from the directors; as Auditor he is the agent of the Lecture I. shareholders, and it is quite possible he may, from fresh information acquired during his audit, refuse, as an Auditor, to certify accounts he has prepared or supervised as a professional Accountant.

work.

Many Chartered Accountants also conduct entirely Secretarial in their offices the secretarial and office work of companies, receiving from them a fee which covers the rent and salaries of secretary and clerks. In many cases this is highly advantageous to the company, and the directors have the satisfaction of feeling they are in the hands of a responsible person, who has a higher interest in conducting the business properly than an ordinary secretary.

The usual official position, however, of Chartered Accountants in connection with public companies is in their capacity as Auditors and Liquidators. The duties of Auditors of companies has been the subject of a separate work by me, while those of Liquidators will be referred to later on.

of Accounts on

Chartered Accountants are almost universally Investigation instructed to examine the books of a firm on behalf of behalf of incoming a proposed partner. Incoming partners have usually to Partner. introduce money into the firm as a contribution towards the working capital of the business, while sometimes they have to pay a premium for the privilege of being admitted into an established firm.

It would be exceedingly rash to take for granted the correctness of a statement that a certain share will yield on the average a certain income, and few would begrudge the fee paid for a proper investigation. It may be contended that, as a man may have to inquire into several businesses before he eventually joins one, he may have many fees to pay; but this is really an argument in favour of investigation, as the number of fees paid before finally deciding on a business is a proof

Lecture I. of an equal number of dangers escaped.

Audit of
Partnership
Accounts.

Of Hospitals

It is very

simple, however, to avoid these fees, and it is customary to request the firm to submit their accounts, on the face of which they offer to take in a partner and receive his money, and then, if they appear satisfactory, to accept the partnership subject to their correctness being certified by a Chartered Accountant chosen by the proposed incoming partner, the fee to be paid by the firm should the statements put forward by them be proved to be incorrect.

When the partnership is eventually agreed upon, it is now very customary for a clause to be inserted in the deed of partnership that the Accounts shall be audited yearly or half-yearly by a Chartered Accountant named in the deed; and if the incoming partner is providing a large portion of the capital, he would, in most cases, be able to make a condition that a Chartered Accountant nominated by him should perform this duty.

In many cases capital is introduced into a business by a sleeping partner, who does not take any part in the management; it is then more than ever necessary, in his interests, that a Chartered Accountant selected by him should periodically audit the books and render statements to him showing the financial results of the management, together with a report thereon.

The audit of the Accounts of public institutions, such as hospitals, charitable and other societies, where the funds are derived from donations and periodical subscriptions, forms another department of a Chartered Accountant's practice, and since the governing bodies of the Hospital Sunday and Hospital Saturday Fund have refused to make any contributions to Hospitals or Dispensaries whose Accounts are not certified by a professional Accountant, the custom is becoming more general of issuing the Accounts to the subscribers with the certificate of a Chartered Accountant appended.

Protection

Although it is very often impossible for a Chartered Lecture I. Accountant to detect the committal of frauds in auditing Auditing as a Accounts, in the same way as it is impossible for a against Frauds. solicitor to protect his clients against losses by forgeries when advancing money on securities, still there can be no doubt that many frauds would be prevented were auditing more universal, but very much on the principle of "locking the stable door when the steed has gone,' Chartered Accountants are too often called in when a fraud has been discovered, instead of having been employed to prevent it, and the analysis of books containing false entries form a very interesting part of his duties, and one frequently requiring his utmost skill.

The devices of absconding cashiers and bookkeepers are too numerous to describe; but the cleverness and astuteness often displayed to ward off the discovery of the peculation of a few hundred pounds would have often yielded the originator a more substantial reward had he turned his skill to better purposes.

Witnesses in

This leads me up to another department of a Qualified Chartered Accountant's profession, namely, that of Prosecutions. acting as a qualified witness.

Where a defaulter of the nature just described is apprehended and prosecuted, the most important evidence against him will probably be that of the Chartered Accountant who has examined the manipulated books, and, having regard to the fact that he will probably have to undergo a very severe cross-examination by the prisoner's counsel, he should fully qualify himself to give his evidence in a straightforward manner, and have his figures and facts carefully brought together, with references from his papers to the entries which will be produced as evidence.

Chartered Accountants are also frequently called as qualified witnesses in other trials and arbitrations, as,

Lecture I. for example, where a purchaser of a business brings an

In Compensation Cases.

Arbitrations.

action against the vendor on the grounds that the profits made have not been in accordance with the statements on which he was induced to purchase. In cases of this nature a Chartered Accountant may be either retained by the plaintiff or defendant or selected as arbitrator.

It is now the practice, where premises are taken compulsorily under Public Acts, by railways, corporations, school boards, &c., and part of the claim is for loss of business, for a Chartered Accountant to be employed by a plaintiff to investigate his books, to enable him to make his trade claim; and also by a defendant to resist it. In these cases, unless the claim be settled before the hearing, the Chartered Accountant on either side will give evidence as a qualified witness.

A Chartered Accountant is very frequently appointed as an arbitrator or umpire where matters of account are in dispute, and in this capacity can hear the parties either in person or represented by counsel or solicitors. In his capacity as arbitrator he can administer an oath to all such witnesses as are legally called before him, and, unless an objection has been made by one of the parties to a legal assessor, he will generally be allowed one to sit with him, and in any case may obtain the assistance of counsel in framing his award.

It must be evident that, not only with reference to arbitrations, but in all the other official positions referred to by me, a Chartered Accountant should have a fair knowledge of mercantile law, and a glance at the papers of the intermediate and final examinations of the Institute will show the importance attached to this branch of a student's studies.

The following duties devolve upon Chartered Accountants in connection with that branch I have designated as Administration of Assets :

-

Manager and

Under the Bankruptcy Act of 1883, creditors can Lecture I. apply for the appointment of a Special Manager of the Special debtor's business pending the appointment of a Trustee, Trustee in and also have the power at the first meeting to appoint their own Trustee.

Both these offices are now almost universally conferred upon Chartered Accountants, which is easily accounted for, as nearly every question occurring, with reference to the duties of a special manager, or trustee, are connected with matters involving a knowledge of

accounts.

In order to undertake duties of this nature successfully, considerable experience in mercantile law and practice must have been gained, for it is quite possible that in either of these capacities a Chartered Accountant may at the same time act as a banker, East India merchant, warehouseman, wharfinger, or a wholesale and retail trader. Experience qualifying anyone to undertake these varied duties can only be gained in the training and practice of a Chartered Accountant's office, where the audit of books and Accounts of traders of every description have laid open the secrets of the various businesses thus examined.

Bankruptcy.

A Special Manager and Trustee in Bankruptcy are, Their Duties. during the tenure of their appointment, accountable to the Board of Trade. They have to give security, and have to pay all money received into the Bank of England; their Accounts are audited periodically by the Board of Trade, and they are accordingly in constant communication with the two departments of the Official Receiver and the Inspector-General in Bankruptcy. Whatever complaint may be made against the Act of 1883, the institution of the latter department was certainly to the advantage of the most respectable Chartered Accountants, and those who have worked under the two Acts greatly prefer the one now in force.

C