laid
of
almost
profits
an
the
earned.
fact, been
what
for
profits,shown
any
it is essential
that
IV
obtain
to
of
knowledge
thorough
in
general
accounts
position
respect, and,
which
with
one
not
have,
this
in
the
correct
or
in
auditor
necessity depend
question
the
dividend
deal.
of
whether
and
true
whether
must
their
by
recommend
to
shareholders
the
by
prepared
are
power
appoint
distribution,
shareholders
the
show
for
the
ascertaining
consequently,
available
seen
declared
of
accounts
rests
shareholders
The
them
also
be
to
purpose
express
the
company,
the
meeting.
Dividend.
for
Available
Profits
DIVIDEND
FOR
any
of
part
ciated
depre-
have
they
any
are
consumed
of
in
PROFITS
the
of
course
AVAILABLE
earning revenue,
any
made
be
must
good
ascertained.
can
be
and
1913, neither
if,for any
lost,then
or
been
of
out
before
revenue
However,
provide as
165
DIVIDEND
FOR
other
reason,
such
the
wastage
profits
true
1908
Companies Acts,
the
to the
exact
in which
manner
of a company
to be ascertained, nor
enact
are
profits
be distributed as dividend.
that only
true profits may
The
of the profitsof a business
periodicalascertainment
is an
operation of such practicalimportance as to be
the
"
"
essential to the
follow
of
profitin making
be
very
"
of the
"
is
firms
and
itself,but
above
would
strict
the
rarely observed
in
to
conception
accounts
practice. Hence
profit
of
business
annual
the
out
difficult in
word
the
of the
strict consequences
the
out
safe conduct
often
meaning
drawing
up
of
the
domestic
are
companies. These
documents
designed for the practicalguidance of those
which
interested,and so long as the principle
on
they are
accounts
drawn
is
up
certain
by
lessen
departures
Sheets
almost
induce
It
and
said
be
Profit
will
found
for
company
that
is not
of
considering
if,when
Articles that
in
some
intact.
the
company
losses of
In
the
company
definition,which
out.
in
Hence
drawing
Accounts, that
cases
it
to
be
profitsmay
originalcapitalof
every
individual
and
Memorandum
are
question
is
all,
them.
be
of Association
For
Loss
at
require specialcircumstances
to
practice,the provisionsof
when
and
available
the
strict
the
if
little,
of making them
difficulty
so
assumptionshave become
customary
Balance
may
from
greatly the
certain
up
case
in
Articles
of the utmost
of
the
formed, it
importance
divisible profits.
is provided in its
166
of
out
actual
or
do not
nor
was
From
in
time
to
practice in
connection
of
decision.
circumstances
particularcase.
that
have
are
But
of that
be
may
Courts
only
several
in this
decided
cases
subject,
whole
of
the
be
borne
when
of what
circumstances.
are
all
not
mind
that
""and
that
surplus
a
or
distribute
such
capitalmay
before
comes
cases
Again,
entirely in
dividend
profit.
the
dividend
not
only
can
be
as
the
proceeds
would
used
would
rulingsin
accord
be
to
pay
out
example,
if
company
of sale of
one
be
paid
out
of
of
the
accepted
probably
paid
can
For
be
the
stances
the circum-
with
cases
previous decisions
Courts
the
the
the circumstances
in
case
of
rules thus
the
entirely
upon
similar
decides
important
and
case,
in similar
this
the
in which
cases
it must
indication
an
parties.
to
the
way,
have
submitted
very
as
decide
be
cases,
case
particular
reversed
and
interested
to
of the
question
definite upon
had
of what
have
difficulty
the
between
not
are
decided
decide any
neither shareholders
particular
cases,
such
in
applicable
are
identical.
Courts
In
There
been
laid down
Companies
are
is fair and
what
of dividends
company.
of
with
in
dispute
of the
circumstances
for dividend
matters
Courts
proceeding,and
intentions
express
the
the
traded
subsequentlycomplain
can
holders
share-
have
creditors
profitsavailable
become
creditors
that
time
arisen
prohibitsuch
of the
one
knowledge,
althoughthe payment
financially
imprudent, the
deemed
be
it is with
; and
the company
might
and
subscribed
have
Acts
AUDITING
losses of
with
OF
it may
As
PRINCIPLES
THE
a
a
one
this
the
dividend,
bond
were
fide
to
of its fixed
assets,
capital,and
would
AVAILABLE
PROFITS
in
be
realitya
return
that they
capital
spiteof
in
capital,for
dividend
out
of which
it could
been
have
extent
When
income
in
incurred
and
will
these
Capital
The
be
now
supposed
such
dividend
capital,to
overstated.
in connection
assets
but
that
been
has
points
of
siderable
con-
with
the
and
capital losses,
treatment
considered.
Profits.
profit available
surplus, or
dividend, is
certain
the
accounts,
shareholders'
income,
depreciation of wasting
of the
of
expenditure
such
arise
difficulty
paid out
been
current
producing
showed
dividend, the
as
of the
of any
all the
charged
Account
the
whole
the
the
at
dividend
surplusor profitavailable
profitsare
the
arriving
against the
be
which
to
out
part of the
paid a
have
paid. If, in
and
paid
Loss
would
no
distributed
been
profitshave
be
be
overstated
profitsare
the
would
there
of
company
of
must
If
subscribed.
167
DIVIDEND
shareholders
the
to
loss,then, again,such
FOR
confined
not
cases,
to
include
may
for
distribution
as
profitsonly, but
capital profits. Suppose,
revenue
in
for
principles.
above
Assets.
Wasting
In
the
decided
of
case
that
such
that
it
Companies
In
the
not, in
Acts
case
as
not
was
of such
mine, and
necessary
of
compel
formed
was
company
wasting asset,
to
Asphalte Co.,
Neuchatel
v.
where
wasting asset,
stated
Lee
to
provide for
there
it to do
was
specially
the
nothing
ciation
deprein the
so.
practice,usually provided
was
work
to
its Articles
it
for out
of the
itself is
current
168
AUDITING
OF
PRINCIPLES
THE
ordinarilythe object of
mine
only, and
particular
because
profits,
is to work
work
life of its
will wind
it will be
of such
depreciationin
sale of
such
and
all the
and
now,
any
and
of the
of
the expenses
Account
of the
mine
the
there
and
may
whole
then
proceeds of
raisingthe
the
the
same,
company
sufficient to
sum
to
providing for
charge against
to
is
object
main
"
charges of
is worked
ore
effect of
Out
for
pany's
com-
is,the
actual
?
case
of
value
scrap
that
"
losses and
Loss
out
whole
the
the
Ordinarily,
further, it is proposed
year'sProfit
the
to
part of the
value
the
acquirethis
paid all
expenses,
when
that
land.
is the
what
will be
ore
and
part thereof
Now,
up.
is sold is
from
is to
company
of the valuable
wind
and
works
exhausted.
peculiarone,
somewhat
sold
entirelyexhausted, apart
be in surface
is
that
and
raised
been
has
is
when
ore
capitalasset,
main
ore
the
that
seen
acquire and
to
up.
therefore,
position,
The
company
is,therefore,roughly equal
asset, and
principal
company
not
originalone
the
The
the
after
mines
other
mining
each
late,
accumu-
of the
in full.
which
the
with
these
is
of
purposes
sufficient
and
the
will be
that
winding
this
up.
sale of ore,
If
business.
of
whole
accumulated
so
funds
remain
that
there
until
whole
after payment
the
paid
is
no
question only
The
be
must
realised and
seen
the
the
asset
outside
the
up,
of
the
when
shareholders.
requiringreplacement,
affects the
of the
whole
the
winding
to
over
capital
started
company
invested
final
this
required for
is not
working capital,therefore,
accumulated
It will be
mine
graduallybeing
business, and
they
life of the
the
During
positionupon
amounts
of all expenses,
realised
are
upon
final
the
payable to
170
of
positionwith that
regards the capitalsunk
above
it will be
plant, but
Therefore, in order
originalmachinery
replaced,or
be
Therefore,
to
is
the
plant and
carry
out
of the
the
company
indefinitely.
the
object,when
this
and
useless,the
earnings of
original
less
out
must
same
continue
cannot
company
In this
as
company
machinery.
more
the
contrast
object of
the
trade
worn
to
manufacturing
the term
to
well
be
that
seen
continue
to
in
only for
is not to continue
Machinery.
it may
going further,
latter case,
AUDITING
and
Plant
of
Depreciation
Before
OF
PRINCIPLES
THE
to
trade.
originalmachinery,
be provided a sum
there must
for the depreciation
thereof,
so
that, during the period of its working life,the capital
sunk
is replaced,and, when
the machinery is worn
out,
is available to purchase the necessary new
this sum
plant.
be replacedin order that a
assets
must
Therefore, when
its objects,the depreciation
out
of
company
may
carry
such assets must
be provided for.
Capital
out
Losses.
Another
Investment
various
Profit and
The
which
pay
had
been
might
law
sometimes
There
is
its
it
held
was
be
very
prevented
circumstances.
sinking
the
company
whether
was
and
the
value
of
company
capitalcould lawfullydeclare or
first making good the capital
which
without
lost ;
which
"
this case,
dividend
case
and
General
v.
producing income,
Account
showed
but the
a profit,
had seriously
depreciated.,.
Loss
had
In
Trust.
Verner
investments
investments
the
is
important case
very
Commercial
owned
the
it
Part of the
no
law
which
imprudent, yet
in
all
and
cases
judgment
reads
prevents
there
as
course
was
no
all
under
follows
company
"
from
before
formed
be
may
company
dividends shall
that no
principle
capitalis kept undiminished, or a
with
its creditors
to
keep its
the
contract
may
A company
up of the company.
the
upon
unless
declared
be
winding
after the
or
171
DIVIDEND
FOR
AVAILABLE
PROFITS
But, in
capitalor assets up to a given value.
of some
specialArticle or contract, there is no
absence
the
law to this
It
effect, and, in my
opinion, for very good reasons.
would, in my judgment, be most
inexpedientto lay down
a
and
hard
either
company
rule
fast
in debt
not
paying dividends
from
would
which
well able
or
its
long as
so
prevent
to
flourishing
its debts,
pay
capitalsunk
in
creating
the
not
was
It will be
dividend, is
that
seen
the
paying
not
the
but
capital,
is paying it out
without
providing for
but
is
different
quitea
losses of fixed
that
appear
If the
kept
be
capitalto
so
be
profitsare
if the
From
it must
But
be
floatingassets
that
arrivingat
the amount
must
be
of the
Perhaps
which
am
capitalmay
current
the
shortest
way
its
that
shareholders
out
sunk
receiptsover
and
that
capitalmust
do
not
there
are
require
then
this
bond
fide
for dividend.
this
clearly holds
case
properly depreciatedbefore
profitsavailable
follows
as
of
for
to
yet that
payments
dividend,
"
distinction
expressingthe
lost,and
current
the shareholders.
of revenue,
endeavouring to explain is
be
it
case,
maintained
observed
before
this
with
again, rests
provides
but
surplus,
revenue
of revenue,
out
and, provided
illegal,
surpluses,these are available
revenue
"
matter,
is not
course
for
do
to
good
dividend
company
intact before
is bound
their
the
fide
which
previousloss of capital,
the point,therefore,is : Must
made
for
"
bond
of a"
capitalbe
available
profitsare
would
matter
out
same
by declaring this
of the shareholders'
company,
may
that
say
the
be
excess
fixed
of
divided,
172
in which
divide
to
case
such
part of such
without
excess
up,
excess,
deducting
forms
capitalwhich
the
form
into and
it will enter
otherwise
as
kept
be
circulatingcapital must
floatingor
that
but
AUDITING
OF
PRINCIPLES
THE
to
contrary
law."
In the situation raised
Co.
it
case,
that
shown
was
wasting
of the
Lee
the
by
AsphalU
non-provisionfor depreciation
the
asset
NeuchaUl
v.
such
not
was
bad
business
to
appear
compel
to
company
lines,so
that
run
it need
not
shareholder
every
is
there
keep
i;d
provides in
its
capitalout
up
subscribes
to
finan
sound
company
law
in the
nothing
if,for instance,
that
Articles that
then
show
of
revenue,
upon
the
company
Conclusions.
Some
doubt
and
ones,
has
thrown
hard
practice as
is
what
to
and
capitaland
conclusions,therefore,would
of
floatingassets
assets, it
provision in
the
need
the
case.
not
Court
In
its
be
must
depends
upon
fact, the
alone
for the
can
many
is
is not
the
objects of
the
whole
position is
that
appl
is
profit;
cases
to
and
decide
floatingcapital,
difficult.
so
to be that
appear
by later
is not, and
be
can
what
what
cases
there
provided for,but
Articles,and
provide
in
distinction
the
that
these
upon
it would, therefore,appear
be, any
cannot
been
depreciation
regards fixed
as
the
The
company,
circumstances
some
the
of
companies
but
any
PROFITS
AVAILABLE
particularcase
all
after
173
DIVIDEND
FOR
circumstances
the
been
have
considered.
dividend
this
way
pre-supposes
means
also
represent
capitalof
share
paid
were
left intact
is such
capitalasset
value
of the
be
profitmust
realised
treated
the
is
out
this
of the
represented by
paid, and
estimated
piece with
serious
trading profitsit
large unrealised
is
effects
profitsare
what
in
paid
the
for
are
cash, with
has
company
and
not
which
dividend
that
value
drawn
upon.
for
is not
dividend
is
and
can
being
Even
concern.
see
that
treated
declared
the
so
company
to the
be
were
company
unrealised
result
be
the
in
increase
paid thereout
in
credited
not
moment
the
must
company
may,
the
capital
extremely important to
the
increase
working capitalof
the
regard
sold, cannot
not
working capital of
penny
without
dividend
the
of the
particular
one
mere
be
to ascertain
dividend, for if it
for
be that
and
unrealised
that
however,
are,
effect must
in order
Further, such
so
one,
the whole
available
as
original
the
profiton
assets.
profitavailable
as
paid
taken
other
of assets, which
treated
be
be
cannot
value
the
to
surplus,as
clearly
so
capitalsurplus
that
valued
re-
cases
some
capitalwould
share
therefore,it is necessary
shall be
above
if such
dividend, the
as
away
;
there
and
that
company,
of the company
assets
that
the
in
ordinary
in the
trading profit,but
proper
capitalprofitsare
profit,and
in
as
respect
must
profits,
be
working capitalof
If, therefore, the
this
large surplusof working capital,
its
financial
position.
The
Interests
One
of
the
of
main
payment
of
dividends
available
to
pay
payment
to
Creditors.
objects
out
creditors
shareholders
of
of
of
must
the
rule
prohibitingthe
improper dividends.
Part
of
174
reads
Ireland
of
in the
judgment
the
"
capitalof
the
.
it follows
from
be diverted
the
liable to be spent
but
company,
have
from
away
as
also
cannot
follows
business
the
be returned
fund
that
member
that
capital,cannot
society. It is,of course,
the
can
the
that
as
carrying on
part of it
right to look,
paid by
opinion,it
Memorandum
lost in
From
up.
been
objectsof
or
no
take
to
as
so
being wound
my
in the
is described
what
In
him.
to
the creditors
is to pay
which
in the
mentioned
as
company
has
whatever
that
returned
be
the
of the company
event
Corporation
Land
v.
"
is to be the fund
Memorandum
in the
Guinness
case
follows
as
AUDITING
OF
PRINCIPLES
THE
to
which
of which
out
to
member
the
they
of the
creditors
are
be
to
paid."
It will be
seen,
interests of the
be used exclu
must
capitalof a company
for the purposes of carryingout the objectsof the company.
in the Memorandum.
Further,
Such objectsare
set out
be paid only out of a bond fide surplusor
dividend may
a
profit,as otherwise the capitalavailable for the payment
creditors,the
is reduced.
of creditors
Position
of
the
Auditor
this
Regards
as
Question.
As
regards
these
of considerable
question and
the
auditor's
an
He
responsibility.
all the
ascertain
He
case.
matters,
must,
must
go
positionis
into the
circumstances
of course,
and
thoroughly
be
one
whole
of
facts
conversant
arisingout of the
principles
and see that these are properlyapplied,and, in any
same,
lutely
that the whole
event, he must
see
positionis made absoclear to the shareholders.
If depreciationis not
being provided for in respect of wasting assets, capital
losses are
not
being provided for, and capitalprofitsare
with
all these
being
used
for dividend
shareholders
the
facts
rulings,and
are
the
purposes
entitled to
of the case,
and
be
look
in all these
the
cases
placed in possessionof
to
the
auditor
to
see
all
that
AVAILABLE
PROFITS
this
is
consulted
in
whole
the
he
that
matter,
find
may
and
board,
it
what
to
and,
have
requires
in
act
and
is
what
may
often
not
is
therefore,
it
complete
grasp
opposition
of
the
to
thorough
upon
of
Again,
great.
are
based
subject,
the
direct
courage
auditor
and
responsibilities
the
essential
of
an
may
shall
he
as
this
knowledge
practice,
to
as
175
DIVIDEND
circumstances,
these
importance
great
in
course,
directors
by
done
be
Of
done.
FOR
of
appreciation
the
responsibilities.
Summary.
To
available
profits
must
assets
current
of
be
it
fixed
assets,
depends
upon
all
these,
profits
that
are
the
actually
re-valuation
of
the
need
available,
realised
subject
of
the
whole
of
Articles
and
of
that
the
assets.
provided
the
te-.ms
and
after
even
the
considering
decide.
Capital
requirements
allow,
such
ciation
depre-
Association,
following
the
be
all
to
regards
company,
finally
can
to
and
profits,
the
and,
case,
alone
Memorandum
of
Articles
whole
As
floating
course,
necessarily
not
objects
the
Courts
the
losses.
the
at
of
of
addition,
and
and
circumstances
in
for,
this
arriving
depreciation
dividend,
charges
in
that,
appear
provided
Memorandum
the
would
for
expenses,
of
for
it
summarise,
profits
that
remain
they
are
after
CHAPTER
THE
Legal
THE
subject
of
the
Parliament
indefinite
very
liabilities.
There
subject which
that
finality
therefore, that
careful
consideration,
extent,
fix
of
sense
his
standard,
own
member
as
It
exhaustively
important
most
is
thereafter, the
but
in the
this
will
cases
conclusions
to
the
each
space
but
subject,
be
to
end
essential,
matter
up
most
to
drawn
large
to
high
to
individual
available,
of
some
briefly considered,
be
the
is rendered
service
in
impossible
with
acting
by
greatest
whole, and
thereof.
this
give
in
is
it
with
thought
Even
practitioner must,
each
as
it is
but
differ
should
responsibility,the
profession
deal
auditor
every
arc
dealing
reached.
been
yet
of
Acts
auditors
cases
legal view,
profession, opinions
accountancy
of
one
responsibilitiesand
important
the
is
various
The
auditors'
several
not
auditors
of
appointment
the
indicate
has
Auditors.
the
to
are
AUDITORS
difficulty.
with
as
the
to
and
dealing
OF
legal position
exact
complexity
some
the
of
Position
The
of
POSITION
LEGAL
the
and,
will
therefrom
be
summarised.
The
Position
of
Auditor
an
to
Private
Firm.
In
the
under
case
suffer
Auditor's
Under
281,
or
if
other
loss
any
document,
in
any
makes
is not
auditor
an
responsible
through
under
Companies
auditor
is
but
Position
the
an
private firms,
statute,
any
employers
of
his
the
in
appointed
damages
neglecf
or
default.
Companies
(Consolidation) Act,
1908,
statement
176
false
in any
if his
Acts.
Section
Sheet,
material
178
is entitled to
auditor
An
of
vouchers
and
the
AUDITING
OF
PRINCIPLES
THE
to all the
access
whose
concern
to
accounts
has
he
accounts
is entitled
books,
to
additional
such
information
1908, and
Act,
be limited
cannot
audit
the
directors
privatefirms
of
of his audit
scope
either
by
way
case
limited
be
can
in any
in the
but
and
his powers
in
by agreement,
the
holders,
share-
or
scope
which
case
of
an
the
auditor's
in
such
of
importance
the utmost
should
recorded
be
Auditor's
in
of the arrangement
terms
difficulties
writing,otherwise
future.
arise in the
may
the exact
that
for
Liability
Neglect.
by
or
been
have
accounts
of dividends
payment
assets,
such
if it is
or
by
the
cases,
the
value
have
must
Auditor's
It must
misled
had
he
may
of
be effected
may
assets, such
as
debtors
as
to
be
reasonable
exercised
discovered
Liability
Third
omission
auditor
proved that,
skill,he
be
capital. This
other
In
of
out
by over-estimating the
and
through an error
falsification,
resulting in the
deliberate
of
reason
overstated, either
the
care
and
discrepancy.
Regards
Parties.
also be remembered
and
thus
suffer
that
damage
third
by
partiesmay
reason
also
of accounts
LEGAL
THE
certified by
POSITION
auditor
an
intending partners
or
audited
of
accounts
proposing
from
the
case
business
into
of Le
Lievre
and
them
by
had
he
though
even
should
third
parties who
However,
is not
employed
But
moral
recognise
otherwise
may
would
damage,
suffered
duty.
no
are
scientious
con-
obligation
suffer
through
neglect.
his
Decisions.
Legal
There
several
are
subject,all
here
space
Leeds
this
case
merely
it
held
was
thus
In
been
carried
that
the
this
the
case
out, and
auditor
it
had
that
As
result
and
held that
where
that
knowing
In this
case
customers,
wholly
General
be
Bank
of
but
accuracy,
of
company's
the
"
of the
is
Articles had
it
was
no
Articles when
not
excuse
he knew
auditor's
bonuses
neglect,
improperly
were
the
insufficient.
Sheet
case,
he
had
the company
but
does
Balance
the
In
Case.
auditor
an
the
it to
books
the
was,
London
auditor
an
Sheet
that
the
seen
In
Balance
of the
held
the
terms
was
not
existence."
paid, and
with
representation
accurate
only
Shephard.
v.
its arithmetical
satisfyhimself
must
of their
verify
is
there
sufficient for
Sheet
Balance
the
compare
affairs."
it is not
that
this
upon
leadingcases.
and
true
of the
few
studied, but
be
Estate
and
he
that
should
consider
decisions
important
very
of which
to
to
account,
to
they
auditor
an
had
the
Gould, it would
v.
fraud,
them
owe
them
to
which
negligent. He
to
appears
Dennes
of
business,
relations.
partieswho
been
auditor
towards
and
absence
not
with
business
enter
to
produced
have
may
the
that, in the
appear
example,prospectivecreditors,
debenture
"
; for
179
AUDITORS
OF
is
not
report
is
advanced
company
case
to
the
it
was
holders
share-
incorrectlydrawn,
guilty of
securities held
The
this
misfeasance.
considerable
sums
by
the
bank
had, however,
were
taken
180
due
the
failure
of the bank's
causes
bad
debts,
of affairs, and
real state
refused
however,
lack
the
of
value
of
the
dependent
guiltyof
assets
to
contained
words
result of which
as
these
dividends
reads
"
to
follows
as
It is
directors
An
an
auditor's
auditor has
of
nothing
dividends
the
on
ground
them
to
had
company
of
being
failed in
had
he
failure the
shareholders
or
found
was
the
his
p.iid
judgment
"
part of
no
is
holders,
facts to the share-
capital. Part
of
out
The
Sheet
two
report
"
jointlyand sevenilly
true
in his
his
of
ro-
no
auditor
held
reportedthe
to have
ought
some
In
Balance
the
respect of
"14,400 odd,
in
directors
the
the
made
the
directors,
the
accounts.
The
was
of
aware
merely stated,
by
realisation."
misfeasance, and
the
but
shown
as
declared, amounting
he
alter
to
security,etc.,
upon
liable with
that
apparently was
reportedfullyto
for
available
shown
the
to
report
auditor
The
respect
made
been
been
have
chief
the
loss in
heavy
reserves
proper
profitswould
no
for dividend.
who,
had
loans, and,
of these
of
One
paid.
the
was
loans, whereas
such
upon
in fact,
never,
was
AUDITING
OF
PRINCIPLES
THE
nothing
making loans
to him
to
as
do
to
duty
what
with
with
the
give advice
either
they ought
to
of
do.
dence
prudence or impru-
without
or
the business
whether
to
It
security.
is
company
is
being
conducted
prudently or imprudently,profitably
or
unprofitit is nothing to him whether
dividends
are
properly
ably ;
or
improperly declared, provided
duty
state
to the
the
shareholders.
financial
true
time
of the
then
comes
position? The
But
company.
this
see
without
that
the
his
duty
is
he
does
enquiry
books
the
is he
and
to
the
at
company
By examining
not
own
is to ascertain
is confined
How
question :
answer
business
position of
audit, and
the
His
discharges his
he
that.
But
ascertain
such
to
the
books
of the
and
without
of the
company
taking
any
themselves
trouble
show
to
the
company's
THE
LEGAL
POSITION
OF
true
position. He
must
ascertain
to
will be
that
than
worse
bound
not
skill in
correctlyshow
does
he
would
part,
if he
even
of
concealment
fraudulent
the
did, he
reasonable
of
want
any
is accurate
If he
his
on
obligationis
His
Sheet
company.
do
affairs ;
company's
the
error
by
say,
"
him.
from
book
the
deceived, without
his part
on
is not
books
the
that
his Balance
an
and
care
investigations.He
guarantee
of
responsiblefor
himself
care
exercise reasonable
positionof
true
books
the
to
be
were
the
not
guarantee that
not
according
does
auditor, however, is
An
enquiries and
he
care
does
he
...
than
more
making
insurer
an
do
to
farce.
reasonable
take
Unless
do.
they
181
AUDITORS
not
as
onerous
so
this.
"
be
I take
Such
honest
skill before
is
right, and
and
suspicion;
opinion of
the
required.
.
"
The
that
to
the
to
he
an
must
Where
there
practice, I believe,
like them
care
more
is not
skill
is
obviously
to
in
they
correct
are
bound
even
that
see
exercise
case
perfectlyjustifiedin acting
special knowledge
expert where
is
directors
Sheet
directors
certificate of
and
1891,
year
of the
and
certificate,
the
and
care
of
on
is
Balance
the
others
and
care
case.
haphazard,
auditor
an
reasonable
than
more
still
but
necessary,
that
assume
not
and, in
cases
does
he
reasonable
of that
suspicionis aroused,
Where
also.
few
must
particularcase
suspicion,
very
select
men
he
certifies is true.
he
in any
care
sufficient ;
and
reasonable
business
excite
to
what
circumstances
the
upon
take
must
believes that
he
nothing
are
he
auditor
certifywhat
not
must
true, and
of the
duty
the
is reasonable
What
depend
be
is,he
that
"
believe to be
"
to
was
bank
accompanied by a report
Taking the Balance Sheet,
the
true
and
if this
report had
Mr.
Theobald
would
financial
been
have
February, 1892,
laid
Theobald
position of
before
the
the
stated
bank,
shareholders,
182
this
Unfortunately,however,
them.
to
AUDITING
OF
PRINCIPLES
THE
it becomes
legalconsequences
the
consider
shareholders, and
the
laid before
report
to
necessary
Theobald
Mr.
to
not
was
of this
circumstance.
"
others, does
them
information
information
of
auditor
An
risk of
and
means
equivalent terms.
means
respect of
financial
company's
of information
means
the
his
at
so
them,
serious
very
failed to
discharge
duty.
"
In this
I have
case
without
February, 1892,
before
is
than
shown
It is
...
loans
and
the
mere
suspicion. But,
is to
that
similar
expresses
without
value
the
of the assets
dependent
upon
that
the
to
say
effect is
that
is
words
so
to
enough
We
an
that
excite
to
auditor
an
enquiry,
arouse
unusual
of
value
unusual
of
as
tion.'
realisa-
their realisation.
upon
not
warning
and
statement
no
was
statement,
than
more
Co.
falsified
had
in
if, as
this
case,
ordinary person
any
language
its
would
infer
it."
Irish Woollen
that
of
follows
it by no means
seriously
wrong,
ordinarypeople would have their suspicionsaroused
was
Sheet
other
no
auditor
something
that
by
as
information,
convey
althoughan
truism
to
with
is
of those
presence
'
words,
depends
statement
shareholders
to the
Sheet
mere
securities
told that
are
the
Balance
the
any
Mr.
saying that
the Balance
them
directors,and
the
conveyed by
on
in
hesitation
layingbefore
certifyingand
laid
no
did fail to
Theobald
he
in
induce
to
Information
peril,and runs
to have
being held, judicially,
position,does
in
is calculated
more.
no
to
gives shareholders
who
of information
instead
his
by
are
information
convey
that
as
to ask for
of them,
some
or
discharge
not
much
so
it is to
duty
whose
person
by
the
he used
v.
In
Tyson.
damages
where
suppression
reasonable
of
care
this
the
case
accounts
the
auditor
had
invoices, it being
and
he should
skill,
been
held,
have
discovered
follows
"
LEGAL
the
fraud.
these
that
audit
London
not
only are
grounds
for
"760, whereas,
to
in
v.
has
liabilities in
the
January, 1892.
and
his assistants
Hasluck
Seear
"
liable for
failed to
had
they
the
mechanical
out."
held
were
and
over
company
4th
Kevans
this, but
Storage Co.
that
Mr.
the
of
since
cause
carried
auditors
the
this
to
was
Oil
damage
care
discovered, and
been
have
any
due
blame
free from
the
would
carrying
under-statement
the
Sheet
I consider
case
as
if due
opinion that
exercised, the
invoices
from
Balance
way
reads
judgment
the
of
am
is liable for
auditor
sustained
been
suppression of
not
of
183
AUDITORS
OF
Part
reasons
skill had
the
POSITION
"
For
and
THE
damages,
the books
of the
amounted
difference
was
the
on
verifythe existence
according to
fact,there
In this
Co.
had
accounts
the
by
Cotton
Kingston
falsified to
been
stock.
managing director,and
the
auditor
stock.
"
of
out
as
capital,
Parts
For
make
of the
several
and
was
no
cotton
auditbrs
extensive
both
the
years
certified
been
appeal that
on
that
had
that
been
manipulationof
follows
as
the
by
quantities and
ately
deliber-
values
He
company's mills.
and
the
and
company
the reverse,
was
the
"
committed
bolster up
by
the
certificates,and
were
it
valuations
over-
of the
did
this at
There
1893.
of account
or
took
of the
to
extent
book
I will refer
the
held
read
frauds
in the
yarn
of the
judgment
order
exaggerated
the end
had
result of the
when
flourishing
it appear
cotton
of
means
was
the
case
considerable
very
accept such
years
in
who,
manager,
it
this
not
was
paid
entitled to
was
stock
The
In
Case.
director, by
managing
of the
he
Mills
yarn
the
year,
in the
mill at any
one
the
last
The
time.
preceding
at the
Balance
ning
beginSheet,
184
of the
a
trade
it
by
shown
as
inserted
in
asset
an
as
the accounts
that
this
into
the
this item.
from
see
breach
of their
duty
He
rely on
him
In
Sheet.
He
manager.
In
was
this
of
man
He
competence.
knew
who
him.
directors
are
auditors
to
had
give
"It
work
a
suspicionthat
no
information
accurate
hand, and
they trusted
is the
he has
duty
to
blamed
be
to
of
him
that
reasonably competent,
would
must
use.
depend
What
on
the
to
not
careful
questioned
un-
the
that
The
and
be
to
trusted
stock-in-trade
bring
skill,care,
is reasonable
the
was
to
of
everyone
held
has
the
on
and
by
accordinglyin
auditor
an
perform
as
in the
trusting him.
for
he
to enable
relied
character
Judge
irly
value
trusted
was
learned
The
not
high
that
to
and
particularcircumstances
on
the
which
caution
and
in
matter.
bear
cautious
skill,care,
an
stock-inmust
necessary
auditors
the
case
mill, he
its proper
at
it is.
that
details of the
cotton
stock-in-trade
the
enter
of
case
was
part of
no
contends
one
people for
the
It is
confess
his returns
company.
No
so.
check
to
stock.
other
skilled person
Balance
The
entry in the
the
they did
that
take
to
in hand.
to
further
summarised.
and
manager,
to the
duty
auditor's
some
per
ascertained
examine
not
accounts
their omission
that
cannot
must
the
showed
Sheet
Balance
on
as
not
item
the
trade
they did
the
was
'
of
professto guarantee the correctness
for it. They
no
responsibility
They assumed
did
auditors
took
of
accuracy
and
always corresponded
But
case.
value
the
Sheet, but
summary
summarised,
the
was
stock-in-trade.
of such
Balance
the
The
manager's certificate.'
with
of all the
summary
and
signed by the manager,
was
adopted by the auditors
was
summary
and
year,
total value
the
showing
accounts
The
of each
end
the
at
purporting to
company's stock-in-
of the
values
and
quantities
the
show
contained
heads,
various
under
series of accounts
end
the
at
book
The
journal.
stock
the
from
year
stock-in-trade
of the
and
AUDITING
OF
PRINCIPLES
THE
auditor
caution
of each
case.
186
in
every
certificate
for
responsible
stock, and
the
would
be
safeguard for
the audit
that
tested
be
check
the stock
there
are
regards this
that
he
that
he
an
auditor
show,
can
used
in the
For
the
should
not
order, therefore,
must
stock
it is
in
it is almost
satisfyhimself completely as
to
in the
the
possibleto
where
others, especially
cases,
he
and
can,
enquiriesand
use
of his
event
various
tests,
no
so
being challenged,
of this most
correctness
i^
there
precaution,in
reasonable
to the
be
company,
in which
ways
some
However,
every
as
In
of manufacture,
course
asset.
satisfyhimself
item
in
should, make
he
many
are
fact, in
in
of
case
were
reasonablypossible. In Chapter
completely,but
goods
impossiblefor
doubt
is
as
accounts
some
there
that
V,it is shown
may
be of
far
as
circumstances,
the
shareholders.
the
may
stock
test the
all that
at
correct, and
no
by manipulating
pleases,
results he
guarantee
mak'
can
the
no
stock
official
the
that
means
of the
valuation
the
whatever
show
accounts
it
as
relies upon
merely
auditor
yet if the
way,
AUDITING
OF
PRINCIPLES
THE
order
to
important
accounts.
foregoing
reasons,
literal construction
too
be
checking
which
upon
large proportion of
so
many
auditors
devoted
time
the
expend
to
an
audit.
Republic of Bolivia
it
was
held
that
auditors
made
are
made
and
discoveringand
of payments
the
on
specialcircumstances
to what
faith
extent
the
of each
audit,
case.
of their
they
callingattention
prior to
Here
are
to
must
Balance
responsible
the
illegality
depend
upon
THE
In
this
certain
case
audit, for
POSITION
LEGAL
which
payments
there
being regulated by
payments
satisfied
been
have
damage
in his
far from
been
carried
was
of
terms
the
Dumbell's
Others
with
defalcations
point
as
of the
where
in
the
From
for
"
and
auditors,
sentenced
in
the
they knew
to
concurring
which
intent to deceive
and
Dalgleish.
and
did
they
and
of
creditors
Book, and
was,
as
to
carry
to whether
various
it is that
definite
an
other
auditor
of
duty,
plaintiffs'
the
"1,700 odd.
to
or
the
not
full audit.
agreeing
accountants
this and
breach
the
case
failed to discover
thus
case
out
In this
check
not
cashier, amounting
clear and
The
case
judgment
to
it will be
cases,
should
understanding
tants
accoun-
have,
with
his
for
seen
in all
clients
what
accountant
an
work
have
audit
the
the
case
prosecuted
the
the
by
important
cover,
was
to
appears
negligence and
for
Cash
instructed
settled
to
auditors
the
this
shareholders
that
the
of
were
cases,
In
Sheets
Cape
v.
sued
were
Book
how
pointing out
in which
manner
with
particulars,
grounds being
"850.
the
actual
stances
special circum-
Court
the
imprisonment,
members,
and
accountants
was
in not
to
appear
suffered
against
as
these
Banking Company."
Wilde
The
costs,
Balance
three
false in material
Pass
action
company
not
Therefore, in the
directors,were
the
publishingof
the
default
various
defraud
does
the
to
out.
together with
be
company
the
satisfied with
Dumbell's
to
(1906). Although
that
without
dismissed, but
this
Court
the
case,
prior
authority,
vires, the
report.
of the
made,
were
no
auditor's
the
through
this fact
Table
ultra
were
was
187
AUDITORS
OF
Several
only.
where
cases
the
have
had
question has
been
accountants
whole
to carry
contracted
to
do.
out
accountancy
to pay
as
what
damages
to what
work
were
they
188
AUDITING
OF
PRINCIPLES
THE
Conclusions.
conclusions
The
subject,would
this
upon
auditor
(1) An
cases
follows"
as
honestly satisfyhimself
must
and
true
positionof
financial
various
the
be
to
appear
show
accounts
the
from
drawn
be
to
the
whose
concern
of
view
correct
that
the
is
he
accounts
auditing.
(2) He
he
books
the
that
examine
must
must
make
records, and
but
official,
skill in
he
testingthe
an
original
and
vouchers
enquiries.
auditor's duty
take stock,
to
the certificate of
relyupon
he is entitled to
and
with
proper
part of
is not
books
the
test
(3) It
correct
are
satisfyhimself
books, and
the
exercise reasonable
must
sible
respon-
care
and
of the stock
correctness
is entitled to
auditor
(4) An
care
and
skill before
he
auditor's
duty
satisfies himself
all is in order.
(6) It
is
part of
no
an
give advice.
to
of
case
far
as
auditor
is
the
(10) If
an
are
and
if it is
proved
company,
the
of
of assets,
auditor
an
Memorandum
is
negligentor
skill,he may
what
be
that
would
to
case
and
must
see
Articles of
carried out.
auditor
care
(11) As
of
case
proper
otherwise
must
provisionsof
Association
partners in the
the
reasonablypossible.
(9) In the
that
to
or
company,
firm.
private
(8) The
so
have
been
does
not
held liable in
suffered
exercise
damages
losses which
prevented.
is reasonable
care
and
skill
depends
LEGAL
THE
standard
general
In
(12)
the
recorded
there
is
these
frauds
of
the
them
If
an
to
be
that
it
point,
event
of
if
he
is
thought
honest
believe
skill
the
his
tracking
fraud,
when
and
when
servants
be
be
he
true,
the
the
the
must
and
believes
of
that
must
what
himself
this
of
auditor;
certify
take
he
what
point,
It
auditor's
an
is
he
he
case
must
does
care
is
of
part
Bank
reasonable
certifies
the
effect.
which
General
the
upon
in
and,
to
and
taking
cases,
material
any
following,
not
he
all
definition
and
duty
provided
skill,
accounts,
report
London
the
be
audit
unlikely
very
liable
in
upon
short
than
is, he
that
before
given
to
his
better
no
in
take
to
in
is
satisfy
to
certifies
liable.
professional
skill
dissatisfied
clearly
it
personally
such
knowing
accounts,
criminally
requisite
he
being
judgment
"
duties
tried
by
that
precaution
that
can
said
exercises
before
reports
Such
utmost
not
suspicion,
held
held
be
of
reasonable
every
the
the
of
schemes
certifies
be
be
may
honestly
he
duties
for
perpetrated
may
will
possessed
every
of
auditor's
the
liable
their
wilfully
false, he
auditor
an
is
he
"
auditor
conclusion,
that
is
concern.
(14)
In
it
of
laid
arouse
been
have
firms,
held
be
not
to
the
upon
profession.
the
scope
carefully
nothing
also
and
case,
writing.
in
and
ingenious
out
exact
will
Auditors
by
private
the
that
be
(13)
of
case
importance
should
adopted
the
189
AUDITORS
OF
of
circumstances
the
upon
POSITION
true."
be
not
and
APPENDIX
EXAMINATION
(1) WHAT
audit
a
of
limited
(3)
and
audit
principal objects of an
in
briefly the difference
principle
of a private partnership,
accounts
the
company.
do
What
what
audit
the
are
State
(2)
'
QUESTIONS
the
are
between
and
Continuous
by a
disadvantages
and
advantages
the
of
those
*'
understand
you
Audit,"
of
such
an
(4) Upon
of (a) a company,
having been appointed auditor
do
in
would
each
case
partnership, what
prior to
you
of
the
actual
work
the audit
?
commencing
Audit
the objects of keeping an
?
(5) What
are
Programme
do
and
understand
Internal
Checks,"
(6) What
by
you
is an
what
?
auditor's
position in regard thereto
should
make
auditor
notes
an
(7) What
during the course
(b)
"
of
audit
an
(8)
the
What
Balance
had
company
find
would
steps
Trial
of
failed
you
take
of
books,
set
which
an
were
you
in
error
of
the
asked
to
staff
the
which
and
detect,
to
discover
to
(9)
(10)
What
do
State
in
efficient
audit
of
(11) To what
when
checking
State
how
Cash
in
(12)
check
understand
you
work
detail
the
Cash
the
Banker's
would
should
you
Pass
verify
'
"
Vouching
and
in a
involved
complete
of a manufacturing
business.
Book
special points
the
the
by
term
auditor
an
Book
with
Balance
the
attention
pay
the
Book
Cash
and
Bank
at
the
Hand.
Describe
the
the
following
Cash
that
steps
would
you
take
as
auditor
to
"
Sales.
Rents
Receivable.
Interest
Receivable
Loans.
on
Proceeds
of
(13) Why
insufficient
what
vouchers
(14)
for
In
payments.
the
What
Travellers'
Staff
consider
the
proof
in
each
Commissions
would
you
and
191
accounts
endorsed
you
find
require
Salaries.
cheques
of
accept
Book
Cash
case
endorsed
payment
you
?
payments
vouching
Consols.
^500
would
any
payment
of
you
for
circumstances
vouchers
of
sale
would
Expenses.
of
to
Under
cheques
the
the
be
as
following
correctness
192
Purchase
of
Plant
Purchase
of
some
Payment
of
(15)
You
whom
of
Debentures
and
you,
(16)
In
(17)
what
ton,
15th
of six months
15th
October,
1914
liabilityin respect
the
31st
would
of
record
the
examining
1914
December,
tons
follows
as
1914
of the firm
books
for whom
2,000
2,000
1,000
1914
15th
Petty
of it be
in
Cash
Account
auditor,
act
as
at
"2
10s. per
of invoice.
date
from
would
"
tons
tons
tons
it be
transactions
these
of
extent
you
of iron
acceptances
delivered
been
April,
June,
What
you
purchase 5,000
to
had
iron
The
?
audit
what
to
some
mode
checked.
payment
both
heads, and,
under
wages
merchants,
of iron
firm
terms
on
would
way
contracted
has
the
check
auditor,
as
the
to
as
the
adopted,
were
manufacturing
workmen,
of
piece workers,
some
suggest
you
of
large number
should
be recorded
the wages
recommend
would
State what
you
system
Railway Company.
auditor
as
which
if the
the
Accounts.
Ledger
consulted
employing
day and
are
for
contract
Machinery.
and
Bought
are
company,
of
account
on
buildings.
of
erection
builders
to
Payments
AUDITING
OF
PRINCIPLES
THE
in the
shown
to
in
see
would
How
of
Sheet
Balance
of a trading company,
if the amounts
take
to ascertain
auditor,
you,
?
correct
charged in respect of purchases were
that the
would
as
auditor,
How
satisfyyourself,
(19)
you
(18)
In
auditing
steps would
Bad
for
Reserve
the
accounts
as
Doubtful
and
Debts
was
sufficient
one
the
(20)
you
Journal ?
(21) To what points should an auditor pay specialattention
when
examining invoices ?
the
would
to check
take
the steps that you
(22) Describe
Bought Day Book.
of a manufacturing
business,
(23) In auditing the accounts
asked
all
ascertain
that
to
are
outstanding
particularly
you
have
been
How
would
accounts
satisfy
brought in.
you
yourself on this point ? Give illustrations
reference
the duties of auditors
with
to the
are
(24) What
evils have
Sheet
What
?
grouping of the items in a Balance
acted
be
be
avoided
?
should
to
What
general principles
upon
What
accounts
(26)
items
"
Account,"
Account,"
cases
the
entries
contained
in
(25)
of
vouch
would
How
Profit
and
"
would
and
what
you
"
Loss
are
Trading
expect to find in the
and
Account,"
Appropriation
the
objects
of
these
preparing
Define
it is not
Balance
a
Sheet,
Statement
and
explain why
of Assets
and
in the
majority
Liabilities
194
take
Sheet
(37)
each
increased
made
was
for
Account
Trading
previous year
(38)How
stock
30th
An
June.
know
to
each
in
of
the
at
the
three
taking
stock-
accurate
without
How,
verify the
would
you
Balance
appearing in a
(39) Are there,
would
justify the
requires
saws,
turing
manufac-
you
30th
the
Balance
again
this information
give him
mately
approxithat
a
September, assuming
proper
each
department had been kept during
on
and
company,
diminished.
or
the
limited
the
whether
quarter
has
departments
the
of
managing director
edged tools, skates and
The
of
Account
Trading
correct
were
end
the
satisfyyourselfthat
to
AUDITING
OF
PRINCIPLES
THE
Sheet
"
item
Work
in
"
Progress
in your
addition
Sheet
purposes
(41) In the
provision
he adopt
(42) On
presented
years,
for
depreciation
insufficient,what
was
annual
Balance
find
of
later
that
the
on
years
the tenth
you
an
auditor
being appointed
you
advise
?
manufacturing company
auditor
being of opinion that
a
the
find
and
Balance
some
directors
Sheet
adopt
with
are
the
at
respectively.
to
buildings acquired at
buildings acquired
leasehold
note
Liability
on
does
mean
this
If so, how
(45)
the
course
which
has
company
its shareholders
for ten
to
freehold
some
company,
annual
and
Sheets
of
What
on
the
Bills
?
would
do
Balance
Sheet
Receivable
taken
to
it be
shipping
discounted,
Is it necessary
verify
understand
for
in
the
you
based
company,
"
Contingent
"5,000." What
:
this
statement
you
you
five
thereto, before
should
follows
the
for
would
course
reference
as
credit
prices paid
What
Balance
Sheet
?
certifythe eleventh
is Goodwill, and
what
(43) What
upon
Sheet
(44) In auditing a Balance
of a
you
the
should
formation
freehold
of
case
of
event
v.
?
and
what
objects of
(46) Explain what is meant
by
(a) A Specific Reserve.
Reserve.
(b) A General
Fund.
(c) A Reserve
A
(d)
Depreciation Fund.
(e) A Sinking Fund.
(47) The directors of a manufacturing company,
owning a
considerable
of
valuable
and
quantity
plant
machinery,
decide to keep a Plant
Register. They request you to advise
them
to how
as
this Register should
be kept, what
information
are
"
195
APPENDIX
should
be entered
should
be
therein, and
dealt
directors
with.
advice
the
Set
how
out
in
the
question
the
form
of
depreciation
of
a
report
to
the
that
give.
you would
the
suggested
necessity of
a
(48) Having
provision for
of each
of three
Depreciation of Machinery in the accounts
of
raise
the
boards
directors
objection
companies,
respective
the
on
following grounds respectively
of similar
cost
machinery having risen, nothing
(a) The
valuable.
should
be written
off, as it is actually more
done
have
maintained
the
(b) Repairs
fully
machinery,
is as good as new.
which
extent
in a
as
(c) To
charge depreciation to the same
of a
would
dividend,
good year
prevent the declaration
"
with
the
and
of
result
dissatisfaction
Criticise
these
shareholders
arguments.
the
manufacturing business, where
expenditure
order
and
in
the
works
to
keep
efficiency
necessary
proper
varied
could
this expengreatly from year to year, how
diture
very
be dealt with
in the yearly accounts
that
the profits
so
for dividend
fluctuate
available
should
not
greatly by reason
of such
variable
?
so
being
expenditure
find
that, during the
(50) As auditor of a company
you
have
been
sums
on
large
expended
repairs, renewals,
year,
and
and
How
additions
to
alterations,
plant
machinery.
would
these
and
what
verify
by
principles
payments,
you
would
be guided in deciding whether
they were
properly
you
?
to
or
revenue
chargeable
capital
the
in practice for
various
methods
used
are
(51) What
writing off depreciation ? Shortly describe each.
do
and
understand
Reserves,
(52) What
by Secret
you
what
is an
auditor's
in
thereto
?
regard
position
the provisions of the Companies
are
(53) What
tion)
(Consolidareference
and
the
to
Act, 1908, with
appointment
(49)
In
price
the
amongst
of shares.
of
remuneration
(54)
Set
Section
the
113
auditors
the
out
of
the
directions
?
and
powers
Companies
contained
in
of
duties
auditors
under
and
the
that
Auditor's
Report.
(55) Having completed the audit
Sheet, and having found
everything
your
report
to
the
of
in
shareholders
in
of
Summary
(57) A
1908
to
1908,
Balance
with
Sheet
reference
required
company's
order, give
to
accordance
the
to
be
Balance
of
copy
the
with
Companies
the
dation)
(Consoliin
statement
filed with
the
the
Annual
company
1917, has
registered
under
shares
for
issued
the
the
Companies
purpose
of
Acts,
raising
196
PRINCIPLES
THE
to
money
the
will
not
which
works,
The
defray
directors
interest
but
take
directors
the
certify the
to
agree
interest
such
treat
must
shares
such
on
of some
of the construction
expenses
income
for three years.
be able to earn
is
desirable
to
it
not
charge
opinion
of
are
AUDITING
OF
without
accounts
comment
in a Register of
particulars have to be entered
(58) What
under
the
Companies (Consolidation) Act, 1908 ^
Mortgages
of a limited
(59) You are appointed auditor on the formation
and
company,
Report
certificate
(60)
take
you
the
Give
When
special power
(61) Is an
how
(64)
shares.
(65)
(66)
do
of
security
be
in
What
be
with
the
for
duties
the
are
of
you
documents
be
"
(68)
1st
dealt
limited
with
in the
and
an
how
auditor
November,
of
accounts
was
company
in
the
issued
should
this
as
position
?
of
formed
and
under
company
"
be
company's
Debentures
and
treated
in
item
auditor,
are.
shares
by
Sheet
duties
company
the
the
to
are
of
accounts
refer
the
transfer
"
of
Loan,"
Balance
the
of
fortnight
Books
discount, and.
in the
of which
company
once
auditor
of Association
at
with
an
a
company
understand
you
collateral
shown
be issued
dealt
should
Minute
any
reasons
your
forfeited
"
accounts
What
necessary
the
examine
to
fully what
out
should
How
published
the
of
directors
Set
the
1908, confer
respect ?
this
in
discount
to audit
you
in connection
entries
the
entitled
purposes
Articles
and
The
instruct
(67)
the
good system of
special duty to perform ?
any
auditor
an
the
what
Memorandum
the
for
(Consolidation) Act,
upon
auditor
should
For
(63)
adopted
not
auditor
company,
(62) Can
if so,
to
you
of certificate.
has
Companies
the
give
enable
to
form
company
keeping, has an
account
books
under
steps would
Does
the
examine
to
of
purpose
instructed
are
respect
and
of
the
should
how
company
incorporated
on
as
1914,
acquire two
private concerns
June, 1914, adopting their trading from that date.
The
1914.
purchases were
completed on the 30th November,
It was
decided
to keep the
of the
businesses
accounts
two
until
the
30th
The
1915.
net
separate
June,
profitsat that
date were
found
to be "2,100 and
"3,600 respectively for the
on
the
to
30th
You
year.
dividend
of
in
ordinary
are
asked
they are
paying on
shares.
to
advise
the
directors
as
to
the
amount
tions,
justified,apart from financial consideraof
total
company's
capital
"50,000 in
the
197
APPENDIX
What
(69)
In
points for
auditing
debited
find
Fees
(70)
consult
their
and
which
Loss
you
The
directors
of
to the
The
For
annum.
per
business
considerable
paid
dividends
had
June, 1914, it
profits. During the
30th
fund
year
made
up
directors
dividend
the
at
of
connection
shareholders
Preference
duty
regard
"
"
shares
10,000
35,000
called
to
shares, upon
up,
been
resolve
to
declared
(76)
strength
pay
that
therefore,
In
been
the
of
Statement
Point
surplus.
the
when
How
should
with
dealt
be
the
by
be
capital
vendors
the
10s. per
company
as
as
public
share.
only
have
it should
in
with
dealt
has
of
the
"50,000
fully paid.
and
have
Of
these,
paid
unpaid
been
calls
appear
in
the
Sheet.
directors
the
to
of
extent
which
Balance
shareholders
on
in
is meant
?
"
dividend
subscribed
the
what
forfeited, and
published
(75) The
allotted
were
up
have
and,
this
of
company
were
shares
400
State
usual
auditor
the
on
dividends
Preference
of the
accounts
to
as
Cumulative
Shares,
should
dividends
unclaimed
(73) How
Sheets
of a company
?
yearly Balance
has a nominal
(74) A limited company
in "1 Ordinary Shares.
of
their
otherwise,
(ifany) devolving
Preference
to
Cumulative
"
of
been
accounts
July, 1915,
1st
therewith.
(72) With
they are
the
On
6 per cent,
per annum.
the
to
correctness, or
as
the
the
until
ascertained
of
rate
views
and
the
to
profits
leaving
no
absorbed,
was
At
undivided
of
June, 1915,
following September.
paid
your
arrears
the
fund
accumulative
an
action,
an
shareholders.
Ordinary
to
were
Give
Dividend.
forming
carried on
years the company
its Preference
dividends
and
ended
the
auditor
are
you
Interim
an
in
several
successfully and
30th
ID
of
payment
How
opinion,
guide you
before
would
advising.
require
you
of
is a limited
Bulgarian Oil Company
company,
is
divided
and
Preference
into
capital
Ordinary
of 6 per
latter
dividend
cumulative
a
carrying
the
were
6d."
is correct
this charge
for which
company
company,
you
"
Directors'
17s.
"653
information
Shares, the
Account,
travelling expenses,
regard
you
would
the points which
(71)
also
Profit
involve
this
limited
satisfyyourself that
what
cent,
of
accounts
with
State
and
would
the
the
to
and
would
consideration
of
dividend
out
such
paid
case
the
trading company
present to their
and
of Receipts
only,
Payments
shown
this
on
statement,
a
surplus
of the
absorbing nearly the whole
risk they run
of its being eventually
dividend
not
been
earned
and
has,
of
out
of
has
capital.
newly formed
company,
set
out
in
198
the
detail
which
to
extent
AUDITING
OF
PRINCIPLES
THE
would
you
check
issue
the
of
shares.
(77)
company
being redeemable
create
to
debentures
be
end
the
(78)
and
premium.
the
in the
what
commission
pay
to
(79)
Is
stated
It is often
(80)
Capital."
dividends
What
(82)
(83)
with
the
the
Is
(84)
revenue
dividend
bad
of
paid
out
how
can
what
of
is the
and
plant
pay
of
position
premium,
and
is it
dividends
the
dealt
be
arrears
lost
replace
dividends
State
that,
you
their fees,
draw
to
of
out
fully the
informed
intend
not
capital
?
of
the
in
affairs
trust
company
earned
has
company
How
dividend.
usual
of a
directors
(87) The
capitalat a premium.
enough
should
auditing
bound
company,
wasting
dividends
the
assets
out
Board
out
of
the
have
to
revenue,
profitsof
to
show
the
of
the
aid
of
annually
in
to
are,
for
and
the
advised
received
premiums
decided
therefore,
liabilities side
They
provide
of
been
limited
company,
issued
it
deal
you
annual
the
accounts
of
and
such
of the Investments
considerably,while
this
that
been
pay
the
company
adopt
you
value
the
profitsto
should
declare
market
to
of the
of
a
company
bound
to
can
would
fallen
with
of
answer.
your
the
directors
The
income
have
depreciation
how
Shares,
accounts
course
(86)
the
purposes
sufficient
not
are
company
before
it
(85) If
owing to
of such
his duties
are
issuing shares at a
company
in the accounts,
be treated
for
reason
what
Dividends
by this statement,
capital ?
manufacturing company,
premium
Preference
in
what
of
event
If there
the
bound
for
available
should
how
and
to
scribing
sub-
of
out
In the
should
how
repaid ?
company
of his
is meant
be
machinery
of
position at
been
a
consideration
in
"
that
so
paid
of a
(81) In the case
legal position as regards
has
have
to work
in this connection,
company
on
debentures
for
the
transactions
wasting property
the depreciation
to meet
Sinking Fund
auditor
is the legal position of an
what
set
of
these
will be the
is it lawful
formed
company
apart a
property, and
a
should
what
person
any
of
repayment
or
procuring subscriptions for shares, and
?
in the accounts
be dealt with
payments
such
to
the
when
circumstances
It is decided
105.
the
for
How
and
accounts,
period
of the
In
to
at
years
provide
Sinking
Fund
with
dealt
of ten
end
at the
debentures
such
"40,000 debentures,
issues
Revenue
the
Balance
under
the constitution
depreciation
only entitled
You
company.
that they cannot
and
Account,
amount
as
Sheet, and
depreciation
of
have
by shares,
in
respect
to
declare
carry
they
separate
apply
leaseholds.
told
are
the
have,
item
on
one-tenth
What
is
199
APPENDIX
duty
your
auditor
as
in
these
circumstances
Give
your
reasons.
Are
(88)
capital
for
available
profits
distribution
as
dividend?
auditor
(89) Is an
personally liable if it is subsequently
he has certified are
false or fraudulent?
proved that the accounts
An
has
built
new
(90)
a
engineering company
workshop
and
lathes.
A
new
equipped it with
portion of the work
has
been
done
and
a
by the company's own
portion by
men,
outside
increased
has
engine
been
sold
State
that
The
addition
steam
power,
contractors.
provide
to
the
needful
it
old
and,
would
you
require,
Buildings
to
and
correct,
were
been
charged
rendered
consequently, an
replaced by a larger one
evidence
amounts
Account
and
what
has
how
the
Account
of
cost
should
be dealt with.
power
A
limited
has removed
(91)
company
chased.
pur-
auditor,
as
and
Plant
additional
the
steam
works
which
of
have
the
portion
"14,000, has
The
value
of
has
above-named
previous
State
from
of
been
plant
balance
an
of
at
loss
on
"3,200.
brought
value
cost
the
The
new
"30,000.
estimated
works
new
sold, showing
and
at
Land,
to
of
of
"1,800.
book
total
profitsfor
forward
the
from
after
years.
views
your
making
to
as
and
removal
financial
plant,
to the
machinery
including the
previous year,
machinery and
cost
removed
the
year,
the
machinery
been
remainder
the
business
its
the
the
loss
of
mode
proper
and
the
on
sale,
considerations,
the
directors
dealing
with
whether,
would
be
the
apart
justified
in
declaring a dividend.
(92) As regards the legal liabilities of auditors, is there any
difference
between
auditor
the position of an
to a partnership,
and
auditor
Acts ?
an
the Companies
appointed under
To
is
auditor
what
extent
an
(93)
responsible for the
valuation
of
the
Stock-in-Trade
for a
manufacturing concern
of past years
the sales have
equalled the average
year in which
You
reduction
show
considerable
are
on
a
preceding years.
for
the
the
asked
reasons
to
to investigate and
partners
report
in
this reduction
profits.
the
what
State
are
give attention,
points to which
"'"."-.'.;
you would
would
them.
how
and
proceed to investigate
you
the
of a charitable
In
institution,
accounts
auditing
(95)
who
is
authorised
is
to
where
a
employed,
paid secretary
and
and
collect
subscriptions,
give receipts for donations
(94)
what
The
trading
and
information
certifyingthe
the
profitsof
Annual
subscriptions
and
evidence
Accounts,
donations
would
to
had
you
require
before
been
200
PRINCIPLES
THE
for, and
what
safeguards
company
desirous
OF
AUDITING
would
to
suggest
you
ensure
this?
A
(96)
company
Sheet
Net
of
cost
Discount
of
the
up
materials
as
of
the
work
follows
which
the
circumstances,
out
obtains
premises,
lowest
by
premises figure in
to
made
thereon
builders, the
carry
additional
the
"4,000,
at
its
extending
from
decide
staff, and
own
work
consideration
On
"4,000.
of the
the
for
estimates
of
directors
of their
means
their
Balance
"
purchased
transferred
is
1,300
Interest
to
and
Discount
Account
Labour
30
erection
on
2,240
Profit
to
Loss
and
his annual
salary)
100
50
40
Account
240
"4,000
What
view
of the
various
(97)
find
should
items
involved
In
examining
following item
the
auditor
an
the
take
of this
transaction
and
Cash
Book
the
among
of Smith
payments
Brown,
you
"
1913.
20
Aug.
The
receipt
reads
For
the
on
follows
as
"
Jones
file
corresponding
in
"42
order
10
this
to
item
"
MR.
A.
coal
supplied
WILLIAMS.
Dr.
to
Received
31st
July.
31st
JONES
to
1913
.
"42
August,
1913,
With
thanks,
(Stamp)
ft Co.
10
J. ROBINS.
In
what
voucher
(98)
Ledger
In
examining
Accounts
features
the
particulars does
this
appear
to
be
insufficient
an
mere
examples
of each
account
arithmetical
of
list of
Debtors
and
Creditors
with
the
for the
error
or
of a Balance
Sheet, to what
purposes
should
you pay attention, apart from
correctness
of the extractions
?
Give
fraud
which
be
detected
in
this
may
process.
" Co. keep all Bills Receivable
(99) Blank
maturity, and then pay them into the Bank
until
On
30th
31st
July, when
June,
it appears
you
are
that
examining
the
actual
the
in
their
Balance
bills in
hands
for collection.
the
Sheet
cash
of
box
INDEX
and
ACCOUNTANCY
Automatic
Auditing,
BAD
Work,
Additions,
Checking
Adjustment
of
Tills, 35
between,
Difference
Doubtful
and
15
of,
Figures,
counts,
Ac-
Nominal
Balance
14,
Sheet,
Audit
63
55
Debts,
26
58
of,
Definition
20
Advice,
Allotment
of
Analysis
Cash
Annuity
Banker's
134
Allotment
Arrears
of
Book
Preference
of
144
Association,
of, 69,
Verification
75,
37,
24,
135
52
81
51
81
Debts,
46
Books,
23,
Bought
Day
Ledgers, 24, 53
71
Value,
Break-up
138
Brokerage,
162
Valuation
Assets,
62
60,
Accounts,
32
Book,
Receivable,
Book,
125
Dividends,
Articles
of
Auditors
Cumulative
of
Balance,
of
133
Banking
Company,
Bills
24,
Book,
Payable
146
Shares,
for
Certificate
Pass
Book,
146
Applications
Appointment
Company,
Appropriation
of,
33
113
and
Balance,
66
Verification
77
Summary,
System,
Application
Bank
28
27
and
List
Annual
object of, 67
of, 65
Preparation
of
Books,
22,
Balancing
Book,
Ledgers,
of
Main
14
Alterations,
66
of,
36
from,
Receipts
147
Letter,
Agents,
75
of,
Audit,
,
167
Wasting,
CALLING
Calls
Banking
Commencement
of,
133
Company,
Company,
15
Continuous,
in
Advance,
of
and
Carts
29
140
170
167
Profits,
10
Internal,
157
Vouchers,
Expenditure,
Losses,
64
Fee,
156
Paid
Capital
176
125,
Arrear,
Cancellation
11
14
Back,
in
98
Vans,
Main
objects
of
,
Share
Balance,
147
Books,
Partial, 18
Periodical,
Cash
of,
Primary
Object
12
Programme,
148
Transfer,
Auditor,
Company,
of,
Received
Sales,
Position
Legal
Qualifications
Auditor's
176
of,
176
Certificate,
Liability
as
19
of,
Commencement
Third
Commission,
for
Report,
neglect,
178
129
Form
of,
35
35
of
22
15
Postings,
22
Audit,
new
Errors
of,
36
Received,
138
etc.,
Underwriting,
Annual
of,
Summary
Company,
Commissions
178
Parties,
37
11
137
regards
Credits,
Debits, 33
from
Debtors,
Castings, Checking,
Additions,
Checking
Castings and
125,
77
30
Vouching
15
22,
Book,
44,
Checking,
134
132
203
204
INDEX
Company, Application
for
Shares
125
of,
Statutory
of,
Report
Summary
(Annual) of, 134
Underwriting Commissions
Auditors
of
Appointment
Company,
136
in, 146
Association
of
Articles
of,
of. 138
Audit
"
of, 125,
of, 6, 17,
Auditor
,
125
of,
176
Continuous
and
Powers
,
Duties
Contra
of
129
Banking,
Capital Losses
Profits
Cost
Creditors'
Preference
Shares
,
101
Directors'
110
Maintenance,
47
Notes,
Credit
of, 170
167
of,
Cumulative
of
90
15
Audits,
39
Accounts,
Copyrights,
133
167
of,
Assets
Wasting
Consignments,
.
Position
Legal
of,
162
176
Dividends
Vouching
144
Statements,
Cumulative
Preference
54
48,
Shares,
146
150
of
Arrears
.
Minute
Book,
Dividends.
162
160
158
Fees,
DEBENTURES
Expenses,
Register of,
Dividends
,
Duties
of
161
of, 129
of, 157
Forfeited
Shares
Interest
paid
Construction,
by,
during
Dividends
of,
161
of
of, 143
Book,
Objects of, 143
Minute
Preference
ations
Associ-
1 1 '2
for
Share
of,
160
of
Desk
Cash
Preliminary
Expenses
of,
Profits
available
for
Differences
Profits
poration,
Incor-
to
155
Book.
Directors,
Discount
of,
Debentures,
Ticks, 13
36, 160
on
Dividends,
142
160
Register
Distinctive
of,
25
Balancing,
Expenses. 159
Minute
of, prior
3, 25
in
Fees, 158
164
Assets.
of
Directors'
Dividend,
170
Machinery,
35
Book,
Errors,
Detection
154
of,
and
Wasting
167
dends
Divi-
161
off.
Writing
Ill
of Plant
141,
System,
Methods
,
Memorandum
,
120
Fund,
-
115
139
Interim
51
35,
Statements,
and
55
Doubtful,
Depreciation, 95, 104. 170
Auditor's
Duties
regards.
as
Bad
Debts,
Auditors
153
Security,
Debtors'
160
of,
Interim,
Collateral
as
142
150
81.
159
Arrears
142
150
Cumulative
of
of
Members
of,
"
of
"
Mortgages
141
Preference,
by.
162
Interim,
161
142,
150
Remuneration
,
of
Auditors
Profits
.
Share
Shares,
for,
available
of, 128
,
Preference
on
Books
of, 147
Capital of, 145
Certificates
of, 81
of, 120, 151
Sinking funds
Statutory Books
of, 141
Unpaid,
Vouching,
Dockets,
Drawings,
Duties
of
161
164
162
162
44
40
Auditors
Acts,
129
under
panies
Com-
205
INDEX
ENDORSED
Cheques,
Errors
41
in
of
Calculations,
4
Commission,
of
Omission,
of
JOURNAL,
23, 52
LAND
Buildings, 40,
Property, 99
14
Erasures,
Principle,
Questions, 191
of Investigations, 9
Decisions
Examination
Fictitious
Final
of Accounts,
7
Payments,
Position
Fixed
Statement
of,
System,
Floating Assets,
Fluctuations
100,
135
MAINTENANCE
111
Managing
Market
Assets,
157
Shares,
Freehold
Property, 99
and
Fittings,
Misappropriation, 7
Miscellaneous'
Receipts, 36
41
Missing Vouchers,
and
Mortgages
Charges, Regis-
117
Reserves,
46
Book,
Goods
Inwards
90
Consignment,
on
Outwards
101
Grouping
Items
NEGLECT,
in
Accounts,
59
Liability
Horses,
98
Auditor
of
178
for,
Nominal
HARNESS,
150
of, 142,
ter
50
Book,
Goodwill,
of
Minute
97
143
13
Work,
Book, 141, 160
Method
GENERAL
110
ation,
Remuner-
71
Value,
Memorandum
Furniture
37
Reserves,
Members,
Forfeited
153
159
of
Value
104
Frauds,
176
146
Director's
70
in
Auditors,
of
Regret,
Interest,
Tools, 97
Loose
Instalment
of
Loans,
58
Accounts,
Assets, 70
Auditors'
to
as
Liabilities, 179
Letter
FALSIFICATION
98
64
Legal Charges,
Extent
and
Leasehold
63
Accounts,
Notes
13
during Audit,
97
OBJECTS
IMPERSONAL
Ledger,
Postings,
Imprest
System,
Income
and
23
Balances,
46
Books,
Outstandings, 32,
80
Policy,
under,
37
PARTNER'S
113
Pass
Drawings,
during Construction,
on
Deposit, 36
139
101
Paying-in Book,
Slips,
37
Payable, 64
161
Interim
Dividends,
Internal
Checks, 9, 30
of surplus
Investment
General
of
Payment
Invoices, 46
Checking,
of, 37
34
Interest
to
holders
Share-
Construction,
139
32,
Payments,
of
Assets
Reserve,
in
Pencil
41,
78
Figures,
Periodical
Petty
39
65
Advance,
14
Statements,
Percentage
Sale
34
during
118
Investments,
40
32
Book,
Patents,
Loans,
63
Amounts
36
representing
27
Opening
Order
System,
on
Memorandum,
107
Obsolescence,
Errors
of, 4
Omission,
43
Stocks,
received
of
Clause
143
Expenditure
Insurance
Interest,
58
61
Account,
Inscribed
24,
Audit,
Cash,
15
43
Book,
23
62,
89
206
INDEX
40,
Machinery,
Depreciation
and
Plant
and
Returns
42
Cards,
Piece-work
23
Books,
of Assets,
94
of,
Re-valuation
Routine
170
114
Checking.
108
life of,
Working
Register, 96,
49, 51
Allowances,
SALARIES
44
Sales
23,
Book,
Postage
Postings, Checking,
22
and
of
Powers
Book, 43. 64
Day Books, 23, 49
Inflation
of, 50
109
Duties
Ledgers. 24.
Auditors,
Omission
129
of, 50
Share
Preference
Expenses,
Preliminary
Premium
available
Profits
Regards.
Self -balancing Ledgers.
Books.
Audit
Capital.
145
Share
164
prior
to
Prospectus,
146
Position
as
Account,
58, 62
for
Dividend,
Loss
and
Profit
Book,
122
Auditor's
24
Ledger,
Cash
of
Reserves,
Secret
38
Accounts,
Audit
of
51
Allowances.
Books,
31
151
of, 5
Principle, Errors
Private
Scheme
154
Debentures,
on
and
Desk
Salesmen's
145
Shares,
Returns
161
Dividends,
54
Incorporation,
10,
22,
of. 147
Certificates. 81
155
Shareholders'
for
Provision
Outstanding
Liabilities,63
Purchase
of Business,
QUALIFICATIONS
Questions, 191
RECEIPT
Issue
19
Auditor,
of
Reconciliation
Instalment
System,
and
Mortgages
111
Checking. 87
Subscriptions. 37
134
Annual,
Summary,
Receivable,
Sundry Amounts
Expenses, 64
.
Charges,
142, 150
Remuneration
of
TABLE
36
by
Reserves,
Trading
Transfer
Accounts,
60, 61
149
Audit,
Journal,
118
Travellers'
23
Books,
35. 43
Commissions
Position
regards,
as
and
Expenses.
43, 64
122
for
Debts, 56
Secret,
,
132
136
116
Auditor's
Reserves
Institute
Accountants,
Funds,
144
97
Tools,
Statutory,
Reserve
A,
65
of
Auditor
128
Rent-Roll, 36
Rents
Receivable,
136
Stock-in-Trade. 82
Stock
Sheets. 24, 87
Directors, 142
of Members,
141
of Chartered
29
32,
of
Company,
120. 151
Sinking Funds.
for
Vouchers.
Special Tick
116
Specific Reserves.
34
Splitting Cheques.
39
Statement,
33
of
of, 157
146
Receipts, 32, 37
on
Cheques,
Reducing
Register
of,
160
Book,
34
Books,
Shares,
,
19
Minute
Forfeiture
Bad
and
Doubtful
UNDERWRITING
Undiscovered
122
Unpaid
Commissions,
Differences,
Dividends,
162
25
13
207
INDEX
of Assets,
VALUATION
Auditor's
,
41
WAGES,
and
Salaries
73, 75,
Verification
of Assets,
side
Debit
side
Outstanding, 63
System, 41
Wasting Assets, 167
of
Cash
Book,
Working
of
Cash
Book,
Work
37
Printed,
life
of
162
by Sir
Isaac
Pitman
v"
""
(1524)
and
Plant
Machinery, 108
in Progress, 91
Writing off Depreciation,
33
Dividends,
42,
44
29
Credit
24
43
40
Missing,
Cash,
Petty
Vouchers,
Vouching,
75
Book,
Checking,
111
BOOK-KEEPING
OF
MANUAL
H.
F.C.A., F.C.I.S., and
330 pp. 10s. 6d. net.
With
AND
EVANS,
E.
EXECUTORS,
OF
ACCOUNTS
THE
B.
WILLIAM
In
Edition, Revised.
Returns)
(Hons. Inter,
loss.
By
ACCOUNTING.
In demy
MANUAL
demy
cloth
gilt,124
NEWHOOK,
By
P.
By
BRITISH
ON
and
J. H. McCALL,
A.S.A.A.
A.C.A.
(Hons.).
In
F.S.A.A.
In
demy
8vo.
OF
COMMERCE.
and
PRINCIPLES
the
same
AND
PRACTICE
Author.
In
OF
demy
PRINCIPLES
W. NORRIS,
MODERN
AND
Management,
Business
Men.
pp.
demy
8vo, 87
pp.
demy
8vo, cloth
COMMERCIAL
8vo, 320
pp.
HISTORY.
By
the
1
.
Author.
same
AND
PRACTICE
OF
COMMERCIAL
ARIT1P1I
M.A., B.Sc. (Hons.). In demy 8vo, 452 pp.
7s. 64.
BUSINESS
cloth, 493
Edited
COMMERCE.
PRINCIPLES
OF
COMMERCIAL
7s. 6d. net.
demy 8vo, 279 pp.
By P.
In
ness,
including Finance, Insurance, BusiW.
PEMBER
HON.
the
by
7s. M. net.
gilt,295 pp.
PRINCIPLES
AND
PRACTICE
OF
B.Sc.
In demy
M.Com.,
M.A.,
SON,
facsimile forms.
8s. 6d. net.
THE
F.C.A.
Preface
Machinery of Business.
assisted by SpecialistContributors.
In
facsimile forms.
with many
7s. Cd. net.
In
ZOUCHE,
TRAINING
cloth
PRACTICE
AND
Methods
THE
C. DB
LUNT,
Juuus
TAGGART.
With
Industry.
demy 8vo,
THEORY
By
8vo,
COMMERCE,
In
REEVES.
THE
com-
gilt,122
LECTURES
THE
8vo.
crown
6s. net.
pp.
BUSINESS
to
In
in Accounts.
History.Value, and Treatment
cloth
260
8vo,
2U.
net.
gilt,
demy
pp.
ACCOUNTS.
COST
cloth
ACCOUNTS.
BRANCH
3s. net.
THE
Fourth
5s. net.
F.C.I.S.
JOHNSON,
".
By
Its
BOOK-KEEPING.
By
net.
7s.
6d.
pp.
MUNICIPAL
TRUST!!
cloth
8vo,
OF
8vo,
pp.
gilt.
Accounts.
to
Final), A.C.I. S.
gilt,150
F.C.A. : and
S. S. DAWSON.
R.
6d.
290
10s.
net.
gilt,
pp.
By
AND
NIXON,
cloth
net.
In
Author.
same
and
8vo,
in
ASSETS, and their treatment
In demy
By P. D. LEAKS, F.C.A.
WASTING
AND
GOODWILL.
the
GEO.
By
demy
it relates
as
A.
By
In
5s. net.
pp.
DEPRECIATION
far
so
FINANCE.
AND
ACCOUNTS
E.
Act, 1911.
By ALLEN
gilt,148
cloth
A.C.A.
8vo, cloth
demy
BOOK-KEEPING.
PRACTICAL
6s. net.
420
cloth,
pp.
RAILWAY
ACCOUNTANCY.
ADMINISTRATORS,
in
of the Law
A.C.A.
PHILLIPS,
Summary
HANDBOOKS
BUSINESS
PITMAN'S
By
ITS
and
W.
METHODS.
Office Procedure
CAMPBELL,
Also
I
.
net.
of Business
Manual
ization,
Organand
for Commercial
Students
Chartered
Secretary. In
in 2 vols.,each 8s. Gd. net.
crown
8vo.
BUSINESS
PITMAN'S
HANDBOOKS
INSURANCE
INSURANCE.
T. E.
By
Practical
YOUNG,
Compensation
Revised
by
Enlarged.
and
OFFICE
INSURANCE
FOR
COMMERCIAL
demy 8vo, cloth
In
GUIDE
LIFE
TO
By
pp.
R.
LAWRENCE
C.B.E.,
Assistant
A.
In
SCHEMES
F.C.I.S.
MANAGEMENT
AND
MANAGEMENT.
IVKCom.,
DICKSEE,
Including
F.C.A.
Fourth
B.Sc., LL.B.
WATSON,
Practical
AND
ORGANIZATION
By
Jos.
Second
S. G. LEIGH,
Fellow of the Institute of
and
Scientific Aspects of the
5s. net.
cloth, 192 pp.
8vo,
crown
Work.
London.
ACCOUNTS.
By
of the
ORGANIZATION
OFFICE
AND
5s. net.
Handbook
In
Business.
LAW.
ASSURANCE.
A
Actuaries.
MANAGEMENT,
LIFE
AND
OTHER
ASSURANCE,
COMPANIES.
HAROLD
DOUGHARTY,
By
Gs. net.
gilt,103 pp.
ENDOWMENT,
PENSION,
demy
RICHARD
A.C.A.
MASTERS,
B.A., F.R.A.S.
; and
In demy
6s. net.
8vo, cloth gilt,150 pp.
INSURANCE
ON
8vo, cloth, 140
crown
Man.
Workmen's
on
the National
F.I. A. ; and
STRONG,
Third
MARK,
F.F.A., F.I.A.
Edition,
10s. 6d. net.
8vo, cloth gilt,440 pp.
ORGANIZATION,
By T. E. YOUNG,
Edition, Revised.
TALKS
In
Business
R.
VYVYAN
Scheme,
Insurance
Exposition
B.A., F.R.A.S.
Insurance, by W.
and
Secretarial
H.
Underground
E.
BLAIN,
Railways of
8vo, cloth
gilt, 314
pp.
COUNTING
of Modern
J. GILMOUR
Office
With
In
C.B.
CLUBS
THEIR
By
E.
with
and
H.
forms.
OFFICE
;
B.
LISSENDEN,
T.
W.
gilt,216
H.
Author
by LORD
demy 8vo,
cloth
H.
P.
By
MAYBURY,
JOHN
K.C.M.G.,
pp.
By FRANCIS
gilt,240
W.
pp.
PIXLEY,
F.C.A.,
7s. 6d. net.
AND
ACCOUNTS.
8vo, cloth gilt,176 pp.,
MANAGEMENT,
In
ROBINS.
demy
6s. net.
ORGANIZATION
COLIN
PURPOSES.
by SIR
ORGANIZATION,
and
numerous
COLLIERY
F.C.A.
COPE
cloth
In
OFFICE
A.
COMMERCIAL
Introduction
MANAGEMENT.
demy 8vo,
Barrister-at-Law.
SOLICITOR'S
FOR
an
8vo,
demy
AND
GEO.
By
21s. net.
pp.
TRANSPORT
PHILLIMORE.
gilt,
With
Foreword
a
etc., etc.
and
Edition, Revised
Enlarged. In
Second
Modern
to
8vo, cloth
crown
By
Application
In
Manual
Factory.
pp.
(Rebates)Case Law,"
gilt,352
ROAD
COPE.
Practical
and
gilt,182
their
and
A.
MANAGEMENT.
TRAFFIC
LEVERHULME.
MOTOR
8vo, cloth
demy
EDWARD
House
Counting
the
Principles
By
illustrations.
Railway
cloth
ORGANIZATION.
to
In
Requirements.
INDUSTRIAL
"
applied
Their
pp., with
200
FACTORY
WILLIAMSON.
SYSTEMS.
FILING
of
AND
Methods
CAMPBELL,
AND
F.C.I.
ACCOUNTS.
In
demy
By
8vo.
J.
W.
INNES,
ORGANIZATION
demy 8vo,
BUSINESS
DRAPERY
In
BAYLEY.
ERNEST
With
BEECHING.
cloth, 183
Buying
Chapters
etc.. by J. A. SMART.
By
MANAGEMENT.
Business, Grocers'
Edition.
Second
J.
net.
By C.
T.
L.
Office Work
In
demy 8vo,
6s. net.
pp.
OP
THE
STOCK
PRACTICE
AND
EXCHANGE.
LAW,
F. H. CARRUTHERS
GOULD.
POLEY, B.A., Barrister-at-Law
; and
7s. 64. net.
In demy 8vo, doth
Edition, Revised.
gilt,348 pp.
HISTORY,
THE
A.
By
P.
Third
ADMIMSTRATIOiN
INDUSTRIAL
THE
MANAGEMENT.
78. M.
pp.
gilt,300
AND
on
Book-keeping,
and
AND
cloth
ORGANIZATION
BUSINESS
GROCERY
HANDBOOKS
BUSINESS
PITMAN'S
OF MANAGEMENT.
7s. 6d. net.
PSYCHOLOGY
8vo, 354 pp.
MANAGEMENT.
EMPLOYMENT
In
BLOOMFIELD.
demy
INDUSTRIAL
MODERN
BLOOMFIELD.
COMMON
CURRENT
pp.
SOCIAL
EDIE.
In
LECTURES
OUTLINES
H.
SAMUEL
By
AND
INDUSTRIAL
8vo, doth
gilt,393
demy
ON
In
LABOUR.
8s. 6d. net.
AND
gilt,290
M.A.
and
SB. M.
pp.
GILBRBTH.
by
OF
edited
by
DANIEL
BLOOMFIELD.
CROWTHER.
FORCES.
12*. M.
INDUSTRIAL
and
A1MIIM
H.
G.
In
by
Edited
DANIEL
demy
8vo,
D.
LIONEL
By
by
R.
B.
O.
8vo, cloth
demy
by
In
Edited
\.
JENKINS.
DANIEL
net.
pp.
ADMINISTRATION.
0s. net.
8vo, cloth, 276 pp.
T. HILDAGE,
demy
net.
INDUSTRIAL
crown
In
MOVEMENTS.
Compiled and Edited
10s. M. net.
demy 8vo, cloth gilt,380 pp.
In
SENSE
cloth
M.
OF LABOUR.
Compiled and Edited
8". M. net.
8vo, cloth gilt,434 pp.
PROBLEMS
In
Compiled
507
8vo,
demy
L.
By
Muscio.
HBRFORD.
gilt.124
pp.
6s. net.
INDUSTRIAL
130
CONTROL.
8s. Gd. net.
pp.
By
F.
M.
LAWSOM.
FACTORY
ADMINISTRATION
IN PRACTICE.
8vo, cloth gilt. 8s. 6d. net.
MANAGEMENT.
133
By
pp.
COMMITTEES.
Report
By
M.A.. M.Com.Sc,
W.
In
8vo, cloth
demy
J. Hiscox.
demy
In
gilt.
demy
8vo. cloth
gilt.
5s. net.
WORKSHOP
In
J. LEE,
In
of the
8vo,
demy
British
52
C.
By
Association
G.
RENOLD.
Sub-Committee
Reprinted
on
Industrial
from
the
Unrest.
Ig. net.
pp.
SHIPPING
SHIPPING
A
OFFICE
comprehensive
Shipping
with
Trade.
numerous
ORGANIZATION,
Guide
By
forms.
to
ALFRED
the
CALVERT.
6s. net.
AND
MANAGEMENT,
innumerable
In
details
demy
ACCOUNTS.
with
connected
203
8vo, cloth gilt,
the
pp..
BUSINESS
PITMAN'S
HANDBOOK
EXPORTER'S
demy 8vo, cloth gilt,254
THE
In
TO
EXPORTING
In
GLOSSARY.
8s. 6d. net.
AND
pp.
WORLD.
THE
export information.
HANDBOOKS
demy
By
By A. A. PRECIADO.
8vo, cloth gilt,447
F.
COSTS.
The Principlesof Calculation
FREIGHT
Sea
Commercial
Cases.
or
of, and
Freight on,
In crown
2s. net.
CROSFIELD.
8vo, cloth, 62 pp.
FOR
REQUIREMENTS
WORLD.
THE
OF
Enlarged.
Including
In demy
8vo, cloth.
and
etc.
EXPORTERS
copies of
exact
AND
relatingto
By A. W.
Students
and
Second
of Bankers.
ENGLISH
of
PUBLIC
Bank
EASTERN
of
Fourth
Edition.
all forms
in their
for
In
From
Bank
the
By
FOREIGN
SPALDING,
F.
Edition.
Revolution
HARVEY
In
BILLS
IN
THEORY
demy
G.
A PRIMER
3s. 6d. net.
OF
ARMITAGE
AND
IN
of
net.
AND
FINANCE.
Author.
By the same
8vo, cloth, 375 pp., illustrated. 15s. net.
demy
OF.
By
the
Author.
same
ALL
AND
CREDITS
THAT
APPERTAINS
LEGAL
AND
EVERYDAY
ASPECTS.
PRACTICAL,
In demy 8vo, cloth gilt,126 pp.
10s. 6d. net.
FUNCTIONS
1688.
With
In demy
8vo,
CertificatedAssociate, Institute
8vo, cloth gilt,261 pp.
7s. 6d.
BANKERS'
by
of
E. FISK.
CURRENCY,
In
FOREIGN
EXCHANGE,
8vo, cloth, 108 pp.
THE
ALL
Edition, Revised
of Consular
Invoices,
Officials, Business
Men,
T. EASTON,
Associate of the Institute
6s. net.
demy 8vo, cloth gilt,312 pp.
England.
AND
W.
EXCHANGE,
Third
TO
Second
pp.
FOREIGN
EXCHANGE
PRACTICE.
By
Bankers.
Edition.
FINANCE.
Chapters on the
cloth gilt,207
SHIPPERS
the
E.
FINANCE
AND
BANKING,
complete Manual
Commerce.
By H.
EXCHANGE,
Legal Aspects.
practical
BANKING
MONEY,
AND
By J. S. NOWERY.
of
21s. net.
Cost
CONSULAR
PARTS
DUDENEY.
A Manual
pp.
AND
CASE
M.
MONEY.
By
the
THEM
By
Author.
same
TO
In
In
crown
IN THEIR
the
same
With
Author.
Foreword
demy
PRACTICAL
Institute of Bankers.
by C. F. HANNAFORD,
Book-keeping," by
In
Ireland.
demy
Associate of the
By J. F. G. BAGSHAW,
Certificated
Principlesof Currency,"
chapters on "The
"
Associate of the Institute of Bankers
Bank
; and
H.
Institute
Member
the
PEARD,
Bankers
in
of
of
With
W.
8vo, cloth
gilt,397
BANK
ORGANIZATION,
MANAGEMENT,
In demy
DAVIS, D.Lit., M.A., LL.B.
BILLS, CHEQUES,
AND
NOTES.
AND
ACCOUNTS.
8vo, cloth gilt,165
Handbook
THE
BANKERS'
P.
W.
MATTHEWS.
CLEARING
In
HOUSE.
demy
pp.
What
8vo, cloth
for
By
pp.
Business
J. F.
6s. net.
(Lond.).
Third
Men
Edition.
it is and
what
it does.
gilt,168
pp.
and
In
By
ADVANCES.
By F.
demy 8vo, cloth, 144
In
K.C.
gilt, 147
cloth
8vo,
demy
TABLES.
INTEREST
SIMPLE
8vo, cloth gilt,188 pp.
Revised
FINANCE.
F.
See
AND
DEEDS
TITLE
SIR
By
In
In
WILLIAMS.
A.
In
K.B.E.
crown
crown
p. 8.
RUDIMENTS
Edition.
PROPERTY
REAL
8vo, cloth, 151
OF
In
demy
Third
MECUM.
Revised
LAW.
60.
pp.
By
net.
WORK
VADE
SECRETARY'S
Edition,
COMPANY
F.C.I. S.
By
SCHOOLING,
Wii.
SECRETARIAL
THE
PAGKT,
JOHN
SIR
by
net.
THE
Third
STEAD.
R.
doth
THOMSON,
By
Enlarged.
and
BRITISH
FOGG,
8vo,
demy
net.
PRODUCE.
6s. net.
21g.
W.
Practice.
and
In
Edited
6s.
pp.
pp.
BANKING.
OF
DICTIONARY
STEAD.
R.
AGAINST
ADVANCES
BANKERS'
A.
LAWRENCE
By
Bankers.
6s. net.
pp.
BANKERS'
of
the Institute
of
CertificatedAssociate
gilt,120
ADVANCES.
AGAINST
SECURITIES
BANKERS'
HANDBOOKS
BUSINESS
'S
PITMAN
Edited
Enlarged.
and
by PHILIP TOVBY.
foolscap 8vo, cloth.
In
HANDBOOK.
with
Country
Gentleman
with
section
with
devoted
in
FOR
for the
Edition,
Second
forms,
COMPANY
THE
of Reference
estate,
of
work
pp.
Practical
Secretary. By
and
DICTIONARY
OF
SECRETARIAL
with
necessary
Secretarial
the
of
of
work
forms
Enlarged
eminent
Revised.
DEBENTURES.
and
Business
Barrister-at-Law.
By
In
The
Work
F.C.I.S.
COLES,
for
demy
Hon.
W.
volume,
F. SHBWKLL
Direction
TOVEY,
Limited
on
G.
F.C.I.S.
F.
and
War
Legislation.
hensive
Compre-
A
on
all
matters
PHILIP
Rt.
PRACTICE.
and
authorities
Crew,
F.C.A.
In one
Handbook
Men.
AND
Company
40
Jenkinson,
and
documents.
Edited
by
Practice, including:
Browne,
K.C., M.A. ; A.
Webster
LAW
Information
and
Work.
by nearly
M.
and
Enlarged
Encyclopaedia
of
Manual
ARTHUR
the
C.B.E.
E. BLAIN.
and
With
76 facsimile
thoroughly Revised.
of the Companies
the full text
the
Acts, 1908 and
1913;
Clauses
Act, 1845 ; Companies (Foreign Interest) Act, 1917 ;
Companies
connected
H.
chapter
net.
SECRETARY.
Company
Institution
and
Secretary,
by
Duties
and
of Parlia
Charitable
Edited
general.
6s.
Member
Lady
Work
the
to
Secretary to
landed
of
the
to
Guide
Practical
Position
the
in connection
Law
Barnes,
M.P.
With
J. P. Earnshaw,
Third
Pixley, F.C.A.
cloth
gilt,1,011 pp.
Company
M.A.,
gilt,149
pp.
tributions
con-
tarial
Secre-
and
COOPER,
8vo, cloth
N.
F.C.I.S.
Company
F.
Gore-
F.C.I.S.
Edition,
42s. net.
Officials, Investors,
the Inner
6s. net.
of
Temple,
BUSINESS
PITMAN'S
THE
TRANSFER
OF
SECURITIES.
of the
Manual
AND
SHARES,
STOCKS,
HANDBOOKS
B.A.
Third
(Oxon), Barrisler-at-Law.
10s. 6d.
d"my 8vo, cloth gilt,220 pp.
In
THE
CHAIRMAN'S
Meetings
GURDON
HOW
of
general, and
complete treatment
and
In
MANUAL.
in
MINUTES.
TO TAKE
and
Edition, Revised
2s. 6d. net.
WHAT
IS THE
VALUE
D.
HEAD,
Enlarged.
net.
ERNEST
ERNEST
by
In
Enlarged.
SHARE
and
F.C.I. S,
MARTIN,
5s. net.
Edited
OF
MARKETABLE
the
to
of
Management
Being a Guide
Meetings of Local Authorities ; with separate
of the
By
Meetings of Public
Companies.
Barrister-at-Law
PALIN,
8vo, cloth gilt,192 pp.
crown
OTHER
Practice.
By F.
and
Edition, Revised
and
Law
F.C.I.S.
MARTIN,
8vo,
demy
Tables
Second
gilt, 130
cloth
pp.
correctly
and
of shares
dividends
(2) what
;
ascertaining (1) the present value
should be paid annually to justifythe purchase or market
price of shares.
In demy
2s. 6d. net.
8vo, limp cloth, 20 pp.
By D. W. ROSSITER.
PROSPECTUSES:
PHILIP
TOVEY,
PRACTICAL
HOW
SHARE
In
AND
the
UNDERSTAND
cloth, 109 pp.
WORK.
of
use
8vo,
demy
TRANSFER
for
Handbook
READ
TO
F.C.I.S.
By
Clerks.
Company
F.
W.
In
crown
THEM.
By
5s. net.
LIDINGTON.
8vo,
123
pp.
TAX
INCOME
INCOME
TAX
AND
Act
Edition.
By
Legacy,
and
Duties, etc.
"
E.
and
Finance
the
SHELLING.
and
Deals
with
Income
Tax
Super-tax; Estate,
Duties
Succession
Customs
and
Excise
Duties ; Stamp
;
In demy
8vo, cloth gilt. 10s. 6d. net.
By W. E. SNELLING.
TABLES.
SUPEtt-TAX
2s.
W.
1918
ANNUAL.
TAXATION
THE
PRACTICE.
solidation
Incorporating the ConFourth
1920.
Acts, 1919 and
In demy
8vo, cloth gilt. 12s. 6d. net.
SUPER-TAX
of
ABACUS
"
G.
By
INCOME
O.
TABLES.
TAX
16
PARSONS.
By
Is. net.
pp.
E.
J. HAMMOND,
A.L.A.A
net.
CORPORATION
P. D. LEAKE,
PROFITS
F.C.A.
TAX
In
crown
EXPLAINED
AND
Is. net.
8vo.
ILLUSTRATED.
By
ECONOMICS
ECONOMIC
GEOGRAPHY.
8vo, cloth gilt,568
THE
PRINCIPLES
BROWN,
D.Sc.,
demy
OUTLINES
Social
OF
OF
pp.,
THE
18
ECONOMIC
Lecturer
8vo, cloth
J. MCFARLANE,
By
with
in
gilt,223
ECONOMIC
By
Development.
King's College,Cambridge.
illustrations.
GEOGRAPHY.
Geography
pp.
in the
10s. 6d.
M.A.,
M.Com.
10s. 6d.
In
demy
net.
By R. N. RUDMOSE
Universityof Sheffield.In
net.
A
HISTORY
OF ENGLAND.
Study in
Fellow
MEREDITH,
M.A., M.Com.,
of
In demy
7s. 6d. net.
8vo, cloth gilt,376 pp.
H.
O.
TRANSPORT.
ADAM
W.
OF
ECONOMICS
AND
By
ALFRED
M.Com.
and
B.Litt.
;
(Birmingham)
(Oxford),
M.A.,
HISTORY
THE
KIRKALDY,
15s.
8vo, cloth
demy
gilt,364
pp.
net.
M.Com.
M.A.,
In
Sc.
8vo,
crown
DURING
FINANCE
BRITISH
TELEGRAPHS
OF
ECONOMICS
THE
In
Edition.
Second
EVANS.
DUDLEY
HANDBOOKS
BUSINESS
PITMAN'S
AND
TELEPHONES.
cloth
gilt,92
THE
AFTER
AND
LEB.
By JOHN
2s. 6d.
pp.
WAR,
net.
1911-1921.
The
collected by a Committee
of the
materials
results of investigationsand
and brought up to date by A. H. GIBSON,
British Association, co-ordinated
In demy 8vo. cloth gilt,
M.A., B.Litt.
KIRKALDY,
and edited by A. W.
net.
15s.
479
pp.
Edited
LABOUR.
by
Replacement and Conciliation, 1914-1921.
Deals
with the results of
M.A., B.Litt., M.Com.
KIRKALDY,
BRITISH
W.
ADAM
British
the
In
crown
SILENT
OF
CRAFT
TRADE.
AND
MAXWELL
Construction.
By
in.
by 9" in., cloth, 98 pp.,
6}
BUSINESS.
NEW
Selling,and
Men's
League,
SALESMANSHIP.
8vo, cloth, 186
PRACTICAL
337
pp.
COMMERCIAL
gilt, 174
W.
By
By
OF
MANUAL
In
demy
A SHORT
cloth
CORBIOM
A.
COURSE
Guide
and
to
J.
M.I.E.E.
W.
Advertisement
FRINGS.
Size.
frs.net.
illustrations,
and
G.
E.
In
GRIMSDALE.
crown
net.
By
By
N.
C.
ALBERT
FOWLER,
E.
Junr.
BULL.
ADVERTISING
IN
12s. 6d. net.
In
THEORY
In
crown
8vo,
8vo, cloth
crown
AND
PRACTICE.
SCOTT, Ph.D.
By
OF SUCCESSFUL
STOREKEEPING.
8s. 6d. net.
8vo, 298 pp.
gilt,261
G. LEE,
By
E. T. WILLIAMS,
ADVERTISING
AS
A BUSINESS
FORCE.
10s. 6d. net.
demy 8vo, cloth, 586 pp.
THE
Issues.
pp.
tising,
dealing with the Principlesof AdverTIPPER, President
By HARRY
Advertising
8s. 64. net.
demy 8vo. doth gilt,406 pp.
W.
TRAVELLING.
8s. 6d. net.
pp.
DILL
with
In
3s. M.
pp.
of
SALESMANSHIP
TRBGURTHA
York.
SALESMANSHIP.
7s. 6d. net.
PSYCHOLOGY
THE
Handbook
Marketing.
New
By
SALESMANSHIP.
C.
THE
Statistics
net.
FINANCE.
"Spectator"
(WALTI
By
and Financial
the Social, Economic,
Pro1
8ft.64. net.
8vo, cloth, 127 pp.
ADVERTISING
THE
and
on
FOREIGN
2s. net.
AND
RECONSTRUCTION
In demy
8vo, 52 pp.
Essential
gilt,110
doth
8vo,
crown
AND
CAPITAL,
F.J.I.). Essays
LABOUR,
^WALL,
of the
Examination
An
In
Science
In demy
Association.
ECONOMICS.
PLAIN
Sc.
M.A., M.Com.
of Economic
Section
the
inquiriesarranged by
IN ADVERTISING.
12s. 6d. net.
pp.
By
ALEX.
P.
T.
CHERINGTON.
By
W.
F. OSBORN.
A.
In
HOTCHKIN.
In demy
8vo
LAW.
RAILWAY
TO
GUIDE
gilt,239
demy
Edition.
With
chapter
INHABITED
gilt,356
THE
on
DUTY.
HOUSE
12s. 6d. net.
pp.
BUSINESS
MAN'S
BUSINESS
(each 450
4to
MAN'S
GUIDE.
Spanish,
and
Edited
and Terms.
includes over
2,000
COMMERCIAL
Edition.
Second
Author.
In
BOOKS
DICTIONARY
AND
COMMERCE.
OF
invaluable
arbitrations.
EFFICIENCY
PERSONAL
cloth
8vo,
gilt,341
DICTIONARY
OF
:
Third
MAMJAL
are
By
called
CORRESPONDENCE
FRENCH,
RUSSIAN.
French.
Words
F.I.C., F.C.S.
upon
conduct
to
In
In
E. E. PURINGTON.
IN
SPANISH.
GERMAN,
demy 8vo, cloth, 718
SETEN
crown
GUAGES
LAN-
IT \UA",
pp.
12s. M.
Edition.
OF
DUPLICATING
METHODS.
By
8vo, cloth, 90 pp., illustrated.
3s. net.
MACHINES,
demy
vols.. large
cloth
COMMERCIAL
AND
B.Sc.,
J. PARRY,
who
men
IN BUSINESS.
7s. 6d. net.
pp.
ENGLISH,
PORTUGUESE,
net.
E.
By
business
8vo,
crown
In
4s. net.
B.A., LL.B.
(Lond.). The work
6s. net.
8vo. cloth, 520 pp.
A. SLATER,
articles.
In crown
guide
In
gilt. "4
by J.
to
Edition.
Second
etc.
With
Seventh
Edition.
Revised
Italian equivalents for the Commercial
ARBITRATIONS.
An
In
crown
same
work
diagrams,
pp.), doth
legal documents,
BUSINESS
German,
OFFICE
HIBBBRT,
all commercial
jects,
subof reference
on
for the busy merchant,
the comwritten
mercial
of affairs.
Edited
student, and the modern
man
by J. A. SLATBR,
LL.B.
Assisted
of
50
tributors.
(Lond.).
specialistsas conby upwards
With
forms
numerous
illustrations, facsimile business
maps,
crown
demy
pp.
WORSFOLD,
net.
ENCYCLOPAEDIA
comprehensive
speciallydesigned and
B.A.,
In
3s. M.
cloth
8vo,
demy
T. CATO
By
REFERENCE
and
reliable
and
NBMBHARD
the
By
demy
W.
By
In
SNELLJNG.
E.
W.
By
PROCEDURE.
OF
LAW
THE
B.A.. LL.B.
By J. A. SLATBR,
2s. 6d. net.
122
foolscap8vo, doth,
pp.
Revised.
Third
at-Law.
Enlarged
and
Revised
Author.
5s. net.
DILAPIDATIONS.
AND
8vo, cloth gilt,104
EVIDENCE.
Edition,
OF
LAW
THE
In
Intestacy.
LAW
OF REPAIRS
In crown
M.A., LL.D.
O.B.E.,
HOLLAND,
8vo, cloth gilt,118 pp.
demy
TRUSTEES.
AND
EXECUTORS,
WILLS,
Edition.
W.
R.
By
CONTRACT.
By the same
In demy
8vo, cloth, 123 pp.
book
Hand-
LL.D.
Second
net.
In
ister-at-Law.
Barr
OF
LAW
THE
78. 6d.
pp.
ACCOUNTS.
AND
LAW
PARTNERSHIP
LL.D.,
M.Sc.,
M.A.,
6s. net.
Students.
Railway
and
M.A.,
CHAPMAN,
E.
A.
By
Passengers,
for Traders,
8vo, cloth
In
HANDBOOKS
BUSINESS
PITMAN'S
10
APPLIANCES,
AND
6s.
METHODS.
net.
W.
DBSBOROUGH.
By
the
same
In
Author.
COM310DITIES
COMMON
AND
INDUSTRIES
Volumes
3s. net.
illustrated.
8vo,
crown
Tea
Salt
Coffee
Furniture
Sugar
Coal
Oils
Knitted
Wheat
Rubber
Zinc
Asbestos
and
Iron
HANDBOOKS
BUSINESS
PITMAN'S
book
publi hed
on
Perfumery
Storage
Making
Tar
Cold
Fabrics
Timber
Paints and
Aeids
Gold
Varnishes
and
Cordage
Hemp
Silk
Wool
Linen
Cordage
and
Electricity
Leather
Cycle Industry
Drugs in Commerce
Cotton Spinning
Sulphur
Ironfounding
Textile Bleaching
and
Wine
the Wine
Trade
Concrete and Reinforced
Concrete
Engraving
and
Motor
Lead
Stones
Resins
and
Quarries
Wallpaper
Clothing Trades Industry Sponges
Industry
Ice
The
Fibres
Alkalis
and
Tobacco
Clays
Paper
Soap
and
and Wireless
Gloves and the Glove
Trade
Jute
The Film Industry
Silver
Cotton
in
Telegraphy,Telephony,
Carpets
The
Each
Petroleum
ssr
Glass
Gums
SERIES.
already
Photography
Steel
11
Modern
Industry
Making
Explosives
Industry
Electric Lamp
Alcohol in Commerce
The Player Piano
(Others in Preparation.)
ORGANISATION
BUSINESS
A
Monthly Magazine
Price
Is. 6d.
LIST
COMPLETE
SIR
Parker
Post
Street,
at
MANAGEMENT.
High Standard
POST
PITMAN
ISAAC
And
of
AND
for Business
Annual
FREE
Subscription,18s.
ON
APPLICATION
AND
Kingsway,
Men.
SONS,
LTD.
London,
W.C.2
and
New
York.