The Responsibilities of Auditors

Wairarapa Daily Times, Volume IX, Issue 2917, 6 June 1888, Page 2

The Responsibilities of Auditors

The following extract from the April number of the 1 Law Quarterly Review' is ot special interest to directors and managers, and auditors of com-

panies ; ~ " Leeds Estate Building Company v. Shepherd (3G Oil. P,, 787), recalls to mind the amusing passage in Lucian's Dialogue of the Dead, in which the chief actors in tho Trojan War, meeting in Hades, try to shift the blame on to each other— Menelaits on Helen, Helen on Paris, Paris on Aphrodite, and so on. In vain I for Khadaroanthiis, in the person of Mr Justice Stirling, has fixed directors, manager, and auditor alike wif'jA liability, This is the first occasion or® which auditors are held liable or their duties defined. An auditor must nti confine himself merely to the task™ verifying the arithmetical accuracy of tho balance-sheet, but must inquire into its substantial accuracy; must as-

certain that ii contains a proper income and expenditure account, and a true and correct representation of the state of the company's affairs. Anything less than this would make auditing illusory—a mere sham, The decision, effectually dispels the notion that atl auditor, because he is paid only a small fee, may perform his duties in a perfunctory manner, or rather not at all. It dispels, too, the notion that the directors can avoid liability by professing ignorance of the mode in which

the balance sheets have been prepared, and of inaccuracies in them, and saying (even truthfully) that they trusted to the manager and auditors. Directors are entitled to employ skilled agents such as auditors, and to rely on th&r reports; but like trustees, they canflft delegate their responsibilities to such agents, They must exercise their own judgment as business men on the reports and balance sheets submitted to them A, -must apply their minds to themsfc just as trustees must to an investment approved by their valuer. In a word they, like auditors, must do their duty. Utopia was a great success, because aj(

tho Utopians were reasonable,virtuous, and obedient. If directors, promoters, managers, auditors, and secretaries, could all be got to do their duty, what the city become ?"