None
" The lord of the manor ought to command and ordain that the accounts be heard every year, not in one place, but on all the manors, for so can one quickly know everything, and understand the profit and loss. The lord ought to command the Auditors on the manors to hear the plaints and wrongs of everybody who complains of the steward or others, that full justice be done, and that the Auditors do right at their peril. " The Auditors ought to be faithful and prudent, knowing their business, and all the points and articles of the account APPENDIX C. 359 in rents, outlays, and returns of stock. And the accounts ought to be heard at each manor, to know the profit and loss, and then can the Auditors take inquest of the doings which are doubtful, and hear the plaints of each plaintiff and make the fines. The steward ought to be joined with the Auditors, not as head or companion of the account, but as sub-ordinate, for he must answer to the Auditors on the account for his doings, just as another. It is not necessary so to speak to the Auditors about making audits, for they ought to be so prudent, and so faithful, and so knowing in their business, that they have no need of others' teaching about things con- nected with the accounts." INDEX. Accountants, Opinion of, on extent of investigations, 301 Accounts, Corrections in, 31 " for which Tabular Ledgers are suitable, 65 " Accident, Title Guarantee, General and Special Liability Insurance Companies, Points in the audit of, 122 " of Architects, Points in the audit of, 156 " Banks, Points in audit of, iii " Branch Establishments, 80 " Breweries, Points in audit of, 94 " Building and Loan Societies, Points in audit of, 150 " Cash Businesses, Points in audit of, gi " Churches, Points in audit of, 149 " Clubs, Points in audit of, 96 " Colleges and Schools, Points in audit of, 150 " Collieries, Points in audit of, 106 " Commerical, 88 " Consignments, 79 " Contractors, Points in audit of, 92 Cost, s(> " Electric Lighting Bodies, Points in audit of, 136 " Executors and Trustees, Points in audit of, 145 " Financial undertakings. Points in audit of, 11 1 " Fire Insurance Companies, Points in audit of, 121 " Gas Companies, Points in audit of, 134 " Gold Mines, &c., 109 " Hotels, Points in audit of, 95 " Institutions, Points in audit of, 149 " Insurance Companies, Points in audit of, 117 " Investment Companies, 123 " Lawyers, Points in audit of, 153 " Life Insurance Companies, Points in audit of, 121 " Manufacturing Traders, Points in audit of, 89 " Medical Men, Points in audit of, 157 " Merchants, Wholesale, Points in audit of, 88 " Mines, Points in audit of, 106 '' Newspapers, Points in audit of, 104 361 362 INDEX. Accounts of Public authorities, Points in audit of, 144 " Public Service Corporations, Points in audit of, 127 Publishers, Points in audit of, loi " Railways, Points in audit of, 137 " Restaurants, Points in audit of, 96 " Retailers, Points in audit of, 89 " Shipping Companies, Points in audit of, 141 " Single-ship Companies, Points in audit of, 143 " Speculative Finance Companies, Points in audit of, 125 " Steam Railways, Points in audit of, 137 " Street Railways, Points in audit of, 139 " Stockbrokers, Points in audit of, 154 " Stores and Stock, Points in audit of, 68 " Theatres, Points in audit of, 97 " Theatrical Companies, Points in audit of, 100 " Traders, Points in audit of, 70 " Trust and Investment Companies, Points in audit of, 123 Water Companies, Points in audit of, 135 " Published form of, Auditor's duty as regards, 197, 230 Action against auditors. Procedure by way of, 293 Additions, Checking, 32 Adjustments of profits in investigations as to profits, 316 Advantages of a " completed audit," 28 " " continuous audit," 27 " an audit, 25 " double-entry bookkeeping, 232 " keeping proper Stock Accounts, 68, 70, 72 " making each Ledger self-balancing, 64 " opening Suspense Accounts, 73 " statistical information, 205 Tabular Cash Book, 57 use of an Audit Note Book, 17 Advisability of checking bank charges, 59 " lawyers keeping clients' moneys separate from their own, 153 Agency Accounts, Treatment of, 78 Agents' Accounts, 78 Agreement, Partnership, Points to be considered in drawing up, 83 Agreements, Hire- Purchase, 177 " " " Distinction between capital and revenue in, 176 " Partnership, 83 Alterations during audit. Methods of detecting fraudulent, 43 Amateur auditors, 251 INDEX. 363 American Malting case, 173, 236, 244, 347 Amount of reserve necessary for insurance company, iig Annuity system of depreciation, 180 Annuity Tables, Charles E. Sprague on, 180 Anticipated Profits, 172 Appleton V. American Malting Company case considered, 236 Apportionment between capital and revenue, Examples of, 131 " of capital and income in Executorship Accounts, 145 Architects, Accounts of. Points in audit of, 156 Arrears of cumulative preference dividends in accounts. Treatment of, 176 Assets and liabilities. Reason for transposing, in Balance Sheet, 207 " " secret reserves, Fluctuations in, 194 " Auditor's duty with regard to writing-up of, 195 " Definition of term, 206 " in books of account. Audit of Capital Stock Accounts, 46 " Corporations Accounts, 46 " payments for dividend or interest, 48 " railway, Programme of, 137 " Sales Ledgers of retailer, 89 " trust companies. Valuation of investments in, 123 " Stamps, Rubber, 40 " System on which, should be conducted, 17 Auditor of a bank. Liability of, in " " company, Position of an, 26 " " gas company, Duty of, in apportioning Capital and Revenue Expenditure, 134 " Liability of, with regard to predecessor's errors, 32 " on behalf of creditors. Position of, 263 " Position of, who disagrees with directors, 268 " Qualifications of an, 259 " " " Whinney, Mr. Frederick, on, 259 " Removal of, how effected, 269 " Responsibility of, for errors, 290 " Right of, as to resignation, 267 " to a firm, Position of, 262 " " an individual, Position of, 261 Auditor's duties, Whinney, Mr. Frederick, on, 274 " duty as regards  " " " public, 115 " " who is refused permission to inspect Minute Book, 198  liability for defalcations of employees, 282 Limits to, 296 " position, 261 " "privileige" as regards verbal statements at company meeting, 289 " responsibility for values. Decision in London and General Bank case, 164, 328, 346 " right of inspection of Minute Book of company, 192 " " to his remuneration, 261 INDEX. 36s Auditors, Amateur, 251, 253 " Civil liability of, 293 " Criminal liability of, 290 " Distinction between various classes of, 251 " Duties of, 270 " Liabilities of, 272 " Liability of, for libel, 289 " Methods of proceeding against, civilly, 293 Official, 256 Duties of, 256 " Privilege " of, 269, 289 " Procedure by way of action against, 293 " Professional, 254 " Rights of, 271 Bad and doubtful debts. Bank Pass Book, English system contrasted with American, 38 " Points in Revenue Account of, 116 Banks, accounts of, points in audit of, ill Beneficiaries, Procedure on division of estate between, 146 Bills of exchange. Method of vouching, 41 " receivable. Examination of, 42 " " Verification of, 170 Bonds in Balance Sheet, Treatment of, 217 Book debts, Auditor's duty with regard to, 167 " " Verification of, 167 Bookkeeping by Card system, 67 " Criticism of card, 68 " Double-entry, Advantages of, 232 " for lawyers, 153 " Loose-Leaf system of, 67 Branch Accounts of banks, Extent of auditor's examination of, iii " establishments. Accounts of, 80 " " Stock Accounts in, 81 Breweries, accounts of, Points in audit of, 94 Brewery, audit of. Saloons in connection with, 94 " plant. Depreciation in connection with, 94 Buckley's definition of term " Profits," 240 Building and Loan Societies' Accounts, Frauds in, 150 " " " " Necessity of vouching every item in Accounts of, 151 Points in the audit of, 151 Buildings and land, . Verification of, 165 " Depreciation of, 163 Burleigh, Herbert Alfred v. Ingram Clark Lim., Decision in, 344 By-Laws, Necessity of perusing, so Calling back postings, 29 Cancellation of vouchers, 40 Capital and income in Executorship Accounts, Apportionment of, 14s " " revenue, Distinction between, 82, 106, 131, 138, 140 " " " Examples of apportionment between, 131 " " expenditure. Duty of auditor of gas company in apportioning, 134 " " in hire-purchase agreements. Distinction be- tween, 176 " expenditure. Treatment of discounts on, 59 " in Balance Sheet, Treatment of, 216 " Reduction of, possible before exhaustion of Reserve Funds, 192, 241 " Stock accounts, 72 INDEX. 367 Capital Stock Accounts, audit of, 46 Capitalization of preliminary expenses, 163, 191 Card bookkeeping, 67 Criticism of, 67 Cash and trade discount, distinction to be made between, 189 " Book, Form of, 57 " " Method of checking Bank Pass Book with, 37 " " suitable for companies, Ti " Tabular, Advantages of, 58 " businesses. Accounts of, Points in audit of, 91 " in hand, Auditor's duty as to verification of, 286 " " Decision in London Oil Storage Company, Lim., v. Seear, Hasluck & Co., with regard to verification of, 343 " " Verification of, 169, 286 " receipts, Method of vouching, 34 Certificate after investigation, Extent of, 300, 307, 320 Certification, Extent of auditor's, 272 " Legislative requirement, 266 Charitable institutions. Accounts of. Points in the audit of, 148, 149 Charter, necessity of perusing, 50 Checking additions, 32 , Churches, accounts of. Points in the audit of, 149 Circumstances in which Reserve Fund should be invested, 191 Civil liability of auditors, 293 Clerks, Qualifications of, 260 Clients' moneys. Advisability of lawyer keeping, separate from their own, 153 Clubs, accounts of. Points in audit of, 96 Coal mines, accounts of. Points in audit of, 106 Colleges and schools, accounts of. Points in the audit of, 150 Columnar Cash-book, advantage of, 57 Commission on the underwriting or placing of shares, 47 " profits from. Treatment of, on underwriting shares, 245 Cook on Corporations, 241 Corporations, Position of auditor of Stock and Share Accounts, 265 Comparative Depreciation Table, 179 Comparison of Ledgers with previous Balance Sheet, 32 " Revenue Accounts in investigations as to profits, 311 " Completed audit," Advantages of a, 28 " " Disadvantages of a, 28 Confirmation of customers' accounts, 35 Consignment Accounts, 79 " " Description of system of keeping, 79 368 INDEX. Consignment Accounts, Method of vouching, 42 ConsoUdated Balance Sheets and Profit and Loss Statements, 225 " " " A. Lowes Dickinson's opinion on, 225 Contingent liabilities in Balance Sheet, Treatment of, 224 " Verification of, 175 " Continuous audit," advantages of a, 27 " " description of, 27 " " disadvantages of a, 28 Continuing Partners, duties of, 321 Contractors, Accounts of. Forms of, 204 " " Points in audit of, 92 Contracts, Uncompleted, Valuation of, 171 Conversions, Treatment of expenditure on, 134 Copyrights, Depreciation of, 185, 186 " Valuation of, 102 Corporation Accounts, audit of, 46 Corrections in accounts, 31 Cost Account of shipping company. Meaning of, 142 " Accounts, 56 " " Necessity of having proper, 56, 92, 204 Coupon Accounts, 49 Coupons, Method of filing cancelled, 49 Creditors, Position of auditor on behalf of, 263 Criminal liability of auditors, 290 Criticism of American Balance Sheets, 211 " Card Bookkeeping, 67 Customers' accounts. Verification of, 35 " " Manipulation of, 119 Danger of "dating forward" invoices for purchases, 174 " Dating forward," Danger of, invoices for purchases, 174 Dead or minimum rents in Mining Accounts, Definition of, 106 Debts, book, Auditor's duty with regard to, 167 " Ledger, Doubtful, Explanation, of, 75 " owing to company, Treatment of, in Balance Sheet, 214 Decision in American Malting case, 237, 347 " " Appleton V. American Malting Company, 236 " " Dovey and others v. Cory (National Bank of Wales case), 234 " " Dumbell's Banking Company, Lim., 291 " " Foster v. The New Trinidad Lake Asphalte Company, Lim., 235 " " Herbert Alfred Burleigh v. Ingram Clark, Lim., 344 " " Lee V. Neuchatel Asphalte Company, Lim., 233 INDEX. 36g Decision in London and General Bank case as to auditor's respon- sibility for values, 164, 328, 346 " " London Oil Storage Company, Lim., v. Seear, Hasluck &■ Co., with regard to verification of cash in hand, 343 " " Lubbock V. The British Bank of South America., Lim., 234 " " Martin v. Isitt, 282, 344 " " Moxham and others v. Grant, 296 " " Richardson v. Buhl, 243 " " Short & Compton v. Brackett, 302, 342 " " The Astrachan Steamship Company, Lim., and others V. Harmood-Banner & Son, 29s " " The Edinburgh United Breweries, Lim., and others v. James A. MoUeson {Nicholson's Trustee) and an- other, 300 " " The Irish Woollen Company, Lim., v. Tyson and others, 337 " " The Kingston Cotton Mill Company, Lim., 333 " " The Leeds Estate Building and Investment Society, Lim., V. Shephard, 293, 328 " " Wilde and others v. Cape & Dalgleish, 282, 337 " " Wilmer v. McNamara &• Co., Lim., 234 Defalcations of employees, Auditor's liability for, 282 Definition, Buckley's, of term "profits," 240 " of depreciation, 177 " minimum or dead rents in Mining Accounts, 106 " term " assets," 206 " " " profits," 239, 240 " "Reserve Fund," 218 " vouching, 34 " words " sale as a going concern," 160 Departmental Accounts, 91 " Ledgers, 64 Depositors' Pass Books, inspection of, 114 Depreciating assets in books of account, Methods of, 177, 207 Depreciation allowed for in Electric Lighting Accounts, Instances of, 136 and fluctuation in values. Distinction between, 162, 177 Annuity system of, 180 Definition of, 177 Fund necessary where company holds lands on lease, 13S Instalment system of, 180 in connection with brewery plant, 94 " investigations as to profits. Method of dealing with, 315 Necessity of providing for, 207 370 INDEX. Depreciation of copyrights, 185, 186 " buildings, 180 " electric lighting plant, Necessity of increased, 136 lands, 180 " furniture, 184 " goodwill, 181 " horses, 181 " investments, 182 " landlord's fixtures, 186 " leasehold land and premises, 182 " " premises. Dilapidations to be considered in, 183 " leases, 63 " licensed houses, 182 " machinery, 183 " mines, 107, 183 patents, 185 " plant, 184 " " under hire-purchase agreements, 184 " ships, l8s " street railway companies, 141 " theatrical plant, 185 " Sinking fund system of, 180 " table. Comparative, 179 Description of continuous audit, 27 " Salaries Ledger, ^^ " system of keeping Consignment Accounts, 79 " " Valuation " Balance Sheet of life insurance com- pany, 121 Detection of errors in books in investigations, 300 " fraud as an object of an audit, 22 " " in investigations, 305 Devising system of books. Points to be considered in, S3 Dickinson, A. Lowes, Introduction, 11 " " Consolidated Balance Sheets, 225 " " Exhaustion of Minerals, 108 " " Marketable Investments, 214 " " Sinking Funds, 219 " " Stocks on hand, 211 Dilapidations to be considered in depreciation of leasehold premises, 182 Directors' fees. Vouching of, 191 Directors, Position of auditor who disagrees with, 268 Disadvantages of a completed audit, 28 " " a continuous audit, 28 INDEX. 371 Disagreement of auditor with directors, 268 Discount and interest, Treatment of, 58 Discounts, Method of providing for outstanding, 189 " on capital expenditure. Treatment of, 59 " outstanding, Treatment of, 189  '* " , fixed and floating assets, 162 " " manufacturing and trading profits, 163 " " "net profit," and "profit safely divisible,'' 250 " " Reserve Fund and reserve for depreciation, 207, 249 " " Sinking Fund to repay loans and depreciation,  189 Dividend or interest. Audit of payments for, 48 Dividends in accounts, Treatment of arrears of cumulative prefer- ence, 17s Dividends, to be paid only from earnings or surplus, 236, 347 " out of capital. Employees, defalcations of, Auditor's liability for, 282 Errors, Localizing, 44 " Responsibility of auditors for, 290 Essential points in system of internal check, 54 Examination of bills receivable, 42 " Depositors' Pass Books in audit of banks, 114 " stockbrokers' accounts, 154 " vouchers, 33 Examples of apportionment between capital and revenue, 132 Executors and trustees, accounts of. Points in audit of, 145 Executorship Accounts, Apportionment of capital and income in, 145 Expenditure on conversions. Treatment of, 134 " " new works, in place of old, Treatment of, 132 Expenses, Distinction between various classes of, 247 " of revenue, 247 " which may be spread over a number of years, 247 Explanation of system of self-balancing Ledgers, 45 Extent of an auditor's examination of the books, 23 " auditor's certification, 272 " "  as to profits, 299 Extract from Accountant on provision for bad debts, 187 " " Lord Lindley's judgment in London and General Bank case, 275 " " report of Select Committee of House of Lords to en- quire into company law, 279 " "Tretyce off Housebandry," 357 Fees, directors'. Vouching of, 191 Feigning Laxity as a method of discovering fraud, 41 Figures, Bad, in accounts, 31 Finance companies, speculative, accounts of. Points in audit of, 124 Financial undertakings, accounts of. Points in audit of, ill Fire Insurance Companies, accounts of. Points in audit of, 121 Firm, Position of auditor to a, 262 Fixed and floating assets. Distinction between, 162 " assets in Balance Sheet, Treatment of, 210 " " Definition of, A. L. Dickinson, 214 " Valuation of, 162, 248 Fixtures, landlord's. Depreciation of, 186 Floating and fixed assets, Distinction between, 162 " assets in Balance Sheet, Treatment of, 211 " Valuation of, 163, 248 INDEX. 373 Fluctuation and depreciation in values, Distinction between, 162, 177 of values in accounts, Treatment of, 177 Fluctuations in assets and secret reserves, 194 Foreign exchanges. Treatment of, 196 Form of Audit Note Book, 18 " Balance Sheet, 207 Cash Book, 57 " published accounts, Auditor's duty as regafds, 197, 230 " Revenue Account for traders considered, 202 Forms of accounts of contractors, 204 " manufacturers, 202 " " mines, 205 " " traders, 201 Foster v. The New Trinidad Lake Asphalte Co., Ltd., decision, 235 Fraud, Audit not an insurance against, 255 " Detection of, as an object of an audit, 22 " in investigations. Detection of, 305 Frauds in Building and Loan Societies' Accounts, 150 " wages, 37 Fraudulent alterations during audit. Methods of detecting, 43 Funds, meaning of word, 221 Furniture, Depreciation of, 184 Future Deliveries, dangers of anticipating profits on, 172 Gas companies, accounts of, Points in audit of, 134 " company. Duty of auditor of, in apportioning capital and revenue expenditure, 131 " rates and meter rents. Method of vouching income from, 134 General course of procedure in an investigation as to profits, 310 " liabilities in Balance Sheet, Treatment of, 216 " system of accounts, Instructions as to, 54 " " " internal check, 53 Gold Mines, &c., Accounts of. Points in Audit of, log Goodwill, Depreciation of, 181 " in accounts, Treatment of, 181 " Meaning of, in Balance Sheet, 181 Governmental supervision, 258 Gross Profit, Meaning of term, 201 " " use in checking stock accounts, 70 Hire-purchase agreements, 176 " " Depreciation of plant under, 184 " " Distinction between capital and revenue in, 176 Holding Companies, Consolidated Balance Sheets in connection with, 227 Horses, Depreciation of, 181 374 INDEX. Hospitals, Points in audit of, 148 Hotels, accounts of, Points in audit of, 95 Hutchinson & McElheny v. American Malting Co., decision, 347 Importance of ascertaining general system of accounts under audit, 24 " balancing books exactly, 44 " retaining books until Trial Balance is audited, 43 Imprest system of petty cash, S4> 60 Income and capital. Apportionment of, in Executorship Accounts, 145 " from gas rates and meter rents. Method of vouching, 134 Individual, Position of auditor to an, 261 Inspection of Minute Book, 192 " " securities, 113, 151 Instalment system of depreciation, 180 Instances of depreciation allov^ed for in Electric Lighting Accounts, 136 Instructions as to general system of accounts, 54 " " preparation for audit, 85 " for audit, 17, 20 Insurance company, Amount of reserve necessary for, iig " funds in shipping companies, Limitations of, 143 " office, Method of vouching premium income of, 117 " Companies, accounts of. Points in audit of, 117 Interest and discount. Treatment of, 58 " or dividend. Audit of payments for, 48 Internal check, General system of, 53 " " system of. Essential points in, S4 Investigation, Extent of certificate after, 300, 307, 320 " Length of period to be covered by, 308 " Limits of an, 304 " Method of procedure in an, 309, 310 " on behalf of a projected company, 304 Investigations as to profits. Adjustments of profits in, 316 " " " Comparison of Revenue Accounts in, 31 1 " " " Extent of, 299 " " " General course of procedure in an, 310 " " " Method of dealing with bad debts in, 314 " ■' " Method of dealing with depreciation in, 315 " ■' " Necessity of inspecting Balance Sheets in, 310 " " " Points in the examination of Revenue Accounts in, 311 " " " Treatment of exceptional losses and profits in, 317 " Detection of errors in books in, 300 Object of, 298 INDEX. 375 Investigations, Detection of fraud in, 305 " Opinion of accountants on extent of, 302 " Purposes for which, are made, 298 Investment Companies, Accounts of. Points in audit of, 123 " . Fluctuation Accounts, Meaning of, 219 " of Reserve Funds, 222 Investments, Depreciation of, 182 " in Balance Sheet, Treatment of, 214 " " stocks and shares. Verification of, 166 Valuation of, in audit of Investment Companies, 123 Invoices for purchases. Danger of " dating-forward," 174 Irish Woollen Company, Lim., case considered, 283, 337 Journal, Method of vouching, 39 Use of the, 76 Kingston Cotton Mills case considered, 278, 333 Land and buildings. Verification of, 165 Landlord's fixtures. Depreciation of, 186 Lands, Depreciation of, 180 on lease. Depreciation Fund necessary where company holds, 13s. Lawyers, Accounts of. Points in audit of, 153 Advisability of, keeping clients' moneys separate from their own, IS3 Leasehold land and premises. Depreciation of, 182 " premises. Dilapidations to be considered in depreciation of, 182 Leases, Depreciation of, 63 Ledger, Advantages of making each self-balancing, 64 " doubtful debts, Explanation of, 75 " Salaries, Description of, 77 " Tabulation of the, 45 Ledgers, Accounts for which Tabular, are suitable, 65 " Comparison of, with previous Balance Sheet, 32 " Purchase, of retailer. Audit of, 90 " Sales, of retailer. Audit of, go Self-balancing, 45, SS, 57, 62, 81 " Tabular, 65 Lee V. Neuchatel Asphalte Company, Lim., case considered, 233 Leeds Estate Building and Investment Society v. Shephard case con- sidered, 293, 328 Legality of writing up assets, 195 Legislative requirements, 266, 278 Length of period to be covered by investigation, 308 Liabilities and assets in Balance Sheet, reason for transposing, 207 376 INDEX. Liabilities, Contingent, Verification of, 175  auditors, 293, 326 " Criminal, of auditors, 290 " of auditor of a bank, iil " " with regard to predecessor's errors, 32 " auditors for libel, 289 " Insurance Companies, General and Special, Accident, Title, Guarantee, accounts of, 122 Libel, Liability of auditor for, 289 Licensed houses, Depreciation of, 182 Life Insurance Companies, Reserve fund of, 221 " " " accounts of. Points in audit of, 121 Limitations of audit, 255 " Tabular Ledgers, 65 Limits of an investigation, 304 " to auditor's liability, 296 Liquidating Partners, duties of, 321 List of statistical books which companies should keep, 49 " books, preparation of, 24 Localization of errors in Trial Balance, 44, 76 London and General Bank case as to auditor's responsibility for values, Decision in, 164, 328, 346 London and General Bank case considered, 328, 346 London and General Bank case, Extract from Lord Lindley's judgment in, 27s London Oil Storage Co., Lim., v. Seear, Hasluck &• Co., case con- sidered, 286, 343 London Oil Storage Co., Lim., v. Seear, Hasluck & Co., with regard to verification of cash in hand, Decision in, 343 Loose Leaf System of bookkeeping, 67 Lubbock V. British Bank of South Africa, Lim., case considered, 234 Machinery and plant, Verification of, 168 " Depreciation of, 183 Magazines, accounts of. Points in audit of, 104 Manufacturers, accounts of, Forms of, 202 Manufacturing and trading profits. Distinction between, 163 " traders, accounts of. Points in audit of, 89 Martin v. Isitt, case considered, 282, 344 Meaning of " Goodwill" in Balance Sheet, 181 " " Investment Fluctuation Account," 219 INDEX. 377 Meaning of term "Gross Profit," 201 " "Net Profit," 206 Medical men, accounts of. Points in the audit of, 157 Memorandum and articles of association, Necessity of perusing, 50 Merchants, Wholesale, accounts of. Points in audit of, 88 Meter rents. Minimum or dead rents in Mining Accounts, Definition of, lo6 Treatment of, lo6 Mining Accounts, Definition of minimum or dead rents in, io6 " " Treatment of minimum or dead rents in, io6 Minute Book, Auditor's duty who is refused permission to inspect, 193 " " Inspection of, 50, 192 " " Liabilities recorded therein, 175 " " of company. Auditor's right of inspection of, 192 Montgomery, Robert H., Accounts of Public Service Corporations, 129 Mortgages, Treatment of, in Balance Sheets, 217 Moxham v. Grant case considered, 296 Necessity of checking starting balances, 33 " having good system in paying wages, 37 " " proper Cost Accounts, 56, 92, 204 " " reserve for renewals in Public Service Compa- nies, 127 " inspecting Balance Sheets in investigations as to pro- fits, 310 " keeping proper rent roll, 62 " perusing charters and by-laws, 50 " " prospectus of company, 50 " providing for depreciation, 207 " vouching every item in accounts of building and loan societies, 151 " Net Profit " and " Profit safely divisible," distinction between, 250 " " meaning of term, 206, 239 Newspapers, accounts of. Points in audit of, 104 New works in place of old. Treatment of expenditure on, 132 Nicholson's, Trustee, Src, case, 301 Object and scope of an audit, 22 " of investigations, 298 " Revenue Accounts, 200 Official auditors, 256 " Duties of, 257 Opinion of accountants on extent of investigations, 302 Partners, Auditor's duty as regards individual, 262 " retiring, duties to, 321 Partnership agreement. Points to be considered in drawing up, 83 " agreements, 83 Pass Books in bank audit. Auditor's duty as regards examination of, 114 Patents, Depreciation of, 185 Payment of dividends out of capital. What is, 237 INDEX. 379 Payments for dividend or interest, Audit of, 48 Pennsylvania Legislature, Bill introduced in 1905 session, 265 Percentage of profits, Method of calculating, 70 Periodicals, Accounts of, Points in audit of, 104 Petty Cash Book, Method of keeping, 36, 60 " " Imprest system of, 54, 61 " " Method of vouching, 36, 91 " " payments. Treatment of, 60 Plant and machinery. Verification of, 168 " brewery, Depreciation in connection with, 94 " Depreciation of, 184 " under hire-purchase agreements, 184 " Necessity of increased depreciation of electric lighting, 136 " theatrical, Depreciation of, 185 Points in Revenue Account of bank, 116 " the examination of Revenue Accounts in investigations as to profits, 311 " to be considered in devising system of books, 53 " " drawing up partnership agreement, 83 Position of an auditor of a company, 26 " auditor, 261 " " named in prospectus under Companies Act, 1900, 264 " " on behalf of creditors, 263 " " to a firm, 262 " " " an individual, 261 " " who disagrees with directors, 268 Postings, calling back, 29 Preliminary expenses. Capitalization of, 162, 191 " " in accounts, Treatment of, 191, 249 " " Vouching of, 191 Premium income of insurance office. Method of vouching, 117 Premiums received on issue of shares, Treatment of, 47, 192 Preparation for audit. Instruction as to, 85 Previous Balance Sheets, Treatment of, 32 Principal, Duties of, at commencement of new audit, 21 Principle in valuation of assets, 160 " of valuing work in progress, 170 Principles of compiling a Balance Sheet, 161 " Privilege " of auditor as regards verbal statements at company meeting, 289 " auditors, 269, 289 Procedure by way of action against auditors, 293 " on division of estate between beneficiaries, 146 38o INDEX. Professional auditors, 254, 297 " " number in United States, 253 Profit and Loss Account, consolidated, 225 " safely divisible and " Net profit," Distinction between, 250 Profits available for dividend, 347 " Buckley's definition of term, 240 " Definition of term, 240 " Distinction between various classes of, 244 " Extent of investigations as to, 299 " from commission on underwriting shares. Treatment of, 245 " in investigations as to profits. Adjustments of, 316 " Lindley's (Lord Justice), definition of term, 245 " Method of calculating percentage of, 70 " " testing if, are safely divisible, 250 " of Public Service Corporation, paper on, 129 " sales of investments. Treatment of, 124 Programme of railway audit, 137 Promissory Notes, 41 Prospectus of company. Necessity of perusing, 50 " Position of auditor named in, under Companies Act, 1900, 264 Provision for bad and doubtful debts, 187 " " debts by percentage of sales, 75 Public Authorities, Accounts of. Points in audit of, 144 " Service Corporations, Accounts of. Points in audit of, 127 " " " Report on Paper of R. H. Montgomery, read at St. Louis Congress of Accountants, 129 Published accounts, form of. Auditor's duty as regards, 197, 230 Publishers, accounts of. Points in audit of, loi Purchase Ledger of retailer. Audit of, 90 Purchases, Danger of " dating forward " invoices for, 174 " Method of recording, 55 Purposes for which investigations are made, 298 Qualifications of an auditor, 259 " audit clerks, 260 Railway audit. Programme of, 138 " Company, Extent of auditor's examination of books of a, 137 Railways, Steam, Accounts of points in audit of, 137 Street, " " " 139 Reason for transposing liabilities and assets in Balance Sheet, 207 Receipts of revenue, 244 Redeemable stocks and bonds, Treatment of, 193 Removal of auditor, how effected, 269 Remuneration, Auditor's right to his, 261 INDEX. 381 Remuneration of auditor under Companies Act, 1900, 264 Rent roll, Necessity of keeping proper, 62 Rents received and paid, Method of treating in accounts, 62 Reserve, Amount of, necessary for insurance company, 119 " for Depreciation and Reserve Fund, Distinction between, 207, 249 " Fund and reserve for depreciation. Saloons in connection with audit of brewery, 94 Schools and colleges, accounts of. Points in audit of, 150 Scope of an audit, object and, 22 Secret Reserves and assets, Fluctuations in, 194 " " Auditor's duty as regards, 195 Securities, Inspection of, 113, 151 Self-balancing Ledgers, 45, 55, 57, 63, 81 " " Explanation of system of, 63 Share Capital Accounts, Audit of, 46 Shipping companies, accounts of. Points in audit of, 141 " " Limitation of insurance funds in, 143 " company, Cost Account of, Meaning of, 142 " " Extent of auditor's examination of books of, 142 Ships, Depreciation of, 185 Short & Compton v. Brackett, Decision in, 302, 342 Single ship companies, accounts of, Points in audit of, 143 Sinking Fund, Explanation of, 145 " " in mining account, 108 " " system of depreciation, 180 " " to repay loans, Distinction between, and depreciation, 220 Societies, building and loan, accounts of. Points in audit of, 150 Speculative finance companies, accounts of. Points in audit of, 125 Sprague, Chas. E., annuity tables, &c., 180 Staff, System of work of, 54 Statistical books, List of, which companies should keep, 49 " information. Advantages of, 205 Steam Railways, accounts of. Points in audit of, 137 Stock Accounts, Advantages of keeping proper, 68, 70, 72 " " in branch establishments, 81 Method of keeping, 68 " of traders, 70 " and Bonds Redeemable, Treatment of, 193 " and Share Accounts of companies, 72 Stockbrokers' Accounts, Examination of, 154 Stockbrokers, accounts of. Points in the audit of, 154 Stock-in-trade, Auditor's duty as regards valuation of, 166, 211 " Verification of, 165 Stocks and shares, investments in. Verification of, 166 " " " Vouching of amounts paid for, i66 Stores and Stock accounts, Points in the audit of, 68 Stores, gross profits of. Table of approximate, 63 Street Railways, accounts of, Points in audit of, 139 Suspense Accounts, 73 INDEX. 383 System of books, Points to be considered in devising, 52 " " bookkeeping, necessity of mastering, 24 " " work of staff, 54 " on which an audit should be conducted, 17 Tabular Cash Book, Advantages of, 57 " Ledgers, 65 " " Limittations of, 65 Tabulation of the Ledger, 45 Theatres, accounts of. Points in audit of, 97 Theatrical Companies, accounts of, Points in audit of, 100 " plant. Treatment of outstanding discounts, 189 " petty cash payments, 60 " preliminary expenses in accounts, 191, 249 " premiums received on issue of share capital, 192, 246 shares, 47 " profits from commission on underwriting shares, 245 " " on sales of investments of trust companies, 124 " redeemable bonds, 193 " Reserve Funds in Balance Sheet, 218 " sales for future delivery, 172 " Tretyce off Housebandry," Extracts from, 3S7 Trial Balance, Importance of retaining books until, is audited, 43 " " Localization of errors in, 44, 76 Ultra vires acts. Auditor's duty as regards, 196 Uncompleted contracts. Valuation of, 171 Underwriting or placing of shares. Commission on the, 47 " shares. Treatment of profits from commission on, 245 Use of the Journal, 76 "Valuation" of assets. Principle in, 160 " copyrights, 102 " fixed assets, 162, 248 " floating assets, 163, 211, 248 " investments in audit of investment companies, 123 " marketable investments, 214 " uncompleted contracts, 171 Values in Balance Sheet, Responsibility for, 164 Verification of bank balance, 168 " bills receivable, 170 " book debts, 167 " cash in hand, 169, 286 " contingent liabilities, 175 " customers' accounts, 35 " existence of assets, 112, 165 " investments in stocks and shares, 166 " land and buildings, 165 " outstanding assets, 173 " " liabilities, 174 " plant and machinery, 168 " sales for future delivery, 172 " stock-in-trade, 165 " work in progress, 170 Vouchers, 33 " Cancellation of, 40 " Examination of, 29 INDliX. 38s Vouching cash receipts, Method of, 34 " Definition of, 34 " of amounts paid for stocks and shares, 166 " directors' fees, 191 " preliminary expenses, 191 Wages, Frauds in, 37 " Method of vouching, 37 " Necessity of having good system in paying, 37 Water companies, accounts of, Points in audit of, 13s Weiner v. Wurtemburg Electro Plate Company and another case con- sidered, 289 What are assessable profits? 413 Whinney, Mr. Frederick, on " Auditors' duties," 274 " " " Qualifications of an Auditor," 259 Wholesale Merchants' Accounts, 88 Wholesale merchants, accounts of. Points in audit of, 88 Wilde and others v. Cape and Dalgleish, Decision in, 282, 337 Wilmer v. McNamara & Co., Lim., 234 Wilkinson, George, Audit of insurance companies, 119 Work in progress. Principle of valuing, 170 " " Verification of, 170. 