(k) The amount issued subject to call;

(1) The amount of calls made on each share; (m) The total amount of calls received;

(n) The total amount of calls unpaid;

(0) The total amount of shares forfeited;

(p) The total amount of shares which have never been allotted or subscribed for.

(q) The total amount for which shareholders of the Company are liable in respect of unpaid stock held by them.

The summary shall also contain a list of persons who, on the 31st day of December previously, were shareholders of the Company, and their addresses and occupation and the amount of stock held by each, and the amount, if any, unpaid and still due by each. R. S. O. 1897, c. 191, s. 79.

The above section shall not apply to any Company not having gain for its purpose or object, where such Company by its charter of incorporation is declared to be exempt from the provisions thereof, or to any Company not having gain for its purpose or object which, on proof thereof being shown to the LieutenantGovernor-in-Council, is, on and after a date to be set forth in the order of the Lieutenant-Governor-in-Council in that behalf, declared to be exempt.

Every other Company is subject to the requirements of this section.

The shares pledged by shareholders as collateral to advances made to the Company, should appear in the return in the names of these shareholders, as they are entitled to vote thereon. The lender to realize his collateral must proceed in the usual course of law; he could not sell or transfer the stock, even if transferred into his name by way of security.

CHAPTER XI.

AUDITING.

Question 1.-You are asked to act as Auditor for a Joint Stock Company.

What books and information would you require for the first Audit?

A. The Auditor would require for his first audit:

To see all the books and have a list of same handed to him,— (The Stock or Share Ledger would be one of the books to be audited).

To examine the Articles of Incorporation and the by-laws; also the minutes of the Directors, where it may be necessary.

To ascertain who was entitled to receive and make payments on behalf of the Company, and order goods.

To generally investigate the system under which the books were kept, and note what internal check (if any) was kept as to the correctness of the work, etc.

To carefully note the sources of receipts with a view to guarding against fraud. All vouchers, including Invoices, Bank Cheques, etc., would also be required.

The above may be considered as answering the question, though the experienced auditor would be guided by circumstances as to the exact methods of gaining the necessary information, and the work to be done. For instance, in auditing the Stock Ledger, if shares had been issued during the period under the audit, it would be his

duty to see that the value given therefor was properly accounted for in the financial books, and that this Ledger represented the amount of capital as shown to be invested in the business or subscribed for. Transfers of shares are made under the authority of the Directors and it is their duty, possibly through their officers, to see that these are correctly made.

The Auditor, however, will see that all the calls are properly made and accounted for, as such a transaction affecting the cash receipts would come under his audit.

Question 2. What system would you recommend to a Trading Company doing a general business through the Dominion, as being the best for keeping a proper check on all cash receipts, part of their collections being made by the travellers?

A.-Probably the best check on cash receipts is to use printed receipt forms bound up as a Cheque Book and numbered consecutively. Statements of accounts rendered should have a memorandum thereon, stating that only receipts on the firm's printed form will be recognized.

The responsible person who received the remittances coming to hand by mail, might enter the amounts and names on the stub of Receipt Book, thus affording a good safeguard, a clerk duly filling out the receipts, after the cashier had initialed said stubs.

The traveller could be furnished with such a Receipt Book, and the stub or carbon copy should on his return be compared with the cash remitted or paid in by him.

A very useful check on cash receipts is to compare a few of the deposits made into the Bank (from copies kept) with the receipts of the same period. The cheques paid in should be recorded on the debit side of Cash Book unless possibly one might have been cashed.

Question 3.-In a Manufacturing Business what method would you propose for the protection of the Company in the purchase of materials and supplies in connection with the business and for the payment of the same?

A. The success of a Manufacturing business so much depends on the knowledge and experience shown in the purchase of materials and supplies that it is a "sine qua non" that first class men be employed to manage the Company. Apart from this, and to ensure that market prices are paid for the goods, proper registers should be kept known as Stock Books, wherein are entered all materials and supplies purchased and the person receiving the goods should also initial the invoice accompanying them and their costs. Where practicable, Ledger Accounts could be kept of quantities, charging when bought and crediting when given out. The person who orders the goods should not be the one who passes the account for payment. The Directors also, noting that their goods were bought from first class houses, could ensure reasonable protection. As to protection in the payment of accounts, a proper system of Book-keeping, combined with regular auditing of the invoices, etc., and internal checking of the quantities of the goods purchased, would ensure that no payments were made, unless for value received, as under such proper system, one officer is a check on the work done by another.

The purchases themselves would be checked from the credit side of the Account in the Purchase Ledger through the Subsidiary Book to the invoice itself, showing the nature and cost of the goods bought.

In conclusion, the Company, to be successful, would have to exercise judgment in engaging their managers, and also in the system of Book-keeping adopted, etc., without which no "method proposed" would be of much avail.

Question 4.-What, in your opinion, would be an adequate system of checking the amounts due and payments for wages in a large Factory?

A. First a proper system of Registers must be kept for checking the time worked by the employees. For piece work the Pay Sheets would have to be certified to by the foreman.

The Wages Sheet should be then made out from the Registers by a separate clerk and handed to the cashier after it has been duly

checked. The cashier, or some other responsible person then pays the wages to the employees, and if possible, occasionally a Director or an Auditor should be present. Some factories give each employee a voucher for the wages due, which he hands in, such voucher operating as a receipt.

The Auditor should check the Wages Book and Pay Sheets and see that the totals agree with cheque drawn for "wages," and also might impress upon the management the importance of internal check on this part of the expenditure.

The best practical check after all is having the Wages Sheet checked by several persons, each department's wages being certified, as experience shows that collusion in fraud is rare amongst responsible officers in a firm.

Where a proper system of costing is adopted-the cost of wages is added to the Material used in the manufacturing of goods, the total cost of wages on the work done can then readily be ascertained, and this should tally with the total of the Wages Sheet for the same period.

Question 5.-In checking the Bank Account in a firm's books you find the balance agrees with the Bank Pass Book at the end of a certain period.

Would you consider any further examination necessary? Give reasons for your answer.

A.

Further examination would certainly be necessary. The Bank Account must always be checked, both receipts and payments. Although the balance happened to agree with the Bank Pass Book, there might be an error in the firm's books, and further, there might be outstanding cheques marked as good and charged, which would require verification.

The Bank Balance should also be ascertained from the Bank in addition to comparing the accounts with the Bank Pass Book.

This can be well illustrated by a case which actually occurred. A firm accepted a Draft at sight, which was duly charged to their account by the Bank on the 31st of the month, but which