ABSTRACT
The following note, which we reproduce from the columns of The Warehouseman. will be of interest to our readers, because it draws attention to the vagueness of the views entertained by many persons as to the respective functions of directors and auditors of companies—particularly the latter:—
That directors should “direct” and that auditors should “audit” is a truism, though it needs to be repeated because many directors consider that all their duties are discharged if they attend the board meetings simply in an ornamental capacity, and auditors have not infrequently been content with adding up the figures in a Balance Sheet and verifying the totals. All the same, there are obvious limits to the duties of auditors, who cannot or ought not to be expected to interfere with the functions of directors. They must themselves be responsible for the policy of the company. We make these remarks because a lengthened advertisement in the daily press calls attention to a Balance Sheet issued by a company, the name of which is not given, the auditor’s certifícate being as follows:—“Under reference to what is “stated in the prefixed report of the directors with regard to “the company’s investments, the above Balance Sheet is, in “our opinion, a full and fair one.” “Now, these words,” the advertiser says, “cover an estimated loss or dépréciation “in the value of the company’s assets, as estimated by the “directors, of a sum of £170,000, and of such loss or deprecia-“tion there does not appear on the Balance Sheet itself any “indication whatever.” And he asks whether the Balance Sheet can be truly declared a full and fair one. Well, we cannot, of course, answer the question, because we do not know anything about the company referred to, or even what its name is. We quote the advertisement simply for the purpose of reminding our readers, if they need reminding, that they must not expect too much of auditors. On the face of the statement made, we should say the auditors had done all that they need do. For some reason or other the directors have called attention to a possible, probable, or actual depreciation, temporary or otherwise, of the assets. The auditors are not apparently in a position to express a positive opinion, and they refer to the directors’ statement as a qualification of their certificate, leaving the shareholders to settle the matter with the directors. We do not see what more could be asked.
