AUDITORS—& EMBEZZLERS

Waikato Times, Volume 122, Issue 20509, 27 May 1938, Page 12

AUDITORS—& EMBEZZLERS

NEED OF INTERNAL CHECK A VALUABLE SAFEGUARD “The Auditor and the Embezzler” is the title of an editorial article in the Canadian Chartered Accountant. “Unless some form of internal check 1 is present the schemes of the trans- ; gressor may remain hidden for years, | or may never come to light, restitution j in some cases having perhaps been ; made,” the writer states. “The regular audit by professional accountants is a valuable safeguard, but it is no guarantee that every type of fraud has been disclosed in the accounts examined. The auditor is expected to exercise skill and care in his work, , but to give an abstract definition of j the degree of skill and care is not ' possible, or as Mr Justice Lindley j stated in re London and General Bank (1895), ’What is reasonable care

in any particular case must depend upon the circumstances of that case. When there is nothing- to excite suspicion very little enquiry will be reasonable and sufficient . . . where suspicion is aroused more care is obviously necessary.' Mr Justice Aiverstone "also stated in the London Oil [ Storage Company case (1904), *. . . if circumstances of suspicion arise it is the duty of the auditor, in so far as these circumstances relate to the financial positron of the company, to probe them to the bottom.’ [ “By way of illustration we mention . a case which came to our attention a [ few years ago in one of our Western provinces. A chartered accountant and his assistant were examining the accounts of a department of government which was almost altogether under the control of one official. The invoices for purchases of building

materials had been approved by this official and cheques duly issued by the treasurer in payment. There was nothing in the transactions to excite suspicion. The street address of the company, however, happened to arouse the curiosity of the auditor, since it was on his usual route to his office and lie could not recall ever having seen a lumber yard there. On investigation the address proved to be that of a vacant lot. Confronted, the official confessed to frauds extending over a considerable length of time amounting to hundreds of dollars of government funds, and to having the necessary stationery printed in another city to avoid arousing local suspicion."