SECURITY.

Taranaki Daily News, Volume LV, Issue 76, 16 August 1912, Page 4

SECURITY.

FRIENDLY SOCIETIES' PROPOSITION. QUESTION OF AUDIT. By Telegraph—Own Correspondent. Wellington, Last Sight The following reference to an important question appears in the annual report of the Registrar of Friendly Societies (Mr. R. E. Hayes) recently presented to Parliament: —"It is mv d'uty to refer again, to the unsatisfactory audit arrangements of .the societies, one of the weakest point* in frieridly society management. The subject is 'brought forward this year in the belief that, no matter how forcibly the results of insufficient auditing are'brought- home to societies by monetary losses, the measures taken by them to prevent a recurrence are. as a rule, of quite a temporary ,-nature; and the, necessity for real reform is quickly forgotten and lost sight of. The auditing in the bulk of the societies is conducted by men whose training and occupations, however useful for general administration purposes, totally unfit them for the special -work of auditing, and if we add to these the auditors who formally sign the balancesheet and, in a case now before me, even a blank form leaving the secretary to fill in his own figures, it is obvious that there is some very faulty auditing in friendly societies. On the average, not more than about 30 out of the GOO odd friendly societies' annual balance-sheets are examined b,y the auditors appointed under the Friendly Societies Act, a state of affairs that roughly indicates the scant use mad'e by the present legal provisipiis for the adequate protection of their funds. I am aware that in many societies there are members who are capable of conducting a simple audit, but it is very doubtful whether such members are always selectqjl, and in any case the finances of a great number of societies are such that independent and competent auditing is absolutely necessary for the proper security of members 1 ' yitevests, apart from the general audit. I am convinced that many auditors fail to realise the nature of the certificate they sign at the foot of the statutory 'balance-sheet form, wherein they declare that they have 'examined and found correct.' If, as I have seen, 'reputable auditors are careless in certifying to securities they have not seen, what is to be'expected where the auditors are-un-skilled men, who would probably be unaine to delect a false security, or who have little or no conception of such a document? The averager-amateur auditor, moreover, is rehicta'iit to call for the product-ion of all securities, for the reason that such a demand in many cases would be regarded as officious and unnecessary, and would be strongly resented by his fellow members. A competent examination of securities would have prevented much loss of societies' funds in the pa«t, and the adoption of some such system, though riot as satisfactory as a complete State audit, would be' a distinct improvement on present methods. Tt would be an advantage to attach an auditor to the Friendly Societies Office, whoso duty it would "be to examine the accounts of lodges throughout the Dominion. Although one official could! not audit the nfl'airs of all societies in the same year, he would be able to exereise a check on the securities, and his appointment would constitute the basis of an independent and expert auTFit system."