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1945 Yearbook 1943-1944 American Institute of Accountants
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YEARBOOK American Institute of Accountants 1943-1944 YEARBOOK American Institute of Accountants 1943-1944
(Incorporated under the Laws of the District of Columbia)
American Institute of Accountants 13 East 41st Street, New York 17, N. Y. Copyright 1945 by the
A m er ican I n st it u t e of A ccountants Introductory Note
OR the first time, this edition of the American Institute of FAccountants yearbook does not include the alphabetical and geographical lists of members and associates, which are being pub lished separately. This book contains reports of committees submitted to the council of the Institute at its spring meeting and at its meeting preceding the annual meeting of the Institute at St. Louis in October. Many of these committee reports reflect the continued war activities of the profession. Others deal with important technical and professional subjects. The proceedings of the annual meeting and lists of officers, council and committee members, state society presidents and members of state accountancy boards, are also included in this volume. Each member and associate of the Institute will receive a copy of this book without charge. Additional copies may be purchased at $2.00 net, $2.20 delivered in the United States.
J o h n L. C a r e y , Secretary
13 E ast 41st Street, New York 17, N. Y. December 1, 1944. AMERICAN INSTITUTE OF ACCOUNTANTS
O fficers President. Samuel J. Broad ...... 70 Pine Street, New York 5, N. Y. R odney D . W h it e ___ ...... 1120 White Bldg., Seattle 1, Wash. Vice Presidents E dward B. W ilcox...... 125 W. Madison St., Chicago, Ill. Treasurer, Maurice E. Peloubet ...... 25 Broadway, New York 4, N. Y. Secretary, John L. Carey...... 13 E. 41st Street, New York 17, N. Y.
M embers of Council
For Three Years
J ohn N . Aitk e n , J r ...... 1818 Packard Bldg., P hiladelphia 2, Pa. R oy A n d r e a e ...... 33 N . LaSalle Street, Chicago 2, Illinois W illiam Jackson Ca r te r ...... 618 First N ational Bank Bldg., A tlanta 3, Ga. C arl E . D iet z e ...... 213 W. Wisconsin Avenue, Milwaukee, Wisconsin P aul W . F itz k e e ...... Philtower Building, T ulsa 3, Oklahoma James I. K eller, J r ...... 1407 Security Building, M iam i, Florida T heodore K r o h n ...... 9 Clinton Street, N ew ark, N ew Jersey Oscar R. M a r tin ...... 515 First N ational Bank Bldg., Lincoln, N ebraska K arl K . M orris...... 1973 Union Commerce Bldg., Cleveland 14, Ohio Oscar M o ss...... 505 T itle Insurance Bldg., Los Angeles 13, California James A. R e n n ie ...... 1105 State-Planters Bank Bldg., Richm ond, Va. E dward S. R ittler ...... 500 Audubon Building, N ew Orleans, Louisiana Jackson W . Sm art...... 111 W . M onroe Street, Chicago, Illinois J. H arold Stew art...... Assistant Director, Office of Contract Settlement, Federal Reserve Building, Washington, D. C. I. D . W ood...... 419 M ayer Building, Portland, Oregon J ohn H . Zebley, J r ...... 1530 Chestnut Street, Philadelphia 2, Pa.
For Two Years
F rederick F. A lfo rd...... Merchants Cold Storage Bldg., Dallas, Texas W alter L. B ra d ley...... 319 Chamber of Commerce Bldg., Buffalo, N. Y. P ercival F. B r u n d ag e...... 56 Pine Street, New York 5, N . Y . J ames A. Councilor...... Tower Building, Washington, D. C. D ixo n F agerberg...... Luhrs Building, Phoenix, Arizona Stanley G. H . F itc h ...... 1 Federal Street, Boston 10, Mass. J u lian A. H a w k ...... 1127 Third National Bldg., Dayton, Ohio J oseph J. K l e in ...... 60 East 42nd Street, New York 17, N. Y. E dward A. K ra c k e...... 67 Broad Street, New York 4, N. Y. F rank W ilbur M a in ...... First National Bank Bldg., Pittsburgh, Pa. J. A rthur M a rvin ...... 100 Broadway, New York 5, N. Y. J. Leonard Penny ...... 105 W. Adams Street, Chicago 3, I l l . D ick D . Qu in ...... 515 Lampton Building, Jackson, Mississippi H arold W. Scott...... 1601 National Bank Bldg., Detroit, Mich. Arthur C. U pleg er ...... 507 Service Mutual Bldg., Waco, Texas E d w in H . W agner, Sr ...... 1218 Arcade Building, St. Louis, Mo.
For One Year A r t h u r L. B a l d w i n ...... 702 Railway Exchange Bldg., Denver, Colo. Parry Barnes ...... 21 W . 10th Street, Kansas City 6, Mo. F r e d J. D u n c o m b e ...... 1730 First National Bank Bldg., Chicago 3, I l l . Ernest H. Fletcher ...... 3110 Book Tower, Detroit 26, Michigan Russell C. H arrington ...... 1702 Industrial Trust Bldg., Providence, R . I. Charles W. H atter ...... 1901 First National Bank Bldg., Baltimore, Md. J. W illiam Hope ...... 886 Main Street, Bridgeport, Conn. H a r r y R. H o w e l l ...... Box 1191, Charleston, W . Va. 1 2 American Institute of Accountants Yearbook
Wm. M . M a d d e n ...... 1146 Consolidated Building, Indianapolis, Ind. W a r r e n W . N is s le y ...... 1 Cedar Street, New York 5, N . Y. Hilary H. Osborn ...... 407 American Trust Bldg., Nashville, Tenn. F r e d J. P e t e r s o n ...... 1036 Des Moines Building, Des Moines 9, Iowa J. B. Scholefield ...... 523 W. 6th Street, Los Angeles 14, Calif. H om er N. S w e e t ...... 80 Federal Street, Boston 10, Mass. E a r l A. W a ld o ...... 1023 Northwestern Bank Bldg., Minneapolis, Minn. A lb e r t J. W a tso n ...... 1550 Russ Building, San Francisco 4, Calif.
Ex Officio Clem W. Collins ...... 333 First National Bank Bldg., Denver 2, Colorado C h a r le s B. C ouchm an...... 120 Broadway, New York 5, N. Y. J oh n F. F o r b e s...... 510 Crocker Building, San Francisco 4, Calif. Frederick H. Hurdman...... 350 Madison Avenue, New York 17, N. Y. Captain N . L oyall M cL a r e n ...... Room 310, International Bldg., 630 Fifth Avenue, New York 20, N. Y. Robert H. Montgomery ...... 1 East 44th Street, New York 17, N. Y. Carl H. Nau ...... 1220 E. 114th Street, Cleveland, Ohio J oh n B. N iv e n ...... 80 Maiden Lane, New York 7, N. Y. G e o r g e S. O liv e ...... 528 Chamber of Commerce Bldg., Indianapolis 4, Ind. Victor H. Stempf...... 80 Maiden Lane, New York 7, N. Y. C. Oliver W ellington ...... 111 Broadway, New York 6, N. Y. William H. W est ...... 40 Rector Street, New York, N. Y.
Board of Examiners For Three Years George E. Perrin ...... 203 Southeastern Bldg., Greensboro, North Carolina Donald Perry ...... 80 Federal Street, Boston 10, Mass. E d w a rd J. S tegm an ...... 1214 Mercantile Trust Bldg., Baltimore, Md.
For Two Years H a r o ld R. C a ff y n ...... 350 Madison Avenue, New York 17, N. Y. H e n r y E. M e n d e s ...... 80 Maiden Lane, New York 7, N. Y. N orm an E. W e b s te r ...... 50 Broadway, New York 4, N . Y.
For One Year Roy Andreae ...... 33 N. LaSalle Street, Chicago 2, I ll. Kenneth M. Montgomery ...... 67 Wall Street, New York 5, N. Y. R aym ond E. N o r t h ...... 67 Broad Street, New York 4, N. Y.
Auditors F. M errill Beatty ...... 67 Wall St., New York 5, N. Y. H e n r y A. H o r n e ...... 50 Broadway, New York 4, N. Y.
Committees
E xecutive Committee Samuel J. Broad, chairman...... 70 Pine Street, New York 5, N. Y. Rodney D. W hite ...... 1120 White Building, Seattle 1, Washington E d w ard B. W ilc o x ...... 125 W . Madison Street, Chicago, I l l . M a u r ic e E. P e lo u b e t ...... 25 Broadway, New York 4, N. Y. Parry Barnes ...... 21 W. 10th Street, Kansas City 6, Missouri Percival F. Brundage ...... 56 Pine Street, New York 5, N. Y. J. William Hope...... 886 Main Street, Bridgeport, Conn. E d w ard A. K r a c k e ...... 67 Broad Street, New York 4, N. Y. Robert H. Montgomery ...... 1 East 44th Street, New York 17, N. Y. Victor H. Stempf...... 80 Maiden Lane, New York 7, N. Y. E a r l A. W a ld o ...... 1023 Northwestern Bank Bldg., Minneapolis, Minn. Committees 3
C ommittee on N ominations Victor H . Stem pf...... 80 Maiden Lane, New York 7, N. Y. E r nest H . F letch er ...... 3110 Book Tower, Detroit 26, Michigan T homas J. D o la n ...... 1600 Toledo Trust Bldg., Toledo, Ohio T hornton G. D ouglas ...... 530 W. 6th Street, Los Angeles 14, Calif. W illiam H . G oldberg...... 520 University Building, Denver 2, Colorado B yron P . H a r r is...... 811 Forsyth Building, Atlanta 3, Georgia H a r v a r d L. M an n ...... 60 State Street, Boston 9, Mass.
C ommittee on P rofessional E thics H om er N. S w e e t, chairman...... 80 Federal Street, Boston 10, Mass. A r th u r L. B a ld w in ...... 702 Railway Exchange Bldg., Denver, Colorado Frederick H. Hurdman...... 350 Madison Avenue, New York 17, N. Y. Joseph J. K lein ...... 60 East 42nd Street, New York 17, N. Y. E d w in H. W a g n e r ...... 1218 Arcade Building, St. Louis, Mo.
Committee on A ccountants’ L iability and L iability I nsurance Norman J. Lenhart, chairman...... 90 Broad Street, N ew York 4, N . Y . P ercival F. B r u n d ag e...... 56 Pine Street, N ew York 5, N . Y. Saul L e v y ...... 1 W all Street, N ew York 5, N . Y .
C ommittee on A ccounting and Statistical R eports by I ndustry C. Oliver W ellington, chairman...... 111 Broadway, N ew York 6, N . Y . A lbin D . Strandberg...... 120 Broadway, N ew York 5, N . Y. H enry W . Sw e e n e y ...... 50 Broadway, N ew York, N . Y .
C ommittee on Accounting M achinery J. Andrew Crafts, chairman...... 15 E ast 41st Street, N ew York 17, N . Y . F rancis R. B r o d ie...... 528 D w ight Building, K ansas C ity 6, M issouri A. K a ssa n d er ...... 90 Broad Street, N ew York 4, N . Y . E dward Q. K r u c h te n ...... 17 N. Dearborn Street, Chicago 2, Ill. E dward G. Sommer...... 906 K entucky H om e Life Bldg., Louisville 2, K y.
Committee on A ccounting M anpow er John A. Lindquist, chairman...... 19 Rector Street, N ew York 6, N . Y . W illiam R. D onaldson...... 90 Broad Street, N ew York 4, N . Y . F rank W ilbur M a in ...... First N ational Bank Bldg., Pittsburgh 22, Pa. B urnell H. D e V o s...... 730 15th St., N . W ., W ashington, D . C.
Committee on A ccounting P rocedure George D. Bailey, chairman...... 2000 Buhl Building, D etroit 26, M ich. W illiam H . B e l l ...... 67 Broad Street, N ew York 4, N . Y. H enry T . Ch am berlain...... L oyola U niversity, Chicago, Ill. M . C. C o nick...... First N ational Bank Bldg., Pittsburgh 22, Pa. James L. D o h r ...... 61 Broadway, N ew York 4, N . Y. A nson H e r r ic k ...... 403 M erchants Exchange Bldg., San Francisco, Calif. H arry E . H o w ell...... 505 18th Street, N . W ., W ashington, D . C. L incoln G. K e ll y ...... 608 W alker Bank Bldg., Salt Lake C ity, U tah P aul K . K n ig h t...... 67 W all Street, N ew York 5, N . Y. George O. M a y ...... 56 Pine Street, N ew York 5, N . Y. W arren W . N issl e y ...... 1 Cedar Street, N ew York 5, N . Y. W illiam A. P ato n ...... 106 Tappan H all, Ann Arbor, M ichigan M aurice E. P elo u b e t ...... 25 Broadway, N ew York 4, N . Y. W alter L. Sch a ffer ...... 90 Broad Street, N ew York 4, N . Y . H arold B . Sim pso n ...... 70 P ine Street, N ew York 5, N . Y . J ackson W . Sm art...... 111 W . M onroe Street, Chicago, Illinois M aurice H . St a n s...... 2626, 1 N . LaSalle Street, Chicago, Ill. Victor H . St em p f...... 80 M aiden Lane, N ew York 7, N . Y . Cyril T albot...... 1 N . LaSalle Street, Chicago, Ill. C. Oliver W ellingto n...... 111 Broadway, N ew York 6, N . Y . J ohn H . Zebley, Jr ...... 1530 C hestnut Street, Philadelphia 2, Pa. 4 American Institute of Accountants Yearbook Advisory Committee on Investment Company Accounting Homer N. Sweet, chairman...... 80 Federal Street, B oston 10, M ass. Chester W . D e M o n d ...... 56 P ine Street, N ew York 5, N . Y . P aul K . K n ig h t...... 67 W all Street, N ew York 5, N . Y . R aymond E . N orth...... 67 Broad Street, N ew York 4, N . Y . H arry I. P rank ard...... 55 Liberty Street, N ew York 5, N . Y .
C ommittee on Accounting un d er State H ighway Construction Contracts J. R. Nelson, chairman...... 1318 First N ational Bank Bldg., D allas, Texas K . J. Ca r pe n te r ...... 528 Chamber of Commerce Bldg., Indianapolis 4, Ind. A loysius C ong do n ...... 1904 Farnam Street, Om aha, Nebraska R obert N . D e n n is ...... 500 Louisville Trust Bldg., Louisville, K y. Claire S. D obson...... 215 Joplin N ational Bank Bldg., Joplin, M o. T . W . M o h le...... 2002 Second N ational Bank Bldg., H ouston 2, Texas H enry S. O w e n s...... 1629 K Street, N . W ., W ashington, D . C. H en ry M . T hom son...... 1432, 756 S. Broadway, Los Angeles, Calif.
Committee on Adaptation of F inancial D ata to Social P urposes Harry E. Howell, chairman...... 505 18th Street, N . W ., W ashington, D . C. M . C. Conick ...... First N ational Bank Bldg., Pittsburgh 22, Pa. Steph en Gilm an...... 3411 S. M ichigan Avenue, Chicago 16, Ill.
Committee on A n n ual A wards George P. Ellis, chairman...... 7 S. Dearborn Street, Chicago 3, I ll. J ames L. D ohr...... 61 Broadway, N ew York 4, N . Y. Steph en Gilm a n...... 3411 S. M ichigan A venue, Chicago 16, Ill.
C ommittee on Arbitration L. C. J. Yeager, chairman...... 820 K entucky H om e Life Bldg., Louisville 2, K y. J ames F. H u g h e s...... 70 Pine Street, N ew York 5, N . Y. J. E . H utchinson, Jr ...... 1009 Praetorian Bldg., Dallas 1, Texas W alter A. M u sg r a v e...... 36 Pearl Street, Hartford, Conn. H ugh E . W all...... 11 W . M onum ent B ldg., D ayton 2, Ohio
C ommittee on A uditing P rocedure Paul Grady, chairman...... 56 P ine Street, N ew York 5, N . Y . F red J. D uncom be...... 1730 F irst N ational B ank B ldg., Chicago, Ill. George P . E l l is...... 7 S. Dearborn Street, Chicago 3, Ill. W illiam E y r e ...... 49 W all Street, N ew Y ork 5, N . Y . A. K arl F isc h e r ...... 2101 Packard Bldg., P hiladelphia 2, Pa. D avid B. Gallow ay...... 1 Federal Street, B oston 10, M ass. P. W . R . Glo ver...... 120 Broadway, N ew York 5, N . Y. Carol F . H all...... 80 M aiden Lane, N ew York 7, N . Y. E dward A. K racke...... 67 Broad Street, New York 4, N. Y. L e w is L ill y ...... 444 California Street, San Francisco 4, Calif. J ohn A. L in d q u ist...... 19 Rector Street, New York 6, N, Y. F rank W ilbur M a in ...... First National Bank Bldg., Pittsburgh 22, Pa. Ch arles H . T o w n s...... 80 Broad St., N ew York 4, N . Y.
Committee on B ankruptcy Charles S. J. Banks, chairman...... 330 S. W ells Street, Chicago, Ill. M aurice I. So h n ...... 295 Madison Avenue, New York 17, N. Y. A rthur C. U pl e g e r ...... 507 Service M utual B ldg, W aco, Texas.
C ommittee on B udget and F inance C. Oliver W ellington, chairman...... 111 Broadway, N ew York 6, N . Y . P ercival F. B r u n d a g e ...... 56 Pine Street, N ew York 5, N . Y. M aurice E . P elo ubet...... 25 Broadway, N ew York 4, N . Y. Committees 5
C ommittee on B y-laws J. A. Phillips, chairman...... 2002 Second N ational B ank B ldg., H ouston 2, T exas H . R . B orthw ick...... 1104 R. J. R eynolds Bldg., W inston-Salem , N . C. R ussell C. E v e r e t t ...... 15 Lewis Street, H artford, Conn. F rancis P . F arquhar...... 220 Bush Street, San Francisco, Calif. W alter E . H u g in s ...... 654 Equitable B ldg., D enver, Colorado
C ommittee on C ooperation w ith B anke rs and Other Credit Grantors Clifton H. Morris, chairman...... 1205 Fair Bldg., Fort Worth, Texas James W . H u n t ...... South Caroling, N a t’l Bank Bldg., Colum bia, S. C. J. A rthur M a r v in ...... 100 Broadway, New York 5, N. Y. E dward J . M cD evitt, J r ...... 1 Federal Street, Boston 10, Mass. J. R . N e l so n ...... 1318 First National Bank Bldg., Dallas, Texas L eonard P a r k ...... 1452 Hanna Building, Cleveland, Ohio J ohn A. P eyro ux, J r ...... 2215 American Bank Bldg., N ew Orleans, La. H arry M . P r evo ...... 2472 N ational Bank B ldg., D etroit, M ichigan Charles S. R ockey...... 1200 Bankers Securities Bldg., Philadelphia 7, P a. James L. R ose...... 728 Illinois Building, Indianapolis, Ind. Cyril T albot...... 1 N . LaSalle Street, Chicago, Ill. Virgil S. T ill y ...... 410 N ational Bank of Tulsa Bldg., T ulsa, Okla. E dward P. T rem per, J r ...... 1411 Fourth Avenue Bldg., Seattle, W ash. R obert S. W a r n e r ...... 411 N . 7th Street, St. Louis, M o. P aul K . W e bste r ...... 155 M ontgom ery Street, San Francisco 4, Calif.
Committee on Cooperation w ith B ur ea u of E conomic R esearch Perci val F. Brundage, chairman...... 56 Pine Street, N ew York 5, N . Y. M aurice E . P elo ubet ...... 25 Broadway, N ew York 4, N . Y . C harles H . T o w n s...... 80 Broad Street, N ew York 4, N . Y .
Committee on Cooperation with Other N ational A ccounting Organizations P. W. R. Glover, chairman...... 120 Broadway, N ew York 5, N . Y . J. P. F ried m a n...... 80 M aiden Lane, N ew York 7, N . Y. A lexander J. L in d sa y ...... 705 Security Building, Denver, Colorado J. A rthur M a r v in ...... 100 Broadway, N ew York 5, N . Y . H iram T . Scovill...... 217 Commerce Bldg., Urbana, Illinois
C ommittee on C ooperation w ith S.E.C . William M. Black, chairman...... 70 P ine Street, N ew York 5, N . Y. George D . B a iley ...... 2000 Buhl Building, D etroit 26, M ichigan P aul Gr a d y ...... 56 P ine Street, N ew York 5, N . Y. H omer N . Sw e e t ...... 80 Federal Street, Boston 10, M ass.
Committee on C ooperation w ith Stock E xchanges C. Oliver W ellington, chairman...... 111 Broadway, N ew York 6, N . Y . R obert C. B ro w n...... 10 S. LaSalle Street, Chicago, Ill. Stanley G. H . F itc h ...... 1 Federal Street, B oston 10, M ass. J ohn F. F o rbes...... 510 Crocker Bldg., San Francisco 4, Calif. W alter A. St a u b ...... 90 Broad Street, N ew Y ork 4, N . Y .
C ommittee on Cooperatives W alter L. Bradley, chairman...... 321 Chamber of Commerce Bldg., Buffalo 2, N. Y. J ohn J. H arring to n ...... 657 M ain Street, W altham 54, M ass. L ew is L ill y ...... 444 California Street, San Francisco 4, Calif. R obert L . P e r sin g e r ...... P eoples Bank Bldg., Covington, Va. Oscar C. St r a n d ...... 1010 Foshay Tower, M inneapolis 2, M inn.
Committee on Coordination of State and N ational Organizations George S. Olive, chairman...... 528 Chamber of Commerce Bldg., Indianapolis 4, Indiana P arry B a r n e s...... 21 W . 10th Street, K ansas C ity 6, M o. H arvard L. M a n n ...... 60 State Street, B oston 9, M ass. J. A rthur M arvin...... 100 Broadway, N ew York 5, N . Y . C. F. M illedge...... 413 Shell Building, H ouston, Texas 6 American Institute of Accountants Yearbook
Committee on Credentials Lewis Ashman, chairman...... 105 S. LaSalle S t., Chicago, Ill. R obert C. B r o w n ...... 10 S. LaSalle St., Chicago, I ll. Jo seph P e l e j...... 33 N . L aSalle St., Chicago, I ll.
Committee on Education For Three Years John W. Queenan, chairman...... 111 W. M onroe Street, Chicago, Ill. A lbert W . T o rbet...... 3900 Board of Trade B ldg., Chicago 4, Ill. For Two Years F rank G. Sh o rt...... 1120 M ills Tower, San Francisco 11, Calif For One Year Carl W . Christiansen ...... 1210 U nion Trust Bldg., Providence, R. I. Christopher H . K n o l l ...... 90 Broad Street, N ew York 4, N . Y .
Committee on F ederal T axation Maurice Austin, chairman...... 60 East 42nd Street, New York 17, N. Y. W alter A. C o o per...... 70 P ine Street, N ew York 5, N . Y . T homas J. D o la n ...... 1600 Toledo T rust B ldg., Toledo, Ohio Scott H . D u n h a m ...... 510 Crocker Building, San Francisco 4, Calif. T homas J. Gr e e n ...... 120 Broadway, N ew York 5, N . Y . H arry E . H o w ell...... 505 18th Street, N . W ., W ashington, D . C. J. K . L a sse r ...... 1440 Broadway, N ew York 18, N . Y . Charles M elvo in...... 1500, 110 S. Dearborn Street, Chicago 3, Ill. J. A. P h ill ips...... 2002 Second N a t’l Bank B ldg., H ouston 2, Texas T roy G. T h u rsto n...... 528 Chamber of Commerce Bldg., Indianapolis 4, Ind. C larence L. T u r n e r ...... 1530 Chestnut Street, Philadelphia 2, Pa.
Committee on Governmental Accounting George P. Ellis, general chairman...... 7 S. Dearborn St., Chicago 3, Ill. Subcommittee on Federal Accounting Lloyd Morey, chairman...... 354 Adm inistration Bldg., Urbana, Illinois E ric L. K oh ler...... 1138 21st Street, W ilm ette, Illinois L eland G. Su th erland...... 730 15th Street, N . W ., W ashington, D . C. Subcommittee on Municipal Accounting James L. Benson, chairman...... 1827 M unsey Bldg., Baltim ore 2, M d. H arlowe A. H arriso n...... 417 S. H ill St., Los Angeles 13, Calif. James W . H u ss, J r ...... 1004 T alcott Bldg., Rockford, Illinois B e n F. I r b y ...... 1522 Alamo N ational Bldg., San Antonio 5, Texas A. H . P u d e r ...... 60 Park Place, Newark, N . J. Samuel W . Sin d er so n ...... 422 Brotherhood Block, K ansas C ity, K ansas
Committee on H istory T. Edward Ross, chairman...... 2101 Packard Bldg., Philadelphia 2, Pa. E rnest R e c k itt...... 3900 Board of Trade Bldg., Chicago 4, Ill. N orman E. W e bste r ...... 50 Broadway, N ew York 4, N . Y.
C ommittee on I ndependence of A ccountants John H. Zebley, Jr., chairman...... 1530 Chestnut Street, Philadelphia 2, Pa. M arquis G. E ato n ...... 1809 Alamo N ational Bldg., San Antonio 5, Texas I ra N . F r is b e e ...... 303 Bank of America Bldg., Beverly H ills, Calif. R ussell C. H a rrington...... 1702 Industrial Trust Bldg., Providence, R. I. A nthony Ja u r eg u y ...... 75 Federal Street, Boston, M ass. A lvin R. Je n n in g s...... 90 Broad Street, N ew York 4, N . Y. R alph S. J o h n s...... 67 Broad Street, N ew York 4, N . Y. L ew is L ill y ...... 444 California Street, San Francisco 4, California F rank G. Sh ort...... 1120 M ills Tower, San Francisco 11, Calif. Jackson W . Sm art...... 111 W. Monroe Street, Chicago, Ill. E dward B . W ilcox...... 125 W . M adison Street, Chicago, Ill. E rnest E . W o o den...... 1827 Munsey Bldg., Baltimore 2, Md Committees 7
C ommittee on L iability of A ccountants in G overnment Service Joseph J. Klein, chairman...... 60 E ast 42nd Street, N ew York 17, N . Y . J. A. L e a c h ...... 15th floor, State-Planters Bank Bldg., R ichm ond, Va. J. A. P h ill ips...... 2002 Second N a t’l Bank Bldg., H ouston 2, T exas
Committee on M eetings Edward B. W ilcox, chairman...... 125 West Madison, St., Chicago, Ill. H arold K lag stad ...... 231 South La Salle St., Chicago, Ill. J. L eonard P e n n y ...... 105 West Adams St., Chicago 3, Ill.
Committee on Membership Clarence L. Johnson, chairman...... 157 Church Street, New Haven 10, Conn. Alabama J. D . P. Arn o ld...... 1015 First N ational Bank Buliding, Birm ingham 3 H arold C. Cr a n e ...... 1019 First N ational Bank Building, M ontgom ery Gilbert F. D u k e s ...... 314 First N ational Bank Building, M obile Arizona U el Clay B obbitt...... 520 Luhrs Building, Phoenix Arthur A. F oster...... 1 V alley N ational Bank Building, P rescott Oran Sa r r els...... 7 E ast Jackson Street, Tucson Arkansas R. Alfred L il e ...... 920 B oyle Building, L ittle Rock M . J. R ein berg er...... P. O. Box 795, Pine Bluff John L. Sw offord...... 810 First N ational Bank Building, Fort Smith California Charles C. B o w e n ...... 1023 R uss Building, San Francisco 4 C. C. Gabrielso n...... 412 Pershing Square Building, Los Angeles A ndrew F. Sh er m a n ...... Central Bank Building, Oakland George W . Sim s...... 1837 Fulton Street, Fresno R aymond M . W a n sl ey ...... Bank of America Building, San D iego 1 Colorado H arry W . N e lso n ...... 1015 F irst N ational Bank Building, D enver Oliver M . W illiam s...... 420 Exchange N ational Bank Bldg., Colorado Springs Connecticut M aurice L. B lanchard...... 15 Lewis Street, H artford 3 M ilton H . F riedberg...... 211 State Street, Bridgeport E dward I. P e tz e ...... 205 Church Street, N ew H aven 10 W illiam Z. W h it e ...... 302 State Street, N ew London Delaware H arry J. M a ck ...... 606 Equitable Building, W ilm ington District of Columbia M illard T . Charlton...... Tower Building, W ashington Florida B enjam in E . Jam es...... 400 Rogers Building, Jacksonville 2 J ohn M ah o ny...... 50 duPont Arcade, M iam i 32 M . A. M ontenegro ...... P. O. Box 789, Tampa 1 Georgia W alter C. A sk ew , Jr ...... 15 D rayton Street, Savannah George B a ir d ...... 1501-6 Southern Finance Building, A ugusta B rooks Geogh eg an...... Bankers Insurance Building, M acon W illiam F . L o f lin ...... 312 Columbus Bank & Trust Co. Bldg., Columbus U. A. M orton...... 747 H urt Building, A tlanta 8 American Institute of Accountants Yearbook Idaho T ru man J o in e r ...... 319 Broadway, Boise Illinois W a rren T . B r o w n ...... 907 Jefferson Building, Peoria 2 R obert J. M u r p h e y ...... 501 C itizens Building, D ecatur J oseph P e l e j ...... 33 N . LaSalle Street, Chicago 2 R aymond E . R ic k beil...... 921 First N ational Bank B ldg., Springfield E d w in L . T h e is s ...... 116 Commerce Building, U niversity of Illinois, Urbana Indiana Cletus F. Ch izek ...... 612 A ssociates Building, South Bend T homas A. H o u lih a n ...... 735 Lincoln Bank Tower, Fort W ayne F loyd H . K ir l in ...... 8th Floor, Peoples Bank Bldg., Indianapolis 4 E arl E . T hom as...... 709 Citizens Bank Building, E vansville 17 Iowa M aurice E . B rooks...... 313 Bank & Insurance Building, Dubuque L ouis S. Goldberg...... 305 Commerce Building, Sioux C ity F red J. P e ter so n ...... 1036 D es M oines Building, D es M oines 9 Kansas J oseph K . B relsfo rd ...... 601 N ew England Building, Topeka W illiam H . M oberly...... 421 W heeler-K elly-H agny Building, W ichita 2 Kentucky L. C. J. Y e a g er ...... 820 K entucky H om e Life Building, Louisville 2 Louisiana Ot is J. Cham berlain...... 609 Carondelet Building, N ew Orleans 12 R alph B . E g l in ...... Commercial N ational Bank Building, Shreveport H arry G. F razer...... Ouachita N ational Bank Building, M onroe R obert B . H aw thorn...... 616 Louisiana N ational Bank Bldg., B aton Rouge Maine R ichard M . M illett...... 465 Congress Street, Portland Maryland C arroll F. D a v is...... 468 Calvert Building, Baltim ore 2 Massachusetts D avid B . Gallow ay...... 1 Federal Street, Boston 10 H arold S. T rew orgy...... 293 Bridge Street, Springfield Michigan P . F. I cerm an...... 203 State Savings Bank Building, Ann Arbor R aymond F. K n a p e ...... 510 Peoples N ational Bank Building, Grand Rapids N eil W atters Oa k e s...... 408 Bearinger Building, Saginaw J ames P ottinger...... 25614 Parkwood, H untington W oods V. E . R y d e n ...... U nion Industrial Building, Flint E. T. Str ing er...... 1704 Old Tower Building, Lansing
Minnesota L eonard J. B y e r s...... 1212 Pioneer Building, St. Paul Virgil J. P edrizetti...... 311 Sellwood Building, D uluth H arold C. U tle y ...... 1204 First N ational Soo Line Building, M inneapolis
Mississippi R oy C. B r o w n ...... 710 Citizens Building, M eridan L o iu s A. M iazza...... 1604 Tower Building, Jackson 105 H en ry G. Orsbo rn...... W hittington Building, Greenwood Committees 9 Missouri H en ry C. H e l m ...... 318 N . 8th Street, St. Louis 1 H arry L. Sto ver...... 1304 Commerce Building, K ansas C ity 6 Montana H ugh D . Ga l u sh a ...... P. O. Box 1699, Helena H arold A. J o h n so n ...... Ford Building, Great Falls E r nest E . M u r r a y ...... :...... 424 Stapleton Building, Billings A lfred J. R o w land...... Masonic Temple, Miles City Nebraska J. H . I m ig ...... 9 3 0 First N ational Bank Building, Omaha P h ilip G. J o h n so n ...... 1223 Sharp Building, Lincoln 8 New Hampshire H iram B . H askell...... 70 M arket Street, M anchester New Jersey John A. Co n l in ...... Federal Trust Building, Newark Charles L . H u g h es...... 120 Garrison A venue, Jersey C ity F rederick L. M e a d ...... 505 Cooper Street, Camden E dward Or e n g e ...... Hudson Trust Building, H oboken H enry B. R ich ardso n...... 657 M ain A venue, Passaic Joseph J. Sea m a n ...... 214 Sm ith Street, Perth Am boy A llen M . K . St e p h e n s...... 802 Trenton Trust Building, Trenton W illiam H . T h om pson...... 1139 E . Jersey Street, Elizabeth J ohn J. W h it e ...... 129 M arket Street, Paterson 1 New Mexico Charles L. L in d e r ...... 817 First N ational B ank Building, Albuquerque New York H arry D . A n d er so n ...... 414 Syracuse Kem per Building, Syracuse 2 R. D ouglas Cam pbell...... 528 M arine T rust Building, Buffalo M arshall Gr a n g er...... 60 E ast 42nd Street, N ew York 17 Oscar L. N il e s ...... 950 Lincoln Alliance Bank Building, Rochester 4 North Carolina F rank P . B u c k ...... W achovia B ank & Trust Co. Building, Salisbury Charles E. E lberso n...... 426 W achovia Bank Building, W inston-Salem W. C. N ich ols...... P. O. Box 1243, W ilm ington J ohn F. P rescott...... 610 Insurance Building, Raleigh W illiam E . St ev e n s...... 201 Fidelity Building, Lenoir A llen E . St r an d ...... 707 Southeastern Building, Greensboro E lton B . T aylo r...... 207-208 L atta Arcade, Charlotte
North Dakota John A. Cu l l ...... 2 0 ½ Broadway, Fargo
Ohio Sidney J. Co llin s...... 711 Mahoning Bank Building, Youngstown Albert R . Co x ...... 516 Brant Building, Canton 2 H omer L. D alton...... 1909 Ohio Bank Building, T oledo 4 J ohn C. M a r t in ...... 33 N . H igh Street, Columbus E dward L. P it t ...... 1052 H anna Building, Cleveland L. R ay Sa rver...... 175 W . Bowery Street, Akron Ab n er J. Sta rr ...... 3815 Carew Tower, Cincinnati
Oklahoma Oscar R . D a v is...... 815 First N ational Building, Oklahoma C ity 2 P aul W . F itzk ee...... Philtower Building, Tulsa 3 10 American Institute of Accountants Yearbook Oregon E ric P. V a n ...... 510 American Bank Building, Portland 5 Pennsylvania J ohn A. B e a r d ...... 632 W ashington Street, Reading M aurice A. B r ew ster ...... D rake T heatre Building, Oil C ity W . F. D obson...... 332 M iners N ational Bank Building, W ilkes-Barre R obert M . Gr if fit h s...... 1639 Gulf Building, Pittsburgh J ohn B . H a r r is...... 304 Fulton N ational Bank Building, Lancaster R obert L. M ill e r ...... 428 Chestnut Street, Lebanon Charles J. R ow land...... 2 Leitzell Building, State College W illiam D . Stow e...... 812 Sunset Street, Scranton Clarence L. T u r n e r ...... 1530 C hestnut Street, Philadelphia 2 W illiam R. W i n n ...... 424 W illiams Street, W illiam sport 2 Rhode Island N icholas P icchione...... 1230 Industrial T rust Building, Providence South Carolina W illiam L a sley ...... Room 302, Palmetto Building, Columbia 23 B elton R . O’N e a l l ...... 410 N ew s Building, Greenville South Dakota H arry H . H obbs...... First D akota N ational Bank Building, Y ankton Tennessee J ohn S. Gl e n n ...... 709 American N ational Bank Building, N ashville 3 J. H . H ardy...... 1029 C hattanooga Bank Building, Chattanooga 2 H arry F. H in d e r e r ...... 106 M iller Artz Building, Johnson C ity John H . R a w lin g s...... 872 Shrine Building, M em phis 3 B uford A. T im m ons...... Burwell Building, K noxville Texas J ohn B. A llr ed ...... 612 C ity N ational Building, W ichita Falls J. Gl en n B ix l e r ...... 1006 M ills Building, El Paso D . R. B o n n e r ...... 1009 Praetorian Building, D allas 1 M arquis G. E ato n ...... 1809 Alamo N ational Building, San Antonio 5 Arthur Sq u y r es...... 410 Peoples Bank Bldg., Tyler F rancis E . K e p p l e ...... 716 W . T . W aggoner Building, Forth W orth 2 O. H . M asch ek ...... Goodhue Building, Beaumont Z. T u r n er M cGu ir e ...... 608 Shell Building, H ouston 2 H arry H . R o berts...... 507 Service M utual Building, W aco F rank Slavik...... 421 N ixon Building, Corpus Christi C. A ubrey Sm ith ...... 1510 W oodridge D rive, Austin Utah Clifford G. Sn o w ...... 608 W alker Bank Building, Salt L ake C ity 1
Vermont W illiam J. Sh ie l d ...... 10 Allerton A venue, Brattleboro
Virginia A lfred N . H ilto n ...... 119 W . Tazewell Street, Norfolk 10 Leslie A. K im ble...... Colonial-American N ational Bank Bldg., Roanoke J ames A rchibald L each ...... 15th Floor, State-Planters Bank Bldg., Richmond Orrie H . T u f t s ...... 512 Krise Building, Lynchburg
Washington George J. B u sc h ...... 1014-20 P uget Sound Bank Bldg., Tacom a 2 P aul Albert K e lso n ...... 963 Stuart Building, Seattle R . Jackson W ortman...... 601 Old N ational Bank Bldg., Spokane 8 Committees 11 West Virginia J. Earl Beatty...... Peoples Bank Building, Charleston Jesse L. Cramer...... 19 Citizens National Bank Building, Parkersburg L in w oo d T . H o lt ...... P. O. Box 1154, Huntington Hobart S. Hutzell...... 401 Wheeling Bank & Trust Building, Wheeling S. Charles Steele...... P. O. Box 865, Morgantown
Wisconsin H a r r y L . K u n ze. 110 E. Wisconsin Avenue, Milwaukee 2 H o w ard L . Sm ith ...... 1 S. Pinckney Street, Madison 3
Wyoming Kenneth Cox ...... Sheridan National Building, Sheridan
Committee on N ational I ncome George O. May, chairman...... 56 Pine Street, New York 5, N. Y. G e o r g e D. B a ile y ...... 2000 Buhl Bldg., Detroit 26, M ich. E d w ard B. W ilc o x ...... 125 W . Madison Street, Chicago, I l l .
Committee on N atural B u sin ess Y ear William Jackson Carter, chairman___ 618 First National Bank Building, Atlanta 3, Georgia H enry J. P ra tt...... 1605 First National Building, Birmingham, Alabama Claud F. H arm on...... 320 Security Building, Phoenix, Arizona L. B. Cr o ft...... 804 Pyram id B uilding, L ittle R ock, Arkansas W alter G. D raew ell...... 2 P ine Street, San Francisco, California A ndrew B . F iel d in g ...... 420 Denver National Building, Denver 2, Colorado H en ry K n u s t ...... 15 Lew is Street, H artford, Connecticut Charles I. B e l f in t ...... 400 Citizens Bank Building, Wilmington 7, Delaware Clyde B . Stovall...... 500-815 15th Street, N .W ., W ashington, D . C. B enjam in E . Ja m es...... 400 Rogers Building, Jacksonville 2, Florida W . S. B o w en ...... 224 Valentine Building, P ocatello, Idaho J acob Coggin P ratt, Jr ...... 1730 First N ational Bank Bldg., Chicago 3, I ll. Steph en S. Y eom an...... 910 H um e M ansur Building, Indianapolis, Indiana James W . E d e n b u r n ...... 6th & Locust Street, D es M oines, Iow a John P . B onicam p...... 719, U nion N ational Bank Bldg., W ichita 2, K ansas E ug ene M . H eimerdinger ...... 500 L ouisville Trust Bldg., Louisville 2, K y. L ouis H . P il ie ...... 609 Carondelet Building, N ew Orleans, Louisiana R ichard M . M illett...... 465 Congress Street, Portland, M aine H oward A. Sc h n e pfe ...... 2602 Baltim ore Trust Building, Baltim ore, M aryland J ohn F. Cla r k e ...... 1 Federal Street, Boston 10, M assachusetts W m . C. R o w land...... 2250 Penobscot Building, D etroit 26, M ichigan O scar C. St r a n d ...... 1010 Foshay Tower, M inneapolis, M innesota R oy P . Co llin s...... 1202 D ep osit G uaranty Bank Bldg., Jackson, M ississippi A. H en ry Cu n e o ...... 400 N ational F idelity Life Building, K ansas C ity, M o. T homas C. F e r r is...... 419 Strain Building, Great Falls, M ontana E lton C. L oucks...... 837 Omaha N ational Bank Building, Omaha, N ebraska H iram B . H a sk ell ...... 70 M arket Street, M anchester, N ew Ham pshire W illiam H . N u ssbaum ...... 423 H ackensack Street, Carlstadt, N ew Jersey J. B ryan St ep h e n so n ...... 816 First N ational Bank Building, Albuquerque, N . M . F reem an H . D a v is...... 41 E ast 42nd Street, N ew York, 17 N . Y . John F. P rescott...... 610 Insurance Building, Raleigh, N orth Carolina Arthur B l eg en ...... 412 Black Building, Fargo, N orth D akota V erno n J. M oore...... 1321 Citizens Building, Cleveland, Ohio F ord L. B il l u p s...... 2220 First National Bldg., Oklahoma City 2, Oklahoma F rank S. H eco x...... 4784 S. E . 17th A venue, Portland 7, Oregon Jos. S. Schm idt...... 1421 C hestnut Street, Philadelphia 2, P ennsylvania Chester R. U n io n ...... 15 Westminster Street, Providence, Rhode Island James A. W i n n ...... 309 Masonic Temple, Greenville, South Carolina T homas J. M organs, Jr ...... 608 National Bank Building, Sioux Falls, S. Dakota J ames A. M atth ew s...... 7th Floor, M anhattan Bank Building, M em phis 3, Tennessee 12 American Institute of Accountants Yearbook
W alter C. B u r e r ...... Second N ational Bank Building, H ouston 2, T exas Oscar R . H e p p l e y ...... 608 W alker Bank Building, Salt Lake C ity, U tah Seth A. D en sm o r e ...... 135 College Street, Burlington, Verm ont A. J oel J ackson...... 713 Citizens B ank Building, N orfolk, Virginia R obert T . K n ig h t ...... Suite 1206, W ashington Bldg., T acom a 2, W ashington R obert L . B a u g h a n ...... First Huntington National Bank Bldg., Huntington, W. Va. C larence H . B e n t o n ...... 110 E . W isconsin A venue, M ilwaukee, W isconsin O ssie M . Cordle...... Consolidated R oyalty Building, Casper, W yom ing
C ommittee on P ublication Frederick H. Hurdman, chairman...... 350 M adison A venue, N ew York 17, N . Y . P ercy E . Everett...... 67 Broad Street, N ew York 4, N . Y . St eph en Gilm a n ...... 3411 S. M ichigan A venue, Chicago 16, Ill. H arold A. M ock...... 50 State Street, B oston, M ass. A lan P . L. P r e s t ...... 56 Pine Street, N ew York 5, N . Y .
Committee on P ublic I nformation John N. Aitken, Jr., chairman...... 1818 Packard Bldg., Philadelphia 2, Pa. J. R . H a n n a ...... 551 F ifth Avenue, N ew York 17, N . Y . A lvin R . Je n n in g s ...... 90 Broad Street, N ew York 4, N . Y .
Committee on P ublic U tility A ccounting Alden C. Smith, chairman...... 56 Pine Street, N ew York 5, N . Y . H ilton R . Cam pbell...... 90 Broad Street, N ew York 4, N . Y . W . M . C o u r sen ...... 67 Broad Street, N ew York 4, N . Y . H en ry A. H o r n e ...... 50 Broadway, N ew York 4, N . Y . E dw ard J. M u r n a n e ...... 3400, 1 N. LaSalle Street, Chicago 2, Ill.
C ommittee on R e fr e sh e r C ourses Raymond E. North, chairman...... 67 Broad Street, New York 4, N. Y. R aymond G. A n k e r s ...... 90 Broad Street, N ew York 4, N . Y . J oseph B. B aernco pf...... 528 Chamber of Commerce Bldg., Indianapolis 4, Ind. H iram T . Scovell...... 217 Commerce Bldg., Urbana, Illinois M arurice H . St a n s...... 2626, 1 N . LaSalle Street, Chicago 2, Ill. T . D wight W illiam s...... 2220 First N ational Bldg., Oklahoma C ity 2, Okla.
Committee on Savings and L oan A ccounts Thomas A. Williams, chairman...... 1028 W hitney Bldg., N ew Orleans, La. Crofford H . B uck les...... 111 W . W ashington Street, Chicago, Ill. G u y A. D ouglass...... 515 E l Paso N ational Bank Bldg., E l Paso, Texas H e l e n H . F o r t u n e ...... 145 E . H igh Street, Lexington, K entucky T heodore K r o h n ...... 9 Clinton Street, Newark, N. J. E mil J. M o n d e ...... 205 Church Street, N ew H aven, Conn. F . R alph W h e e l e r ...... 1700 Lincoln-Liberty B ldg., Philadelphia, P a .
C ommittee on Selection of P ersonnel Warren W. Nissley, chairman...... 1 Cedar Street, N ew York 5, N . Y . P ercival F. B r u n d a g e ...... 56 Pine Street, N ew York 5, N . Y . E dw ard A. K rac k e...... 67 Broad Street, N ew York 4, N . Y. A. C. L ittleton...... U niversity of Illinois, Urbana, Illinois D . G. M a ck enzie...... 70 Pine Street, N ew York 5, N . Y . H en ry E . M e n d e s ...... 80 M aiden Lane, N ew York 7, N . Y .
Committee on S ocial Security Theodore L. Koos, chairman...... P . O. Box 1017, 306 Fourth A venue, Pittsburgh 30, Pa. Le e V. B r in t o n ...... 1023 Bankers Mortgage Bldg., Houston, Texas B yron P . H a r r is...... 811 Forsyth Building, A tlanta 3, Georgia Gl en n A. R ailsback...... 407 N ational Building, Pine Bluff, Arkansas F rank A. Shallenberger...... Eutaw & Saratoga Sts., Baltim ore, M aryland Committees 13
H arry M . T u r n b u r k e ...... M anson Arcade, Clearwater, Florida John W ise m a n ...... 405 W heeling Bank & Trust Bldg., W heeling, W . Va.
Committee on State L egislation T. Dwight Williams, chairman...... 2220 First National Bldg., Oklahoma City, Okla. Ch arles F. C o a t es...... 750 Main Street, Hartford, Conn. Charles C. Co b u n ...... 735 Standard Oil B ldg., Los A ngeles, Calif. George R. Drabenstadt ...... 2101 Packard Bldg., Philadelphia 2, Pa. Sam uel W . E s k e w ...... 706 K entucky H om e Life Bldg., L ouisville, K y. B rooks Geoghegan...... Bankers Insurance Bldg., Macon, Georgia H . W . Giffo r d ...... 601 New England Bldg., Topeka, Kansas D on S. Gr if f it h ...... 555 Skinner Building, Seattle, Wash. Lyle W . H in e s ...... E-706 First N ational Bank B ldg., St. P aul 1, M inn. R oland B . K e a y s ...... 2035 Dime Bank Bldg., Detroit, Mich. Saul L e v y ...... 1 W all Street, N ew York 5, N . Y. R alph B. M ayo ...... 1200 Security Bldg., Denver 2, Colorado R oy L. P o p e ...... 512 Insurance Bldg., San Antonio 5, Texas D ick D . Qu in ...... 515 Lam pton Building, Jackson, M ississippi W illiam M . R u s s ...... 302 Security Bank Bldg., Raleigh, N . C. Aubrey E . S w an so n ...... 3400, 1 N . LaSalle Street, Chicago 2, I ll.
Committee on Stock B rokerage A ccounting Murdock N. MacRae, chairman...... 67 Broad Street, N ew York 4, N . Y . T homas W . B y r n e s ...... 19 Rector Street, N ew York 6, N . Y . M . T yndall H ia t t ...... 75 W est Street, N ew York 6, N . Y . R obert H . R issin g e r ...... 1401 Girard Trust Bldg., Philadelphia, P a. James A. R u n s e r ...... 444 California Street, San Francisco 4, Calif. F rederick W . W u l fin g ...... 120 Broadway, N ew York 5, N . Y .
Committee on T echnical Sessions Mark E. Richardson, chairman...... 2101 Packard Bldg., Philadelphia 2, Pa. J ohn B . I n g l is...... 56 Pine Street, N ew York 5, N . Y . H . T . M cA n l y ...... 231 S. LaSalle Street, Chicago, Ill.
Committee on T ermination and R enegotiation of W ar Contracts Donald M. Russell, chairman...... 2912 Book Bldg., Detroit 26, Mich. George D . B a il e y ...... 2000 Buhl Building, D etroit 26, M ich. E ric A. C am m an...... 70 P ine Street, N ew Y ork 5, N . Y . J ohn B . I n g l is...... 56 Pine Street, N ew Y ork 5, N . Y . C harles W . Jo n e s ...... 120 S. LaSalle Street, Chicago 3, Ill.
Committee on T erminology George O. May, chairman...... 56 P ine Street, N ew York 5, N . Y . George D . B a il e y ...... 2000 Buhl Building, D etroit 26, M ich. Anso n H er ric k ...... 403 M erchants Exchange Bldg., San Francisco 4, Calif.
American Institute of Accountants Foundation
OFFICERS President, Samuel J. Broad ...... 70 Pine Street, New York 5, N. Y. Vice President, E d w ard B. W ilc o x ...... 125 W . Madison St., Chicago, I ll. Treasurer, Maurice E. Peloubet ...... 25 Broadway, New York 4, N. Y. Secretary, J o h n L. C a r e y ...... 13 E . 41st Street, New York 17, N. Y.
BOARD OF TRUSTEES P e r c iv a l F. B r u n d a g e ...... 56 Pine Street, New York 5, N. Y. J. William Hope ...... 886 Main Street, Bridgeport, Conn. E d w ard A. K r a c k e ...... 67 Broad Street, New York 4, N. Y. E a r l A. W a ld o ...... 1023 Northwestern Bank Bldg., Minneapolis, Minn. 14 American Institute of Accountants Yearbook
American Institute Benevolent Fund, Inc.
BOARD OF TRUSTEES John B. Niven, president...... 80 M aiden Lane, N ew York 7, N . Y . Maurice E. Peloubet, treasurer...... 25 Broadway, New York 4, N. Y. John L. Carey, secretary...... 13 E . 41st Street, N ew York 17, N . Y . Ch arles B . C ouchm an...... 120 Broadway, N ew York 5, N . Y . J ohn F. F o r bes...... 510 Crocker Bldg., San Francisco 4, Calif. F rederick H . H urdm an...... 350 M adison A venue, N ew York 17, N . Y . R obert H . M ontgomery...... 1 E . 44th Street, N ew York 17, N . Y . C. Oliver W ellingto n...... 111 Broadway, N ew York 6, N . Y .
National Conference of Lawyers and Certified Public Accountants Representing the American Bar Association David F. M axwell, co-chairman...... Packard Bldg., Philadelphia 2, Pa. W right M atth ew s...... Gulf Building, H ouston 2, T exas J ames R . M orford...... Delaw are Trust B ldg., W ilm ington 28, D el. E d w in M . Otterbourg...... 200 F ifth A venue, N ew York 10, N . Y. P ercy W . P h ill ips...... Southern Bldg., W ashington 5, D . C. Representing the American Institute of Accountants William Charles, co-chairman...... 1221 Locust Street, St. Louis 3, M o. F rederick H . H urdm an ...... 350 M adison A venue, N ew York 17, N . Y . E dward A. K rack e...... 67 Broad Street, N ew York 4, N . Y. J. A. P h illips...... 2002 Second N ational Bank Bldg., H ouston 2, Texas H omer N . Sw e et ...... 80 Federal Street, B oston 10, M ass.
Association of Certified Public Accountant Examiners President, L e w is L i l l y ...... 444 California St., San Francisco 4, Calif. First vice president, T. Dwight W illiams. .2220 First National Bldg., Oklahoma City 2, Okla. Second vice president, James I. K eller, Jr ...... 1407 Security Bldg., Miami, Florida Secretary-Treasurer, W a lt e r N . D e a n ...... 41 M aiden Lane, N ew York, N . Y .
Advisory Council of State Society Presidents
(Consisting of presidents of state societies of certified public accountants) At its meeting at Dallas, October 1 9 , 1936, the Advisory Council adopted a resolution providing that for purposes of continuity state society presidents succeeded in office between meetings of the Advisory Council shall continue as members until the following meeting of the Council; in addition, their successors as presidents of the respective state societies shall become members of the Advisory Council upon assuming office. In order to avoid possible confusion there are printed below only the names of the members of the Advisory Council holding office as presidents of state societies at the time this yearbook goes to press, who may be regarded as “active” members of the Advisory Council.
OFFICERS Chairman—C. F. M illedge, 413 Shell Building, Houston, Texas Secretary—M. C. Conick, Main & Co., First National Bank Building, Pittsburgh, Pa. Alabama Henry J. Pratt, president, Alabama Society of Certified Public Accountants, 1605 First National Bldg., Birmingham Arizona Fred G. Lambert, president, Arizona Society of Public Accountants, 621 North Fifth Ave., Phoenix Arkansas Ralph Cotham, president, Arkansas Society of Certified Public Accountants, 804 Pyramid Bldg., Little Rock Advisory Council 15 California F r a n k G. S h o r t, president, California Society of Certified Public Accountants, 220 Bush St., San Francisco 4 Colorado Wm. H. G o ld b e r g , president, Colorado Society of Certified Public Accountants, 520 University Bldg., Denver Connecticut F r a n k N. R o b in son , president, Connecticut Society of Certified Public Accountants, 66 North Main St., South Norwalk
Delaware A lf r e d H. C o e, president, Delaware Society of Certified Public Accountants, 4154 duPont Bldg., Wilmington District of Columbia H e n r y A. O’N e i l l , president, District of Columbia Institute of Certified Public Accountants, Metropolitan Bank Bldg., Washington, D. C. Florida Leonard L. Abess, president, Florida Institute of Accountants, First National Bank Bldg., Miami Georgia B y r o n P. H a r r is , president, Georgia Society of Certified Public Accountants, 1130 Candler Bldg., Atlanta Idaho M. T. D e a t o n , president, Idaho Society of Certified Public Accountants, P.O. Box 1430, Pocatello
Illinois J. Leonard Penny, president, Illinois Society of Certified Public Accountants, 105 West Adams St., Chicago Indiana K. J. Carpenter, president, Indiana Association of Certified Public Accountants, 528 Chamber of Commerce Bldg., Indianapolis Iowa C. B. K n ob be, president, Iowa Society of Certified Public Accountants, 1003 Southern Surety Bldg., Des Moines Kansas C. L. C o e, president, Kansas Society of Certified Public Accountants, P.O. Box 806, Salina
Kentucky R o b e r t N. D e n n is, president, Kentucky Society of Certified Public Accountants, 500 Louisville Trust Bldg., Louisville 2 Louisiana J o h n F. H a rtm a n n , president, Society of Louisiana Certified Public Accountants, 433 Balter Bldg., New Orleans 12 Maine R ic h a r d M. B a k e r , president, Maine Society of Public Accountants, 465 Congress St., Portland Maryland J u liu s S. L e v y , president, Maryland Association of Certified Public Accountants, 704 Union Trust Bldg., Baltimore Massachusetts H a r v a r d L. M a n n , president, Massachusetts Society of Certified Public Accountants, 60 State St., Boston 16 American Institute of Accountants Yearbook Michigan H a r r y M. P r e v o , president, Michigan Association of Certified Public Accountants, 2472 National Bank Bldg., Detroit 26 Minnesota E d w in L. P e a r so n , president, Minnesota Society of Certified Public Accountants, 510 Essex Bldg., Minneapolis Mississippi F. J. B lo c k , president, Mississippi Society of Certified Public Accountants, Laurel Missouri J. H. O’C o n n e ll, president, Missouri Society of Certified Public Accountants, 1120 Bank of Commerce Bldg., St. Louis Montana R. Lowell Watkins, president, Montana Society of Certified Public Accountants, State Capitol, Helena Nebraska Aloysius Congdon, president, Nebraska Society of Certified Public Accountants, 730 Service Life Bldg., Omaha New Hampshire P e r c y H. B e n n e t t , president, New Hampshire Society of Certified Public Accountants, 70 Market St., Manchester New Jersey C. Perry King, president, New Jersey Society of Certified Public Accountants, 68 William St., New York, N. Y. New Mexico W. Ernest Hammond, president, New Mexico Society of Certified Public Accountants, 816 First National Bank Bldg., Albuquerque New York H e n r y A. H o r n e , president, New York State Society of Certified Public Accountants, 50 Broad way, New York, N. Y. North Carolina C h a r le s S. Lowrimore, president, North Carolina Association of Certified Public Accountants, 708 Murchison Bldg., Wilmington North Dakota Arthur Blegen, president, North Dakota Society of Certified Public Accountants, Black Bldg., Fargo Ohio S t a n le y A. H it t n e r , president, Ohio Society of Certified Public Accountants, 603 Traction Bldg., Cincinnati Oklahoma F o r d L. B illu p s , president, Oklahoma Society of Certified Public Accountants, 2220 First National Bldg., Oklahoma City Oregon A. L. A m ach er, president, Oregon State Society of Certified Public Accountants, Wells Bldg., Hillsboro Pennsylvania M. C. C on ick , president, Pennsylvania Institute of Certified Public Accountants, First National Bank Bldg., Pittsburgh Rhode Island W illia m B. M. M iller, president, Rhode Island Society of Certified Public Accountants, 49 Westminster St., Providence Officers 17 South Carolina N o a h E. D e r r ic k , president, South Carolina Association of Certified Public Accountants, 1226 Sumter St., Columbia South Dakota Harry H. Hobbs, president, South Dakota Society of Certified Public Accountants, First Dakota National Bank Bldg., Yankton Tennessee J oh n S. G le n n , Sr., president, Tennessee Society of Certified Public Accountants, 709 American National Bank Bldg., Nashville Texas C. F. M ille d g e , president, Texas Society of Certified Public Accountants, 413 Shell Bldg., Houston Utah W allace W. Dansie, president, Utah Association of Certified Public Accountants, 824 McIntyre Bldg., Salt Lake City Vermont S e th A. D en sm o re, president, Vermont Society of Certified Public Accountants, 135 College St., Burlington Virginia A. Frank Stewart, president, Virginia Society of Public Accountants, 1105 State-Planters Bank Bldg., Richmond Washington Albert Moss, president, Washington Society of Certified Public Accountants, 1146 Henry Bldg., Seattle West Virginia J e s s e L. C ram er, president, West Virginia Society of Certified Public Accountants, Citizens National Bank Bldg., Parkersburg Wisconsin L. W. Van Natta, president, Wisconsin Society of Certified Public Accountants, 201 Sixth St., Racine Wyoming C h a r le s S. C hapin, president, Wyoming Society of Certified Public Accountants, Townsend Bldg., Casper Hawaii E d w ard J. G r e a n e y , president, Hawaii Society of Certified Public Accountants, 432 Dillingham Transportation Bldg., Honolulu Puerto Rico B. Rosas Hernandez, president, Puerto Rico Institute of Accountants, P.O. Box 1844, San Juan
Officers of the American Institute of Accountants PRESIDENTS *W. Sanders Davies ...... 1916-1918 *Waldron H. Rand ...... 1918-1920 Carl H. Nau ...... 1920-1922 *Edward E. Gore ...... 1922-1924 J o h n B. N iv e n ...... 1924-1925 W illiam H. W est ...... 1925-1927 *John R. R uckstell...... 1927-1928 Frederick H. Hurdman ...... 1928-1930 * Now deceased. 18 American Institute of Accountants Yearbook
Charles B. C ouchm an...... 1930-1932 J ohn F. F o r bes...... 1932-1934 *George A rm istead...... 1934-1935 R obert H . M ontgomery...... 1935-1937 C lem W. Co llin s...... 1937-1939 *John K. M a th ieso n ...... 1939-1940 C. Oliver W elling to n...... 1940-1941 C aptain N orman L oyall M cL a r e n ...... 1941-1942 George S. Ol iv e ...... 1942-1943 V ictor H. Stem pf...... 1943-1944 Samuel J. B ro ad...... 1944-
VICE PRESIDENTS H arvey S. Ch a se ...... 1916-1917 Carl H. N a u ...... 1916-1917 George O. M a y ...... 1917-1918 *W aldron H. R a n d ...... 1917-1918 *Charles S. L udlam ...... 1918-1919 *E. G. Shorrock...... 1918-1919 *Arthur W . T e e l e ...... 1919-1920 H . Ivor T hom as...... 1919-1920 W. P. H ilt o n ...... 1920-1921 T . E dward R o ss...... 1920-1921 J ohn B. N iv e n ...... 1921-1922 *Arthur W. T e e l e ...... 1921-1922 *John R. L oomis...... 1922-1923 N orman M cL a r e n ...... 1922-1923 F rank L ow son...... 1923-1924 N orman E. W e bste r ...... 1923-1924 E rn est Re c k it t ...... 1924-1925 W illiam H . W e s t ...... 1924-1925 J ohn F. F o rbes...... 1925-1926 *F rederick A. R o s s ...... 1925-1926 F rederick H . H u r d m a n...... 1926-1927 *John R. R uckstell...... 1926-1927 J ames S. M a tteson...... 1927-1928 R obert H . M ontgomery...... 1927-1928 A lbert T. B acon...... 1928-1929 *Lew is G. F ish e r ...... 1928-1929 Stanley G. H. F itc h ...... 1929-1930 *Overton S. M eldrum ...... 1929-1930 M ajor General Arthur H . C arter...... 1930-1931 James M . M cCo nah ey ...... 1930-1931 *George Arm istead...... 1931-1932 W ill-A. Clader...... 1931-1932 F rederick B. A nd r ew s...... 1932-1933 *W alter M ucklow ...... 1932-1933 P. W. R. Glover...... 1933-1934 *E lmer L. H atter...... 1933-1934 J ohn D . Cherrington...... 1934-1935 *H. W . H e n n e g in ...... 1934-1935 W illiam B. F r a n k e ...... 1935-1936 Ca pta in N orman L oyall M cLa r e n ...... 1935-1936 C harles F. R itt e n h o u se ...... 1936-1937 E d w in H . W a g n e r ...... 1936-1937 *W illiam C. H e a to n ...... 1937-1938 A nso n H e r ric k ...... 1937-1938 L e w is A sh m a n ...... 1938-1939 *John K . M a th ieso n...... 1938-1939 Sam uel J. B road...... 1939-1940
* Now deceased. Annual Meetings 19
L incoln G. K e ll y ...... 1939-1940 M aurice E. P elo ubet...... 1940-1941 T . D wight W illiam s...... 1940-1941 George Cochrane...... 1941-1942 George S. Ol iv e ...... 1941-1942 George P . E l l is ...... 1942-1943 Victor H . St em pf...... 1942-1943 George D . B a il e y ...... 1943-1944 J. A. P h il l ip s...... 1943-1944 R odney D . W h it e ...... 1944- E dward B . W ilcox...... 1944-
TREASURERS *Adam A. R o s s ...... 1916-1919 *J. E. St errett...... 1919-1922 *Arthur W . T e e l e ...... 1922-1928 Colonel A ndrew Stew a r t...... 1928-1930 Allan D a v ie s...... 1930-1934 *A rthur W . T e e l e ...... 1934-1940 Sam uel J. B ro ad...... 1940-1944 M aurice E . P elo ubet...... 1944-
EDITOR A. P . R ich ardson...... 1930-1936
SECRETARIES A. P. R ic h a r d so n ...... 1916-1929 J o h n L. C a r e y ...... 1930-
American Institute of Accountants Annual Meetings 1916 New York, N. Y. 1917 Washington, D. C. 1918 ...... Washington, D. C. 1919 Cincinnati, Ohio 1920 ...... Washington, D. C. 1921 Washington, D. C. 1922 ...... Chicago, I l l . 1923 Washington, D. C. 1924 St. Louis, Mo. 1925 ...... Washington, D. C. 1926 Atlantic City, N. J. 1927 Del Monte, Calif. 1928 Buffalo, N. Y. 1929 ...... Washington, D. C. 1930 Colorado Springs, Colo. 1931 Philadelphia, Pa. 1932 Kansas City, Mo. 1933 ...... New Orleans, La. 1934 Chicago, I ll. 1935 Boston, Mass. 1936 Dallas, Texas 1937...... New York, N. Y. 1938 Cincinnati, Ohio 1939 ...... San Francisco, Calif. 1940 . Memphis, Tenn. 1941 Detroit, Mich. 1942 Chicago, I ll. 1943 New York, N. Y. 1944 ...... St. Louis, Mo. * Now deceased. State Boards of Accountancy
A l a b a m a S t a t e B o a r d o f P u b l ic A c c o u n t a n c y F ra n cis B. L atad y, CPA, chairman, 205 Woodward Bldg., Birmingham 3 C h e ste r H. K n ig h t, CPA, secretary, Box 1506, University W illiam J. Christian, CPA, Comer Bldg., Birmingham M a y er W. A ld rid g e, CPA, 208 Shepherd Bldg., Montgomery
A laska T erritorial B oard of Accountancy W illiam H. Head, CPA, president, Anchorage James C. Cooper, CPA, secretary-treasurer, P. O. Box 2275, Juneau M arshall Crutcher, Stedman Hotel, Ketchikan
Arizona State B oard of A ccountancy E. G. R a w lin s, CPA, president, Phelps-Dodge Corp., Ajo James A. Smith, CPA, secretary, Professional Bldg., Phoenix W e s le y G. Johnson, treasurer, Heard Bldg., Phoenix A r th u r A. F o ste r , CPA, Valley N at’l Bank Bldg., Prescott F eed H. W oodw ard, CPA, Phoenix
State B oard of Accountancy of Arkansas Asa Stanley Fox, CPA, president, 608 Pyramid Bldg., Little Rock R. A. L ile , CPA, secretary, 920 Boyle Bldg., Little Rock Warren E. Banks, CPA, treasurer, 508 Citizens Bldg., Hot Springs
California State B oard of Accountancy John F. Forbes, CPA, president, 620 Market St., San Francisco 4 G eo rg e R. K e a st, CPA, vice president, 2 Pine St., San Francisco 4 B. W. Bours, CPA, secretary-treasurer, 620 Market St., San Francisco 4 Lewis Lilly, CPA, 444 California St., San Francisco 4 M. Leland Stanford, CPA, 756 S. Broadway, Los Angeles J. B. Scholefield, CPA, 523 West Sixth St., Los Angeles
State B oard of Accountancy of Colorado Allen Redeker, CPA, president, University Bldg., Denver 2 D avid M cE. W atson , CPA, secretary, U. S. Nat’l Bank Bldg., Denver 2 Charles Kentor, CPA, treasurer, First Nat’l Bank Bldg., Denver 2
Connecticut State B oard of Accountancy J. W illiam Hope, CPA, president, 886 Main St., Bridgeport 3 C h a r le s F. C o a tes, CPA, secretary, 750 Main St., Hartford 3 George W. Childs, Jr., CPA, treasurer, 205 Church St., New Haven 10
D elaware State B oard of Accountancy Joseph L. Pyle, CPA, president, 311 Industrial Trust Bldg., Wilmington James W. Burns, CPA, secretary, 1083 Dupont Bldg., Wilmington C aleb M. W rig h t, attorney, Cherry Lane, Georgetown
B oard of Accountancy for the D istrict of Columbia Wayne Kendrick, CPA, president, Rust Bldg., Washington M illa r d T. C h a r lto n , CPA, secretary, Tower Bldg., Washington 5 S. F ra n k L evy, CPA, treasurer, Earle Bldg., Washington 20 State Boards of Accountancy 21
F l o r id a St a t e B o a r d o f A c c o u n t a n c y Russell S. Bogue, CPA, chairman, 607 Citizens Bldg., Tampa 2 Jas. I. K eller, Jr., CPA, secretary, 1414 Security Bldg., Miami 32 L. L. A bess, CPA, First N at’l Bank Bldg., Miami Joseph Hartman, CPA, 309 West Bldg., Jacksonville D. A. Sm ith, CPA, 224 Hildebrandt Bldg., Jacksonville
Georgia State B oard of Accountancy W illiam J. Carter, CPA, chairman, First Nat’l Bank Bldg., Atlanta S. M. W ellborn, Jr., CPA, vice-chairman, Columbus Bank and Trust Co. Bldg., Columbus Harvey H. Hunt, CPA, First Nat’l Bank Bldg., Atlanta A lfr e d E. G arber, CPA, First N at’l Bank Bldg., Atlanta W. C. H en son , attorney member, Cartersville, Georgia R. C. C olem an, joint secretary, State Examining Boards, Room 111, State Capitol, Atlanta 3
Hawaii T erritorial B oard of Accountancy W ilford W. King, CPA, president, c/o Bank of Hawaii, Honolulu 2 E r n e s t R. Cam eron, CPA, secretary, 314 Bishop Trust Bldg., Honolulu 2 M atthew M. Graham, CPA, treasurer, S. M. Damon Bldg., Honolulu 1
I daho: Department of Law Enforcement Chas. E. Spoor, commissioner, State House, Boise L ela D. P a in t e r , Director of th e Bureau of Occupational License, State House, Boise Sta te E xam ining B oard for C e r t if ie d P ublic A ccountants W illard S. B o w en , CPA, chairman, Valentine Bldg., Pocatello W aldo A. T h u r b er , CPA, secretary, 1312 No. 23rd St., Boise L est er J. R andall, CPA, Wallace
I llinois: University Committee on Accountancy William Everett Britton, chairman, Urbana George Philip Tuttle, secretary, Urbana H o ra ce M. G ray, Urbana D o n a ld A. Grossm an, clerk, Urbana Board of Examiners in Accountancy Frank Ahlforth, CPA, chairman, 1 N. LaSalle St., Chicago H en ry C. H aw es, secretary, 231 S. LaSalle St., Chicago A n d rew J. Dallstream, B.S., Ph.B., J.D., 231 S. LaSalle St., Chicago Department of Registration and Education (Administrators of Illinois public accountancy law) F ra n k G. Thompson, director, Springfield P h ilip M. Harm an, superintendent of registration, Springfield
State B oard of Certified A ccountants of I ndiana W illiam M. Madden, CPA, president, 1146 Consolidated Bldg., Indianapolis R. P. Freem an, secretary, 304 State House, Indianapolis E dw ard A. C ooper, treasurer, 304 State House, Indianapolis G eo rg e S. O liv e, CPA, 528 Chamber of Commerce Bldg., Indianapolis E a r l E. Thom as, CPA, 709 Citizens Bank Bldg., Evansville 22 American Institute of Accountants Yearbook
I owa B oard of Accountancy R. C. P a tr ic k , CPA, chairman, 619-622 Foresters Bldg., Mason City Loius J. M u e h le , CPA, secretary-treasurer, 304-306 Securities Bldg., Des Moines 9 Iowa Sidney G. W in te r , CPA, 219 University Hall, Iowa City
K an sas CPA Board of Examiners E lm er E. Fox, CPA, chairman, 207 Fourth National Bank Bldg., Wichita W. F. H a rd esty , CPA, secretary, 601 New England Bldg., Topeka C. L. C oe, CPA, 229 United Bldg., Salina
State B oard of A ccountancy of K entucky Espy Bailey, CPA, president, 1st National Bank Bldg., Covington W aller Grogan, CPA, secretary-treasurer, Lincoln Bank Bldg.,Louisville John S. P e to t, CPA, 414 Marion E. Taylor Bldg., Louisville 2
State B oard of Certified P ublic A ccountants of L ouisiana E dw ard S. R it t le r , CPA, president, 500 Audubon Bldg., New Orleans R o b ert B. H a w th o rn , CPA, secretary, 616 Louisiana N at’l Bank Bldg., Baton Rouge Joh n A. Peyroux, Jr., treasurer, 2215 American Bank Bldg., New Orleans C la u d e M. Pasquier, CPA, Slattery Bldg., Shreveport R e n e J. LeGardeur, CPA, 1002 Baronne Bldg., New Orleans
M aine B oard of Accountancy Lincoln L. Adam, CPA, chairman, 465 Congress St., Portland 3 R ich ard M. M il le t t , CPA, secretary, 465 Congress St., Portland 3 B a lla r d F. K e ith , Bangor, Maine
M aryland B oard of Examiners of P ublic Accountants Edward J. Stegman, CPA, chairman, 1214 Mercantile Trust Bldg., Baltimore 2 J. W allace Bryan, CPA, secretary-treasurer, 1302 Mercantile Trust Bldg., Baltimore 2 J u lia n A. J e n k e l, CPA, American Bldg., Baltimore 2 W. Frank Every, LL.B, 1134 Baltimore Trust Bldg., Baltimore 2 William O. W eyforth, Ph.D., 104 Thicket Road, Baltimore 12
M assachusetts B oard of R egistration of Certified P ublic Accountants Harold Wald, CPA, chairman, 45 Milk St., Boston D o n a ld P. P e r r y , CPA, secretary, 80 Federal St., Boston Arthur W. Yardley, CPA, 10 State Street, Boston G eo rg e T. F in n egan , CPA, 24 Federal St., Boston Stanley G. H. Fitch, CPA, 1 Federal St., Boston
M ichigan State B oard of Accountancy A rn o ld L. B a r r e tt, CPA, chairman, 2000 Buhl Bldg., Detroit 26 F ra n k E. Seidm an, CPA, vice chairman, Peoples Nat’l Bank Bldg., Grand Rapids 2 E r n e s t H. F le tc h e r , CPA, secretary, 3110 Book Tower, Detroit 26 John J. Sloan, counsel, 1717 Dime Bldg., Detroit 26 H a rry F. K e lly , Governor, Lansing
M innesota State B oard of Accountancy V. J. Pedrizetti, CPA, chairman, 610 Sellwood Bldg., Duluth A lb e r t E. Larsen, CPA, vice-chairman, 1010 Foshay Tower, Minneapolis L y le W. H in es, CPA, secretary & treasurer, E-706 First National Bank Bldg., St. Paul State Boards of Accountancy 23
M i s s i s s i p p i S t a t e B o a r d o f P u b l ic A c c o u n t a n c y J. A. R o g ers, CPA, chairman, 1703 Tower Bldg., Jackson A. D. Morris, CPA, vice-chairman, P. O. Box 225, Laurel Dick D. Quin, CPA, secretary, 515 Lampton Bldg., Jackson
M issouri State B oard of Accountancy E. C. B o y e, CPA, president, 208 North Broadway, St. Louis John J. Lang, CPA, vice-president, 509 Olive Street, St. Louis R o b e r t S. W a rn er, CPA, secretary, 411 North Seventh Street, St. Louis F. G. B u en g er, CPA, treasurer, 800 Fidelity Bldg., Kansas City F. R. B rod ie, CPA, 528 Dwight Building, Kansas City
M ontana State B oard of Examiners in Accountancy A lfr e d J. R ow lan d , CPA, chairman, Masonic Temple, Miles City C. Howard Walden, CPA, secretary, 101 Securities Bldg., Helena Conrad T. Bjornlie, CPA, Thisted Bldg., Great Falls
N ebraska State B oard of Examiners O scar R. M a r tin , CPA, chairman, 515 First Nat’l Bank Bldg., Lincoln John P. B e g le y , CPA, secretary-treasurer, Creighton University, Omaha 2 R ay C. Johnson, auditor of public accounts, State House, Lincoln
N evada State B oard of Accountancy D. J. S u lliv a n , CPA, president, Carson City W. L. M e r ith e w , vice-president, 36 East Second Street, Reno W. B. Kottinger, CPA, secretary, P. O. Box 30, Reno
N ew H ampshire B oard of Accountancy C la r e n c e I. D ra y to n , CPA, chairman, 1015 Elm St., M anchester C la r e n c e H. W rig h t, CPA, secretary-treasurer, 196 M ain St., Nashua Robert M. Bruce, CPA, New Hampshire Nat’l Bank Bldg., Portsmouth
N ew Jersey State B oard of P ublic A ccountants Joseph Thieberg, CPA, president, 64 Hamilton Street, Paterson Joseph J. Seaman, CPA, secretary, 214 Smith Street, Perth Amboy J u liu s E. F lin k , CPA, treasurer, 1180 Raymond Boulevard, Newark
N ew M exico State B oard of Accountancy C. Lester Linder, CPA, president, 817 First Nat’l Bank Bldg., Albuquerque E r n e st D. R ey n o ld s, CPA, secretary, Box 58, Raton R odney B. H o r to n , CPA, 108 N. 6th St., Albuquerque
N ew Y ork: State Education Department Irw in A. C on roe, M.A., LL.D., Assistant Commissioner for Professional Education, Albany Horace L. Field, M.A., Chief, Bureau of Qualifying Certificates and Professional Examinations, Albany Board of Certified Public Accountant Examiners Norman E. Webster, CPA, chairman, 50 Broadway, New York George E. Bennett, CPA, vice chairman, 404 Scott Ave., Syracuse W alter N. Dean, CPA, secretary, 41 Maiden Lane, New York Edwin E. L effler, CPA, 1300 Genesee Bldg., Buffalo W infield McKeon, CPA, 12 E. 41st St., New York 24 American Institute of Accountants Yearbook
G rievance C ommittee F red er ic k H . H urdman, CPA, chairman, 350 Madison Ave., New Y ork 17 W illiam J. N usbaum, CPA, vice chairman, 100 State St., Albany 7 E rn est W illvonseder, CPA, secretary, 70 Pine St., New Y ork 5 Sam uel J. B road, CPA, 70 Pine St., New Y ork 5 Sidn ey B. K a h n, CPA, 295 Madison Ave., New Y ork 17 H en ry E . M en d e s, CPA, 80 Maiden Lane, New Y ork 7 I ra A. Sch ur, CPA, 125 Park Ave., New Y ork 17 Carl D . T homy, CPA, 1416 Temple Bldg., Rochester 4 N orman J. L en h a rt, CPA, 90 Broad St., New Y ork 4 E ric J. B lomqvist, CPA, 1 Cedar St., New Y ork 5 C ouncil on Accountancy R obert H . M ontgomery, CPA , president, 1 E. 44th St., New Y ork 17 J ohn T . M adden, CPA, secretary, New York University, Washington Square, New Y ork 3 Charles H ec h t, CPA, 20 Exchange Place, New York Arthur E. Surdam, CPA , 1635 Marine Trust Bldg., Buffalo H oward V. Swartz, CPA, University Bldg., Syracuse G len n O. W illiam s, CPA, 183 E. Main St., Rochester
N orth Carolina State B oard of Accountancy W. B owen H enderson, CPA, president, 403 Public Service Bldg., Asheville H arry W. Bundy, CPA, vice president, Bundy & Moran, Elizabeth City W. M. Russ, CPA, secretary-treasurer, 302 Security Bank Bldg., Raleigh George E. P errin , CPA, 203 Southeastern Bldg., Greensboro
N orth D akota State B oard of A ccountancy
W illiam M. Schantz, CPA, president, Box 565, Bismarck E dward W. B rady, CPA, secretary-treasurer, Clifford Bldg., Grand Forks H e l e n B rooks L arsgaard, CPA, Dickinson
Oh io State B oard of Accountancy
L ouis C. W e is s , CPA, president, Union Commerce Bldg., Cleveland Sid n ey J. C ollins, CPA , secretary-treasurer, 711 Mahoning Bank Bldg., Youngstown H arry W. Cuthbertson, CPA, Third National Bldg., Dayton
Oklahoma State B oard of Accountancy T. D wight W illiams, CPA, chairman, 2220 First National Bldg., Oklahoma City 2 Oscar R. D avis, CPA, secretary, 815 First National Bldg., Oklahoma City 2 J ohn T. Steed, CPA, 312-313 Simpson Bldg., Ardmore W. K. N ewton, CPA, c/o Oklahoma University, Norman E arl L. H ogard, CPA, 238 Kennedy Bldg., Tulsa 3
Oregon State B oard of A ccountancy
M. D. W ell s, CPA, chairman, Citizens Bank Bldg., Portland 14 T. H. Carstensen, CPA, vice chairman, Pittock Block, Portland 5 R. C. K n eelan d, CPA, vice chairman, Public Service Bldg., Portland 4 J. F. L e e , CPA, vice chairman, 304 Selling Bldg., Portland 5 H. W. M cIn tosh , CPA, secretary-treasurer, 1410 American Bank Bldg., Portland 5
P ennsylvania State B oard fo r th e E xam ination of P ublic A ccountants
Geo rge R . D rabenstadt, CPA, chairman, 2101 Packard Bldg., Philadelphia 2 R obert J. B en n e t t , CPA, secretary, 619 Land Title Bldg., Philadelphia 10 J. C yril M cGa r rigle, CPA, 1818 Packard Bldg., Philadelphia 2 State Boards of Accountancy 25
M . C. C on ick, CPA, First Nat’l Bank Bldg., Pittsburgh 22 W ilh elm E. S h is sle r , attorney, Bergner Bldg., Harrisburg D r. F ra n cis B. H aas, Superintendent of Public Instruction ex-officio, Harrisburg
P uerto R ico B oard of Examiners of A ccountancy Juan E. Soltero, chairman, Rio Piedras , A n g e l E. M a r ic h a l, secretary, Box 3545, Santurce W illia m A. W aym outh, CPA, treasurer, Edificio ‘‘Padin,” San Juan
Rhode I sland B oard of A ccountancy Chester R. Union, CPA, chairman, 508 Hospital Trust Bldg., Providence E dw ard C. D aley, CPA, secretary, 2400 Industrial Trust Bldg., Providence Abraham B lackman, CPA, treasurer, 1209 Industrial Trust Bldg., Providence
South Carolina B oard of Examiners of P ublic Accountants M. C. P a tte n , CPA, president, Woodside Bldg., Greenville E. T. Campbell, CPA, vice president, Liberty Life Bldg., Columbia Raymon R. Finch, CPA, secretary, P. O. Box 12, Columbia
South Dakota State Board of Accountancy C. O. Quickstad, CPA, president, Watertown John Penne, vice president, comptroller, State of South Dakota, Pierre H en ry A. S c h o lte n , CPA, secretary, National Bank of South Dakota Bldg., Sioux Falls
Tennessee State B oard of Accountancy M. O. C a r te r , CPA, president, 890 Shrine Bldg., Memphis R. Carl Counts, CPA, vice president, Cherokee Bldg., Kingsport H. H. O sborn, secretary, 407 American Trust Bldg., Nashville 3 F. Marlin Connelly, CPA, 921 Third Nat’l Bank Bldg., Nashville 3 J. Clayton Sims, CPA, 890 Shrine Bldg., Memphis C a r l A. S w a ffo rd , CPA, 1023 Chattanooga Bank Bldg., Chattanooga
State B oard of P ublic A ccountancy of T exas Clifton H. M orris, CPA, chairman, 1203 Fair Bldg., Fort Worth J ohn B. Allred, CPA, secretary, 612 City National Bldg., Wichita Falls J ay A. P h illips, CPA, Second N at’l Bank Bldg., Houston 2 C. A. F reeze, CPA, Central N at’l Bank Bldg., San Angelo O. H. M asch ek , CPA, Goodhue Bldg., Beaumont
Utah D epartment of B usiness R egulation State B oard of Accountancy L incoln G. K elly, CPA, 608 Walker Bank Bldg., Salt Lake City Wilford A. Beesley, CPA, First Nat’l Bank Bldg., Salt Lake City J. P ercy Goddard, CPA, 823 McIntyre Bldg., Salt Lake City Registration D ivision G. V. Billings, CPA, secretary, 324 State Capitol, Salt Lake City M iss R ena B. L oomis, assistant director, Department of Registration, 314 State Capitol, Salt Lake City
Vermont State B oard of Accountancy W illiam J. S h ield , CPA, chairman, c/o The Vermont Savings Bank, Brattleboro S eth A. D en sm ore, CPA, secretary, Burlington H. Stanwood Brooks, CPA, St. Johnsbury 26 American Institute of Accountants Yearbook
Virginia State B oard of Accountancy A. Joel Jackson, CPA, chairman, 713 Citizens Bank Bldg., Norfolk A. W. B u r k e t, CPA, secretary-treasurer, P. O. Box 756, Richmond 6 D e n t K. B urk, CPA, Bristol Jam es W. F le tc h e r , attorney, Sperryville W. L. Prince, educator, University of Richmond, Richmond
Washington State A ccountancy Examining Committee D o n S. G r iffith , CPA, chairman, 555 Skinner Bldg., Seattle John H. B en son , CPA, secretary, 1120 White Bldg., Seattle T ra cy K. E ld e r , CPA, 601 Washington Trust Bldg., Spokane Department of Licenses Thom as A. Sw ayze, director, Olympia
W est Virginia B oard of Certified P ublic Accountants N orm an S. F itzh u gh , CPA, president, 508 Kanawha Banking & Trust Bldg.. Charleston 1 O key K. H ayslip , CPA, secretary, P. O. Box 1642, Huntington 19 S. Charles Steele, CPA, P. O. Box 865, Morgantown
Wisconsin State B oard of Accountancy Clarence Lichtfeldt, president, 735 N. Water St., Milwaukee A rth u r E. W eg n er, secretary, 1000 State Office Bldg., Madison 2 C a r l J. B ech er, vice president, 303 W. College Ave., Appleton
Wyoming State B oard of Accountancy Kenneth Cox, CPA., president, Sheridan National Bldg., Sheridan K a r l A x t, CPA, vice president, 211 W. 19th St., Cheyenne O. M. C o rd le, CPA, secretary-treasurer, 211 Con Roy Bldg., Casper
Virgin I slands B oard of Examiners of Accountants C h a r le s W. Margolies, chairman, Charlotte Amalie, St. Thomas Louis Shulterbrandt, secretary, Charlotte Amalie, St. Thomas Jorge Rodrigues, Charlotte Amalie, St. Thomas AMERICAN INSTITUTE OF ACCOUNTANTS
Proceedings of the Annual Meeting Held at St. Louis, Mo. October 17 , 1944
The fifty-seventh annual meeting of the Amend Article VIII, Section 3 by adding American Institute of Accountants con the following sentences: vened at the Jefferson Hotel, St. Louis, “ The council shall, at least three months Missouri, October 17, 1944, at 10.00 A. M., arior to the annual meeting of the Institute, Victor H. Stempf, president of the Insti appoint certified public accountants to pudit the accounts of the Institute and its tute, presided. affiliated organizations for the current J. Harvey O’Connell, president of the fiscal year. The report of the auditors shall Missouri Society of Certified Public Ac be submitted to the members of the Insti countants, extended a welcome to those tute at the annual meeting and shall be present. published for the information of the The minutes of the annual meeting held membership.” October 19, 1943, were approved as printed Amend Article XI, Section 2 by deleting in the pamphlet “ Officers, Council, and the words “ and auditors” from the first Committees and Admissions, since 1942.” and second sentences, and the words “ or auditors” from the fourth sentence. The president read his report.* Amend Article XI, Section 3 by deleting The chair extended greetings to officials the words “ and auditors” therefrom. of professional, governmental, and financial bodies who were present by invitation. Henry E. Mendes, chairman of the board J. A. Phillips, vice president, presented of examiners, presented the Elijah Watt the report of the council.* Upon motion Sells awards to the following accountants duly seconded, the meeting approved the who had received highest grades in the recommendation of council that selection Institute’s standard examination at the of the time and place of the 1945 annual November, 1943, and May, 1944, sessions meeting be referred to the executive com before cooperating state boards: mittee with power. On motion duly seconded the report of November, 1943: council and all acts of council during the First prize (gold medal)—Sergeant John year were approved. N. Newland, Butte, Montana Second prize (silver medal)—Robert Howard A. Withey summarized the Grady Murdoch, New York, N. Y. report of the auditors.* On motion duly May, 1944: seconded the report was received. First prize (gold medal)—William Har L. C. J. Yeager, chairman of the com mon Simmons, Tyler, Texas mittee on by-laws, read the report* of the Second prize (silver medal)—Thomas committee, as presented to the membership Bernard Donahue, St. Louis, Missouri in the official notice of the annual meeting. On motion duly seconded the following Mr. Mendes announced that honorable proposed amendments to the by-laws were mention had been given the following: approved for submission to the member November, 1943: ship for mail vote: Elin Frances Sondergard, Boston, Massa Amend Article VII of the by-laws by chusetts eliminating Section 4 and changing the Irving Richardson, Chicago, Illinois number of the present Section 5 to Section Willis A. Leonhardi, (now serving in the 4, and of the present Section 6 to Section 5. United States Navy) T. A. Waites, Jr., Columbia, South * Published elsewhere in this Yearbook. Carolina 27 28 American Institute of Accountants Yearbook May, 1944: nominating committee for treasurer. A Maurice D. Atkin, Chicago, Illinois motion was made and seconded that the Theodore Thulstrup, Chicago, Illinois nominations be closed and that the secre tary cast one ballot for the election of Mr. Maurice E. Peloubet, chairman of the Peloubet as treasurer. The motion was committee on annual awards, presented carried, the ballot was cast, and Mr. awards to the following members on behalf Peloubet was declared elected. of the American Institute of Accountants:* Mr. Olive presented the following names George Oliver May, for his book Finan proposed by the nominating committee for cial Accounting, an outstanding contri auditors: bution to the literature of accounting. F. Merrill Beatty, New York Captain J. Harold Stewart, SC, USNR, Henry A. Horne, New York for outstanding services to his country and to the accounting profession during the Upon motion duly seconded, the nomina fiscal year ended August 31, 1944, in his tions were closed and the secretary was former capacity as Executive Assistant to instructed to cast one ballot for the persons the Director of the Cost Inspection Service, Bureau of Supplies and Accounts, Navy named. The motion was carried, the ballot Department of the United States of was cast, and the members named above America, and more recently in his present were declared elected. post as Assistant in Charge of Accounting Names of the following members, pro to the Director of Contract Settlement. posed by the nominating committee for William A. Paton, for his article “ Ac members of council, were presented by the counting Policies of the Federal Power chairman of the nominating committee: Commission,” published in The Journal of Accountancy, June, 1944, which is con Oscar Moss, California sidered the most significant and valuable James I. Keller, Jr., Florida article on an accounting subject published William Jackson Carter, Georgia in the fiscal year ended August 31, 1944. Roy Andreae, Illinois Jackson W. Smart, Illinois George S. Olive, chairman, presented Edward S. Rittler, Louisiana the report of the committee on nomina J. Harold Stewart, Massachusetts Oscar R. Martin, Nebraska tions, proposing Samuel J. Broad, of New Theodore Krohn, New Jersey York, for president. It was moved and Karl K. Morris, Ohio seconded that the nominations be closed Paul W. Fitzkee, Oklahoma and that the secretary cast one ballot for I. D. Wood, Oregon the election of Mr. Broad as president. The John N. Aitken, Jr., Pennsylvania motion carried, the ballot was cast, and John H. Zebley, Jr., Pennsylvania Mr. Broad was declared duly elected. Presi James A. Rennie, Virginia dent Broad expressed his thanks for the Carl E. Dietze, Wisconsin honor conferred upon him, and at the It was moved and seconded that the request of the chairman assumed the chair. nominations be closed and that the secre Mr. Olive presented the following names tary cast one ballot for the election of those offered by the nominating committee for named. The motion was carried, the ballot vice presidents: was cast, and the members named were Rodney D. White, Washington declared elected. Edward B. Wilcox, Illinois The chairman announced that the next order of business was election of five mem A motion was made and seconded that bers of the committee on nominations for the nominations be closed and that the the current year. The following were nomi secretary cast one ballot for the candidates nated by Albert J. Watson, who stated that named. The motion carried, the ballot was in accordance with the by-laws, the council cast, and the members named were de had already elected Victor H. Stempf, of clared elected. New York, and Ernest H. Fletcher, of Mr. Olive presented the name of Maurice Michigan, to serve on the nominating com E. Peloubet, of New York, proposed by the mittee, the first named to act as temporary * Mr. Peloubet’s presentation address ap chairman until the committee elected a pears elsewhere in this Yearbook. permanent chairman: Annual Meeting, 1944 29 Thomas J. Dolan, Ohio Wednesday Oct. 18th: Thornton G. Douglas, California William H. Goldberg, Colorado Session on “ War Contract Termina Byron P. Harris, Georgia tion.” Chairman, Donald M. Russell; Harvard L. Mann, Massachusetts speakers: Dundas Peacock, H. T. McAnly, Captain J. Harold Stewart, Maurice H. It was moved and seconded that the Stans, Colonel John W. McEachren, John nominations be closed and that the secre B. Inglis; commentators: Lt. Col. F. F. tary cast one ballot for the election of Tannery, and members of the committee on those named. The motion was carried, the termination of war contracts, American ballot was cast, and the members named Institute of Accountants, and speakers at were declared elected. session. The chair introduced Fred Johnson, president of the Dominion Association of Chartered Accountants, who delivered an Thursday Oct. 19th: address on problems of the accounting Session on “ Federal Corporate Taxa profession in Canada.* tion.” Chairman: George P. Ellis; speakers: Captain N. Loyall McLaren, chairman Charles Melvoin, Harold M. Groves, of the New York Division of the Navy Maurice Austin, Thomas J. Dolan, James Price Adjustment Board, was introduced J. Mahon, Lawrence O. Manley, Randolph by the chair, and delivered an address on E. Paul, Weston Vernon, Roy Blough, “ Government Pricing Policies.”* Harry E. Howell. The meeting adjourned sine die at 12:30 P. M. Annual D inner T echnical Sessions More than 800 members and guests Over 1,000 members of the Institute, attended the fifty-seventh annual d in n er accountants and guests who registered for which was held in the Gold Room of the the meeting, attended the following techni Jefferson Hotel in the evening of Oct. 18th. cal sessions (all papers presented have been Col. Robert H. Montgomery spoke at the published in “Termination and Taxes”— dinner on the subject of “ The International 1944). Congress of 1904,”* and Samuel J. Broad, newly elected president of the Institute, Tuesday Oct. 17th: delivered an address entitled, “ The Profes Chairman: Lincoln G. Kelly: Papers: sion Comes of Age.” * Victor H. Stempf, “ Selection of Accounting Personnel” ; retiring president of the Institute, was “Independence”; “Recommended Reforms honored during the evening as an out in Governmental Accounting” ; “ The Legal standing alumnus of St. Louis University. and Accounting Professions Prepare To Mr. Stempf was presented with a plaque Meet Problems of Mutual Interest.” by the Rev. Bernard W. Dempsey of the Speakers: Warren W. Nissley, Lewis School of Commerce and Finance on behalf Lilly, Lloyd Morey, and William Charles. of the University. Forum on “ Historical vs. Earning Power No entertainment was provided, in view Concept of the Income Statement.” of the war. Chairman: Jackson W. Smart; speakers: Henry T. Chamberlain, Maurice E. Pelou The members attending the annual bet, Paul Grady; commentators: William meeting expressed their thanks to the W. Werntz, Philip L. West, and speakers at officers of the Missouri Society and the the session. committee on meetings for the excellent arrangements which had been made for the * Published in “ Termination and Taxes”— 1944 (papers presented at the 57th Annual annual meeting in spite of extraordinary Meeting). wartime difficulties. ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANT EXAMINERS
Meeting Held at Hotel Jefferson, St. Louis, Mo., Monday, October 16, 1944 The annual meeting of the Association “ Practical Experience of Certified Public Accountant Examiners as a Prerequisite was held at the Hotel Jefferson, St. Louis, for a C. P. A. Certi Mo., on Monday, October 16, 1944, at ficate” -George S. Olive 12:30 p. m. Following the presentation of the two The Association members were luncheon papers on legislation, there was a general guests of the board of examiners of the discussion of the subject from the floor American Institute of Accountants, with led by John A. Peyroux of the Louisiana Dick D. Quin of the Mississippi Board, Board, and following the presentation of and past president of the Association, the other two papers, a general discussion presiding. was led by Robert P. Briggs of the Michi Following the luncheon, a general session gan Board. of the Association was called to order by The president presented for consider President Brooks Geoghegan. The follow ation by member boards a suggestion by ing twenty-six boards were represented Mr. Gale that in publishing the names of at the meeting by one or more delegates— successful candidates a summary state Arkansas Michigan ment of the requirements be included in the California Minnesota announcement. Colorado Mississippi The secretary-treasurer reported that Connecticut Missouri dues had been collected from the forty- Florida Montana eight state boards, the District of Columbia Georgia New York Board, the Alaska Board and the American Illinois North Carolina Indiana Oklahoma Institute board of examiners. The cash Iowa Tennessee balance in the treasury at October 1, 1944, Kansas Texas was $285.94. Details of the financial Kentucky Utah transactions are set forth in the report of Louisiana Virginia the auditor. Massachusetts American Institute The following officers were elected for the ensuing year:— Two other state boards, Ohio and Penn sylvania, had sent representatives but one Lewis Lilly—California—President of these was prevented by illness from T. Dwight Williams—Oklahoma—1st Vice attending the meeting and the other had President to attend another meeting being held at James I. Keller, Jr.—Florida—2nd Vice the same time. President The following papers were presented:— Walter N. Dean—New York—Secretary- Treasurer “ Canadian Examina tions” —W. A. McKague A vote of thanks was extended to the “ The Restriction of board of examiners of the American Practice by a Regu- Institute for the luncheon. latory Account A vote of thanks was extended to the ancy Law Would speakers on the program for their excellent Strengthen the Profession” —J. William Hope papers. “ Restrictive Legisla A vote of thanks was extended to the tion and its Con officers who had served the Association so comitants” —Lewis Lilly well during the past year. “ Education as a Pre The meeting adjourned at 5:15 p. m. requisite for a C. P. A. Certificate” —Thomas W. Leland W a lte r N. D ea n , Secretary
30 APPENDIX A
Midyear Reports of Secretary, Board of Examiners and Committees Report of the Secretary T o the Council of the societies, which involved the creation and A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : maintenance of the Advisory Council of Gentlemen: A picture of the physical State Society Presidents, the continuous growth of the Institute following the merg transmittal of information to state society er in 1936 of the two national organizations presidents, the establishment of regional which then existed may be provided by the c onferences and attendance by Institute following statistics: officers at state society meetings. During the war, regional conferences have been 1937 1944 dropped due to transportation difficulties, Membership as of May but, as a substitute, wartime conferences 1st...... 4,764 7,808 have been arranged in various cities at Circulation of The which officers of the Institute and chairmen Journal of Account of its committees have delivered addresses ancy as of May 1st.. 10,549 21,633 covering subjects of immediate interest and Estimated consolidated importance. This year, all the officers and income for the fiscal the chairman of the committee on federal year...... $129,755 $275,445 taxation addressed audiences aggregating B a s ic A c t iv it ie s more than 2,500, in Pittsburgh, New Orleans, Houston, Tulsa, Kansas City, These figures, however, do not indicate the increased scope of activity. The older Omaha, and Minneapolis. In addition, the president of the Institute has spoken at activities, which were in full swing before the merger, have been carried forward but meetings of state societies in St. Louis, Indianapolis, Chapel Hill, Newark, and have expanded. The Journal of Accountancy has been enlarged and altered. More publi Providence; the vice-presidents in Detroit, Tulsa, and St. Louis; and the secretary in cations are being issued and more work is being done on them. The board of ex Milwaukee, Madison, Wilmington, and aminers has spent more time and effort Newark. each year on the standard examination, This year a brand-new project has been which it is determined shall attain such a undertaken—a five-year research program degree of excellence that every state in the on selection of accounting personnel, which Union will adopt it. The committee on will be described more fully by the com ethics continues to refine and clarify the mittee in charge. rules of conduct and to consider with care W a r A c t iv it ie s all complaints which are submitted to it. The library renders an invaluable continu The war has created many new problems ous service. This year it will produce the for the accounting profession, to the solu Sixth Supplement to the Accountants’ tion of which the Institute has attempted Index. to contribute. Special war activities related to contract termination and renegotiation, N e w A c t iv it ie s placement of accountants in the armed In addition, much new work has been services and war agencies, manpower re undertaken in the past seven years. One quirements, gasoline rationing, government indication is the number of committees, financial-reporting forms, and similar mat which in 1936 were thirty-five and in 1944 ters, account for a substantial part of the were forty-six. The entire research program present program. Keeping the membership has been undertaken and developed within informed of government requirements the past five years. The tax committee has which affect their clients or themselves is undertaken a more extensive program in itself no small task. The Journal of Ac following the employment last year of a countancy has attempted to cover all such full-time technical assistant. A regular, matters, but, in addition, in order to get continuous public-relations program is an prompt information into the hands of the addition to the Institute’s activities since membership, special mailings have been the merger. undertaken in the current year, through A major project originating after the which the following documents have been merger has been cooperation with state transmitted to members a few days after 33 34 American Institute of Accountants Yearbook official release: War Department Termina tion. A brief was filed on behalf of the tion Accounting Manual for Fixed-Price Institute before the Supreme Court of the Supply Contracts; Procurement Regula United States in a case involving a question tion No. 15, Termination of Contracts for of accounting principle. A Conference on the Convenience of the Government; pre Federal Government Accounting was held print of addresses at the annual meeting on in December under the auspices of the war contract termination; letter from the Institute in cooperation with the Bureau president of the Institute to members and of the Budget, the General Accounting other certified public accountants, dated Office, and the Treasury Department. The April 5, 1944, on war contract termination; American Bar Association has offered the uniform article for the termination of opportunity for closer relationship with the government fixed-price war supply con Institute through creation of a Joint Con tracts and related statement of principles ference Group of Accountants and Lawyers, for determination of costs, accompanying consisting of five representatives of each the Baruch report on termination; two organization. In assuming leadership in the letters to members, one of which was mailed demand for tax simplification, and particu to all other certified public accountants, larly for the creation of a non-partisan body with reference to legislation proposing a of experts to advise Congress in this field, non-partisan commission to aid Congress new friends have been made among private in revision of the tax laws; letter from the organizations interested in taxation and acting Commissioner of Internal Revenue among many members of Congress. regarding extensions of time for filing tax returns; revised financial reporting Forms R elations with Congress A and B issued by the Office of Price Ad and Government ministration; new reporting form issued by the Price Adjustment Boards in accord The closer relationship with members ance with the Revenue Act of 1943, to be and committees of the Congress is among filed by companies subject to renegotiation; the most significant recent developments. revision of Selective Service Local Board Representatives of the Institute in the Memorandums No. 115 and No. 115B. past few months have testified before a subcommittee of the Senate Committee on Military Affairs and before the House P ublic A ffairs Naval Affairs Committee on problems of But over and above the continuation of war contract termination. Conferences the regular work undertaken years ago, have been held with Senators and Congress and the addition of new projects and men on problems related to the audit of services to the regular program, it seems government corporations, and recommen that a new element has been introduced dations of the Institute have been cited on into the Institute’s work. This new element the floor of the Senate and reproduced in can be described best, perhaps, as increased the Congressional Record. Members of participation in public affairs. Without its Congress have given the Institute the being generally realized, the Institute has privilege of making specific recommenda gradually come to occupy the position of tions on simplification of the individual consultant to various bodies and persons income tax at an informal meeting of a com who may be interested in accounting. The mittee of experts working directly under bankers, the Stock Exchange, and the the House Ways and Means Committee. Securities and Exchange Commission, have The War Manpower Commission and for years cooperated closely with Institute Selective Service Headquarters in consider committees in the consideration of account ing manpower problems, and the Office of ing and auditing questions. Other agencies Price Administration in considering gaso of the government and other private or line rationing, have shown a greater ganizations have come to do likewise. In appreciation of the services of the profes the current fiscal year representatives of sion than was evident in the early days of the Institute have appeared before a com the war. Rulings which seemed harsh in mittee of the National Association of Rail their application to public accountants road and Utilities Commissioners to express have been modified at the Institute’s opinions on a proposed report on deprecia request. Midyear Reports 35
All this betokens greater effectiveness, arrangement of personnel has been made wider recognition, and increased oppor under which Elizabeth Arliss, assistant to tunity for service in the future. the secretary, will take over a large part of the work which had been conducted by Staff Mr. Winton, and other functions will be Wartime shortages of manpower and assumed by Frank A. Gale, assistant material, however, impair the opportuni secretary, and Susan Ranney, assistant ties. The council will hear a recommenda to the treasurer. It is almost too much to tion for increasing the flow of technical expect, however, that a smaller number of information to the membership, but if the trained persons can carry on the same recommendation is adopted its execution volume of work which had occupied the will depend on the ability to secure addi full time and energy of a larger number. tional technical assistants. A committee It seems more than likely that George N. will present a program for closer coordina Farrand, research assistant for the past tion of activities of the state and national four years, will enter the armed forces organizations, but the program cannot be within the next two months. He, too, will fully successful without additional com be very difficult to replace. He has cheer petent staff assistants. The executive fully assumed heavy extra burdens im committee has approved a plan worked posed on the research department by war out by the committee on membership, conditions. Besides carrying on his regular which provides for a continuous effort to work for the committees on accounting bring to the attention of every eligible and auditing procedure, Mr. Farrand has certified public accountant the advantages made himself a specialist in technical of membership in the Institute. This accounting and auditing requirements of program might speedily increase the war agencies in relation to renegotiation, membership by several thousand without termination, and other matters, and has any lowering of standards, but it cannot rendered great assistance to the committees be carried out without competent clerical on war activities and to the editor of assistants under intelligent direction. The The Journal of Accountancy. Through Journal of Accountancy could increase its his efforts, members of the Institute have subscription list considerably if sufficient received information on many important paper were available to print the number subjects much earlier than otherwise of copies for which there is already a would have been possible. demand. Like many other organizations, the Up to the present time, by dint of Institute seems faced with the paradox of strenuous effort, replacements have been increased opportunities for service but secured for most of the members of the diminished facilities with which to serve. staff who have had to leave the Institute’s It must fight a rear-guard action to main service. Now, however, the headquarters tain its strength and to keep its opportuni office is confronted with the loss of two ties alive, until the end of the war. Its key men. H. T. Winton, assistant secre future is bound up with that of the eco tary, accepted a commission as Lieutenant nomic life of the country as a whole, and (j.g.) in the United States Naval Reserve will be conditioned largely by the duration as of May 1, 1944. His departure leaves a of the conflict which absorbs all our gap which will be very difficult to fill. His energies. seven years experience and keen interest Respectfully submitted, in the work have enabled the staff to carry a substantially greater load of work than John L. C arey, Secretary would have been possible otherwise. Re May 1, 1944 36 American Institute of Accountants Yearbook
Report of the Executive Committee
To the Council of the I ndependence American I nstitute of Accountants: The question of the independence of Gentlemen: Since its election by the professional certified public accountants, council, October 21, 1943, the executive which is vital to the profession, came to the committee has held four meetings: one in forefront again in a release by the Securities the evening of October 21st, the others and Exchange Commission summarizing December 16th, March 22nd, and May 7th. opinions expressed by the Commission or Complete copies of the minutes of each its staff in twenty cases which had not meeting except that of May 7th have been previously been published. The executive sent to all members of council. Many of committee did not object to the publication the matters which have come before the of the release, but did not concur with all executive committee will be dealt with at the opinions summarized therein and in length in the reports of other committees. structed the appropriate committee to This report, therefore, is confined to refer make the Institute’s position clear in a ence to a few matters of major importance letter to the chief accountant of the and a few questions which the executive Securities and Exchange Commission, who committee particularly wishes to bring to had submitted a draft of the release for the attention of council. comment.
F ederal Government Audits T ax R eform Closely related to the question of inde An extraordinary amount of work has pendence is the attitude of Congress and been done by the committee on federal government agencies toward the certified taxation and by the staff of the Institute public accountant. In hearings before a to induce Congress, in accordance with Senate committee, misunderstanding of the resolution adopted by the Institute the nature of an independent audit was at the annual meeting last October, to evidenced in the course of debate on an appoint a non-partisan body of experts to appropriation for audit of the Tennessee draft a simple revenue law expressing a Valley Authority by independent certified permanent and consistent policy of federal public accountants. The chairman of the taxation. At this time there seems an excel Institute’s committee on governmental lent prospect that something of this kind accounting submitted a statement de will be done. Many members of the In signed to correct that misunderstanding, stitute have supported the proposal ac which was reproduced in the Congressional tively, and the full cooperation of the Record. American Bar Association has been secured. Later a bill was introduced providing A by-product of this effort, of great value for audits of Reconstruction Finance to the profession, is general public recogni Corporation by the General Accounting tion that certified public accountants have Office. The president of the Institute dis taken a position of leadership in urging cussed this question informally with the tax simplification. Senator who introduced the bill, and was The executive committee has not em assured that there was no intention of pre ployed any additional staff assistants or cluding audits by certified public ac made available any funds not provided in countants in appropriate cases. the regular budget for the purpose of A Conference on Federal Government carrying on its campaign for tax reform. Accounting, sponsored by the Institute’s committee on governmental accounting in It is believed that in a matter of such great cooperation with the General Accounting importance, involving broad questions Office, the Bureau of the Budget, and the apart from accounting and auditing, the Treasury Department, was held in New Institute is not called upon to do more York in December. The Conference devel than offer its suggestions as emphatically oped a great deal of valuable information as possible through the means normally on auditing and accounting procedures of at its command. the federal government which afford a Midyear Reports 37 basis for fruitful study. Since a wide sale The chairmen of the Institute committees of the proceedings could not be expected, and the research director met with the the executive committee appropriated executive committee to discuss the situa $1,000 from the contingency fund to tion, and after discussion they undertook cover the cost of publishing the proceed to draft a plan under which such interim ings so that those interested might have supplemental studies might be released by them. the research director without being con fused with official statements of the com Cooperation with B ar A ssociations mittees or taking their place. Such a plan At the recommendation of the com has now been submitted to the executive mittee on cooperation with bar associa committee and approved, with some tions, the executive committee adopted a modification, as follows: resolution similar to a resolution already adopted by the house of delegates of the 1. The present procedure of the two com mittees with respect to Accounting Re American Bar Association, authorizing search Bulletins and Statements of creation of a Joint Conference Group of Auditing Procedure should be continued Lawyers and Accountants, to consist of as heretofore. five members of the Bar Association and 2. As an additional and separate activity five members of the American Institute of of the Institute a series of memoranda Accountants, for the purpose of consider should be initiated dealing with ac ing matters of mutual interest. The first counting and auditing questions. They meeting of the conference group was held are not to be issued as definitive pro May 6th in Philadelphia. It is believed nouncements of the Institute but pri marily as an educational activity of the that this new channel of communication Institute. between the accounting and legal profes (a) Such memoranda should deal with sions places cooperation between the two subjects believed of current interest to on an appropriate basis. The Joint Con the membership generally. ference Group of Lawyers and Accountants (b) The issuance of the memoranda to be also affords an opportunity for mutual prepared by the Research Department consideration of problems of much broader should be under the supervision of a interest than those which have hitherto subcommittee to be composed of mem been the subject of discussion at meetings bers of the committees on Accounting Procedure and Auditing Procedure. of committees of the Institute and the Bar (c) Although the memoranda should dis Association. Members of the legal and cuss the various questions pro and con, accounting professions often have to work stating the various aspects of the sub together, and it seems desirable that their ject considered, they should not state two national organizations should do like any conclusions. wise in a fully cooperative spirit. (d) In the first memorandum of the new series the plan of issuance should be Accounting and Auditing P rocedure outlined.
The executive committee suggested to Contract T ermination the committee on accounting procedure, as well as the committee on auditing The executive committee approved sub procedure, that for the information of mission of a resolution to the council with members of the Institute the research respect to audits of data related to settle director publish tentative interim studies ment of terminated war contracts. The on accounting and auditing problems of resolution will be presented by the com broad professional interest which were mittee on war contract termination. before the committees on accounting and Selection of P ersonnel auditing procedure for discussion but on which no final conclusions had been Under authority of the council the ex reached. It was the opinion of the executive ecutive committee appointed a special committee that such interim studies should committee to consider the practicability of be supplemental to the present accounting research for the purpose of developing research bulletins and statements on audit measures of aptitude and achievement ing procedure, which embody definite which might help to judge the qualifica recommendations of those committees. tions of an individual for professional public 38 American Institute of Accountants Yearbook accounting practice. After careful investi 1944 Annual Meeting gation the special committee recommended The executive committee, under author that the project be undertaken, and be ity vested in it by the annual meeting of the financed by voluntary subscriptions from Institute, selected St. Louis as the place for members of the Institute. After careful the 1944 annual meeting and selected consideration and much discussion the October 17, 18, and 19, 1944, as the dates executive committee approved the recom for the general meetings. mendation. The project as outlined is ex pected to extend over a period of about five Results of 1943 Annual Meeting years at a total cost of about $50,000. Sub The committee on meetings for the past scriptions amounting to $42,853.50 have year entered a financial report showing an already been received. excess of receipts over expenditures in con junction with the 1943 annual meeting of B rief F iled with Supreme Court $3,377 which has been credited to the general fund. Under the authority of the council and the executive committee, a brief was filed Liability of Accountants on behalf of the Institute as amicus curiae in Government Service with the Supreme Court of the United States in the case of Northwestern Electric After consideration of certain federal Company, et al. v. Federal Power Commis statutes under which liability might be sion. The Supreme Court’s decision was imposed on professional practitioners in not in accordance with the Institute’s the employ of the federal government on contentions, although reference was made a part-time or full-time basis while retain to the Institute’s argument in the Court’s ing partnerships in firms which assist opinion. clients in the presentation of claims against the government, the executive committee authorized appointment of a special com U nited States T ax Court mittee to investigate the possibility of A subcommittee of the executive com protection of members of the accounting mittee is continuing its efforts to bring profession who were serving the federal about a change in the rules of the United government as a patriotic duty in time of States Tax Court requiring written ex war. amination of certified public accountants who apply for admission to practice before Compensation of I nstitute’s Auditors the Court. Members of the Institute elected as auditors have in the past served without P ostwar P roblems compensation. A member who recently completed his term of service in this capac The executive committee authorized ity suggested that, in view of the greatly appointment of a committee on postwar increased scope of the Institute’s affairs problems and referred to it suggestions and the increasing volume of receipts and that plans be laid for refresher courses to be disbursements in the several funds, the given accountants returning from the task of auditing the accounts had become armed services after the war, and for one of sufficient magnitude to justify com reemployment of such accountants in the pensation to those who performed it. After profession. discussion the executive committee re solved to refer this matter to the council Committee on Social Security without recommendation. The executive committee carefully re viewed recommendations submitted by the Sixth Supplement Accountants’ I ndex committee on social security which had The executive committee has authorized originally been presented to the council the publication of the Sixth Supplement last fall but had been referred back for to the Accountants’ Index. It is expected to further study. The executive committee be published early next summer. More approved the recommendations fully and than 500 advance subscriptions have authorized their publication. already been received. Midyear Reports 39
Payments from Contingency F und George H. Matthews In accordance with authorization pre Marvin McCarty viously granted, the executive committee John J. Monahan approved payment to a member of the L. J. Nolan Institute of $1,800 to reimburse him for Frank L. Pollard part of the legal expenses incurred in the John F. Prinzing trial of a case involving application of the Charles M. Riedell Fair Labor Standards Act to employees of John W. Robbins public accountants. The executive com Barney Robins mittee also approved payment from the Harold S. Russell contingency fund of $2,623 to the Massa Louis E. Smith chusetts Society of Certified Public Ac Reginald G. Snodgrass countants, representing 50 per cent of the Albert L. Swearingen legal expenses incurred by the Massa Samuel Tarter chusetts Society in filing a brief as friend George H. Weber of the court in a case in which the question Chester L. Weberg at issue was whether the preparation of Associates income-tax returns by an accountant constituted unauthorized practice of the Everett W. Charters law. Louis M. Comen Twenty-four members have resigned M embership in good standing, 21 have been dropped for The increase in membership continues non-payment of dues. Dues of 55 members at a highly satisfactory rate. Members were advanced by the executive com and associates at May 1, 1944, were 7,808 mittee, the total amount advanced being in comparison with 7,137 at the beginning $1,174.59 of which $422.92 has been of the fiscal year. Deaths of 43 members repaid. and associates have been reported as The executive committee has approved follows: recommendations of the committee on membership for a program of activity Members designed to bring to the attention of every William F. Ackerson eligible and desirable certified public Albert George L. Baines accountant the benefits of membership in J. Christian Baker the Institute. Employment of two addi Otto Baumgartner tional clerical assistants has been author Albert Edward Baylis ized to develop the records and conduct James Peter Cornetet the correspondence which this program will Norman B. Chandler require. James B. Creedon C. Irving Dennett Staff Organization Gilbert V. Egan The committee approved as a long- George D. Fish range objective the statement submitted Walter J. Goggin by the secretary outlining the staff organ Graham Robert Green ization necessary to meet the requirements Oscar Goddard of the Institute in the light of present and W. Lowell Grinstead expected demands. The plan provides for George W. Hailer the following executive positions: secretary Romney N. Hallman and managing editor; assistant secretary; William H. Hartman full-time research director with three William C. Heaton assistants, one on accounting, one on J. Leon Hartsfield auditing, one on taxes; full-time educa Joseph H. Hummel tional director; director of public informa Henry W. Hunt tion; controller; librarian; assistant editor; D. V. Johnston business manager; head of office service P. H. Kelso department. Most of these positions are Elwin MacLeod now occupied. The principal additions 40 American Institute of Accountants Yearbook would be enlargement of the research sibilities indicated in the plan outlined, staff, and addition of an educational who might be engaged on terms to be director. The acceptance by H. T. Winton approved by the executive committee. of a commission in the Navy, and the expected entrance of George N. Farrand, Respectfully submitted, research assistant, into the armed forces, leaves vacancies in the present executive Victor H. Stempf, President staff. The secretary has been authorized John L. Carey, Secretary to attempt to find suitable persons who might assume some or all of the respon May 7, 1944
Report of the Board of Examiners To the Council of the Accounts, Commercial Law, Auditing, and American I nstitute of Accountants: Accounting Practice, have held several special meetings. Examination papers for Gentlemen: The board of examiners has the November, 1944, examination are held two meetings since the annual meeting in New York, and there have been several nearing completion, and a stock pile of questions in all subjects is being developed. subcommittee meetings. The board has been concerned with planning examinations that will over the Statistics years touch upon the principal fields of Four hundred and twenty-seven applica accounting interest. Some state laws tions were pending at the beginning of the require that candidates for the C.P.A. fiscal year. Since that time, the board certificate be examined in governmental has received 591 applications (including. accounting, and therefore it has been the 20 applications for advancement) and has practice in recent years to include a prob recommended the admission of 760. Ap lem in governmental accounting in the proximately 357 applications were pending standard examination. Because of the on May 1, 1944. (The board has approved importance of federal taxation, the board ninety-five applicants whose names will has felt that there should be at least one be submitted to council in May.) tax question in the examination papers. In November, 1943, 1,689 candidates Studies have been made of the fre wrote the standard examination, and the quency in which various subjects have been Institute’s examining staff graded the dealt with in past examinations and al papers of 684 candidates. The following though the board does not automatically percentages show the proportion of the project the pattern for the past into the candidates who received passing grades of future, the summary has proven of value 75 points or more: Auditing, 64.5%; in planning for the future. Commercial Law, 49.2%; Theory of The board of examiners gauges the Accounts, 67.3%; Accounting Practice, examination to test candidates of senior 9.8%. grade. While the identity of no candidate is known to the board, there is no doubt that Examinations many candidates who sit for the standard There rests with the board of examiners examination have never had a single day’s the responsibility of preparing the standard experience in a public accountant’s office examination which is now used by forty- nor have they had accounting training. seven state and territorial boards of It is not surprising, therefore, to find that accountancy in examining candidates for at the November, 1943, examination in the C.P.A. certificate. The board held a Accounting Practice, less than 10% of the three-day meeting in the fall, which was papers graded by the Institute received devoted to preparation of the standard passing grade. Members of the profession examination in all subjects, and subcom in those states which do not require public mittees of the board, charged with de accounting experience have frequently velopment of the papers in Theory of stated that they rely upon the quality of Midyear Reports 41 the uniform examination to remedy the ence, who apply for admission as asso deficiency of their present law and to main ciates under Article II, Section 5(a) of tain the standard for the C.P.A. certificate the by-laws, which provides that applicants within the state. “shall have been in practice on their own To ascertain the amount of time re account or in the employ of a practicing quired to solve each problem and to check public accountant for not less than two against inclusion of ambiguities in the years, or shall have had experience which in questions, arrangements were made for the opinion of the board of examiners is eight certified public accountants to write equivalent to two years’ public accounting the May papers under examination con practice, and at the date of application ditions, using advance printer’s proofs. shall be engaged in work related to account Commencing with the May, 1944, exam- ing.” A subcommittee of the board is ination, a wide-measure single-column-type making a study of all the factors that enter page has been adopted, instead of the two- the problem of admitting as associates, column type page, so as to avoid any applicants who have not had two years of possible confusion to the candidate. public accounting experience. Upon con Throughout the years, the board of sideration of the findings of the subcom examiners has striven to present an mittee, the board hopes to present to examination that will meet the needs of council at the annual meeting in St. Louis, the profession in every state and maintain a resume of the factors involved in the a high national standard. The board problem and specific recommendations for cooperates closely with the Association of its solution. Certified Public Accountant Examiners, of which it is a member. Progress is being Respectfully submitted, made toward even wider adoption of the standard examination. H en ry E. M endes, Chairman Roy Andreae Admissions Robert P. Briggs One of the functions of the board is to Harold R. Caffyn pass upon the qualifications of applicants J. William Hope for admission to the Institute. Since the Kenneth M. Montgomery annual meeting, the board has recom Raymond E. N o r th mended the admission of 760 applicants. G eo rg e E. P e r r in One of the more difficult problems con N orm an E. W eb ster fronting the board concerns applicants who have had no public accounting experi May 1, 1944
Report of Committee of Professional Ethics To the Council of the 10 of the Rules of Professional Conduct so American Institute of Accountants: as to prohibit all advertising of any kind, Gentlemen: The New York members including publication of so-called cards of the committee on professional ethics except for specified announcements. This have held several meetings with members recommendation was approved by the of the Institute to discuss questions arising council and was submitted to the member from matters referred to the committee. ship at the annual meeting, and was voted The only meeting of the full committee, upon favorably. The amendment was then since its election last October, was held submitted for mail ballot and was declared just prior to the present session of council. effective by the president of the Institute December 27, 1943. Numerous inquiries Rules of Professional Conduct have been received by the committee as At the May, 1943, meeting of council, to the effect of the amended rule, as a your committee on professional ethics result of which the committee issued the recommended an amendment to rule No. following interpretation, which was printed 42 American Institute of Accountants Yearbook in The Journal of Accountancy and The guage of the rule, which states that a Certified Public Accountant for April, 1944: member or an associate shall not advertise his professional attainments or services. In “The committee on professional ethics the committee’s judgment, directory list has received a number of questions as to ings in special type or boxes are a form of the effect of rule No. 10 of the Rules of display advertising intended to attract Professional Conduct of the American attention to the professional services of Institute of Accountants, which was re the firm or individual so listed. cently amended. “The committee believes that the “ This amendment of the rule was amended rule does not prohibit members originally recommended by the Advisory and associates from being listed in tele Council of State Society Presidents. The phone and other general directories, but council of the Institute approved the re that the use of special type or other form commendation, and authorized submission of display to attract attention constitutes of the amendment to the members of the advertising, is undignified and unprofes Institute at the annual meeting in October, sional in character, and is detrimental to 1943. The members present at the meeting the interests of the profession as a whole.” approved the amendment, whereupon it was submitted for a vote by mail ballot, and a majority of all the members of the Analysis of Cases Institute voted affirmatively, making the 38-14. This case, arising from a court amended rule effective December 27, 1943. decision involving alleged conspiracy to “The rule as amended now reads as defraud, has been reported to the council follows: at numerous meetings. Information made “ (10) A member or an associate shall not available to the committee, and further advertise his professional attainments or questions resulting from this material services. The publication of what is techni have had consideration. Upon reconcilia cally known as a card is restricted to an tion of questions arising from the partner announcement of the name, title (member ship relationship of the members of the of American Institute of Accountants, Institute concerned in the matter, the CPA, or other professional affiliation or designation), class of service, and address committee believes it will be able to reach of the person or firm, issued in connection a conclusion in the case. with the announcement of change of ad 42-2. There have been no new develop dress or personnel of firm, and shall not ments in this case since the committee exceed two columns in width and three reported to the council at the October inches in depth if appearing in a news meeting. Civil proceedings have been paper, and not exceed one-quarter of a instituted, and the committee is awaiting page if appearing in a magazine, directory, the official record of the case before for or similar publication. mally considering the matter. “The amendment consisted of eliminat 42-5. The committee has reported at ing from the earlier rule the provision per four previous meetings of the council on mitting publication of ‘cards’ as a regular this case, which involves a member who method of advertisement. The present rule has been indicted by a Federal Grand permits the publication of ‘cards,’ but Jury. In accordance with its usual policy only for the specific purposes of announcing in cases of this kind, the committee is change of address or personnel of firm. deferring formal action in the matter until “The committee on professional ethics has already officially interpreted the the court record may become available. phrase ‘change of address’ to include 42-11. This case, reported to the council announcement of the opening of a new at its October meeting, involves allegations office (see The Certified Public Accountant, by a non-member of the Institute against December, 1943, page 3). an accounting firm, of which partners are “ More recently, the commmittee has members of the Institute, to the effect that interpreted the rule in its application to said accounting firm had certified mis listings of names and addresses of members leading financial statements. The com and associates of the Institute in direc mittee received an explanation from the tories. The committee believes that the rule prohibits such listings in bold type, or firm involved, and initiated an exhaustive in any other form which differentiates them study of the published annual reports of from other names and addresses in the the corporation concerned. The study has same list. This belief is based on the lan been somewhat impeded by the illness of Midyear Reports 43 the technical assistant to the committee, knowingly violated rule No. 10 as but it is expected that the results will soon recently amended? be available, and the committee will be A. Any complaint of violation of rule No. permitted to reach a conclusion in the 10 would be considered by the com matter in the very immediate future. mittee on professional ethics, and if it 42-14. This case, which was referred to concluded that a violation of the rule the committee by the Securities and Ex had occurred it might either accept change Commission, will be reported upon assurance from the member that he separately to the council in a supple would discontinue such violation or mentary report. report the matter for a hearing by the 43-3. The attention of the committee council sitting as a trial board. was drawn to a civil case in which a firm of accountants, of which a partner is a member of the Institute, was sued for Q. Complaint has been filed with a state alleged negligence. The committee con board of accountancy that I violated sidered an explanation from the partner its code of ethics in sending out an who is a member of the Institute, and as a appeal for funds for an eleemosynary result thereof answers to further questions institution to members of a fraternal are now awaited before final disposition organization, of which I am an officer, may be made of the case. on my professional letterhead. Please advise if this constitutes a violation Summary of I nquiries and R esponses of the Institute’s Rules of Professional Q. In 1941 I entered into partnership with Conduct. another CPA. When we formed the A. While the views of the Institute would partnership it was provided that upon not be binding on a state board or state the retirement of either of us, the one society, it is not believed that the remaining in practice would purchase material submitted is directly pro the clients of the other, and would be hibited by the Institute’s rules. Pre permitted to use the firm name for a sumably complaint was made on the period of five years. Is it permissible ground that such distribution violated under the Institute’s rules to continue Rule No. 7, regarding indirect solicita practice under the firm name inasmuch tion. It is also possible that use of your as my former partner is now privately letterhead, showing your practice en employed? rollments and type of service rendered A. We know of no reason why the old by your firm, when sent to non-clients, partnership name cannot be continued, might be regarded as advertising of provided the letterhead clearly indi professional services or attainments, cates who the members of the firm are. which is prohibited by rule No. 10 If through the purchase of the clientele of the Institute. under your former partnership agree ment the firm in effect becomes a sole Q. For several years we have served proprietorship, of which you are the clients in a fairly distant city and have sole proprietor, there may be some accomplished this by sending staff question as to the propriety of your members from our office to that city using the designation “ Certified Public and having them return to our office Accountants and Tax Consultants” with their working papers for review under the firm name, since this implies by our principals. We now wish to that more than one or more persons open an office in that city with an are members of the partnership. This accountant as manager, who is neither would not be permitted under the a CPA nor a member of the Institute. provisions of rule No. 1 of the Institute’s Our firm members will fully supervise rules, and may be an infringement of all his activities as well as those of the rules of practice of the Treasury other staff assistants there, and all Department governing enrolled agents. reports will be reviewed and signed at our main office. Please let us have Q. What would be the attitude of the your opinion as to the propriety of our Institute toward any member who proposed procedure. 44 American Institute of Accountants Yearbook
A. Rules No. 2 and No. 6, which might Q. Is it permissible for a member to run bear on this question, both clearly an occasional card, giving his name, permit a member to allow another address, and type of service, in a person to practice in the name of the national trade publication, and also in member if such person is in the mem the classified section of an international ber’s employ; and also permit a member newspaper? to sign a report or express his opinion A. Under rule No. 10 as recently amended, as a result of examination of financial this would be considered a violation of statements if such statements have the Rules of Professional Conduct. been examined by an employee of the member’s firm. Q. Will you please advise whether the standing of a member of the Institute Q. A firm of specialists in insurance is affected by his filing a voluntary investigations prepared reports on a petition in bankruptcy? western branch of an eastern insurance A. The mere fact of filing a voluntary company. Would it be proper for a petition in bankruptcy by a member CPA to sign a report expressing his would not be regarded as cause for opinion on the financial statements of complaint. In an individual case, how the company based on audit of the ever, the circumstances which culmi home office records by his own firm, and nated in a bankruptcy petition might reliance on the report of the specialists require investigation to determine on the western branch? whether or not they indicated conduct A. In view of the fact that the firm of discreditable to the profession within specialists in insurance investigation is the meaning of the Institute’s by-laws. not composed of certified public ac countants and does not qualify under Q. Are there any restrictions which would any of the exceptions permitted in prevent a certified public accountant, rule No. 6 of the rules of the Institute, who is not a lawyer, from associating an expression of opinion by you as a with a lawyer who is not a certified result, to any material extent, of an public accountant, for the purpose of examination by such specialists would practicing as tax consultants? Specifi be regarded as a violation of rule No. 6 cally, could they (1) practice inde pendently, using the same office; (2) Q. While I am not a CPA, I have been hire each other; (3) form a partnership? associated for the past seven years A. (1) We know of nothing to prevent a with a CPA who is now in the armed lawyer and an accountant practicing forces. There are several accounts independently from using the same which I consider “joint” accounts and office. The letterheads, lettering on I am anxious to preserve that relation office doors, and building directory ship and interest for my former should avoid any indication that they associate until he returns to practice. were associated in their practice. (2) While the letterhead is joint, I wish We know of no reason why, in inde to set forth distinctly that the certifica pendent practice, one should not retain tion and responsibility for the audit the other. However, fee splitting is not are mine. May the certificate state permitted under Institute rule No. 3, “ We have audited ...” and bear nor under the Canons of Ethics of the typed names of myself, as well as my Bar Association. (3) The advisability associate as a CPA, and be signed by of partnership would depend to some me with the title “ Public Accountant extent on the nature of the practice to and Auditor”? be carried on. Institute rule No. 15 A. The use of “ I ” or “ we” by a single does not prohibit a member from enter practitioner in expressing his opinion ing into partnership with a member of is of little importance or significance. another profession but provides that in The report of audit should bear only both capacities he must observe the by your signature as “Public Accountant laws and rules of professional conduct and Auditor.” of the Institute. Midyear Reports 45 Q. Do the rules of professional conduct of use the name “ — and Associates.” Is the Institute prohibit an accountant this term good form for accounting from serving as a director of a corporate firms? client if his stock ownership is not sub A. There is no rule of the Institute which stantial in proportion either to his would prohibit the use of the term “ and own estate or the total stock of the Associates” in your firm name. Some corporation? .... members of the Institute have adopted A. While the rules of professional conduct that designation and no objection do not specifically forbid simultaneous has been raised to its use by certified service as auditor and director so long public accountants. as the auditor holds no substantial fi nancial interest in the corporate client, Q. I am in partnership with two other the committee is unanimous in its be certified public accountants who are lief that it is unwise for an independent not members of the Institute. Could auditor to serve also as a member of you suggest a suitable form or method the board of directors of the corporate whereby I could sign audit reports indi client. The rules of the Securities and cating my membership in the Institute? Exchange Commission do provide that A . Rule No. 1 is the only rule bearing on an auditor will not be considered inde this question. You could sign your pendent if he is an officer or director of reports as an individual, under the firm a corporate client. name, showing your own membership in the American Institute of Accountants. Q. I am entering into partnership with another certified public accountant. We are both associate members of the Q. We are the publishers of legal direc Institute. May we carry on our letter tories. Please advise us whether adver head the statement “Members of the tisements giving the firm name, address, American Institute of Accountants”? phone number, and member of the A. Since you are both associates, the de American Institute of Accountants, scription used should be “ Associates of under the general heading of “ Certified American Institute of Accountants” Public Accountants ” is permitted under (see rule No. 1). the rules of the Institute. A. Rule No. 10 prohibits advertising of any Q. I am employed by an accounting firm kind except for the specific purpose of but I wish to find a new job. Is there announcing changes in address or per any rule of ethics which will prevent sonnel of firm. The fact that a number me from communicating with other of accountants advertise in a single page accounting firms to seek a position? or section of a directory does not alter A. Rule No. 8 restricts the extent to which the basic fact that each individual is a prospective employer may offer em purchasing space in which his name, ployment to an employee of a fellow professional designation and address practitioner but does not restrict the appears, and which constitutes adver extent to which an employee may seek tising under the rules of the Institute. employment elsewhere. It would, how ever, be desirable to notify your present Respectfully submitted, employer of your intention, in order to Committee on Professional Ethics avoid embarrassment to a prospective Joseph J. Klein, Chairman employer who might consider engaging Frederick H. Hurdman you. H om er N. S w e e t Edwin H. Wagner Q. With regard to existing and expected Ross T. W arn er partners in my firm, I would like to May 7, 1944 46 American Institute of Accountants Yearbook
Report of the Committee on Budget and Finance
T o the Council of the changed, but the increased revenue from American I nstitute of Accountants: investments of the Foundation, all of which is contributed to the library, and Gentlemen: The committee on budget and finance presents herewith a report of of the Endowment Fund, which is used for operation of the library, results in a the revenue and expenditures of the Ameri can Institute of Accountants and its decrease of $1,110 in the deficit from library several departments and subsidiary com operations, leaving a balance of $6,565 panies for the period from September 1, to be met from the General Fund. 1943, to March 31, 1944, and, as is cus While there is an increase of $1,000 in tomary at this time, submits a revised the budget for fees receivable from state budget for the fiscal year ending August boards for certified public accountant 31, 1944. Attached hereto are a consolidated examinations, this increase is more than statement of revenues and expenditures, offset by an increase of $2,930 in fees followed by separate statements for the paid for preparation and examination of General Fund, Endowment Fund, Founda papers. The total services and expenses tion, and Publishing Company. Comments of the board of examiners are budgeted at in this report refer to the more important $22,350, which is slightly more than double changes as shown in the consolidated the fees receivable from the state boards. statement. If the board of examiners is credited with The revised budget shows a total excess all the application fees, estimated as $1,700, of income over expenditures of $1,480, to the net costs of operation are nearly be credited to the contingency fund. This $10,000, without including in such costs i san improvement of $1,005 as compared any administrative or clerical services and with the original budget. expenses of the Institute office. The principal increases in revenue are: The principal increases in expenditures dues and application fees because of are: salaries and fees, $7,080; administra increased membership, $2,700; improve tive expenses, $2,160; traveling expenses, ment in the operations of the Publishing $2,000; special reports to members, already Company, $3,735; income from invest mentioned, $3,500; expenses of council ments, $1,265; excess of receipts over and executive committee, $1,050; and expenditures for the last annual meeting general expenses, $900. There is a reduction of the Institute, $3,377; and sales of of $1,000 in the cost of the Yearbook, due Institute bulletins and pamphlets, $2,043. to its preparation in less complete and The improvement in the operations of expensive form. the Publishing Company is due to increased The increases in salaries and fees are: subscriptions and advertising, which is $2,930 for the board of examiners, as partially offset by increased costs, so that already mentioned; $860 for the research the net deficit originally estimated as staff; and $3,290 for additional clerical $4,335 is now reduced to a deficit of $600. service, of which $1,150 is in the Institute The additional revenue from sales of office and the balance of $2,140 in the Institute bulletins and pamphlets paid Publishing Company. for by the general fund represents in part The increase in administrative expenses returns from expenditures for such pub is due to increased rates of postage, taxes on lications incurred in the previous year or telephone calls, and increased costs of years. The revised budget includes an miscellaneous supplies. additional appropriation of $3,500 for Traveling expenses are increased to increased special reports to members. cover extra trips of the president, the Some revenue can undoubtedly be expected secretary, and others, principally the con in the current or succeeding fiscal year templated trip of the president and the from sales of such publications, but no secretary to the west coast. such revenue is included in the present The increase in the budgeted allowance revised budget. for expenses of the council and executive The budget for expenditures in the committee are principally in connection operation of the library is practically un with meetings. The increase in general Midyear Reports 47 expenses is principally for public relations cost will be within the $1,000 appropriated. reprints and two special conferences, one Some sales of these proceedings have on governmental accounting and the other already been made, and it is expected that with the National Association of Railroad there will be a recovery of part of the cost. and Utilities Commissioners. The United States Trust Company has In addition to the regular budget, the continued to advise the committee on the council approved an appropriation of investment program. Since August 31, $5,000 from the contingency fund, to be 1943, the only changes of investments expended only on the authority of the have been the purchase of United States executive committee for extraordinary Treasury bonds—$5,000 for the Benevolent expenses for which no provision had been Fund and $75,000 for the general and made in the budget. The executive com contingency funds. A substantial part of mittee has approved expenditures charged the latter represents temporary invest to this appropriation of $2,622.66 and ment of cash received from dues. Since $1,000. The former is a payment to the March 31, 1944, $10,000 of this total has Massachusetts Society of Certified Public been sold and additional amounts will be Accountants, representing one-half of the sold as cash is needed for current operations. legal fees in connection with a suit brought The committee requests that the several by the state bar association against certain revised budgets submitted herewith be individuals that had prepared income-tax adopted. returns, which case decided the important point that preparation of such returns by Respectfully submitted, accountants and others was not unauthor C. Oliver W ellington, Chairman ized practice of the law. The second G eo rg e D. B a ile y appropriation covers the cost of printing Sam uel J. B road the proceedings of the conference on federal government accounting. The total May 5, 1944 48 American Institute of Accountants Yearbook AMERICAN INSTITUTE OF ACCOUNTANTS AMERICAN INSTITUTE PUBLISHING CO., INC. Revised, Consolidated and Summarized Budget—1943-1944 Actual Original Sept. 1, 1943 Revised Budget to Budget 1943-1944 Mar. 31, 1944 1943-1944 Revenue Estimated: Dues...... $150,000 $151,385 $152,500 Income from The Journal of Accountancy...... 68,000 45,017 76,575 Income from sales of books...... 8,500 5,545 8,500 From investments...... 11,435 7,091 12,700 Fees from state boards...... 10,000 6,174 11,000 Application fees...... 1,500 1,290 1,700 Miscellaneous...... 7,050 10,106 12,470 Total income...... $256,485 $226,608 $275,445 Expenditures To Be Appropriated: Salaries and fees for professional services: Secretary and managing editor...... $ 14,000 $ 7,940 $ 13,690 General Institute administration...... 19,200 11,255 19,400 Editorial, advertising and promotion...... 14,640 8,385 14,640 Research staff...... 17,140 10,216 18,000 Library staff...... 9,300 5,472 9,400 Board of examiners ...... 16,070 10,043 19,000 Accounting, purchasing and office services ...... 31,200 18,753 34,500 $121,550 $ 72,064 $128,630 Honoraria...... $ 5,000 $ 2,916 $ 5,000 American Institute pension fund...... 3,810 — 3,810 Social security taxes...... 3,965 855 3,490 Legal fees and expenses...... 6,300 4,004 6,525 Administrative expenses: Stationery and printing...... $ 2,585 $ 1,912 $ 3,010 Postage and express...... 10,370 6,475 11,620 Telephone and telegraph...... 3,630 2,279 4,050 Rent...... 16,500 9,333 15,750 Electricity...... 2,000 1,166 2,000 Insurance and taxes...... 1,095 272 1,085 Supplies and equipment...... 3,150 2,752 3,975 Building expenses...... 1,320 964 1,320 $ 40,650 $ 25,153 $ 42,810 Traveling expenses: President...... $ 1,000 $ 136 $ 1,500 Council...... 3,000 75 3,000 Secretary...... 1,250 2,350 Public relations...... 554 750 Others...... J 2,000 291 400 $ 6,000 $ 2,306 $ 8,000 Publications: Direct cost of The Journal of Accountancy...... $ 36,120 $ 21,949 $ 39,035 Advertising and promotion...... 2,000 755 1,500 Direct cost of books...... 4,300 2,456 4,300 Yearbook...... 4,500 3,462 3,500 Special reports to members...... 6,500 7,069 10,000 $ 53,420 $ 35,691 $ 58,335 Library books and magazines...... $ 3,300 $ 1,874 $ 3,300 Legislative and newsclipping services...... 625 271 625 Board of examiners’ expenses...... 3,350 2,306 3,350 Annual meeting expenses...... 2,000 1,872 2,100 Council and executive committee expenses...... 2,200 1,250 3,250 General expenses ...... 3,840 3,205 4,740 Total expenditures...... $256,010 $153,767 $273,965 Contingency fund...... 475 1,480 $256,485 $275,445 Midyear Reports 49
Actual Original Sept. 1, 1943 Revised Budget to Budget 1943-1944 Mar. 31, 1944 1943-1944 Gen er a l F und Revenue, Estimated: Dues...... $150,000 $151,385 $152,500 From investments...... 300 518 600 Fees from state boards...... 10,000 6,174 11,000 Application fees...... 1,500 1,290 1,700 Miscellaneous...... 7,000 10,036 12,400 Total income...... $168,800 $169,403 $178,200 Expenditures To Be Appropriated: Salaries and fees for professional services: Secretary...... $ 7,500 $ 4,375 $ 7,500 General Institute administration...... 19,200 11,255 19,400 Research staff...... 17,140 10,216 18,000 Board of examiners...... 16,070 10,043 19,000 Accounting, purchasing and office services...... 16,840 9,707 18,000 $ 76,750 $ 45,596 $ 81,900 Honoraria...... $ 2,500 $ 1,458 $ 2,500 American Institute pension fund...... 2,510 — 2,510 Social security taxes...... 2,160 446 1,900 Legal fees and expenses...... 4,300 2,837 4,525 Administrative expenses: Stationery and printing...... $ 2,125 $ 1,621 $ 2,500 Postage and express...... 4,150 2,941 5,000 Telephone and telegraph...... 2,500 1,561 2,800 Rent...... 6,050 3,422 5,775 Electricity ...... 2,000 1,166 2,000 Insurance and taxes...... 500 142 500 Supplies and equipment...... 2,075 1,748 2,500 Building expenses...... 1,320 964 1,320 $ 20,720 $ 13,565 $ 22,395 Traveling expenses: President...... $ 1,000 $ 136 $ 1,500 Council...... 3,000 75 3,000 Secretary...... | 1,250 2,350 Public Relations...... 554 750 Others...... 2,000 291 400 $ 6,000 $ 2,306 $ 8,000 Publications: Special reports to members...... $ 6,500 $ 7,069 $ 10,000 Yearbook...... 4,500 3,462 3,500 The Journal of Accountancy subscriptions ...... 19,500 18,739 19,500 $ 30,500 $ 29,270 $ 33,000 Legislative and newsclipping services...... $ 625 $ 271 $ 625 Board of examiners’ expenses...... 3,350 2,306 3,350 Annual meeting expenses...... 2,000 1,872 2,100 Council and executive committee expenses...... 2,200 1,250 3,250 General expenses...... 2,700 2,468 3,500 Total expenditures...... $156,315 $103,645 $169,555 Add: Estimated deficit of: Endowment fund...... 7,675 4,001 6,565 American Institute Publishing Co., Inc...... 4,335 3,1501 600 $168,325 $104,496 $176,720 Contingency fund...... 475 1,480 $168,800 $178,200 1 Profit. 5 0 American Institute of Accountants Yearbook Actual Original Sept. 1, 1943 Revised Budget to Budget 1943-1944 Mar. 31, 1944 1943-1944 E ndow m ent F u n d Revenue, Estimated: From investments...... $ 8,500 $ 4,956 $ 9,150 Contribution for library from the Foundation...... 2,425 1,469 2,740 Miscellaneous...... 50 70 70 Total income...... $10,975 $ 6,495 $11,960 Expenditures To Be Appropriated: Salaries of library staff...... $ 9,300 $ 5,472 $ 9,400 Social security taxes...... 400 95 340 Administrative expenses: Stationery and printing...... $ 50 $ 21 $ 50 Postage and express...... *...... 120 69 120 Telephone and telegraph...... 155 98 200 Rent...... 4,400 2,489 4,200 Insurance...... 210 — 200 Supplies and equipment...... 275 137 275 $ 5,210 $ 2,814 $ 5,045 Library books and magazines...... $ 3,300 $ 1,874 $ 3,300 General expenses...... 440 241 440 Total expenditures...... $18,650 $10,496 $18,525 Estimated excess of expenditures to be absorbed by General Fund...... 7,675 4,001 6,565 $10,975 $ 6,495 $11,960
AMERICAN INSTITUTE OF ACCOUNTANTS FOUNDATION Actual Original Sept. 1, 1943 Revised Budget to Budget 1943-1944 Mar. 31, 1944 1943-1944 Revenue, Estimated: From investments...... $2,635 $1,617 $2,950 Total income...... $2,635 $1,167 $2,950 Expenditures To Be Appropriated: Contributions to endowment fund—library...... $2,425 $1,469 $2,740 Stationery and printing...... 10 — 10 General expenses...... 200 148 200 Total expenditures...... $2,635 $1,617 $2,950 Midyear Reports 51
To the Directors of the American Institute Publishing Co., In c .: Gentlemen: The committee on budget and finance of the American Institute of Accountants submits herewith a revised budget for your corporation for the year ending August 31, 1944: AMERICAN INSTITUTE PUBLISHING CO., INC. Actual Original Sept. 1, 1943 Revised Budget to Budget ' 1943-1944 Mar. 31, 1944 1943-1944 Revenue, Estimated: Income from The Journal of Accountancy, subscriptions earned, advertising, sales of single copies...... $ 87,500 $55,822 $ 96,075 Income from sales of books...... 8,500 5,545 8,500 Total income...... $ 96,000 $61,367 $104,575 Expenditures To Be Appropriated: Salaries and fees for professional services: Secretary and managing editor...... $ 6,500 $ 3,565 $ 6,190 Editorial, advertising and circulation...... 14,640 8,385 14,640 Accounting, purchasing and office services...... 14,360 9,046 16,500 $ 35,500 $20,996 $ 37,330 Honoraria...... $ 2,500 $ 1,458 $ 2,500 American Institute pension fund...... 1,300 — 1,300 Social security taxes...... 1,405 314 1,250 Legal fees...... 2,000 1,167 2,000 Administrative expenses: Stationery and printing...... $ 400 $ 270 $ 450 Postage and express...... 6,100 3,465 6,500 Telephone and telegraph...... 975 620 1,050 Rent...... 6,050 3,422 5,775 Insurance and taxes...... 385 130 385 Supplies and equipment...... 800 867 1,200 $ 14,710 $ 8,774 $ 15,360 Publications: Direct cost of The Journal of Accountancy...... $ 36,120 $21,949 $ 39,035 Advertising and promotion...... 2,000 755 1,500 Direct cost of books...... 4,300 2,456 4,300 $ 42,420 $25,160 $ 44,835 General expenses...... $ 500 $ 348 $ 600 Total expenditures...... $100,335 $58,217 $105,175 Excess of expenditures over income to be absorbed by General Fund...... 4,335 3,1501 600 $ 96,000 $61,367 $104,575 1 Profit. Respectfully submitted, C. Oliver W ellington, Chairman George D. Bailey Samuel J. Broad May 5, 1944 52 American Institute of Accountants Yearbook
Report of the Committee on Accounting Procedure
To the Council of the dated January 28, 1944, signed by the A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : chairman and approved by your committee, was addressed to the NARUC committee, Gentlemen: Since its organization in 1939, your committee on accounting pro commenting on its report and making sug cedure has issued sixteen accounting re gestions for its revision. Two members of search bulletins. The response to these your committee also appeared before the bulletins within and without the profession NARUC committee at its conference held has been uniformly favorable and your on February 2, 1944, and expressed their committee has been gratified to observe views on the matter. that its promulgations have become an Your committee’s letter dealt mainly important part of a body of “ generally with two points, the definition of deprecia accepted accounting principles.” tion and retroactive adjustments. That In addition to these bulletins your com part of the letter which dealt with defini mittee has considered a number of matters tions is discussed in the report of the com as to which no pronouncement has been mittee on terminology being submitted at made. As to some of these matters it is this time. It is gratifying to note that the apparent that further discussion and equities of the case in regard to retroactive thought are necessary by the committee adjustments, to which this committee and the profession before bulletins can be drew attention, are receiving recognition. issued. It is also gratifying to observe that there At the instance of the executive com is a growing acceptance of the Institute’s mittee the chairman of your committee, view that depreciation accounting is a the chairman of the committee on auditing process of allocation, not of measurement of procedure and the director of research exhaustion of value. considered proposals for extending the The letter of January 28th was reprinted work of the Institute through stimulating in The Journal of Accountancy and dis and facilitating the study by its members tributed to the membership as a separate of controversial matters, in the field of document. A substantial supply of copies accounting and auditing, largely by an of this communication was made available expansion of the activities of the research for general distribution and rapidly ab department. A joint recommendation has sorbed. Your committee believes that it been made to the executive committee that forms a useful contribution to the discus the activities of the research department in sion of a subject of great public importance. this respect be placed under the immediate direction of a new committee, so that the R enegotiation activities will be independent of the pro After a year’s experience with the re cedure under which research bulletins and negotiation law your committee found it statements on auditing procedure are is advisable to issue a further bulletin on sued. The executive committee now has the the subject as a supplement to Accounting matter under consideration and will doubt Research Bulletin No. 15. When that less in its report make recommendations as bulletin was issued there was little experi to the conduct of this activity. ence available to serve as a guide for the creation of reserves for possible renegotia D epreciation tion refunds, and the committee’s emphasis Since the submission of your committee’s was therefore placed upon disclosure. The report in October, 1943, a report of your developments during the year 1943 were committee on terminology on the subject such that the committee deemed it ad of depreciation was issued as Accounting visable to require a reserve on the basis of Research Bulletin No. 20. In addition, your past experience unless the facts were such committee considered a tentative statement as to make such a reserve impractical or on the subject by the committee on depre misleading. The supplement was issued in ciation of the National Association of Rail December, 1943, as Accounting Research road and Utilities Commissioners, and at Bulletin No. 21 and has been favorably the invitation of that committee a letter, received. Midyear Reports 53
I n c o m e T a x e s by the executive committee, to which refer Since the time of your committee’s last ence was made above. report another subcommittee was ap pointed to deal with the difficult subject of N orthwestern E l ec t r ic C o m p a n y C a s e income taxes in the financial statements. The subcommittee prepared a draft bulle Under authority of the executive com- tin, but your committee has not as yet mittee the Institute filed a brief as amicus reached an agreement thereon. A discussion curiae of the Supreme Court in the above of the various views expressed as to this matter. In its decision the Court took problem may form the subject of a research cognizance of the Institute’s brief, but memorandum which will be issued under upheld the order of the Federal Power Com the plan discussed above. mission. Your committee feels that the decision of the Supreme Court is indicative S u r p l u s of the failure of legal and accounting minds to meet on a matter of common interest. Your committee’s study of surplus has Despite this disagreement, the proceedings continued and there have been several served to emphasize the social significance important developments in the presenta of accounting. It is believed, therefore, that tion and classification of surplus in financial the Institute’s effort was worth while and statements which indicate the desirability that the policy of intervening in cases of a pronouncement on this subject. It involving important accounting matters appears, however, that the subject may should be continued. be one requiring further discussion and thought by the profession and if a bulletin is not issued it may be desirable to make T e r m in a t io n o f W a r C o n t r a c t s the matter the subject of a published re Governmental policies in connection search memorandum. with the termination of war contracts will have a profound effect on our economy, and R e d e m p t io n of P r e f e r r e d S to ck the committee on termination of war con As indicated in prior reports, your com tracts, on which this committee is repre mittee has submitted its views to the sented, has indicated its alertness to the Securities and Exchange Commission on importance of settlements on a sound its Accounting Series Release No. 45, accounting basis. At the same time, your dealing with the treatment of premiums committee on accounting procedure is con paid on the redemption of preferred stock. sidering the advisability of issuing a The matter is now pending before the pronouncement dealing with the effects Commission. The subject matter comes of terminated war contracts on financial within the general area of the surplus prob statements. lem and should be dealt with in connection with the committee’s study of this subject, as set forth above. Your committee be W r it e - o f f o f I n t a n g ib l e s lieves however, that the issuance of During the past year the Securities and Accounting Series Release No. 45 may Exchange Commission has adopted a make it necessary for the committee to policy of encouraging the writing off of issue a research bulletin prior to the com intangibles. The chief accountant has pletion of the surplus study. indicated to your committee that the Commission may eventually issue an ac C o st a n d V a l u e counting release on the subject and he has An article on this subject by the director suggested that your committee will be of research was published in the March, given an opportunity to discuss the matter 1944, issue of The Journal. Since your prior to the issuance of such a release. To committee had formulated no conclusions this end your committee has been engaged in the matter the purpose of the article in a study of the problems involved and as was to stimulate discussion and comment. soon as the research department has com In furtherance of this objective it may be pleted its investigation of practices in this advisable to deal further with this subject respect, your committee will give further under the new procedure, to be worked out consideration to the subject. 5 4 American Institute of Accountants Yearbook
P o st w a r R e s e r v e s and to augment its research staff. Owing The research department cooperated to the absence of Lt. Colonel Brink in with the Division of Tax Research of the military service, Mr. Farrand has taken United States Treasury in studies as to over his duties as assistant to the com the nature and extent of, and basis of mittee on auditing procedure. The research making provision for, postwar reserves by department has a number of studies under corporations. This problem is also an consideration for both committees and the extremely important one and your com growth of accounting problems has been mittee has continued its interest in the such as to indicate the necessity of expan subject since the issuance of Accounting sion. The committee has had this matter Research Bulletin No. 13. under consideration for some time and it is now being considered by the executive A c c o u n t in g R e s e a r c h committee. In carrying out the plans of the executive committee your committee believes that Respectfully submitted, it may be necessary, in the near future, to W alter A. Staub, Chairman extend the Institute’s research activities May 8, 1944
Report of the Committee on Auditing Procedure
To the Council of the sideration to the function of the inde A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : pendent public accountant in contract termination. A subcommittee appointed G e n t l e m e n : for the purpose prepared the draft of a W a r C o n t r a c t T e r m in a t io n statement on this subject which was the The termination of war contracts for the chief matter under consideration at a com convenience of the government continues mittee meeting held in New York City on to be one of the most important matters October 18th. The meeting was attended affecting the accountancy profession as well by all but one member of this committee as the entire national economy. Progress as well as by members of the executive has been made in official circles as to the committee and by all members of the basic policies regarding war contract termi committee on termination of war contracts. nation, but Congress is still wrestling with Following this meeting a statement was important legislation regarding the specific issued in December, 1943, as No. 20 of application of these principles and several Statements on Auditing Procedure, under bills are now pending which are designed to the title “ Termination of Fixed-Price implement the basic policies of termination Supply Contracts—Examination of Con by establishing administrative organi tractors’ Statements of Proposed Settle zations and outlining the termination ments.” This Statement deals with practical procedures. considerations affecting the scope of exami The Institute’s committee on termina nations by independent public accountants tion of war contracts, on which this com of contract termination proposals; the mittee is represented, has been following responsibility they might properly assume closely the administrative and legislative thereunder; reports on such examina developments respecting war contract ter tions; and special problems relating to mination. While naturally interested in subcontractors. these developments, the committee on While the aforementioned statement of auditing procedure is more immediately the committee has, no doubt, helped in concerned with phases of contract termina bringing to the attention of the profession tion settlements in which the independent the importance as well as the peculiarities public accountant may be expected to play of war contract termination and the rela a part. tion of the independent public accountant As indicated in its annual report for 1943, thereto, further education appears to be this committee has given extensive con necessary and the Institute has undertaken Midyear Reports 55 to do its part by bringing to the attention Act of 1933, that the financial statements of its members the necessity far their in and other data covered by the accountant’s forming themselves on the technical aspects report are given “on the authority of such of the problem. Experience to date has firm as experts.” A subcommittee rendered indicated the necessity for this; examina a report on this question, containing alter tions and reports of independent public native forms of declarations respecting the accountants on termination settlement pro- accountant, and the report was pub posals and claims, in some instances, have lished in the May issue of The Journal of not been of a nature or scope sufficient to Accountancy. meet the needs of governmental officials or to provide the information and sub O t h e r A c t iv it ie s stantiation required in reaching a settle Dean Acheson, Assistant Secretary of ment. The rendering of professional services State, acting on behalf of the United Na in respect of terminated war contracts tions Relief and Rehabilitation Administra constitutes a challenge to the accountancy tion requested the Institute to review a profession which must be met by the proposed plan of accounting for use by the adoption of an objective professional atti Administration in accounting for its activi tude and the assumption of a proper but ties. A subcommittee of your committee, clearly defined responsibility. which was appointed for this purpose, re viewed the plan and made recommenda O t h e r P ublications tions thereon which were transmitted by In addition to the statement on termina the chairman of the committee to the tion of war contracts, the committee in Assistant Secretary of State and cordially November issued Statements on Auditing acknowledged. Procedure No. 19, entitled “ Confirmation Numerous inquiries have been directed of Receivables (Positive and Negative to the Institute in recent months as to the Methods),” in which recognition was given independent public accountant’s responsi to the use in appropriate cases of either bility to detect and report on violations by method of confirmation. While this was a client of government wartime regulations. generally understood among accountants, While, as indicated in previous reports, the it was considered desirable that it be stated committee has given considerable attention formally. to the broader question of the independent Reference was made in a previous report accountant’s responsibility in respect of to a study being made by a subcommittee illegal and improper transactions by a as to various aspects of the independent client corporation, the committee feels that accountant’s short form of report. This the more immediate question as to wartime subcommittee rendered a report which was government regulations should be dealt reprinted in the March, 1944, issue of The with first, and a subcommittee has been Journal of Accountancy. The report dis working on the subject. The basic ques cusses various phases of the standard form tions here involved are whether and, if so, of report, including references therein to to what extent, the independent accountant the scope of examination, confirmation of should extend his usual examination of government receivables, testing and sam financial statements in order to assure him pling, comparative statements, and the self that the client has compiled with such opinion paragraph. No change was recom regulations; and what course he should mended at the present time in the standard pursue if violations are discovered. Pending form of report, but the necessity for a the issuance by the committee of a formal reasonable degree of flexibility therein was statement on the subject, the research recognized. assistant has prepared a statement con For some time the committee has given taining information regarding some of the consideration to the matter of the inde basic questions involved, such as the nature pendent accountant’s responsibility on of the regulations, the purposes of the usual securities registrations, particularly such type of examinations, and applicable aduit- responsibility which may result from the ing procedures. This statement was pub declaration frequently made, in registration lished in the March issue of The Journal of statements filed with the Securities and Accountancy, and the committee is con Exchange Commission under the Securities tinuing its consideration of the subject. 5 6 American Institute of Accountants Yearbook
In addition to the formal activities of as the materiality of the item in relation this committee, the research assistant and to the whole, the relative risk of error chairman of the committee have answered (whether of omission, commission, or of inquiries directed to the Institute dealing judgment), and the relationship of cost to with a number of matters of less general the protection or benefit which may be interest, which were not considered of suffi expected to result. One or more of these cient importance to warrant detailed con relationships seems to be involved in all of sideration by the full committee. the statements dealing with auditing which have been issued by the committee. A u d it in g S t a n d a r d s Starting in October, 1939, with “ Exten Respectfully submitted, sions of Auditing Procedure,” the com mittee has now issued twenty bulletins in Samuel J. Broad, Chairman the series of “ Statements on Auditing J. N. A it k e n , J r. Procedure.” These deal primarily with Fred J, Duncombe specific auditing procedures, including case George P. E llis studies, and the independent public ac Ira N. Frisbee countant’s report on his examination. P . W . R. G l o v e r The committee has not made much P a u l G r a d y progress in agreeing upon a statement of Carol F. H all auditing standards, but it is becoming evi Edward A. Kracke dent as the committee pursues its studies Norman J. Lenhart that the determination of what is sound John A. Lindquist auditing procedure in particular circum Frank W ilbur Main stances calls for the exercise of judgment George W agner with respect to certain relationships, such May 8, 1944
Report of the Committee on Bankruptcy
To the Council of the The first is with reference to the income- A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : tax feature. The committee on bankruptcy of the American Institute of Accountants Gentlemen: Your committee on bank ruptcy has been in touch with various has kept in touch with the problems in situations regarding the affairs of bank volved in section 270 of the Bankruptcy ruptcy. While we are of the belief that no Act and the limited remedial effects of the new bankruptcy legislation will be passed amendments to the Internal Revenue Code during the current session, we are cognizant brought about by the Federal Revenue Act that a committee of the American Bar of 1943. This whole matter is under careful Association, headed by John Gerdes, has consideration by special committees, both presented to the Judiciary Committee a of the Association of the Bar of the City of strong recommendation for an amendment New York and the American Bar Associa to section 270 of the Bankruptcy Act. I t is tion. Charles S. Banks of Chicago, who is a doubtful, in our opinion, that this amend member of the Institute’s committee on ment will be put through, due to the bankruptcy and who is also a member of tremendous amount of work that Congress the committee of the American Bar Asso has in war activities. Your committee be ciation, will keep the council informed of lieves, however, that close attention should be maintained by the bankruptcy com developments. As soon as any action is mittee regarding the problems with which taken on this, it will be referred by the it is faced. bankruptcy committee to the tax com We are pleased at this time to present mittee of the American Institute for con particular problems, as follows: sultation and advice. Midyear Reports 57 The following is the text of a report If adopted, the above rule will supplant made by John Gerdes, chairman of the the following: committee on reorganizations of the Ameri can Bar Association, on the above matter. No auctioneer or accountant shall be We feel sure that his statement fully employed by a receiver, trustee, or debtor covers the problem. in possession except upon an order of the The second matter has to do with the court expressly fixing the amount of the assignment of accounts receivable as compensation or the rate or measure security for loans. The committee on bank thereof. The compensation of appraisers ruptcy has kept in touch with this feature. shall be provided for in like manner in the order appointing them. This agitation is backed by the National Bankruptcy Conference, in which Charles S. Banks of Illinois, and the chairman of The committee believes that rule No. 46 your committee, are active conferees. as now adopted should be abrogated, and Agitation has been developed by banks and that the following should be adopted as other agencies to amend section 60-A of rule No. 46: the Bankruptcy Act, particularly to elimi nate the bona fide purchaser test from the Appointment of accountants: No ac section as it affects assignment of accounts. countant for a receiver, trustee, or debtor This agitation has been intensified by the in possession shall be appointed except Supreme Court decision of the Corn upon the order of the court, which shall be Exchange Bank v. Klauder, 318 U.S. granted only upon the verified petition of 434. This decision affects banks, lending the receiver, trustee, or debtor in posses sion, stating the name of the accountant agencies, and also attorneys, but not, to whom he wishes to employ, the reasons for any great extent, accountants. However, his selection, and the professional services when a decision is reached with reference he is to render, the necessity for employing to uniformity in reporting assigned ac an accountant at all, and, to the best of the counts, the council of the Institute will be petitioner’s knowledge, all of the account advised in order that proper accounting ant’s connections with the bankrupt or procedure may be outlined. As soon as this debtor, the creditors or any other party matter develops further, it should be in interest, and their respective account referred to the committee on accounting ants. If satisfied that the accountant represents no interest adverse to the procedure. receiver, the trustee, or the estate in mat The third matter has reference to con ters upon which he is to be engaged, and tinuation of membership in the National that his employment would be to the best Bankruptcy Conference. Your committee interests of the estate, the court may recommends a continuation of this mem authorize his employment, and such em bership. ployment shall be for specific purposes There was presented to the committee unless the court is satisfied that the case is by the committee on bankruptcy procedure one justifying a general retainer. If with of the New York State Society, a proposal out disclosures any accountant acting for a receiver or trustee or debtor in possession for changes in Supreme Court rules No. shall have represented any interest ad 45 and No. 46. The procedure as proposed verse to the receiver, trustee, creditors, or by the New York committee has been stockholders in any matter upon which he approved by the board of directors of the is employed for such receiver, trustee, or New York State Society. We therefore debtor in possession, the court may deny recommend that the following rule be the allowance of any fee to such account ant, or the reimbursement of his expenses, proposed as No. 45: or both, and may also deny any allowance to the receiver, or trustee if it shall appear Auctioneers and appraisers: No auc that he failed to make diligent inquiry into tioneer shall be employed by a receiver, the connections of said accountant. trustee, or debtor in possession except upon an order of the court expressly fixing the amount of the compensation or the rate or As soon as these rules have been ap measure thereof. The compensation of proved by the Institute, it is the intention appraisers shall be provided for in like of the committee on bankruptcy to contact manner in the order appointing them. the New York committee and formulate a 58 American Institute of Accountants Yearbook plan for presentation to the administrative with the Supreme Court administrative office of the Supreme Court. It is felt by office. your committee that by working together, Respectfully submitted, with the cooperation of other organizations, A r t h u r C. U p l e g e r , Chairman a satisfactory arrangement can be made May 5, 1944
To the Members of the Committee on Reorganizations of the Section of Cor poration, Banking and M ercantile Law of the American Bar Association: Since the flurry which occurred at the take into consideration the effect of loss time of the passage of the Federal Revenue carry-over provisions, excess-profits credits, Act of 1943 in February of this year, its and other factors. veto by the President, and its final re It is clear that section 270 of the Bank enactment over such veto, I have been ruptcy Act should be amended so as to making inquiries as to the situation regard eliminate the inconsistency between its ing possible further legislation on the provisions and the new provisions of sec subject of taxes affecting reorganizations. tion 113(a) (22) of the Internal Revenue My information is that proposals at this Code. I t seems to me, however, that it time to modify the Revenue Act would would be well to delay any bill on this sub receive little attention. There is a greater ject until agreement is reached on possible probability of action if the matter is other amendments to meet the foregoing treated through the medium of proposed problems. amendments to the Bankruptcy Act. An efficient and effective subcommittee In section 121 of the Revenue Act of of the committee on bankruptcy and cor 1943, certain questions were definitely porate reorganizations (of which I am settled: (1) taxable gain or loss is not chairman) of the Association of the Bar of recognized in connection with a transfer of the City of New York (of which sub property in a reorganization through a re committee Edmund Burke, Jr., former ceivership, foreclosure, or similar proceed member of the Securities and Exchange ing, or in a proceeding under section 77B Commission, is chairman) is working on the or Chapter X (new section 112(b) (10) matter, in conjunction with tax experts. added to Revenue Code); (2) where a It seems to me that our committee may different corporation is used to acquire the very well await the recommendations and assets of the debtor, the corporation ac proposals of the foregoing committee be quiring the assets retains the old tax basis fore taking action. Distance and travel (new section 113(a) (22) added to Revenue difficulties handicap us in consulting to Code); and (3) the exchange of new securi gether and in doing the constructive work ties for the old securities; in the consum necessary to build up concrete proposals. mation of a reorganization, does not result We are best qualified to pass upon the in a taxable gain or loss for the person merits of proposals which have been making the exchange (new section 112 (1) formulated. added to Revenue Code). Unless the members of our committee The law is still in an unsatisfactory state believe this course should not be pursued, I where the debtor retains its assets under shall assume that they agree that we should the reorganization. Furthermore, the in await the formulation of definite proposals. equity of saddling the reorganized cor Your views on the foregoing matters, in poration with greatly increased income cluding suggested legislation, will be taxes and surtaxes—because the dividends appreciated. on stock substituted in the reorganization for indebtedness cannot be deducted from Sincerely yours, gross income before the tax is calculated— has not been remedied. The measures to be J. G e r d e s adopted to meet these, two problems must April 20, 1944 Midyear Reports 5 9
Report of the Committee on Cooperation with Bar Association
To the Council of t h e Mr. Maxwell on behalf of the lawyers A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : suggested that something should be done Gentlemen: The committee on coopera to bring the two professions together in tion with Bar Association had no active the interest of protecting and serving the program during the last six months b u t general public and he was assured that the desires to report on certain matters which accountants would cooperate in any such are of importance to the profession. move. In support of this it was pointed out The case of Lowell Bar Association v. that the Institute for a great many years Birdie T. Loeb et al. was appealed and a has had acommittee on coöperation with brief filed on behalf of the Massachusetts bar associations and that the accountants Society as amicus curiae. The decision of have on numerous occasions suggested to the lower court had enjoined the defendants the American Bar Association that it ap from, among other things, making out point a similar committee. Mr. Maxwell income-tax returns, whereas under the was of the opinion that rather than follow subsequent decision of the Supreme Court this suggestion, which he admitted had its the making out of income-tax returns was merits, it would be preferable to appoint not the unauthorized practice of the law. what he termed a “ conference group,” con The excellent brief filed on behalf of the sisting of five members from each of the Massachusetts Society and the decision two professions, who would be prepared to of the Supreme Court were published in full discuss any matters of importance coming in The Journal of Accountancy. between the two professions and would be The Georgia case, to which reference authorized to make joint statements on was made in our last report, is still pending. behalf of both professions. The accountants On January 5, 1944, David F. Maxwell, agreed to follow this suggestion, and after chairman of the American Bar Association’s considerable discussion a resolution was standing committee on unauthorized prac drawn up and unanimously approved by all tice of the law for 1943-1944, addressed a present. That resolution read as follows: letter to the president of the American “ That a national conference group be Institute of Accountants asking the Insti organized consisting of five members of the tute to send a representative to the next American Institute of Accountants and five meeting of the Bar Association’s committee members of the American Bar Association, in St. Louis early in February for the to be appointed by the presidents of the purpose of considering ways and means respective organizations.” of eliminating the unlawful activities of and it was agreed to add the following state people who have gone into the business of ment by way of explanation: preparing income-tax returns on a whole sale scale. As a result of that request, the “ The American Institute of Accountants chairman of this committee, together with was originally organized in 1887. The Messrs. Wagner and Barnes, members of American Bar Association was organized the Institute’s council, and Messrs. Boye in 1878. “ Both organizations were created by and Lang, representing the Missouri State their respective leaders to aid their mem Board of Accountancy, attended a meeting bers and to better serve the public. with members of the unauthorized practice “ In the years that followed both organi of the law committee of the American Bar zations have sought to raise the standards Association, consisting of D. F. Maxwell, of practice, have adopted and enforced E. M. Otterbourg, W. W. Schroeder, and codes of ethics, and have insisted on in F. H. Spellman, in St. Louis on February 5, creasingly higher qualifications of charac 1944. At that meeting the representatives ter, knowledge, study and education. This of the Institute furnished the lawyers work which is highly in the public interest is now being carried on. with information as to the organization of “In modern times more and more, the the accounting profession, the ethics of the average citizen is required from time to Institute, and the extent to which the time to seek the professional services of profession is able to exercise control over accountants or lawyers, or both. The public its members. is entitled to receive the most competent 6 0 American Institute of Accountants Yearbook advice and to be served by men of the chairman of the section on taxation; highest character, aware of their public Thomas B. K. Ringe of Philadelphia, Pa., responsibility. Whatever can be done by representative of the administrative law both national organizations to improve committee; Edwin M. Otterbourg of New service by their respective members will York, N. Y., a member of the unauthorized be of great and lasting benefit to the public. practice of law committee; and David F. “ Misunderstandings of the proper re Maxwell of Philadelphia, Pa., chairman of spective functions of accountants and the unauthorized practice of law committee. lawyers in this service should be avoided. “ For the American Institute of Ac Each has his proper sphere and responsible countants—William Charles of St. Louis, activity. Closer cooperation between the chairman of the committee on cooperation two professions is in the public interest. with Bar Association of the American “ A national conference group composed Institute; Frederick H. Hurdman of New of representatives of both professions can York, a past president of the Institute, at do much to further the development of present a member of its committee on pro professional standards, dispose of con fessional ethics, and a member also of the troversies and misunderstandings and ex committee on practice of the Treasury pand the usefulness to the public of both Department; George P. Ellis of Chicago, accountants and lawyers.” general chairman of the committee on The action of the accountants at this federal taxation of the American Institute; Edward A. Kracke of New York, a mem meeting was approved by the executive ber of its executive committee, and Homer committee of the American Institute of N. Sweet of Boston, chairman of the Insti Accountants, and the president appointed tute committee on cooperation with the F. H. Hurdman, George P. Ellis, Ed Securities and Exchange Commission. ward A. Kracke, Homer N. Sweet, and “One of the first subjects to be con William Charles to serve as the Institute’s sidered by the national conference will be representatives. the simplification of the tax structure. On March 29, 1944, the secretary of the Other problems which may be considered Institute had a meeting in Philadelphia by the conference include tax legislation and administration; procedure of adminis with David F. Maxwell to discuss a joint trative agencies of the government; expres release announcing the formation of the sion of accounting principles in statutes; conference group of lawyers and account judicial decisions; legal and accounting ants and to arrange a proposed agenda for aspects of corporate financial practice and the first meeting of the group to be held in reporting; and other matters of mutual Philadelphia on May 6, 1944. The joint interest. statement, released on April 21st was as “In their joint statement issued today follows: Messrs. Henderson and Stempf said: “ ‘In modern times, more and more, the “ The American Bar Association and the average citizen is required to seek the pro American Institute of Accountants today fessional services of accountants and announced the joint establishment of a lawyers or both. He is entitled to receive permanent National Conference of Lawyers the most competent advice, and to be and Certified Public Accountants to con served by men of the highest character, sider mutual problems affecting the inter aware of their public responsibility. Harm ests of business and the general public. and injury are suffered by the public “ Announcement of the establishment of whenever such services are rendered by the Conference was made jointly by unqualified, incompetent or unprincipled Joseph W. Henderson of Philadelphia, persons. president of the American Bar Association, “ ‘The American Bar Association was and Victor H. Stempf of New York, presi organized in 1878, and the American Insti dent of the American Institute of Account tute of Accountants was founded in 1887. ants. The group, which comprises five Both organizations were created by their representatives of each association, will respective founders to aid their members meet in Philadelphia on May 6th. Mem and to serve the public better. Both have bers of the new conference as announced continually raised their standards of prac by the two presidents in their joint state tice, have adopted and enforced codes of ment are: ethics and have insisted on higher qualifica “ For the American Bar Association— tions of character, knowledge, study and James R. Morford of Wilmington, Del., a education among their members. One of member of the board of governors; Percy the objectives of this national conference W. Phillips of Washington, D. C., vice will be to coordinate the common efforts Midyear Reports 61 of these two great associations to improve spective fields by persons not qualified and expand the usefulness to the public of to serve the public. both.’” “F u r t h e r r e so l v e d Your committee is of the opinion that “That the co-chairman be authorized to this development in the relations between appoint subcommittees to study the above problems and to report back the two professions is of considerable im recommendations.” portance. As was pointed out to the lawyers at the meeting in St. Louis on February 9th Several subcommittees were appointed to the Institute for many years has had a cover the matters referred to in the pre committee on cooperation with bar associa ceding resolution. tions. The suggestions put forward at the The next meeting of the conference is to St. Louis meeting were the first definite be held in Chicago, Illinois, in the week of indications on the part of the representa September 10, 1944. tives of the American Bar Association of a It is perhaps too early to predict the full desire to cooperate with our profession. benefits which may be derived by our The first meeting of the National Con profession from this new spirit of coopera ference of Lawyers and Certified Public tion on the part of the American Bar Asso Accountants was held at the Ritz Carlton ciation, but it may be in order to discuss Hotel in Philadelphia on May 6, 1944, at at this time some aspects of the situation. which all of the representatives from the The extent to which such cooperation Institute were present, together with between the two professions may be effec John L. Carey, secretary of the American tive must depend in the first instance on Institute of Accountants. the extent to which both organizations can Mr. Maxwell and Mr. Charles were exercise control over their members. On designated as co-chairmen of the confer our side, we can exercise control over mem ence, and John L. Carey was designated bers through the Institute, the state boards, secretary of the Conference. All communi and the state societies, but the weakness cations in connection with the Conference in our position lies in our inability to are to be sent to Mr. Carey at the office of exercise control over a relatively large the American Institute of Accountants. number of people who practice accounting It was agreed that a statement of the but who do not come under the control of policy and scope of activity of the Con these governing bodies. State legislation ference group should be prepared and sent which prohibits the practice of accounting to local bar associations and state societies except by those duly registered by the state of certified public accountants, together board appears to be the only method with an announcement of the formation and developed so far of achieving this result. first meeting of the conference. It may be that with the active support of The following resolution was adopted the state bar associations such legislation unanimously: could be more easily accomplished. This matter should receive the careful considera “ R e s o l v e d That tion of the Institute. “The objectives of this National Con It is inevitable that the discussions of this ference are the following: conference group will deal with that part 1. To further the development of profes of the accountant’s work which may be sional standards in both professions. described as tax work. So far as can be 2. To encourage cooperation between the gathered at this time, the lawyers are more two professions for the benefit of each concerned with what they call the “ fly- and of the public. by-night ” people all over the country who 3. To consider misunderstandings, in reaped a rich harvest early this year making volving fundamental issues, between up tax returns. Simplification of the tax law the two professions and recommend and tax returns and further development means for disposing of them. of the withholding tax feature, all of which 4. To devise ways and methods of ex panding the usefulness to the public the Institute has actively urged ahead of of both. the Bar Association, will undoubtedly put 5. To seek means of protecting the a large number of these fly-by-nights out public against practice in these re of business, but will not put them all out 6 2 American Institute of Accountants Yearbook of business. If the two professions cannot In working out the proposed plan con furnish the service required by taxpayers, sideration will be given to setting up some solution other than prosecution of similar conference groups in the separate the fly-by-nights must be found. Of course, states. any attempt by the lawyers to restrict the It would appear that the representatives tax work done by members of our pro of the Institute on this National Conference fession will be opposed. group will take over the functions of the There are a number of other matters in Institute’s committee on cooperation with which the two professions can and should Bar Association, but it is recommended work together for the good of the business that no action of this kind be taken at this community. State income-tax laws and time. state corporation laws, with their duplica tion of effort and conflicting provisions, Respectfully submitted, would in themselves be fruitful fields for research and joint action by the two W illiam Charles, Chairman professions. May 6, 1944
Report of the Committee on Cooperation with Bureau of Economic Research
To the Council of the suggestions and criticisms on a preliminary A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : draft of the report. These suggestions and Gentlemen: During the period since criticisms were based on a detailed review the meeting of the council in the fall of of the draft of report which had been made 1943, this committee has, upon request, by the members of the committee. met with the director of the financial research program of the National Bureau, Respectfully submitted, of Economic Research and with the author C h a r l e s H. T o w n s , Chairman of a report on a study of “ Corporate Cash P e r c i v a l F. B r u n d a g e Balances in Peace and War, 1914-1942,” at M a u r ic e E. P e l o u b e t the request of the National Bureau of Economic Research, and offered certain May 2, 1944
Report of the Committee on Cooperation with Credit Men
To the Council of the Morris Associates and with local credit A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : associations within the affected states, sug gesting the desirability of communicating Gentlemen: Early in the year 1942 your committees on cooperation with bankers with the state society to explore areas of and cooperation with credit men collabo mutual interest. rated in the preparation of a long-range Under date of April 26th a letter was program for the extension of state society addressed to the presidents of state activities with commercial and bank credit societies suggesting the plan, together men throughout the country. This program with a copy of the proposed letter to the was submitted to each of the state societies Robert Morris Associates and trade associa (see pages 110-112 of the Institute’s 1942 tions. The plan will be best understood yearbook). by a perusal of these two documents, Mindful of the important factor of copies of which are appended and made a “ timing,” your committees recently inau part of this brief interim report. gurated a supplementary plan of procedure, whereby, with the permission of the Respectfully submitted, individual state societies, the Institute office would undertake to communicate Simon Loeb, Chairman direct with local chapters of the Robert May 3, 1944 Midyear Reports 6 3
A PROGRAM OF ACTIVITY FOR STATE SOCIETY COMMITTEES
I. B a c k g r o u n d stitute, have frequently been reproduced in Credit and Financial Management, the Bank credit departments and commer official magazine of the National Associa cial credit men are among the principal tion of Credit Men. It is believed that the “consumers” of certified public account cooperation of the National Association of ants’ reports. Credit Men and Robert Morris Associates Credit men are not through the country, can readily be obtained in furtherance of perhaps, as directly interested in account any program designed to bring the state ants’ reports as bank-loaning officers, for credit associations, and chapters of the example, because commercial credit men Robert Morris Associates, which are closely (with certain exceptions) seem to rely to a affiliated with the national bodies, into greater degree on ledger experience as closer contact with the state societies of reflected by the several rating agencies certified public accountants. more than upon financial statements. Notable exceptions to this generalization II. P u r p o s e are such groups as the uptown credit group of the textile industry in New York. The principal object of cooperation with Here the peculiarities of the industry are bank credit men and commercial credit such—for example, a lack of centralization men should be to encourage them to make in large units, a highly seasonal factor, the most advantageous use of financial heavy risks due to rapid style changes— statements audited by certified public that credit grantors cannot rely solely on accountants, while at the same time avoid experience but must have current certified ing “ overselling,” which might lead them financial statements. to expect more than can be obtained from As a result, the New York State Society this source, with the subsequent reaction has been able to develop close cooperative of disappointment and hostility toward relations with credit groups in New York the accounting profession. City, and, through joint meetings, joint Information on the following basic sub projects conducted by cooperating com jects should be imparted: mittees, exchange of speakers at meetings, and exchange of articles for publication in 1. The nature of accounting—emphasis on importance of estimate, judgment, and the magazines of the respective groups, opinion in financial statements and, has had the opportunity to impart to therefore, the importance of the skill and those groups much information about the experience of the accountant who audits nature of financial statements, auditing them. procedure, and auditors’ reports. This 2. The nature of auditing—emphasis on experience may be of some benefit to other testing and sampling technique and con state societies which have not yet been sequent importance of judgment in active in this field. determining the extent of testing and In other states commercial credit men sampling in view of internal control, and in manufacturing and commercial business the importance of the skill and experi ence of the auditor. might be brought to rely more upon finan 3. The meaning of the auditor’s report cial statements, in addition to ledger (certificate)—his responsibilities and experience, through closer contact with the limitations. accounting profession. 4. Rules of ethics of accountants and credit The American Institute of Accountants men as they relate to each other, and the has long maintained close cooperative rela responsibilities of both groups to client tions with the national headquarters of the and the public. National Association of Credit Men and the Robert Morris Associates. Represen III. M e t h o d tatives of those bodies have appeared on The state society committee on coopera programs of the Institute, and members of tion with bankers or credit men should the Institute have appeared on programs request the local association of credit men of the Associations. Articles by Institute to appoint a cooperating committee, if members, and publications of the In- none already exists. The Institute, when 6 4 American Institute of Accountants Yearbook the state society is ready to initiate this on misunderstanding, and the problem cooperation, will urge the National Asso here is to explain to the complainant ciation of Credit Men or the Robert Morris the purpose, nature, and limitations of Associates to use its influence to persuade accounting and auditing. On the other the local associations to do so. Through hand, some complaints will be found to have been caused by substandard work the cooperating committees, the following on the part of individual CPA’s. In activities can be undertaken: such cases, it is essential to the main (a) Joint meetings of the state society with tenance of confidence in the profession the local chapter of the Robert Morris on the part of bankers and credit men Associates or the local credit associa that the state society show willingness tion, at which there may be addresses to investigate such complaints, to by members of both groups, possibly endeavor to prevent repetition of sub followed by questions and answers. In standard work by the member con such cases it is desirable that the ques cerned, and in extreme cases to take tions be submitted in advance so that disciplinary action against members answers may be submitted with care. guilty of serious malpractice. (b) Addresses by certified public ac This does not mean that in dealing with countants at meetings of credit men, bankers and credit groups certiefid public and vice versa, in order that the point of view of each group may be known accountants need adopt an apologetic to the other. attitude. Many complaints by bankers and (c) Conferences between the cooperating credit men against individual accountants committees on special problems, fol have been found to be unjustified, and a lowed by reports by each committee state society should be just as zealous to to its full membership in regard to the defend its members against ill-founded matters discussed. criticism as to prosecute wrongdoers. Some (d) Preparation of articles by CPA’s for credit men and bankers may try to shift publication in the local credit men’s to the accountant responsibilities which bulletin or commercial bankers’ maga zine if one exists, and vice versa. are not rightfully his; and this should be (e) Circulation of appropriate written resisted. material among local bankers and In any event, it should be to the benefit credit men, for example, American of all concerned to have facilities for free Institute of Accountants public-infor- and frank discussion of general or specific mation pamphlets, “Accounting and problems which otherwise might give rise Your Pocketbook,” “ Financial State to serious misunderstanding between credit ments—What They Mean”; reprints men and certified public accountants. of magazine articles or speeches of It is important to certified public ac particular interest to bankers and credit men; copies of statements on countants that bankers cooperate in auditing procedure issued by the responding to requests for confirmation American Institute of Accountants, of clients’ cash balances, notes outstanding, and similar material (any speech by a maturities in custody, etc. To this end, local certified public accountant of general use of the standard bank con particular interest to local bankers and firmation form approved by the American credit men could well be mimeographed Institute of Accountants and the National and sent to the bankers and credit Association of Bank Auditors and Comp men of the community by the state trollers should be encouraged. Auditors of society). (f) Complaints by bankers and credit men the banks concerned, rather than the with regard to financial statements or credit departments in this case, should be auditors’ reports are almost certain to informed of the existence of the standard develop out of the joint discussions. form and the importance of coöperating in Some of these complaints will be based responding to confirmation requests. Midyear Reports 65
Report of the Committee on Cooperation with Securities and Exchange Commission
To the Council of the munities of the country are rendering A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : important constructive services to large G e n t le m e n : The subject we have to re and small businesses. An accountant port upon at this midyear meeting is again through such work may gain a firsthand the independent status of the public knowledge of the organization, operations, accountant. and policies of a business and enjoy a close The report of last October by the com acquaintanceship with its executives. He mittee on cooperation with SEC discussed should not because of the scope of his the amendment that the SEC had made in services alone be presumed to be not the independence rule in May, 1943. The. properly qualified to serve as independent substance of the amended rule in Regula auditor for the same company. tion S-X is that an accountant certifying The view of the executive committee of the financial statements of a company the Institute and of this committee is that shall not have any substantial interest, types of relationship which per se preclude direct or indirect, in the company, shall independence should be limited to the con not be connected with the company in an nections specifically mentioned in the official capacity or as employee, and shall present rule in Regulations S-X. No other not act for the company as promoter or relationship should be conclusive of the underwriter; and the rule gives notice accountant’s bias and absence of inde that the SEC may take into consideration pendence without direct evidence of his all the relationships between the account actual lack of impartiality. This view has ant and the company in determining been stressed to the chief accountant of the whether he is in fact independent. SEC. In January, 1944, the SEC issued The development and acceptance of Accounting Series Release No. 47, in which high standards of professional practice are described briefly twenty examples have been and are a primary aim of the where the accountant had been considered American Institute of Accountants. There by the SEC not to be independent. The can be no dissent from the general proposi SEC indicated in this release its conviction tion that auditors should be independent that certain types of relationships between in relation to their clients. Auditors a company and its certifying accountant should not enter into any of the relation would be so apt to bias the accountant’s ships specifically mentioned in the SEC judgment on accounting and auditing rule. In other situations which may arise matters that the mere existence of such a leading to a fair and judicial investigation relationship would preclude a finding he of the auditor’s independence, weight was independent in fact with respect to should be given to the auditor’s character the particular company. In one of the and professional attitude. These qualities examples given in Release No. 47, for mainly determine whether he is in fact instance, the ruling was that an account independent and performs the auditing ing firm was not independent with respect with due objectivity and impartiality. to a certain company, apparently on the sole ground that one of the partners had Respectfully submitted, living with him a son who was assistant H o m e r N. S w e e t , Chairman treasurer and chief accountant of the Samuel J. Broad company under supervision of the treasurer. H e n r y A. H o r n e It is not yet clear how far the SEC might Frederick H. Hurdman apply the presumptive theory and dis Lewis L illy qualify an accountant for lack of inde Robert W. W illiams pendence solely on presumption without John H. Zebley, Jr. regard for other evidence. Public accountants in different com- May 8, 1944 6 6 American Institute of Accountants Yearbook
Report of the Committee on Coöperatives To the Council or the from federal corporation income and capi A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : tal-stock taxes and the right to borrow money from the banks for cooperatives. Gentlemen: The committee on coop eratives is a relative newcomer among the Too often, the auditors have been inclined standing committees of the Institute. For to follow a program of audit which would this reason, its purposes and activities be entirely satisfactory for the audit of a may not have proved of general interest purely commercial firm, and have over to the members. However, the extremely looked these special. requirements. This rapid extension of the cooperative form of lack of attention has failed to uncover business endeavor makes it prudent and contingent liabilities and in some instances advisable to extend to the membership a actual liabilities with respect to back greater knowledge of the requirements in taxes, which has had an adverse reflection this specialized field. The large number of on our profession, almost to the point of cooperative organizations, especially in indications of negligence. the agricultural field, and the rapid growth The purpose of the activities of this of those organizations, coupled with the committee may be stated as follows: fact that the cooperative statutes of many 1. To make recommendations with respect of the states, as well as an almost uniform to required audit procedures, subject, of by-law provision, require annual audits, course, to the confirmation and approval from reputable public accountants, renders of the appropriate standing committee this a field of increasing importance to the within the Institute, devoted to matters profession, and one which should be gener of audit procedures. ally embraced by it. 2. To suggest to the profession appropriate Since these agricultural cooperatives are terminology and forms of statements, created under separate statutes of the especially adapted to the cooperative form of organization, in order properly several states, the audit thereof presents to reflect the particular cooperative special problems for the consideration of character of a business enterprise; and the auditor. The record of the profession to state its operations in such a manner generally in this field, has not been too as to conform to and reflect the non good. Too often, there has been failure profit principle. It is our intent to do this on the part of the auditor to observe in cooperation with the Institute’s compliance with the special requirements standing committee on terminology. with respect to both the organization and Respectfully submitted, operation of the enterprise. These special requirements particularly apply to con W a l t e r L. B r a d l e y , Chairman ditions precedent to the right of exemption May 6, 1944
Report of the Committee on Coordination of State and National Organizations
To the Council of the tute’s annual meeting, and was the subject A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : of some discussion there. Gentlemen: The committee on coordi Following the annual meeting your com nation of state and national organizations mittee addressed a letter to all members of submitted a report to the council at the council of the Institute, and all presidents 1943 annual meeting, indicating what it of state societies, asking for responses to believed to be the nature of the problem the following questions: with which it was confronted, and suggest ing possible means of approaching a solu 1. What, if any, weaknesses do you believe tion. The report was also presented at a exist in the professional accounting meeting of the Advisory Council of State societies in the United States at the Society Presidents held during the Insti present time? Midyear Reports 67 2. What specific thoughts have occurred to committee submits an outline of a proposed you as to how the professional account plan of coordination providing for the ing societies might be strengthened? establishment of a state society service 3. Particularly, what steps in your opinion department, and indicating its functions. would facilitate closer collaboration between the state societies and the If council approves the plan, your com Institute? mittee suggests that it be placed on the agenda for consideration of the Advisory Only sixteen replies were received from Council of State Society Presidents at its 112 individuals to whom the inquiry was meeting in. October, 1944, and that the addressed. However, the replies provided report of the Advisory Council, following a sufficient cross section of opinion to be discussion of this matter, be submitted to of considerable value to the committee. the council of the Institute for final action. Most of the suggestions contained in these replies would, in the opinion of the Respectfully submitted, committee, be met through the creation of a department in the staff of the Institute G e o r g e S. O liv e , Chairman which would devote full time to distribu Parry Barnes tion of information to state society officers Julian A. Hawk and committees, and to coordination of Frederick H. Hurdman state society and Institute activities. J. Arthur Marvin As a part of this report, therefore, your April 1, 1944
MEMORANDUM OUTLINING PLAN OF COORDINATION BETWEEN STATE SOCIETIES OF CERTIFIED PUBLIC ACCOUNTANTS AND AMERICAN INSTITUTE OF ACCOUNTANTS
Ob je c t iv e s ment of these objectives could be greatly 1. To bring full information about pro accelerated by employment of a full-time fessional affairs of both local and national staff to operate as a department of the interest to every member of every state Institute, whose objective would be to society, as well as to every member of the serve state societies. Institute, so far as possible. As a part of the Institute’s staff, the 2. To assist state societies in improving state society service department would their operating procedures where neces operate under the direction of the secretary sary, and to stimulate additional activity of the Institute, and its work would there by state societies, so as to increase their fore be fully coordinated with that of the value to their members and their influence general administration department, the in their several communities. editorial department, the research depart 3. To coordinate action of state and ment, the public relations department, the national organizations on specific projects library, and the various committees of the so as to bring the full influence of the whole Institute. profession to bear in the solution of prob The staff would consist of the following: lems involving legislation (viz., proposal Head of the State Society Service for non-partisan tax commission), relations Department—a man or woman re with other bodies (viz., American Bar sponsible for carrying out all the Association in re unauthorized practice of specific procedures listed below, and law), or general public relations (viz., reac supervising the entire work of the tion of public to McKesson & Robbins case). department. A secretary to assist the head and P r o po sa l handle correspondence. A typist and clerk to reproduce infor These objectives are being achieved to a mation such as circular letters, considerable extent under the present pro memoranda, and reports. gram. However, the staff of the Institute A file clerk to maintain card records believes that progress toward full attain of names and addresses and cor 6 8 American Institute of Accountants Yearbook
respondence files, and files of reports on Cooperation with Credit Grantors.”) and memoranda issued to state These programs of activity would be sub societies. mitted for criticism to state societies before It is estimated that the salaries of the final adoption. The state society service staff of this department might aggregate department would then place in the hands from $7,000 to $8,000 at the beginning, and of each committee member of each state that printing, postage, mimeographing, society a copy of the program as adopted telephone, telegraph, and travel expense and revised for the current year. might aggregate another $3,000 or $4,000 3. At periodic intervals the state society per annum. service department would request the chair A beginning budget of $12,000 appears men of all state society committees for adequate to launch the experiment, though reports of progress. The information re it is probable that the amount would in ceived in these reports would be digested crease if the department proved successful and consolidated, and an over-all report in view of added demands that would be would then be returned to the appropriate made upon it. state society committees showing what other states had accomplished in compari S p e c if ic P r o c e d u r e s son with their own accomplishments, and Mailing lists in comparison with the uniform program agreed upon (this might serve as a stimulus The department would maintain mailing to committee activity). lists (probably on Addressograph stencils) of the names and addresses of the following groups, segregated for special use: Distribution of information (a) All members of state societies not mem 1. Weekly or fortnightly the state society bers of the Institute. service department would issue a mimeo (b) All members of state societies also graphed outline containing very brief re members of the Institute. ports of everything that was being done by (c) Presidents of all state societies and the Institute’s officers, committees or staff, their chapters. and every subject of importance under con (d) Other officers and directors of all state sideration by the Institute. This memo societies and their chapters. randum would be sent to all officers, (e) Members of all committees of state societies. directors and committee members of the (f) Editors of state society bulletins. state societies, and editors of state society bulletins, each of whom would note the Coordination of committee activities captions indicating subject matter related 1. The Institute would request each to his own state society work. state society to appoint as a minimum the 2. At periodic intervals (probably following committees: monthly) all state society bulletins would be reviewed and a digest of the information Accounting Cooperation with they contained would also be sent in Auditing Bar Association dittoed or mimeographed form to all state Taxes By-laws Ethics Budget society officers, directors, editors, and CPA law Audit committeemen. Education Nominations 3. Copies of Institute research bulletins, Public information Membership statements on auditing procedure, tax Cooperation with Meetings bulletins, committee reports, and relevant credit grantors Bulletins items in The Journal of Accountancy and Other “standard” committees might be The Certified Public Accountant, govern recommended from time to time. ment documents reprinted for distribution 2. At the earliest possible date the state to Institute members, etc., would be sent society service department, with the aid of to the appropriate committee of each state the corresponding Institute committee, society. would provide each state society with a detailed outline of activity for each com Service to state societies mittee (See exhibit A attached, “ Program 1 . State society committees would be of Activity for State Society Committee encouraged to request the advice of Insti Midyear Reports 69 tute committees on specific problems, which societies as often as convenient to discuss would be procured by the state society specific problems and to improve the service department. cooperative procedure. 2. A speakers’ bureau would be main tained through which the state society A d v is o r y C o u n c il service department would provide speakers The Advisory Council would meet as at for state society meetings. present at the time of the annual meeting 3. Regional conferences would be organ of the institute. It would receive a report ized by groups of state societies with the from the state society service department full cooperation of the Institute’s state relating accomplishments of the year, which society service department, as well as the would probably afford the basis for ex public relations department, and other tended discussion of all aspects of the work members of the staff. of the professional societies. 4. All the facilities of the Institute would The meetings might be expanded to in be available in planning the subject matter clude secretaries and committee chairmen to be covered at state society and regional of the state societies, and to cover more meetings. than one day, or it might be broken up into 5. The Institute’s librarians could assist sections for part of the time at which the greatly in the establishment of local ac chairmen of like committees would meet counting libraries. together, secretaries would meet together, 6. State societies would be encouraged and presidents would meet together. to provide means whereby younger prac Presidents of state societies, as before, titioners might secure the benefit of the would be invited to attend the spring knowledge and experience of other mem meeting of council of the Institute. bers of the profession. Resolutions adopted by the council re 7. The head of the state society service questing the assistance of the state societies department might, on invitation, attend would be transmitted to the Advisory meetings of boards of directors of state Council, and vice versa.
Report of the Committee on Federal Taxation
To the Council of the Howell. The general chairman was desig A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : nated as over-all coordinator and expediter of the two subcommittee programs. Gentlemen: The work of your com mittee on federal taxation has been divided The major emphasis of the committee’s into two subcommittees. The general policy work during the past six months has been and operating procedure, and the prospec placed on furthering the Institute’s resolu tive programs for these subcommittees tion adopted at the annual meeting were discussed with our president at a October 19, 1943, urging Congress to special organization meeting on November establish a non-partisan tax commission to 5, 1943, in New York City, attended by simplify the federal tax system. The com the two subcommittee chairmen and the bined efforts of the committee chairmen, general chairman. A twofold program on the secretary of the Institute, and the short-range and long-range tax problems staff, have resulted in the introduction of was decided. The immediate administra several bills which are in accordance with tive and legislative tax issues requiring the purposes of the Institute’s resolution. prompt attention and action were delegated This project has brought indirect benefit to the subcommittee on current legislation to the profession through the closer rela under the chairmanship of Maurice tionship which has been established be Austin. Research studies and recommenda tween the profession and the community tions of long-range projects of tax reform, through our efforts in behalf of this public- simplification and codification were as spirited project. The details of the In signed to the subcommittee on research stitute’s activities on this project and all under the chairmanship of Harry E. general progress will be presented in the 7 0 American Institute of Accountants Yearbook report of the chairman of the subcom Commissioner in charge of income tax of mittee on research. the Bureau of Internal Revenue. The issue On February 19, 1944, the committee on involved the right to convert inventories federal taxation met at the offices of the in semi-finished and finished state back Institute in New York City to consider into their component costs and to classify recommendations for simplification of the the raw material contained therein as part individual income tax at the request of of the inventory subject to the benefits of several Congressional members of the the last-in, first-out method. The subject House Ways and Means Committee for was discussed at length, but due to the advice. On March 2, 1944, pursuant to controversial points involved, no conclu arrangements, Messrs. Austin and Howell, sions were reached. Your general chairman accompanied by the secretary, appeared since then has participated in several before a technical group composed of meetings with the various industries con representatives of the staff of the Joint cerned to discuss their individual problems, Committee on Internal Revenue Taxation, and the matter is now receiving our further the Treasury Department, and the Bureau consideration. of Internal Revenue, formed at the in Your committee has also endeavored to stance of the House Ways and Means establish a program of cooperation with the Committee to draft recommendations for committees on federal taxation of the simplification of the individual income tax. state societies. The secretary contacted The government representatives were very the presidents of the state societies in be receptive, and expressed appreciation for half of the committee on November 10, the contributions made in the appearance. 1943, suggesting that it would be mutually A preliminary report of the recommen beneficial to exchange ideas, and asking dations has been prepared and is in the them to create specific tax committees, if final processing stage. This technical not already in existence. These groups group is now giving consideration to these were invited to submit their recommenda recommendations. The details of these rec tions which would be correlated through ommendations, as well as technical recom the subcommittee on current legislation. mendations regarding the Revenue Act of On January 13, 1944, a memorandum was 1943, and administrative considerations distributed to the state societies, outlining of the subcommittee on current legislation the current activities of our committee as will be presented in the report of its sub of that date, and inviting their comments. committee chairman. It is indeed gratifying to report that we In response to an invitation from Nor have received many responses; that several man D. Cann, Deputy Commissioner of societies have newly created tax com the Bureau of Internal Revenue, Harry E. mittees, and that many have taken an Howell, the secretary, and your general active part in the Institute’s non-partisan chairman, called at his office in Washington tax commission project. Closer cooperation on March 14th to discuss the application and coordination may be expected in the of regulations governing the use of the future. last-in, first-out inventory basis. Due to a Respectfully submitted, prior engagement, Mr. Cann requested us to discuss the matter with F. T. Edding- G e o r g e P. E l l i s , Chairman field, technical advisor to the Deputy April 13, 1944
Report of the Subcommittee on Current Legislation of the Committee on Federal Taxation year report of its activities. These activities To the Council of the may be divided into the principal categories American Institute of Accountants: of administrative and procedural matters, Gentlemen: The subcommittee on cur recommendations re Revenue Act of 1943, rent legislation of the committee on recommendations for simplification of the federal taxation submits the following mid individual income tax, and pending matters. Midyear Reports 71
A dministrative a nd P rocedural that the matter was being acted upon, and M atters on March 2, 1944, TD 5335 was issued which provided that the Commissioner Extensions of time for filing 1943 tax might grant a reasonable extension for the returns making of an election under sections 760 On January 8, 1944, the chairman and 761 upon a showing prior to March 15, addressed inquiries to the Commissioner 1944, to his satisfaction that (1) unusual of Internal Revenue and the Assistant circumstances existed in the taxpayer’s Secretary of the Treasury, requesting an case, and (2) the granting of the extension expression of the policy of the Bureau of would not jeopardize the interests of the Internal Revenue in connection with the government. consideration of applications for extension of time for filing individual income-tax Use of privately printed income tax return returns and corporate income and excess- forms profits-tax returns for 1943, in view of the In view of the Internal Revenue Bureau’s difficulties which public accountants were ruling of November 10, 1943, requiring experiencing under current conditions in income-tax returns to be prepared in all completing tax returns in time for filing by cases on the official forms, the chairman of the statutory due dates. A reply was re the subcommittee advised the Commis ceived under date of January 31, 1944, sioner of Internal Revenue on December from the Acting Commissioner of Internal 22, 1943, of the difficulty involved in ob Revenue, to the effect that the procedure taining a sufficient number of the returns and policy would be substantially the for filing purposes, retained copies, and same as promulgated last year and that pencil copies, which necessitated the use of the Bureau and the Collectors fully such privately printed forms. Information appreciated the problems confronting tax was requested as to the effect of the payers and their agents under wartime Bureau’s ruling and whether sufficient conditions and were prepared to cooperate official forms would be available for all in every reasonable way. Copy of this purposes. Reply was received under date of announcement was distributed to the mem January 29, 1944, advising that the policy bers and associates of the American In of the Bureau is to accept income or stitute of Accountants under date of excess-profits-tax returns only when filed February 4, 1944, with a transmittal letter on official forms furnished by the govern in which attention was directed to the ment. It was stated that Collectors of importance of keeping applications for Internal Revenue had been instructed to extensions to a minimum in order to furnish tax accountants with copies of cooperate with the Bureau of Internal official forms reasonably required for work Revenue. sheets and retained copies, but that there was no objection to the reproduction of Extension of lime for election of retroactive official forms for use other than for filing application of sections 760 and 761 purposes. On February 9, 1944, a letter was addressed by the chairman of the subcom Regulations regarding certificates of non mittee to the Commissioner of Internal necessity—section 124(d)(1) Revenue pointing out the difficulties being Under date of November 18, 1943, the encountered by accountants in gathering chairman of the subcommittee requested and analyzing the data necessary in deter information from the Secretary of War and mining whether an election should be made the Secretary of Navy regarding the to apply the provisions of sections 760 and issuance of regulations for obtaining cer 761 retroactively to taxable years begin tificates of non-necessity under section ning in 1940 and 1941, and urging that 124(d)(1) in view of the fact that cases of the regulations be amended by extending discontinuance of the use of war facilities the time for election from March 15, 1944, for war production purposes had already to September 15, 1944. This was preceded occurred. Under dates of November 23 and followed by personal discussions with and November 25, 1943, the War Depart representatives of the Bureau. Reply was ment and the Navy Department, respec received on March 1, 1944, indicating tively, advised that these regulations had 72 American Institute of Accountants Yearbook not been finally promulgated. However, Bureau of Internal Revenue. These views the War Department forwarded a form were further expressed in a communication memorandum on which they are currently dated December 6, 1943, to Stanley S. accepting applications. This form was Surrey, Tax Legislative Counsel of the reproduced in The Certified Public Account Treasury Department, copies of which ant, December, 1943, page 3. were forwarded on December 11, 1943, to Senator George, Chairman of the Senate Natural business year changes Finance Committee, Representative Efforts are being continued, through Doughton, Chairman of the House Ways personal conferences with Treasury and and Means Committee, and Colin F. Bureau representatives, to obtain a modi Stam, Chief of Staff of the Joint Committee fication of the Bureau’s policy so that on Internal Revenue Taxation. This com changes to natural business years may be munication, though expressing approval made without difficulty where the change of the purposes of the House version of is not sought for tax avoidance purposes. section 115, recommended that the lan guage of the section be clarified and limited Independent Bureau of Internal Revenue— so as to provide assurance to the honest H. R. 4273 taxpayer that, ordinary and normal busi Representative Knutson’s bill, H. R. ness transactions, not intended to be 4273, introduced February 24, 1944, attacked by the legislation, would not be “ providing for the collection of internal impugned as tax avoidance devices. The revenue taxes and the administration of section, as finally enacted in the Revenue the internal revenue laws by an agency Act of 1943, is in substantially revised independent of the Department of the form, which eliminates most of the diffi Treasury,” was considered by the indivi culties and uncertainties found in the dual members of the full committee on House version. federal taxation in response to a written re Tax return simplification quest dated March 3, 1944. The consensus of the replies was that no position should The chairman requested by letter the be taken on this issue. views of the members of the subcommittee with regard to certain proposals dealing “ Mushroom” tax experts with withholding and tax return simplifi The committee, at its meeting on Feb cation. On the basis of the responses ruary 19, 1944, considered whether any received by mail and telegram, the chair action should be taken on the sudden man presented in person to representa growth of “mushroom” tax experts, of tives of the Treasury Department the doubtful qualifications, who offered their following suggestions: (1) closer correla services at rates up to $5.00 in shops, tion of the withholding tables with the stores, and similar locations. It was agreed short form (1040-A) tax schedule so that, that it was not feasible to take any action for example, the weekly withholding at the present time, but that the matter table would provide for withholding of an would receive further attention with a view amount equal to 1/52of the tax shown for to the future. It was further agreed that that income bracket in the 1040-A table, basic simplification of the tax laws and the purpose being to provide for more forms was the real solution to the situation. exact correspondence between the amount withheld and the actual tax, and thus to Recommendations re 1943 Revenue Act pave the way for further steps in the direc tion of eliminating tax-return filing in the Excess profits tax avoidance—section 115 lower wage brackets; (2) the use of In a letter dated November 29, 1943, graduated withholding for those above the the chairman requested the views of the first surtax bracket; (3) elimination of per members of the subcommittee regarding centage withholding and restriction of the proposed House version of section 115 withholding to the wage bracket tables or, relating to tax avoidance devices. The alternatively, to narrow the wage brackets chairman presented the views of the sub in the withholding tables, so as to eliminate committee in person to representatives of the present large disparity in many cases the Treasury Department and of the between percentage withholding and with Midyear Reports 73 holding according to the tables. These at Washington, the committee reached suggestions were not acted upon in con substantial agreement on the following nection with the Revenue Act of 1943 but propositions: do appear in the tax return simplification bill now pending before Congress. 1. Income subject to tax should be the same for all tax purposes. 2. The normal tax, surtax, and victory tax Computation of excess-profits tax postwar should be integrated into a single rate refund—section 780(a) schedule, unless the victory tax was to In a letter dated December 11, 1943, the be retained with all its present features, chairman of the subcommittee submitted in which event a separate victory-tax computation probably could not be recommendations to Senator George, Rep avoided. resentative Doughton, Colin F. Stam, and 3. Penalty for underestimating tax should Stanley S. Surrey, proposing an amendment not apply if the original declaration, to section 780(a) to prevent discrimination timely made, is at least equal to the in the computation of excess-profits tax preceding year’s tax, as distinguished postwar refunds for corporations with from the tax, at new rates and exemp fiscal years beginning in 1941 and ending tions, on last year’s income, as in the after June 30, 1942. The Revenue Act of Revenue Act of 1943. 1943 has adopted this amendment. The committee also considered the following proposals: R ecommendations f or S implification o f t h e I n d iv id u a l I n c o m e T a x 1. Graduated withholding. 2. Elimination of necessity of filing returns At the joint meeting of the subcom by wage earners subject to withholding. mittee on current legislation and the 3. Extension of the use of Form 1040-A to subcommittee on research on February higher income brackets, such as $5,000. 19, 1944, at the Institute’s offices, presided 4. Establishing a fixed tax-saving value for over by the general chairman, considera exemptions and credits, thus making tion was given to immediate simplification them deductible in the lowest income of the individual income-tax law. The dis bracket instead of in the highest income cussion was based on the premise that the bracket as at present. 5. Integration of tax rates into income present income and rate structure would bracket tables. not be materially disturbed, and the recommendations dealt solely with simpli The chairman of the subcommittee on fication of mechanics within the existing research, the secretary, and the chairman basic rate structure. The committee felt of this subcommittee, with a technical that, while improvements in these matters group constituted by the Ways and Means are of first-rate importance and will yield Committee, composed of representatives immediate relief, particularly to taxpayers of the staff of the Joint Committee on in lower income brackets, the basic need Internal Revenue Taxation, the Treasury is for a thorough review of existing internal Department, and the Bureau of Internal revenue laws with a view to ultimate Revenue, met in Washington on March 2, enactment of a relatively simple revenue 1944. At this meeting the subcommittee law embodying a consistent policy of chairmen informally discussed these mat federal taxation designed to meet war and ters and the factors in favor of or against postwar needs. The best instrument to these proposals as discussed in the meeting accomplish such purpose, it was felt, of your committee, as well as certain per would be a legislatively created non sonal suggestions from the two subcom partisan tax commission for the express mittee chairmen. The recommendations purpose of examining into this question were received very favorably and it is and reporting its recommendations, and our understanding that they were given that the creation of such commission full consideration in the individual tax should receive immediate Congressional simplification bill which is now before consideration. Congress. Many of the recommendations In the brief time at its disposal due to made have been incorporated in the pend the urgency of preparing recommendations ing bill, including such matters as (a) for a discussion with the technical group replacement of the victory tax by a 3 per 7 4 American Institute of Accountants Yearbook cent normal tax and incorporation of the not appear to be appropriate during the old normal tax in the surtax table; (b) pendency of tax bills intended to be limited using the same basic exemption, $500, for to revenue raising and simplification ob the purpose of all tax computations; (c) jectives. These technical recommendations rearrangement of the exemptions and and the position which the committee credit so that the difference in exemption should take on the problem of deductions between joint and separate returns would for postwar expenditures and losses arising be an even multiple of the credit for de from wartime operations are receiving pendents, thus permitting of simplification current attention by this subcommittee, of the 1040-A table; (d) extension of the and a meeting to discuss these matters 1040-A principle of automatic tax tables, will be called shortly. First in order of according to income brackets, to incomes business will be consideration of proposals up to $5,000; (e) closer correlation of the for simplifying and coordinating the taxes withholding tables with the 1040-A tables, on corporate income. Mr. Green and Mr. with the result that the withholding in Chinlund, members of the subcommittee, brackets up to $5,000 would in virtually have also been appointed to study and all cases cover the entire tax as per the make their recommendations on the specific 1040-A tables; (f) extension of the 1040-A problem of dealing with excessive depre principle to all types of gross income, after ciation deductions in loss years from which allowance for business deductions, etc.; no tax benefit was derived, in the light of and (g) adaptation of form W-2 as a simple the Supreme Court’s decision in the form of return for wage earners under Virginian Hotel Corporation case. $5,000 whose tax would be almost entirely collected through withholding. In addition to the foregoing activities, the subcommittee on current legislation P e n d in g M a t t e r s received suggestions and inquiries from Extensive technical recommendations on members of the Institute, which were re various provisions of the federal tax law, viewed and appropriate action taken. some adopted by your committee, and Respectfully submitted, others yet to be acted upon, have not yet been submitted to Congressional and M aurice Austin, Chairman administration officials because that did A p ril 14, 1944
Report of the Subcommittee on Research of the Committee on Federal Taxation
To the Council of the they are based with a view to attempting A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : to resolve the differences either by recom Gentlemen: Your subcommittee on re mending a change in the accounting prac search is pleased to submit the following tice or in the tax practice. midyear report of its activities. Nuisance provisions The work conducted by this subcom Frank Youngman has made a prelimi mittee has been handled on the basis of nary review of the nuisance provisions in specific assignments of topics to its various the tax law of minor revenue value which members, and the submission of reports complicate administration and should be for consideration and review by the other eliminated. members. The studies which are in process now are: Depreciation The technical assistant to the committee Accounting v. tax concepts of income on federal taxation has a study of “depre Charles Melvoin is analyzing “account ciation for tax purposes” in process. The ing v. tax concepts of income.” His study purpose of this study is, by an examination includes a comparison of accounting and of the statutes, the regulations and the tax methods and the concepts upon which administrative procedures, to determine: Midyear Reports 75 (a) By what means continual adjustments five chapters adopted such resolutions can be eliminated. and publicized them in their communities (b) To what extent it is possible for the and to their local legislative representatives. taxpayer’s depreciation, within certain This first publicity was followed by limits, to be accepted as final. (c) To what extent some binding declara regular editorial comment in The Journal tory determination or stipulation could of Accountancy and the publication of an be made in advance on specific depre- article in the January, 1944, issue entitled ciation matters. “Defects in Federal Tax Law and Admin istration,” an analysis of 600 letters received in response to Colonel Robert H. L o n g -r a n g e T a x S implification : Montgomery’s circular letter dated June N o n -p a r t is a n T a x C o m m issio n 25, 1943. News abstracts, based on this The major project of this subcommittee analysis, and on talks presented at state during the past six months has been the society meetings in November, 1943, by sponsorship of the resolution adopted at the Messrs. Phillips and Carey, were released annual meeting October 19, 1943, urging to the press and to the state societies, Congress to establish a non-partisan tax while reprints of the analysis were mailed commission. This entailed the building up to various government officials. of favorable opinion throughout the A statement entitled “The Case against country—of the general public, industry, Federal Taxation,” by Colonel Robert H. financial circles, professional groups, the Montgomery, was distributed by the government agencies involved, and, in par American Enterprise Association, a non ticular, the key committee men and the profit organization supported by business, members of Congress most influential in whose sole purpose is to inform Congress tax matters. The president, the secretary, men on their list regarding legislative and the general chairman have performed matters, particularly those involving tech a major part of the work and we have had nical and economic questions. the splendid cooperation of the executive The Institute’s resolution was brought to committee and the staff of the Institute. the attention of the New England Council The development and progress of the of Governors, and, after consideration, the program may be divided into two phases. Council adopted a resolution urging the The first phase entailed all efforts to President of the United States to establish bring the resolution and the meaning of a non-partisan tax commission, which tax simplification in terms of the resolution resolution, however, was withheld at our to the attention of the accounting profes request pending the outcome of negotia sion, the general public, and government tions with representatives of the House officials, with a view to the introduction of Ways and Means Committee. legislation in Congress. Personal interviews with Congressional Widespread announcement of the adop representatives were begun in December, tion of the resolution through press re 1943. The first conferences on December leases, The Journal of Accountancy, and 14, 1943, with a member of the House through special mailings to state societies Ways and Means Committee and a mem and to members of the federal government, ber of the Senate Finance Committee including those of the House Ways and indicated sympathy with the objective Means Committee, the Senate Finance of the resolution but a coolness to the Committee, the Treasury, and the Bureau establishment of a non-partisan commis of Internal Revenue, was the first step in sion as the means of accomplishing a long- the program. These distributions brought range, integrated tax law. Arguments were forth favorable editorial comment through advanced that existing technical facilities out the country and evoked interest among were adequate and that the creation of the profession, as well as sympathetic another outside group would be a waste acknowledgment from the various govern of money and would result in the same ment officials. bickerings which are experienced at present. The state societies were invited to adopt It appeared unlikely at the time that a similar resolutions as evidence of the majority member of Congress would unanimity of the accounting profession on sponsor such legislation, but more prob the proposal. Fifteen state societies and able that a minority member might 76 American Institute of Accountants Yearbook introduce the legislation, which would not provided in the Carlson bill, but differently be passed. constituted and appointed. Representative Your subcommittee chairman there Harold Knutson (R-Minn.) introduced upon submitted a report to the executive H. J. Res. 233 on February 9, 1944, and committee at its meeting on December 16, Representative Henry O. Talle (R-Iowa) 1943, in which five alternatives, including introduced H. J. Res. 236 on February 16, the abandonment of the project, were out 1944, providing for the creation of an lined as possible courses to pursue. The advisory council to assist the Joint Con executive committee approved continued gressional Committee on Internal Revenue activity along the lines of the first four Taxation in simplifying and coordinating suggestions. These were as follows: the federal tax system. Finally, Senator James J. Davis (R-Pa.) introduced S. (1) Should efforts to obtain endorsement by a majority member be unavailing, Con. Res. 36 on February 25, 1944, pro if possible, a minority member should viding for a committee of ten certified be urged to introduce a resolution, re public accountants to study the tax laws gardless of the likelihood of enactment. and report recommendations for simpli (2) If legislation could not be enacted, fication. Four of these bills may also be Congress should be urged to reestablish said to be the direct or indirect results of the advisory council to the Joint Con the Institute’s efforts. gressional Committee on Internal Rev Upon the introduction of Representative enue Taxation, which functioned in Carlson’s resolution, the progress on this 1927. It was felt that this might be the most practical solution since no legisla project entered its second phase. Every tion would be required other than Con effort was made to enlist the support of gressional appropriation for operating the accounting profession, state societies, funds. the general public, and leading organiza (3) In the event that either of the first two tions interested in the tax problem, and suggestions should not be feasible, to stimulate expression of their support to efforts should be made to establish an their legislative representatives in order to independent tax commission composed bring about early and favorable action on either of several interested groups or of the pending resolutions by Congress. Institute members only. Such a group On January 25, 1944, the president dis would be entirely separate from the government and would study, report, tributed a letter to the members and asso and publicize their results and, in ciates of the Institute setting forth the turn, present them before the govern Institute’s resolution and the Carlson bill, ment committees. The difficulty in and urging all to write their Congressmen financing such a project adequately, and to have their clients do likewise in either by interesting a foundation or support of this bill which embodied the through Institute membership volun purposes of the Institute’s resolution. A tary subscriptions, was noted. How copy of the Carlson bill and the text of the ever, the committee felt that this was American Institute of Accountants resolu worth trying if all else failed. (4) The President of the United States tion on tax reform were sent to a special should be asked to appoint a non information list of 201 editors of daily partisan tax commission. newspapers, which resulted in several editorial references to tax simplification Conferences were then continued with and the Institute’s part in promoting the various members of the House Ways and proposal. A second letter was distributed Means Committee and the Senate Finance by the president on February 19, 1944, to Committee. Largely as a result of these all certified public accountants, as well as efforts, Representative Carlson (R-Kan.) Institute members and associates, calling introduced H. J. Res. 211 on January 10, attention to the bi-partisan support evi 1944, providing for a non-partisan com denced by the Forand bill, and again urg mission to make a thorough study of the ing all possible support of the objective. tax system. Following Representative Two similar letters were sent by the Carlson’s resolution, Representative Aime president to the state societies again sug Forand (D-R.I.) introduced H. R. 4086 gesting the adoption and publication of on January 28, 1944, providing for a non resolutions, the circularization of mem partisan tax commission similar to that bers, and the conducting of meetings and Midyear Reports 77 discussions before local Chambers of stitute, entitled “ Tax Simplification.” The Commerce, Kiwanis, and Rotary clubs. Credit Executive, the monthly publication The president also wrote to sixteen lead of the New York Credit Men’s Association, ing organizations, including banking, credit, contained an article by Maurice Austin, business, accounting, legal, labor, farming, chairman of the subcommittee on current and tax research groups, explaining the legislation, entitled “ Tax Simplification,” project and urging them to contribute, in its February, 1944, issue. their support to this worthy objective. Two other organizations, the American The secretary followed this letter up Bankers Association and the Tax Founda energetically with numerous conferences tion, have expressed sympathy with the and luncheon meetings with leading idea an d have given publicity to the matter. executives and representatives of these The March, 1944, Tax Review, the monthly organizations, as well as others. bulletin of the Tax Foundation, contained As a result of these efforts, the subcom an article entitled “Tax Simplification,” mittee file indicates that 69 individual by Harley L. Lutz, which analyzes the Senators were contacted in 36 states, and broad problem and the various bills. The 165 individual Representatives in 38 April, 1944, issue of Banking, the monthly states. We have also been informed that magazine of The American Bankers Asso 58 of the Senators and 120 of the Repre ciation, published an article, “A Step sentatives have replied generally express Towards Tax Simplification,” by the ing sympathetic interest and cooperation. chairman of this subcommittee. Although the number of Institute mem Publicity was also maintained through bers who responded represents only a little continued editorials in The Journal of more than 2 per cent of the total member Accountancy, through press releases of a ship, this group has been very active in statement by the president on the need their local communities in sponsoring for a non-partisan tax commission now, discussions before their local Chambers of and announcement of the adoption of the Commerce and R otary Clubs; in dis resolution by the tax committee at its tributing circular letters to their clients, meeting on February 19, 1944, endorsing and having the project publicized. Formal the purposes of the Carlson and Forand action endorsing the objective has been bills and urging early action by Congress taken by the Chamber of Commerce of on them. Huntington, West Virginia, the New In addition to the flow of communica Haven Chamber of Commerce, the Scran tions which were begun from Institute ton Chamber of Commerce, and the members and state societies and organiza Chamber of Commerce of Kansas City, tions, personal interviews were arranged Missouri. with members of Congress and detailed A total of twenty-one state societies correspondence on the subject was for and five chapters have taken an active, warded explaining the nature and purpose cooperative part in contacting legislative of this method of tax reform. During the representatives, passing resolutions, and past six months Institute representatives publishing articles, and contacting local had a total of seventeen personal confer business groups. ences with legislative representatives, in Four prominent organizations, the Na cluding eight members of the House Ways tional Association of Cost Accountants, and Means Committee and two members the National Association of Credit Men, the of the Senate Finance Committee, in an American Bar Association, and the New effort to interest these persons in the project York State Chamber of Commerce, which, and to build strong support for the pending together with the American Institute of bills. Accountants, represent a combined mem An analysis of all the reactions during bership of about 75,000 individuals, have these interviews indicated that there was formally endorsed the project and issued practically no chance for the establishment publicity on the subject. Credit and Finan of an independent non-partisan commission cial Management, the monthly publication this year. On the other hand, it was found of the National Association of Credit Men, that the idea of an advisory council was will publish in a forthcoming issue an article received with more cordiality on the basis by Victor H. Stempf, president of the In that it would be practicable and desirable. 78 American Institute of Accountants Yearbook On March 7, 1944, the members of the standing between the Institute and executive committee and the committee on government officials, and has had an federal taxation were informed of the trend excellent public relations value in bring toward the advisory council idea and that, ing the American Institute of Account in accordance with the second choice indi ants to the attention of the public in the role of leaders for a movement of major cated by the executive committee at its national importance. The importance of meeting on December 16, 1943, in the this project as a part of an effective event that the establishment of a non postwar planning program has made partisan tax commission proved impracti the work all the more timely. cable, our support was shifted to the 2 There is little question but that this advisory council idea. project has enlisted so much support The subject of an advisory council was throughout the country that it has been discussed with Colin F. Stam, chief of staff of major influence in speeding up the of the Joint Committee on Internal Revenue work of the House Ways and Means Committee on the entire tax simplifica Taxation, who was very receptive to the tion problem. idea and invited the Institute to submit a 3. It has, we believe, stimulated outside plan for the appointment and functioning groups to undertake as a private project of such a body. The scope and nature of the rewriting of the entire tax structure. the 1927 advisory council was reviewed 4. The present status of the official negotia and a plan drawn up to avoid the defects tions is, in the opinion of your subcom of that council and to achieve the objec mittee, not entirely satisfactory for the tives of the Institute’s resolution. reason that, apparently reflecting the The American Bar Association, which attitude of the Senate Finance Com had been informed of the Institute’s resolu mittee Chairman, the chief of staff of the Joint Committee, and the Bar tion and invited to support the project, Association section of taxation, the requested the secretary, Mr. Carey, to trend seems to be toward creation of a attend a meeting of the section of taxation more or less informal advisory group on March 21, 1944, in order to discuss which might be restricted to considera mutual objectives. At that meeting the Bar tion of particular technical questions, Association representatives suggested that and might not be free to make recom both organizations meet with Mr. Stam mendations on questions of policy. The and submit a joint plan. The plans of each activities of this subcommittee were organization were reviewed by the mem designed to bring about the establish ment by Congress as soon as possible bers of the executive committee and the of a qualified non-partisan commission committee on federal taxation and, at a composed of members of Congress, meeting on Wednesday, April 12, 1944, representatives of the Treasury Depart the president and the secretary met with ment and independent lawyers, ac members of the tax section of the Bar countants, and economists to write a Association and drafted a joint plan which simple revenue law which would express was presented to Colin F. Stam that day. a permanent and consistent policy of Mr. Stam informed the group that he federal taxation. would submit this proposal to the Joint Committee on Internal Revenue Taxation The distinction in objectives is clear. We as soon as the pending tax simplification plan to continue our attempts to achieve bills for individual income taxpayers had the goal outlined in the American Institute been cleared, and that he would suggest of Accountants resolution. that members of the Institute and the Bar We may find it necessary to recommend Association meet with the committee to that we dissociate ourselves from any explain and discuss the proposal further. acceptance of a modified plan as a final To summarize: answer to the basic problem. This would leave us free to renew our drive for our full 1. Regardless of the final outcome the sub objective as soon as the political situation committee believes that the intangible clears and is favorable. benefits already derived from the Insti tute’s efforts in behalf of this project, Over-all review of the federal tax law which is of great public interest, have justified the undertaking. It has estab In the meantime, and so that some pre lished closer relationship and under liminary work on the basic project may go Midyear Reports 79 forward, an analysis is now being submitted now imposed upon the use of the to the full subcommittee for consideration, corporate form for doing business as which, in a preliminary way, at least, should well as the question of double expose the issues of the problem and estab taxation of corporate earnings. lish a syllabus for work on an over-all re (2) The rewriting of the substantive law to achieve a basis for simplification. view of the federal tax law. The material (3) The review of administrative and is grouped around and involves: procedural matters. (4) Simplification of income tax return (1) The basic concepts and policy deter forms. minations upon which a basic tax law should be based. Respectfully submitted, N o t e . —Under this heading special Harry E. H owell, Chairman attention is being given to the ques tion of the penalties and disabilities April 24, 1944
Report of the Committee on History To the Council op the sembled data concerning the progress of A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : the profession since 1895, and the Wyoming Gentlemen: Your committee on history Society reports a collection of material has had the very valuable cooperation of covering the period since the passage of the President Victor H. Stempf in its efforts to first accountancy law in that state in 1911. discover and preserve historical data. His Your committee is endeavoring to letter addressed to the presidents of all secure the interest of any who may be in a state societies, in which he emphasized the position to add to the Institute’s store of importance of this work, has given addi historical material. tional impetus to this department of the Institute’s activities. Respectfully submitted, The article in the April 1, 1944, issue of T. E d w a r d Ross, Chairman The Certified Public Accountant is another helpful contribution to this work. As Norman E. W ebster noted therein, the Illinois Society of Ernest Reckitt Certified Public Accountants has as April 14, 1944
Report of the Committee on Membership accomplished in spite of increasing pressure To the Council of the from all sides upon the staff and board A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : of examiners bespeaks their selfless loyalty Gentlemen: It is fortunate indeed that and devotion to the affairs of the Institute. the OPA has not attempted to put a ceiling This increase in membership has been on membership in our Institute, for in the accomplished without any pressure or year elapsed since the last spring meeting drive whatsoever upon the part of your of the council membership has increased committee. Perhaps it is not necessary by 921, to bring the total present member to seek the causes of our growth, but even ship to 7,808 of which 5,839 are members in these times an unsolicited growth of and 1,969 associates. Five hundred and over 13 per cent in one year does not ninety six applications have been received merely happen. We feel that the prevailing since September 1, 1943, of which only financial conditions have had little to do 262 now remain to be acted upon. On with it, but rather that the problems forced September 1, 1943, with a somewhat upon accountants by the war have been smaller number of prior applications, there so many and so difficult that they have were 427 to be acted upon. This progress, gladly turned for help and guidance to 80 American Institute of Accountants Yearbook that bulwark of professional strength Here is a brief outline of the program: which the Institute has come to be during All non-member CPA’s will shortly re the many years of its existence. All of ceive a letter from President Stempf out which in turn imposes upon the Institute a lining the approach of professional account serious responsibility, to be found not ing societies to problems directly affecting wanting in the eyes of its members new every certified public accountant, and sug and old, and to gird itself to be prepared gesting that development of the maximum to be of the greatest possible service to the capacity of the accountant for service to membership in meeting the postwar prob his community will be aided by member lems which in their economic impact may ship in his state society and in the Institute. be even more numerous, difficult, and of Records relating to former members will greater duration than those we are now be carefully examined and those who facing and meeting. appear eligible to apply for reinstatement Today 725 of our members, or nearly 10 notified of the new rules governing rein per cent of the entire membership, are statement by individual letter and per serving in the armed forces—400 in the sonal follow-up by local members of the army, 317 in the navy, 5 in the marines, committee. and 3 in the coast guard. Of this total of From time to time members of the com 725, there are 560 holding commissioned mittee will be invited to encourage new officers rank. In these figures lie an indica membership through brief paragraphs in tion of the qualities of leadership inherent The Certified Public Accountant. in the profession as a whole, and your com There is to be compiled and maintained mittee feels that the proper time has an up-to-date list of members of state arrived for the Institute to gather to itself societies, and of CPA’s who are non as much of this leadership as can be accom members of either state societies or the plished in a manner befitting its high Institute. standards and position in the affairs of Local committee members will be asked the community. to contact heads of firms in their localities In spite of our growth, less than one- for the purpose of informing staff members third of the certified public accountants of of the value of membership in a profes the United States are members of the sional society. Institute. Not all of these non-members The coöperation of membership chair are qualified for membership it is true, but men of state societies in encouraging there are certainly a great many who are membership in both the state and national and who by their membership would add organizations will be sought. not only to their own stature but also Inquiries received since early 1943 re to that of the Institute. garding membership, on which no further With the gracious aid of our secretary developments have occurred (there are and assistant secretary (the latter now approximately 800 of these), will be care being entitled to a naval salute) in familiar fully reviewed and followed up through izing the committee chairman with the correspondence or by local committee past activities and problems of the mem members. bership committee, a long-range program Some attempt will be made to encourage has been developed, submitted to and the delivery of the Institute’s literature to approved by the executive committee, the the home of the subscriber rather than to objective of which is eventually to bring his business address. into the Institute at least a simple majority The chairman is authorized to enlarge of all qualified certified public accountants his committee in those localities in which of the United States. such enlargement may appear to be proper. We cannot emphasize too strongly that It was soon apparent that the carrying no drive or high pressure campaign is con out of this program, if only in part, would templated. First and foremost in our minds add greatly to the work of an already fully is the maintenance and improvement of the occupied staff. The suggestion was there high standards of professional accomplish fore made to the executive committee ment and conduct so carefully developed that the staff be increased by two em and husbanded throughout the years. ployees to devote their entire time to the Midyear Reports 81 processing of applications and such other come suggestions from members of council duties as would arise through the adoption as to ways in which its proposed program of this program. We are happy to say that and present work may be carried out the executive committee concurred in this most effectively. suggestion, that one young lady has been engaged, and that every effort will be Respectfully submitted, made to engage another. C. L. Johnson, Chairman The committee on membership will wel May 1, 1944
Report of the Committee on Natural Business Year To the Council or t h e First A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : Quarter Gentlemen: No official program for 1944 1943 1942 Total the further development of the natural Changed from fis business year campaign has been under cal year ac taken during the current year; however, counting period members of the committee located in to calendar year 21 290 249 560 every state of the Union and the District Changed from cal of Columbia have kept the subject alive, endar (or fiscal) and used every opportunity to accelerate to a fiscal year the trend. accounting pe Your committee considered the advisa riod...... 84 517 1,265 1,866 bility of protesting the provision of the Total...... 105 807 1,514 2,426 1943 Revenue Act which provided for application of increased rates to fiscal Your committee believes that the In year taxpayers, for fear that future rate stitute’s active campaign has produced decreases might not be made in the same many disciples in and out of the account manner. The Institute’s tax committee ancy profession who are continually felt that its policy adopted when the 1942 preaching the gospel of “ The Natural act was considered should be followed and Business Year.” no action taken until such time as future rate decreases were included in a proposed tax bill providing inequitable application Respectfully submitted, to fiscal year taxpayers. W illiam J. Carter, Chairman Reports of the Commissioner of Internal Revenue provide the following information: May 5, 1944
Report of the Committee on Publication
To the Council of the paper have been adopted. In April the A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : text was reduced from 88 to 80 pages, following an earlier reduction from 96 Gentlemen: Demand for The Journal of Accountancy now exceeds the supply. pages. Several departments were con Circulation, at an all-time peak of 21,750, densed and one was discontinued. Previ has increased by about 3,000 in the past ously, lighter weight paper had been sub year. The total number of copies which stituted and the number of words on each can be printed is now limited by govern page had been increased by reducing the ment regulations restricting the supply of width of all margins. paper available for magazines. The Journal of Accountancy, like other To comply with these requirements a publications, must continue to coöperate number of economies in the consumption of in conserving paper which is a critical 82 American Institute of Accountants Yearbook war material not currently available in tions of the Renegotiation Act by the War sufficient quantities to meet all government Contracts Price Adjustment Board. and civilian requirements. As the official organ of a profession to which important J o u r n a l C ir c u l a t io n wartime responsibilities have been as Nearly two-thirds of the copies of The signed, The Journal is also obligated to Journal of Accountancy placed in circula circulate timely information, relating di tion each month are sent to persons who rectly to the war, among a constantly are not members of the American Institute increasing number of subscribers. A request of Accountants. An analysis based upon for a supplementary allotment of paper the most recent annual audit by the Audit has recently been filed with the proper Bureau of Circulations classifies sub authorities. scribers and members as follows: account ants and accounting firms, 47 per cent; C o n t e n t s o f t h e J o u r n a l corporation executives, 14 per cent; stu The majority of articles published in The dents of accounting, 6 per cent; members Journal of Accountancy from September, of the armed forces, 6 per cent; teachers, 1943, through May, 1944, the period educational institutions, and libraries, 3 covered by this report, emphasize wartime per cent; federal, state, municipal officials problems of accountants. Among the and their staffs, 3 per cent. The remaining topics which have been presented are subscribers are distributed among several renegotiation and termination of war con smaller groups or unclassified. tracts, “V” loans, amortization of war facilities, tax problems of war contractors, J o u r n a l A d v e r t is in g postwar reserves, salary and wage stabiliza Revenue from advertising published in tion, the effect of the war upon financial The Journal of Accountancy for the eight statements and reports, and problems in months beginning in September, 1943, and auditing under wartime conditions. Of the ending in April, 1944, amounted to forty-four authors who have contributed $15,186. This total exceeds the correspond signed articles published in the past nine ing figure for the preceding fiscal year by months, sixteen are engaged in the practice 24 per cent and establishes an all-time of public accounting. Others include record. Letters have been received from the teachers of accounting; cost accountants Treasury Department and the Red Cross and internal auditors; representatives of expressing appreciation for advertising government agencies; members of the space contributed by The Journal in armed forces; attorneys; specialists in recent issues. economics, finance, and statistics; and a An increase in advertising rates, amply commercial banker. justified by larger circulation, has been Editorials published in The Journal con approved by the committee to become tinue to inform subscribers, from month to effective July 1st. The present rate schedule month, concerning current developments will continue to apply throughout the life of major interest to accountants including of contracts in effect on that date, none of changes in Selective Service regulations, which will extend beyond July 1, 1945. As revisions in contract-renegotiation and most advertising space in The Journal is termination procedure, new reporting re sold on an annual basis, the new schedule quirements of government agencies, and will not produce substantially increased trends in federal taxation. Among the revenue in the current fiscal year. official documents which have recently been reprinted, in full or in part, for the T h e C e r t if ie d P u b l ic A c c o u n t a n t information of Journal readers are the Like The Journal of Accountancy, The Baruch Uniform Termination Article and Certified Public Accountant is subject to statement of principles for determination wartime restrictions upon the supply of of costs upon termination of fixed-price paper available for magazines. The pur supply contracts, the Baruch-Hancock pose of this publication is to present report on war and postwar adjustment information about the profession of interest policies, War Department cost interpreta to members of the American Institute of tions applicable to audits of cost-plus- Accountants. Circulation among non fixed-fee supply contracts, and interpreta members has never been promoted, but Midyear Reports 83 subscriptions were formerly accepted at a on federal-government accounting spon price of $1.00 a year. On December 31, sored by the American Institute of 1943, such subscriptions totaled about 500. Accountants in cooperation with the In order to conserve paper, no additional United States Treasury Department, the subscriptions or renewals have been ac General Accounting Office, and the Bureau cepted since that time. Present subscrip of the Budget, early in December, 1943, tions, none of which extend beyond the were also published. end of 1944, will remain in effect Until Because of the shortage of paper and the expiration date. All information of manpower, the 1943 edition of the In general interest about activities of the stitute Yearbook was omitted. To present accounting profession will be published in some of the more important information The Journal of Accountancy. The Certified normally included in the Yearbook, a Public Accountant will become exclusively pamphlet was published containing names a membership bulletin, circulating among of officers, members of council and com all Institute members and associates. mittees, and new members and associates Since January 1, 1944, this publication admitted to the Institute since publica which previously appeared on the fifteenth tion of the 1942 Yearbook. Another of each month has been converted to a pamphlet includes reports presented by flexible time schedule, permitting the print officers, council, and committees at the ing of an issue at any date necessary to midyear meeting of council in May and the provide prompt coverage of important annual meeting of the Institute in October, accounting developments such as the 1943. It is expected that the next edition recent release by the Securities and Ex of the Yearbook will be published late in change Commission referring to inde 1944. pendence of accountants; the Institute’s The Accountants' Index, Sixth Supple proposal for establishment of a non ment, is scheduled for publication in the partisan commission to help simplify tax coming summer. This volume will catalog laws; a ruling of the Joint Price Adjust all books, articles, pamphlets, and govern ment Board with respect to renegotiation ment publications relating to accounting reserves; comment by the chief accountant which have appeared between January 1, of the SEC concerning treatment of pro 1940, and December 31, 1943. In conjunc visions for renegotiation in financial state tion with the six earlier editions, it will ments filed with the Commission; coopera provide a guide to practically all account tion between the American Bar Association ing literature in the English language and the American Institute of Accountants which was in print in 1912 or has since in the establishment of a national con been published. ference group to consider mutual problems Although publication of books, except of the two professions. Unofficial Answers to Examination Ques tions, was discontinued in 1938, a total of O t h e r P ublications 2,839 volumes were sold in the first seven As in previous years, proceedings of the months of the current fiscal year, producing 1943 annual meeting of the American In $5,545 in revenue. This represents a de stitute of Accountants were published in cline of about 150 volumes, but an increase pamphlet form. One copy of this text, in revenue of about $200, in comparison entitled “Accounting Problems in War with the corresponding period in the pre Contract Termination, Taxes, and Postwar ceding fiscal year. Best sellers were Unoffi- Planning,” was sent without charge to cial Answers to Examination Questions, each Institute member and associate. Five May, 1939, to November, 1941: 619 thousand additional copies have been copies; Duties of the Junior Accountant, sold at a price of one dollar, providing published in 1933: 594 copies; and Duties revenue in excess of the cost of printing of the Senior Accountant, published in the entire edition. One section of the 1932: 403 copies. proceedings, containing papers presented at the technical session on war-contract F u n c t io n o r I n s t it u t e P ublications termination problems, was published im The primary function of Institute pub mediately after the meeting and widely lications is to report and discuss, promptly circulated. Proceedings of the conference and adequately, all significant develop 84 American Institute of Accountants Yearbook ments affecting the accounting profession. expense has increased, reflecting higher Much of the material published is not wages and material cost, and a further readily accessible elsewhere. More than advance is expected. War also brings new 15,000 reprints of articles and editorials opportunities to serve present members published in The Journal of Accountancy, and subscribers, and to extend the in from September, 1943, through April, fluence of Institute publications. Success in 1944, have been sent to members of Con meeting the wartime challenge is not gress, government officials, leaders in easily measured. Circulation and adver trade and professional associations, and tising revenue provide the most tangible others interested in the topics discussed. evidence of accomplishment. War brings new responsibilities to Institute publications. Problems in ac Respectfully submitted, counting practice multiply and become Frederick H. Hurdman, Chairman more complex. Numerous government I. R ussell Bush regulations must be reported and inter Percy R. Everett preted. Speed in presenting information Albert E. Hunter becomes more essential, but technical A l a n P . L. P r e s t accuracy must not be sacrificed. Printing May 3, 1944
Report of the Committee on Public Information
To the Council of the public problems and editorials appearing A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : in The Journal of Accountancy. A number of items, including news statements, have Gentlemen: Under normal conditions, been devoted to the current effort of the your committee is concerned with the Institute to promote simplification of publication and distribution to the public federal taxes. of information relating to the professional The most recently completed undertak work of the certified public accountant. ing was the making of publicity and other Before the outbreak of war, your com public relations plans in connection with mittee had published five public-informa- the series of state society wartime account tion pamphlets, distribution and sale of ing conferences held in April. Considerable which has continued to the present day. space was given in the newspapers to Owing to the emphasis placed by the reports covering addresses presented at executive committee on war problems the conferences by the officers of the in so far as the activities of the Institute American Institute and the general chair are concerned, publication of items of man of the committee on federal taxation. information of this type has been discon Similarly, plans were made and carried tinued for the duration. For the present, out for the release of news and other the public information activities at Insti information in connection with the Con tute headquarters are confined to staff ference on Federal Government Accounting operations. held in New York last December by the Public information work at Institute committee on governmental accounting headquarters has reflected, of course, the of the American Institute, with the coop continued interest of the profession and of eration of the United States Treasury the Institute in business problems arising Department, the Bureau of the Budget, out of the war. A large volume of informa and the General Accounting Office. Public tion has been distributed to the press, to information plans in connection with this outside organizations, to Congress and meeting resulted in good news publicity other agencies in connection with problems of federal taxation, termination of war con for the reforms in governmental accounting tracts, renegotiation and related subjects. advocated by the American Institute. Sources for the information distributed Tax simplification has been a public have included Institute committees, activi information subject of major importance, ties of Institute officers in connection with and activities in this connection at Institute Midyear Reports 85 headquarters have brought this subject Institute headquarters cooperated in prominently into the news. A special news sending out to local committees of state release, prepared for use by state societies societies, National Association of Cost of certified public accountants in the news Accountants and other groups, press in papers of their own states, was widely formation relating to the appearances of used, and served to center considerable representatives of the Institute, including public attention on the efforts of the ac- its president, secretary, director of research countancy profession to reform the tax laws. and others, as speakers on accountancy This release was based upon the contents of and other problems. a printed analysis of the opinions of 600 Cooperation in the preparation of a members of the American Institute in con news release announcing the formation nection with tax simplification. of a joint national conference representing Cooperating with representative Frank the American Bar Association and the Carlson of Kansas in his efforts to bring American Institute of Accountants was about enactment of tax reform legislation, another activity. A large number of copies the Institute distributed widely the text of the proceedings of the Conference on of House Joint Resolution 211, known as Federal Government Accounting have been the Carlson bill. This particular distribu sent to newspaper editors, members of tion, which included a mailing list of chief government, teachers, national organiza editors of newspapers, resulted in a con tions and others. siderable number of news and editorial In general, the public information pro references to the need for changes in the gram continues to be concerned with revenue laws. securing expression of the ideas and pro Other information items sent to the posals of the accountancy profession in press and to other agencies in connection the press and through other channels. It with American Institute activities have is interesting to report in this connection included a statement by the president of that, in the course of the recent wartime the American Institute in connection with accounting conferences held in seven states, the presidential veto of the tax bill; a the president of the American Institute resolution calling for formulation of a appeared as a co-broadcaster with prom basic national tax policy passed by the inent local citizens in four business centers, committee on federal taxation; the text namely, Houston, Tulsa, Omaha, and of a letter sent to the committee on de Kansas City. The public-information pro preciation of the National Association of gram has proven beyond any doubt that Railroad and Utilities Commissioners by the accountancy profession and its national the committee on accounting procedure and state organizations are gaining in of the American Institute; an analysis of recognition by the press, by business, and the results of a study into current corporate by the general public as sources of reliable profits; an accounting research bulletin information in connection with economic devoted to the treatment of renegotiation problems of present-day and postwar refunds in the current financial statements importance and interest. of contractors and subcontractors subject to the provisions of the War Profits Control Respectfully submitted, Act; a. number of news releases based on papers presented at the conference on M a u r ic e E. P e l o u b e t , Chairman federal government accounting. M a y 5, 1944.
Report of the Committee on Public Utility Accounting
To the Council of the and limited it to the consideration of such American Institute of Accountants: specific problems as might be submitted Gentlemen: The war program of the to it for cooperative effort with the com executive committee restrained this com mittees on accounting procedure and mittee from the initiation of any activities auditing procedure. 8 6 American Institute of Accountants Yearbook The progress on such matters since the procedure appeared personally before the last previous meeting of council is as NARUC committee at a hearing held on follows: February 2, 1944, and discussed the Insti tute’s position with respect to the report N orthwestern E l ec t r ic C o m p a n y C a s e of the NARUC committee. The petition for a writ of certiorari was Two major points of difference were granted by the Supreme Court of the expressed on behalf of the Institute. The United States. The executive committee first point rested on the definition of authorized the filing of a brief amicus depreciation accounting by the Institute curiae. In that brief the Institute pointed as purely a matter of allocation of cost out that the order of the Federal Power and not at all a matter of measurement Commission was not supported by ac of loss of value. The second point was an cepted accounting principles as had been opposition by the Institute to a proposed alleged erroneously in a brief filed in retroactive application of a narrowly con behalf of the Commission. The Institute ceived formula of straight-line depreciation. carefully refrained from expressing any There seems to be an impression that opinion on the merits of the case itself. the cooperation of the Institute has been The court upheld the order of the Com helpful. mission. However, the intervention by the Institute was the first step in affirming the A m e r ic a n T r a n s it A ss o c ia t io n authority of the Institute as the exponent C o n f e r e n c e of the informed opinion of professional Responding to an invitation addressed accountancy. to the Institute, the chairman of this com mittee participated in a conference of the T e l e p h o n e A c c o u n ts accounting division of the American The proposed revision by the Federal Transit Association in New York on Communications Commission of its system April 26, 1944. The subject assigned was of accounts for telephone companies has “Depreciation practices during and after been postponed for the duration of the the war.” Considerable satisfaction at the war. No further action has been taken in cooperation of the Institute was expressed that matter by this committee. by the officers of the Transit Association. Depreciation Report by NARUC M iscellaneous M a t t e r s In cooperation with the committee on Some requests for information or advice accounting procedure, the chairman of have come to the office of the Institute this committee participated in the drafting and have been referred to this committee. of a letter, dated January 28, 1944, ad They have all been answered. dressed to the committee on depreciation of the National Association of Railroad Respectfully submitted, and Utilities Commissioners. Also, the chairman of this committee and the acting Henry A. Horne, Chairman chairman of the committee on accounting May 5, 1944. Midyear Reports 87
Report of the Committee on State Legislation
T o the Council of the of the several states until disposition was A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : made of them. It continued the policy of keeping the members of the committee, Gentlemen: During the current year the legislatures of seven states were in ses officers of the state societies and the state sion and seven bills affecting the profession boards of accountancy, informed of the were introduced in the legislatures of four legislative developments as they occurred. of these states. Three of the bills were For the past three years the committee has had as its objective the preparation of enacted into laws. In Kentucky a bill was passed which model CPA bills, both the restrictive and abolished the Division of Professional nonrestrictive type. At the meeting of Regulations and returned to the various council last fall it presented preliminary state boards (including the Kentucky State drafts of model bills for consideration of all Board of Accountancy) the authority and parties interested and stated that revised functions previously held by each board. drafts would be submitted to this meeting. Another bill which would have granted The preliminary drafts were submitted to CPA certificates by reciprocity to account Spencer Gordon and William M. Aiken, of ants licensed by other states failed to pass. counsel for the Institute, who have pre A bill, introduced in the Mississippi pared a revised draft of the restrictive senate, proposing the issuance of CPA bill, a copy of which was mailed to the certificates to certain public accountants members of council with the hope that many helpful suggestions will be made at died in the senate. In the senate of South Carolina a bill this meeting. was introduced proposing amendments to In the past several years council has the provisions of the present law relating approved certain broad general principles to the examination of applicants to practice as a basis for accountancy legislation. The as public accountants, to require the committee felt that these principles had state board to notify applicants as to been included in the model bill submitted whether or not they passed the examina last fall and also believes that they have tion, and providing a method for applicants been continued in the latest draft. to secure examination papers from the In the preparation of this draft, coun board of examiners. This bill failed to pass. sel has attempted to incorporate these Three bills affecting the profession were principles into a bill which will successfully introduced in the general assembly of withstand the legal tests to which such Virginia. Two of these were enacted into legislation is liable to be subjected. The laws, the other relating to the educational latest draft is modeled after a bill intro and experience requirements of applicants duced in the New York legislature in 1939 for the CPA certificate failed to pass. One but which failed to pass. It should not be of the laws enacted by the Virginia understood that either the draft or the assembly relates to the composition and 1939 bill has the approval of the New appointment of the state board of account York State Society, or of the board of ancy; provides for terms of five years examiners of that state. instead of three, staggers the appointment It is the hope of the committee that a of members, restricts membership on the free discussion of the question raised by board to two successive terms, and em this draft will be had on the floor of this powers the governor to remove any mem meeting so that the committee may have ber for misconduct, incapacity, or neglect the benefit of opinion of council. It is also of duty. The other law requires all state hoped, however, that no specific effort will agencies authorized to conduct examina be made to rewrite the bill on the floor tions of applicants for admission to prac of the meeting but that it will be referred tice or pursue any profession, vocation, back to the committee for redrafting in the trade, calling, or art to file a copy of the light of the views expressed here. examination with the secretary of the Respectfully submitted, commonwealth as a public record. The Institute’s office followed these bills T. Dwight W illiams, Chairman from their introduction in the legislatures May 1, 1944 8 8 American Institute of Accountants Yearbook
Report of the Committee on Technical Sessions
To the Council of the 2:00 P.M. American Institute of Accountants: Accounting Aspects of Contract Ter mination Gentlemen: The committee on tech nical sessions met in New York City on Friday, April 7th. Messrs. Richardson, Thursday (Oct. 19) Carey, Winton, and Gilman were present. All-day technical session on Taxation: During the course of the meeting the 9:30 A.M. following tentative draft program was “Tax Reform from an Accounting developed for the 57th annual meeting of Viewpoint ” the American Institute of Accountants, —Tax Simplification October 16-19, 1944, at St. Louis, Missouri. —Tax Legislation —Administrative Improvements Monday (Oct. 16) —Accounting v. Tax Concepts Registration, and meetings of council, —Time of Realization of Income state society presidents, accountancy —Proposed Changes in Deprecia examiners, Advisory Council, and tion Provisions Association of Certified Public Ac 2:00 P.M. countant Examiners “ Current Tax Practice Problems” —Important Recent Tax Account Tuesday (Oct. 17) ing Decisions 9:30 A.M. General Session, including —Tax Problems Arising from Re outside speaker of national prominence negotiation to deal with the subject: “How Can —Consolidated Returns Private Enterprise Meet Problems of —Capital Gains Provisions a Peacetime Economy” —Problems of Fiscal Year Tax payers 2:00 P.M. —Recomputation of Amortization Technical Sessions: of Emergency Plant Facilities “ Selection of Accounting Personnel” —Carry Back and Carry Forward— “ Independence of Professional Ac Net Operating Losses or Unused countants” Excess Profits Credit “Recommended Reforms in Gov ernmental Accounting ” Your attention is called to the fact that —Government Corporations no provision has been made for the annual —Administrative Agencies “The Legal and Accounting Profes dinner. If such an annual dinner is to sions Prepare To Meet Problems be included as part of the program, then of Mutual Interest” 7:30 P.M. Wednesday, October 18th, would appear to be an appropriate 8:30 P.M. time. Technical Sessions: The committee recommends and has “The Problem of Reporting Annual tentatively provided for a joint meeting Income ” of council and the state society presidents —Earnings Per Share on the evening of Monday, October —New Form of Income Statement 16th. From the tentative outline as submitted Wednesday (Oct. 18) above it will be seen that special emphasis All-day technical session on War Con has been given to two subjects, namely tract Termination: 9:30 A.M. War Contract Termination (to which the Report of Committee on Termination entire day of Wednesday, October 18th, has of War Contracts been devoted), and Taxes (to which the —Auditing Aspects of Contract entire day of Thursday, October 19th, has Termination been devoted). Your committee believes Midyear Reports 89 that these two subjects are of such par The selection of and invitation to session ticular interest at this time as to justify chairmen and speakers are now well this special emphasis. under way. The all-day session on War Contract Termination will be planned in coopera Respectfully submitted, tion with the committee on termination of Stephen Gilman, Chairman war contracts, while the Tax session will be John J. Lang outlined and conducted with the coöpera M a r k E. R ic h a r d s o n tion of the committee on federal taxation. May 2, 1944
Report of the Committee on Terminology
To the Council of the order to emphasize the fact that deprecia A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : tion accounting is a process of allocation. Two members of the NARUC committee G e n t l e m e n : on depreciation submitted comments on your committee’s definition. An oppor D epreciation tunity to deal with these suggestions arose The definition of depreciation suggested in the form of a request for comments on in the committee’s report of October 18, the tentative report of the NARUC com 1943, was approved by the committee on mittee, and the opportunity was availed of. accounting procedure and the report was The letter, dated January the 28th, ad circulated to the membership of the dressed by the chairman of the committee Institute as Accounting Research Bul on accounting procedure to the chairman letin No. 20. It has elicited considerable of the NARUC committee, deals at length comment, and one suggestion has been with the definition of depreciation. It is made to which effect might perhaps advan the strong feeling of your committee on tageously be given in a revision of the terminology that straight-line depreciation definition. It is that a specific reference has sufficient practical merits in given should be made to salvage, and the point situations to justify its adoption and that could be covered by inserting the words it is neither necessary nor desirable to “ less salvage, if any” after the words claim for that method characteristics, “ tangible capital assets” in the definition. such as being factual, which it does not As amplified the definition would read: possess. Depreciation accounting is a system of Your committee’s definition of deprecia accounting which aims to distribute the tion has become particularly timely in cost or other basic value of tangible capital view of the current problem, in the public- assets, less salvage (if any), over the esti utility field, of dealing with companies mated useful life of the unit (which may be which have, with regulatory approval, used a group of assets) in a systematic and the retirement reserve method. If such rational manner. It is a process of alloca companies are now required to use deprecia tion, not of valuation. Depreciation for the tion accounting, it is important that careful year is the portion of the total charge under consideration be given to the manner of such a system that is allocated to the year. Although the allocation may properly take effecting the change, and this necessitates a into account occurrences during the year, clear understanding of the true import of it is not intended to be a measurement of the depreciation charge; your committee the effect of all such occurrences. is following developments in this respect and hopes to cover the matter in its next A number of suggestions have been made report. as to the description of the annual charge for depreciation in financial accounts. After considering the various comments received, C u r r e n t A s s e t s a n d L ia b il it ie s your committee suggests that it would be The article prepared by Mr. Herrick, to helpful to describe the annual charge as which reference was made in the last re “depreciation allocated to the year” in port, appeared in the January, 1944, issue 90 American Institute of Accountants Yearbook of The Journal of Accountancy, and the that element has materially changed. Con April Accounting Review carries an article sistency, in its judgment, does not assure by Stephen Gilman in which he suggests an comparability except in so far as compara abandonment of the “ current” groupings. bility may be attained by accounting It seems desirable that the committee methods. on accounting procedure consider whether An illustration may be found in the or not there should be either some modifica problem of the proper treatment of re tion of present practice or a fundamental negotiation at the end of 1942 and at the change in classification. end of 1943. The governing principle is It seems evident that bankers, lawyers, that the accounts should reflect all liabili and others who are called upon to deal with ties which can be estimated with a reason the question, find difficulty in defining cur able degree of approximation. At December rent assets and liabilities satisfactorily, 31, 1942, the amount of the liability was, and are apt to rely on the procedure of in most cases, wholly uncertain and the requiring that they shall be determined in application of the principle did not, there accordance with generally accepted account fore, require provision in the accounts for ing principles. If accounting views on the the liability, but only an appropriate note question change materially thereafter, im of its existence.2 portant questions are likely to arise as to At the end of 1943 the elements of whether the reference to the accounting liability were in many cases reasonably principles in such cases is to be interpreted ascertainable. Where this was so, the as referring to the principles recognized at accounting principle above cited called for the date when the contracts were made, or inclusion of the liability among current the principles recognized at the later time liabilities in financial statements.3 If, there when effect was being given to them.1 fore, a company made no specific provision A pronouncement by the accounting pro for renegotiation in 1942, but made such cedure committee on the subject would be provision in 1943, it was not applying helpful and timely. different accounting principles in the two years, nor applying any principle in two C o n s is t e n c y different manners. Whether the difference Numerous suggestions have been made in treatment may have so seriously affected to your committee that it discuss the word the comparability of the two statements, “consistent” as used in the phrase “in that fair disclosure may call for a state conformity with generally accepted ac ment on this point is another matter. counting principles applied on a basis Your committee has noted with satisfaction consistent with that of the preceding year.” the number of cases in which corporations In particular, an indication has been sought have restated the accounts for 1942 in order of your committee’s views on the question to overcome the lack of comparability of the relation between consistency and which would have otherwise existed.3 comparability. In your committee’s view Your committee does not feel that the the phrase quoted from the standard form subject of “consistency” should be dealt of certificate implies consistency in the with solely as a matter of terminology; principles employed and the manner of it suggests that it be given further con their application. In relation to similar sideration by the auditing and accounting situations, it does not call for the same procedure committees. treatment of a given element in the ac Respectfully submitted, counting if the situation with respect to George O. May, Chairman Anson H errick 1 An interesting discussion of a similar ques tion, such as the meaning of the word “ min W alter A. Staub erals” when used in an old statute which is May 8, 1944 being applied today, is contained in the chapter on Law and Language which appears in Lord 2 See Accounting Research Bulletin No. 15. MacMillan’s Law and Other Things. 3 See Accounting Research Bulletin No. 21. Midyear Reports 91
COMMITTEES ON WAR ACTIVITIES
Report of the Committee on Accounting and Statistical Reports by Industry
To the Council of the Form B consists of two schedules as follows: A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : Statement of profit and loss Gentlemen: The committee on account Analysis of sales ing and statistical reports by industry has held no meetings since the annual meeting In connection with this revision of forms in October, 1943, as no specific problems A and B, the special subcommittee of the have been presented which called for Advisory Committee on Government Ques action of the whole committee. However, tionnaires held several meetings in New it is believed that the function of the com York and Washington and investigated mittee is to cooperate with other agencies the uses made by several sections of the in helping to make accounting and statis OPA of the data called for on these fi tical reports by industry as simple and nancial reports. effective as possible and to relieve industry Arrangements were made for sample from any unnecessary burden, especially copies of the revised forms A and B to be during the war period. This report, there sent to members and associates of the fore, summarizes the activities of members Institute. of the committee in connection with Albin D. Strandberg, a member of the accounting and statistical reports by committee, met in January with officials industry. of the Controlled Materials Plan Division The chairman was one of three members of the War Production Board, to consider of a special subcommittee of the Advisory possible revision of the Controlled Mate Committee on Government Questionnaires rials Plan Accounting Manual. Following which, in cooperation with the Bureau of this meeting the committee submitted a the Budget, assisted in drafting the revised brief report covering the questions raised. OPA financial reporting forms A and B. The chairman of the committee is now Form A, which was originally twenty-six serving as a member of the subcommittee pages legal size and had been revised in of the Advisory Committee on Government 1942 to twenty pages, was reduced to four Questionnaires, which is dealing with re pages letter size, and Form B, which was vision of standard procurement forms originally twelve pages legal size and had numbers 1 and 2 of the War Department. been revised in 1942 to four pages, was reduced to four pages letter size. Form A, Respectfully submitted, the annual financial report, now consists of four schedules as follows: C. O liver W ellington, Chairman George Cochrane Statement of profit and loss W arren W. N issley Balance-sheet Albin D. Strandberg Analysis of sales Summary of surplus and surplus reserves May 4, 1944
Report of the Committee on Accounting Manpower
To the Council of the their contradictions or inconsistencies, made A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : confusion worse confounded for registrants and their employers. Gentlemen: Since the October, 1943, This situation, so unfortunate and so meeting of council, administration of the Selective Training and Service Act has unhappy, for registrants, their families, and been marked by much confusion, especially their employers, because of the uncertain since the first of the current calendar year. ties created, apparently had its origin in a For several weeks there were almost daily memorandum from the President of the pronouncements of policy, that because of United States to the Director of Selective 92 American Institute of Accountants Yearbook
Service, which in turn through the ma amendment, which is still effective, pro chinery of the Selective Service administra vided that a registrant, ages 18 through 25 tion was communicated to local boards. (other than a registrant who has been found This was taken by local boards as a direc to be disqualified for any military service tion to induct, with few exceptions, all or found to be qualified for limited service physically fit male persons under 26 years only), may not be considered a “ necessary of age, and to postpone induction of men man” entitled to be placed in Class II-A over that age only if they were engaged in or Class II-B unless activities which could be considered essen tial from a narrow viewpoint. The immedi (a) The state director of Selective Service ate result was the temporary practical of the state in which the registrant’s elimination of the broader basis theretofore principal place of employment is existing for employers’ requests for occu located has endorsed the application pational deferment. Some local boards, for for deferment, or (b) The Selective Service director spe instance, were reported to have concluded cifically authorizes the classification, that Local Board Memoranda No. 115 and and the local board determines that No. 115B defining the general bases for the registrant is, in certain named occupational deferment, listing essential occupations. activities and critical occupations and pre scribing procedures, under certain con The amendment also provided that a regis ditions, with respect to registrants in trant, aged 18 and over, may be considered critical occupations, had in effect been for deferment into Class II-A and Class abrogated, and such boards began to cancel II-B, who, by reason of his occupation, is occupational deferments granted or to re making a contribution in support of the fuse to consider applications for such defer war effort or in war production, provided ments. State Selective Service directors in he has been found to be disqualified for any some states were reported to have canceled military service or to be qualified for limited then existing replacement schedules effec service only. tive for accounting firms, and/or refused The age factor has been given added to consider new schedules when offered for importance in the classification of regis filing. In some cases appeals from immedi trants. Local Board Memorandum No. 115, ate reclassification into I-A by local boards, as amended, provides, among other things, of registrants covered by replacement that schedules that were summarily canceled, were reported to have been unanimously “ (b) For registrants ages 26 through 29, denied by appeal boards, precluding Presi the requirement that a registrant dential appeal. must be ‘a necessary man’ in war The condition into which the draft situ production or in support of the war ation had been thrown evoked strong pro effort will be strictly applied. tests and eventually saner procedures were “ (c) For registrants ages 30 and over, the requirement that a registrant must adopted that brought operations by local be a ‘necessary man’ in war produc boards into line with Local Board Memo tion or in support of the war effort, randa No. 115 and No. 115B; and replace will be applied less strictly with the ment schedules continued effective, or new increased age of the registrant.” schedules were accepted by at least some state Selective Service directors. Through Further, with respect to fathers, it is pro out this period of confusion, your com vided that: mittee endeavored to keep informed on developments, and in The Certified Public “ (b) Fathers, ages 26 through 29, if other Accountant of April 1, 1944, published a factors are equal, will normally be statement which gave to the membership accorded occupational deferment in of the Institute, the situation as it then preference to all non-fathers. “ (c) Fathers, ages 30 and over, if all other appeared on the basis of information ob factors are equal, will normally be tained by the committee. accorded more liberal consideration On April 4, 1944, Local Board Memo for occupational deferment than randum No. 115, which had been amended fathers under the age of 30 and in January, 1944, was again amended. The non-fathers.” Midyear Reports 93 “ Replaceability ” continues to be a para in Congress, is the earlier introduced, mount test in determining whether or not Austin-Wadsworth bill, which provides for a given registrant is a “necessary man” national service on a far broader scale, for Orders to local boards have given pre men and women, and consequently proba cedence to the reclassification of registrants bly is even less likely to pass. ages 18 through 25, and to the processing The list of critical occupations which was of them for induction, so that induction of attached to Local Board Memorandum registrants ages 26 and over has in effect No. 115 prior to the April 4, 1944, amend been postponed for an indeterminate, ment, was continued in effect with that though for those in the lower age brackets amendment. As to accountants, this list perhaps only a short, time. includes, among others, as a critical occu A by-product of the stirring about during pation, “accountant” with this definition: the period of confusion has been a sug- “Included under this title are certified gestion that steps be taken, legislative or public accountants or those persons who otherwise, to force registrants classified as have comparable training and responsibili IV-F who are not engaged in essential ties. They must be engaged in devising, activities, to change their employment into installing and controlling accounting sys war production or into work in support of tems, and assume extensive responsibilities the war effort. Efforts were made to bring for the examination and verification of about the enactment of national service records and prepare comprehensive finan legislation that had been pending in Con cial reports based thereon. It does not gress for some time. More recently there include persons who perform routine ac counting, auditing and bookkeeping duties has been introduced in Congress a bill under general supervision.” known as the Brewster-Bailey bill. Accord ing to a newspaper report, this bill includes This definition is not wholly acceptable three main features as follows: to your committee. The second sentence in the definition, taken literally, would ex (a) Provision for the immediate classifica clude from the classification any account tion as available for military service, ants who in addition to assuming “ extensive subject only to a routine appeal, of any responsibilities for the examination and registrant, age 18 to 45, who leaves an essential job without his draft board’s verification of records and (preparing) permission. comprehensive financial reports based (b) Authority to the Director of Selective thereon,” did not also devise, install and Service to designate types of deferred control accounting systems. On January 14, or physically rejected registrants, and 1944, after seeing a draft of the definition older men in those categories who are it was pointed out in a communication not engaged in essential work, into addressed to the authorities responsible for specified essential work in which there the definition that is a manpower shortage. (c) Provision for classification as imme “Public accountants frequently devise diately available for military service, and install accounting systems. However, of registrants classified as IV-F and controllers and other principal accounting those now considered too old for mili officers employed by corporations ' control’ tary service, who fail to heed a work accounting systems. Again, many highly directive within a specified time. They trained accountants in most responsible would be inducted with special Army positions, assume extensive responsibilities or Navy service units, in which their for examination and verification of records, work would consist of activities neces and prepare financial reports based thereon, sary to support and maintain fighting but do not devise and install accounting members of the armed forces, or chores systems. Accountants who specialize in on farms or in canneries. system installation are likely to do less of At a hearing on this bill, Army and Navy the auditing work and report preparation. The fact that there are degrees of spe representatives are reported to have been cialization in types of accounting work insistent that some form of legislation to does not, of course, reduce the importance solve the manpower problem was neces of each type.” sary. However, a senator is said to have commented that there were no signs now The comparatively slight changes in that this bill could be passed. Also pending wording necessary to cure the infirmities 94 American Institute of Accountants Yearbook your committee found in the definition, activity, as contained originally in WMC were suggested. But beyond an acknowl field instruction No. 53. That instruction edgement of the suggested changes and a read in part: statement that they would be given con sideration, no action resulted. It may be “ (b) Whenever the essential activities of an establishment are not separate that in the confusion and turmoil that and distinct from those which are shortly thereafter arose in the administra unclassified or non-deferrable, as is tion of the Selective Training and Service the case when the same set of Act, the matter was lost sight of or was workers is engaged in both sets of tabled for matters considered more impor activities, the entire establishment tant at the time. should be designated as essential if In November last year, your committee approximately 75 per cent of its was requested by the National Roster of activities are essential.” Scientific and Specialized Personnel to Under date of November 1, 1943, this was assist in the devising of a check list which followed by Supplement No. 1 which read the Roster was using in connection with as follows: its questionnaire for registration of account ants of professional level. Suggestions were “ In some regions the offices of the War submitted to the director of the Roster, as Manpower Commission have been desig requested. nating establishments as essential when as little as 50 per cent of the establishment’s Also in November, 1943, your committee activity has been devoted to production of was requested by the Roster to review a essential items. Where this practice has draft of material purposed by the Roster been followed, all establishments should for personnel of the United States Employ be put on notice that henceforth 75 per ment Service, to assist the latter in dis cent of their activities must be devoted to tinguishing accountants of professional the production of essential items. If they level from bookkeepers and record keepers, wish to remain on the essential list, they and also to aid in judging those who claim should be required to declare their inten training, experience and responsibilities tions of qualifying under the 75 per cent requirement and indicate when such adjust comparable to those of certified public ment can be completed. A reasonable time accountants. While the suggestions made should be allowed for making adjustment were not adopted in identical form, the to the 75 per cent level. Plants should be substance of the material ultimately re required to have 60 per cent of their leased by the Roster did contain definitions activity devoted to essential production and descriptions supplied by your com within 60 days and 75 per cent in not more mittee at this time, or at other times in than six months as a condition of retain other connections. ing their classification as an essential Last November your committee was re establishment. Establishments not already designated as essential should not be so quested to suggest names of professional designated unless at least 75 per cent of accountants in or within easy reach of, their activity is devoted to the production Washington, to constitute a panel that the of items included in the essential list.” National Roster of Scientific and Special ized Personnel could consult when evalu Following the promulgation of Supple ating claims for deferment filed in behalf ment No. 1 to Field Instruction No. 53, it of registrants in the professional field, and became apparent that in various areas of which had been referred to the Roster for the country, professional accounting firms recommendation as to action. Your com would not be able to meet the condition mittee complied, and it is understood that prerequisite for declaration as an essential those suggested for the panel accepted establishment, namely, that not less than appointment, and have rendered eminently 75 per cent of their services was being satisfactory service. given to activities engaged in war produc Another problem that has engaged the tion or in support of the war effort. It also attention of your committee because of its was apparent from the language of the relation to accounting manpower, is the Field Instruction and the supplement, that War Manpower Commission’s rule for de both were written for manufacturing estab termining the essentiality of an establish lishments, while they also were applicable ment as distinct from the essentiality of an to service organizations. Your committee Midyear Reports 95 early explored the possibility of some re Out of the discussions ultimately grew a vision of the rule that would give recog suggestion for an interpretative instruction nition to the realities of professional that would permit of the classification of accounting practice as these varied in dif professional accounting firms as essential ferent sections of the country in accordance establishments, if they could establish that with variations in the economic activities over a 12-month period their services to in these sections. It was pointed out that activities engaged in war production, or in in certain areas predominantly industrial, support of the war effort, averaged not less the character of professional practice, gen than 60 per cent of their services during erally speaking, would probably follow very that period to all types of activities; and much the economic pattern of the area; th at in eight weeks of the year, not neces whereas in localities such as New York sarily consecutive, not less than 75 per cent City, which is not predominantly indus- of their services were rendered to activities trial, accounting practices would probably engaged in war production or in support of generally reflect that condition. The com the war effort. No final decision has yet mittee received no encouragement in its been had on this proposal, but your com efforts to obtain some modification of the mittee is hopeful that either this suggestion, rule. or some other, can be worked out that will Some time after the initial activities of recognize the situation of the professional the committee on the problem, a new ap accountant. proach was made to War Manpower Com In the discussions with the New York mission authorities in Washington. Among regional and area representatives of the other things, it was pointed out that many War Manpower Commission, your com accounting firms handling a substantial mittee had the cooperation of representa amount of work for essential activities tives of the New York State Society of could not in important areas meet the Certified Public Accountants. 75 per cent qualification except by divest Failure of accounting firms to secure ing themselves of clients not considered classification as essential establishments, essential and having portions of their staffs not only would completely change their idle in the interims between services to status in respect of recruitment and mainte different essential clients—an obviously nance of staffs, under War Manpower absurd situation. A more sympathetic atti Commission employment-stabilization pro tude was encountered in these later dis grams, but also would affect adversely the cussions, and with the idea of using the consideration of certified public account New York City area as a testing ground, a ants or their equivalent on the staffs of conference was arranged with the New professional firms, for deferment under the York regional director, whose jurisdiction Selective Training and Service Act, includes the New York City area. A problem to which your committee so The initial conference was devoted pri far has given only cursory attention but marily to the presentation of the profes which will become increasingly important sional accountants’ problem in meeting the with continued discharges of larger num 75 per cent test and to a preliminary ex bers of men from the armed services, is ploration of interpretations of the rule that that of required reemployment under pro would take into consideration differences visions of the Selective Training and Service between professional service activities and Act. It is hoped that authorities charged establishments engaged in the production with the administration of the pertinent of physical things. After some delay, a provisions of that Act, will soon make second meeting was held, participated in available rules and regulations that un also by representatives of the area direc doubtedly will be adopted to implement the tor’s office, out of which came a suggestion administration of the reemployment pro for an interpretation of the rule in its visions of the Act. application to accountants that would not abandon the 75 per cent test set forth in Respectfully submitted, the rule, yet would give recognition to the J. A. Lindquist, Chairman variations in accounting services as these occur from time to time. May 5, 1944 96 American Institute of Accountants Yearbook
Report of the Committee on Postwar Problems
To the Council of the examined by the professional accountant, American Institute of Accountants: nevertheless the committee believes that Gentlemen: Your committee was ap the professional accountant properly may pointed to consider certain broad postwar suggest that the annual report include problems of general professional interest, statements and schedules prepared pri not directly related to expansion of the marily for non-stockholders. Institute’s activities nor to internal reor We therefore recommend the appoint ganization of the Institute’s departments. ment of a committee to devise or approve Matters of a procedural or administrative forms of statements and schedules designed nature will, we understand, be referred to meet the varying requirements of non directly to the Institute committees con stockholding readers of annual corporation cerned or to the executive committee of the reports and to bring about their dissemina Institute. tion to Institute members. After considering numerous matters which might properly come within our A c c o u n t in g I ndependence province, we have decided to confine our In addition to examining his client’s recommendations, at this time, to four balance-sheet and profit-and-loss state items (not already in the hands of other ment, the professional accountant may committees) which seem to us sufficiently serve in other ways. He may be consulted in the public interest to justify current with reference to the client’s management emphasis. problems, tax problems, and operating or These items are: financial procedures. Often he is asked to 1. Preparation of corporate reports in such attend directors’ meetings or even to be a manner as to harmonize with antici come a member of a client’s board of pated social and economic changes. directors. 2. Investigating problems of professional Smaller clients may desire him to main accounting independence. tain certain of their accounting records in 3. Fostering the growth and employing power of small closely held corporations. his own office. 4. Encouraging postwar training on a pro Some of these activities, while admittedly fessional level for present members of helpful to the client, may so affect the our armed forces. accountant’s independence as to make it unethical for him to express a profes R e p o r t P r e p a r a t io n sional opinion as to the client’s financial Stockholders, management, labor, gov statements. ernment, financial interests, and the public Non-professional or semi-professional re are all concerned with corporate reports lationships between the accountant and his from varying viewpoints. With a few out client seem to require additional study. The standing exceptions, such reports have long definitions and illustrations of independ been prepared for, and primarily addressed ence now existent seem inadequate since to, stockholders only. Your committee be industry is composed not only of a rela lieves that the reporting procedure of tively few large corporations, but of many corporations should be broadened, and that smaller enterprises unable to support inter the annual corporation report should in nal auditing staffs or employ competent clude statements, schedules, tables, com controllers. parisons, and charts designed to inform Such smaller enterprises look to their others than stockholders respecting the public accountants for much more than corporation in its varied relationships to formal written audit reports. society as a whole. To what extent may the accountant While your committee recognizes the further serve his client and still remain doctrine of primary responsibility and “independent”? This question will assume agrees that each corporation’s report is its great importance after the war, and we own pronouncement and that the financial therefore recommend that the Institute statements contained therein are prepared undertake to uncover and survey pertinent by the corporation and only thereafter are case histories and to develop therefrom a Midyear Reports 97 reasonable practical code, the application needs without lowering the standards of of which will be helpful to both the client the profession. and the accountant. We therefore recommend the appoint ment of a committee to: P o st w a r E m p l o y m e n t b y S m all C orporations 1. Survey the training needs of discharged accountants. The small business enterprise, with little 2. Coöperate with the training program of access to money markets, has, in the past, the Veterans Administration (or any grown in stature and employing power other similar government agency). through reinvesting rather than distribut 3. Prepare curricula for presentation to ing its earnings. the Veterans Administration (or other If this mode of growth, admittedly im- similar government agency). portant to our postwar economy, is to 4. Prepare appropriate text material for use of any school approved by the continue, it seems that some relief from the Veterans Administration (or other simi rigorous application of section 102 should lar government agency). be sought. Such relief is particularly needed 5. Determine educational and experience in the cases of closely held corporations. prerequisites for refresher courses. While we understand that the committee 6. Recruit qualified members of the ac on taxation is giving consideration to prob counting profession to serve as part-time lems arising from section 102, we recom instructors or text writers. mend that: (1) the committee on taxation The foregoing program refers only to give special attention to the need for training on a professional level to be made accumulation of surplus from the view available through the Veterans Administra point of postwar unemployment, and (2) tion (or other similar government agency) the council of the Institute consider a to qualified accountants upon discharge formal resolution bearing on this matter. from the armed forces. I t is, however, recommended that the proposed committee P o st w a r T r a in in g also give consideration to the training Many accountants in the Army, Navy, needs of other qualified accountants who or other services, have had little oppor have been serving the nation in civilian tunity to keep currently informed respect capacities. ing the changing patterns of taxation, SEC regulation, accounting for, or auditing of, Respectfully submitted, government contracts, and the like. G eorge S. Olive, Chairman Upon their discharge, many of these Robert P. Briggs accountants will require short refresher E r ic A. C am m an courses of various types. H erbert C. Freeman In making the following recommenda Stephen Gilman tions, we have been influenced by con Harry E. H owell siderations of the needs of the profession, W illia m A. P a t o n the needs of men who may desire to enter M aurice E. Peloubet the profession, and the meeting of these May 7, 1944
Report of the Committee on Renegotiation of War Contracts contracts attributable to the increment in To the Council of the value of the excess inventory of certain A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : raw materials and agricultural products Gentlemen: Your committee has held specifically exempt from renegotiation in one meeting, which was with representa their first form or state suitable for indus tives of the Army to discuss suitable regula trial use. tions to carry out the provisions of section The committee made certain suggestions 403 (i) (3) of the renegotiation act as during the meeting and offered to review amended by the Revenue Act of 1943. The a draft of regulations when prepared or in purpose of this section of the law is to any other way to assist in the handling of exclude from consideration in renegotiation this problem. Incidentally, it is reported that portion of the profits derived from that May 25, 1944, is the time limit for 98 American Institute of Accountants Yearbook filing claims for correction of renegotiation The filing of a mandatory financial state due to this amendment of the revenue act in ment in accordance with provisions of the regard to excess inventory. Act will not relieve any contractor or sub With the help of the Institute office and contractor of the duties of furnishing any otherwise, your committee has endeavored additional information which the Board to keep in close touch with developments may later require. in methods and procedures for handling As soon as it was available, the “ Stand renegotiation of war contracts, and we are ard Form of Contractor’s Report” was summarizing in this report the more impor sent to all members and associates of the tant developments since the annual meeting Institute. Copies are now available for dis of the Institute in October, 1943. tribution and can be obtained by writing The matter of most immediate impor to the War Contracts Price Adjustment tance is that many businesses with war Board, Assignments and Statistics Branch, contracts subject to renegotiation must file Renegotiation Division, Room 3D573, The on or before June 1, 1944, a substantial Pentagon, Washington 25, D. C. amount of information. This filing must The regulations require that the ap be made by all those with fiscal years end plicable form must be filed, notwithstand ing after June 30, 1943, up to and including ing the fact that the information has February 28, 1944. There appears to be in already been furnished to a price adjust the act and the regulations no provision for ment agency. However, in the latter extension of time for filing. instance, the forms can be completed by Generally speaking, all concerns that reference to the information so furnished have received or accrued an amount in and making a specific statement of the time excess of $500,000 in the aggregate from and place of such filing. When certified by sales, either directly or indirectly, to the the appropriate price adjustment agency War Department, Navy Department, that it has received such information, the Treasury Department, Maritime Com forms will be accepted as having complied mission, War Shipping Administration, with the mandatory filing thereof. This Defense Plant Corporation, Metals Re procedure is apparently required to be serve Company, Defense Supplies Corpora followed even though a renegotiation has tion, and Rubber Reserve Company, for been completed for a year ended after any fiscal year ended after June 30, 1943, June 30, 1943. are subject to renegotiation. Regulations and interpretations of the The term “direct or indirect sales” War Contracts Price Adjustment Board means sales under a prime contract, a have been issued, and are available in the subcontract, a purchase order, or any sale, regular commercial services. the end-use of which is for any of the The first item of the instructions for government agencies enumerated above. preparation of standard form of con It is the duty of every concern to determine tractor’s report states that “ Copies of whether such sales exceed $500,000 for any audit reports by independent public ac period in question and consequently are countants should be submitted if available.” subject to renegotiation. There appears to be general appreciation The required information is to be filed on the part of the boards and the con in one of the three different sets of forms tractors as to the assistance that can be provided by the Board, as follows: rendered by independent public account (1) “ Standard form of contractor’s report ” ants in preparing the necessary data. Our to be used by concerns principally profession has a great responsibility to see engaged in manufacturing and general that the preparation and reporting of business. financial and other data are handled with (2) “ Standard form of contractor’s re complete impartiality and independence, port” (for construction contractors, no matter what our personal opinions may architects, and engineers) to be used be as to the fairness or unfairness of the principally by those engaged on con amounts or bases for renegotiation proposed struction projects, including those in particular cases. operating under architects’ and en gineers’ contracts. A hearing on the first renegotiation case (3) “ Standard form of contractor’s re before the United States Tax Court has port (for agents, brokers, and sales already been held and new standards of engineers).” procedure undoubtedly will be developed Midyear Reports 99 as this and other cases progress. There are A study of special reserves arising out various cases in connection with renegotia of the war was made by the research de tion pending in different United States partment and printed in The Journal of district courts which will undoubtedly Accountancy for November, 1943. This and have a bearing on any cases that are not similar studies by the Treasury Depart settled by mutual agreement between the ment and the Securities and Exchange contractor and the applicable service or Commission are mentioned in the bulletin board representing the government. of the National City Bank of New York for Because of the discussions in Washington May, 1944, which calls attention to the and elsewhere prior to the revision of the importance of postwar reserves and con law in regard to renegotiation of war con cludes its discussion as follows: tracts, there will undoubtedly be some changes in attitudes and procedures in “ In the balance-sheets of the 50 large handling renegotiations for 1943 as com war material manufacturers in our study, pared with similar procedures for 1942. the combined total of all reserves—includ The limits of war contracts subject to ing reserves allocated to specific purposes, renegotiation have been increased to $500,- general or unallocated, and including rou tine operating reserves as well as special 000 of sales directly or indirectly to depart wartime reserves—increased from $435 ments and agencies of the government. millions at the end of 1940 to $892 millions Greater attention must be given to income at the end of 1943. and expenses determined for income-tax “ The latter figure is a large dollar purposes, which may result in unsound amount. However, it represents but 6 per and unfair renegotiation if the tax figures cent of the total assets of these companies, differ appreciably from the regular oper which during the same period had expanded ating figures of the company. There is still from $9,868 millions to $13,960 millions in no allowance for reserves arising out of the meeting the unprecedented demands for production of war materials. In view of the war in determining true costs and profits. problems and uncertainties which these Information available as to the results companies face in the postwar period, the of renegotiation proceedings for a number real danger is that the reserves may prove of companies for 1942 appears to indicate to be less than adequate, rather than that, while the principle of over-all re excessive.” negotiation is sound, its administration has not been wholly satisfactory. Too little The chairman of your committee spoke credit has been given to unusual achieve on this same subject at the December, ment in helping the war effort and to out 1943, meeting of the New York Chapter standing efficiency of operation, so that the of the National Association of Cost Ac high-cost, inefficient producer in some cases countants and pointed out that security has been left in a better relative position holders, members of Congress, officers and after renegotiation than the more efficient employees of the government, and the concern in the same or a similar industry. general public are all interested in knowing The actual results of renegotiation have the true results of business operations approached too closely cost plus a profit during the war period. All of us, as well based on cost. Let us hope that, in con as the executives of companies, especially sidering results for 1943, companies with the large listed companies, have a great outstanding achievements in high produc responsibility to see that financial state tion and low costs will be given financial ments give as nearly as possible the true recognition in addition to flags and other earnings. This responsibility is not lessened evidences of excellence. by the fact that deductions of provisions Our president, Mr. Stempf, chairman of for postwar losses and expenses are not a similar committee of the Institute in allowable in determination of current the previous year, urged many times and taxes on income or in current procedures before different organizations that there for renegotiation. should be included in the determination of There is general agreement that business renegotiation of war contracts and also in should not make large profits out of the the Revenue Act suitable provisions for war, and the broad purpose of both rene expenses and losses arising out of the war gotiation and federal excess-profits taxes is in order to show the true income during the to take away abnormally large profits. war period. We have no quarrel with the purpose, but 100 American Institute of Accountants Yearbook we can and should be critical of certain In Accounting Research Bulletin No. 21 provisions of the laws and regulations, it was pointed out that profits would be and especially critical of their administra overstated unless provisions were made for tion. Because of the failure to allow in renegotiation of war contracts. Recom determining income all expenses necessary mendations in this bulletin have generally to produce such income, the results in been followed and have been approved by many cases have been to tax as income the War Department and other procure what is not true income and to renegotiate ment agencies who have emphasized that profits that were not true profits. There those charged with renegotiation should fore, the maximum tax of 80 per cent of pay no attention to reserves for renegotia income may actually be 85 per cent of the tion set up by contractors in determining true income, and an allowance of 8 per cent the amount of “ excessive” profits. for profits on sales after renegotiation may Over-all renegotiation of war contracts actually be an allowance of only 6 per cent will undoubtedly be affected by the law, if measured by the true profits. regulations, and procedures adopted in There has been some loose thinking and connection with termination of war con some equally loose talking about proposed tracts. The chairman of this committee has allowances for postwar expenses and losses conferred with Mr. Bailey, chairman of the as if such allowances were a bonus or sub committee on termination of war con sidy. Actually, what is desired is merely tracts, and the two committees will con the allowance as a deduction of the pro tinue to work together so that accounting portion of such expenses and losses that is problems involved in the termination of fairly chargeable against the earnings of war contracts may be handled in a manner each current period in order to give a bal that is most equitable and practical in their ance of net income which is as nearly as effect on over-all renegotiation. Tenta possible the true net income. Such true tively, we agree that the results of termina net income would be a sound basis in tion settlements should be included in the place of the present unsound basis for both figures for over-all renegotiation. The taxes and renegotiation. amount billed in termination for completed Even though allowances for postwar or partly completed articles and for inven expenses and losses cannot be made spe tory should be included in total sales and cifically as deductions from income, it is the cost of inventories—raw, in-process, to be hoped that the necessity for such and finished—should be included as a part allowances in order to show true income of cost. The only time that the settlement will be stressed by accountants and by of a termination claim will be given con contractors in preparing data for renegotia sideration for renegotiation is after the tion and in renegotiation proceedings, and close of the fiscal year when the contracts that such facts may be given consideration terminated will be included in one total in determining what profits on war con with the contracts completed and those tracts may fairly and reasonably be deter still in process at the close of the year, to mined to be “ excessive.” make up the sales and also the costs and There has been developing in recent profits on total war business. months a tendency toward renegotiation Your committee will continue to watch of individual contracts. If this procedure the progress of renegotiation of war con is extended broadly, it might result in tracts, keep members of the Institute ad renegotiation of the profitable contracts, vised of important developments, and be leaving the contractor to stand the full available for consultation and assistance to loss on unprofitable contracts. The over-all the boards and others in charge of renego return from war contracts might either be tiation policies and procedures. a net loss or a net profit so grossly inade quate as to be unfair to the contractor. Respectfully submitted, Certainly, if there is to be any recapture of profits during the war other than through C. O liver W ellington, Chairman the tax laws, every one will agree that M. C . C o n ic k over-all renegotiation is a sounder and A. S . F e d d e fairer method than either renegotiation of Raymond C. Reik individual contracts or any fixed percentage Prior Sinclair of profits. May 5, 1944 Midyear Reports 101
Report of the Committee on Termination of War Contracts
To the Council of the during the subsequent development of poli Am erican I n st it u t e of A c co untants: cies and the subsequent discussions on legislation. The resolution, the accompany Gentlemen: The committee on termina ing statement, and most of the testimony tion of war contracts has continued its were printed in The Journal of Accountancy policy of cooperating with various branches and need not be repeated here. or departments of the government in all The position taken by the Institute matters where auditing and accounting appears to be in accord with the decisions enter into procurement of war materiel arrived at by various procurement agencies. or the cessation thereof. The name of the The Baruch-Hancock report took the same committee was changed from the “ com position. During recent weeks, however, mittee on government audit of contractors’ there has been a resurgence of the demand costs” to the “ committee on termination that the Comptroller General be allowed of war contracts,” because the emphasis to participate in termination settlements in of the committee’s activities seemed to be some way, The House Committee on Mili on the latter problem. The committee tary Affairs recommended to the House has cooperated with other citizen groups that the Comptroller General be given veto interested in the same general subject power over settlements. Senator Murray, and has had occasionally to deal with sponsor of the Senate bill on this subject, special problems which involved the War indicated a feeling that the Comptroller and Navy Departments. The activities of General should exercise something more the committee can be divided generally than his traditional function. The House into four main classifications, as follows: Committee on Naval Affairs indicated a desire to permit the Comptroller General (1) Legislative to participate in some manner. (2) Administrative The committee on termination of war (3) Cooperation with others contracts took cognizance of this discussion (4) Miscellaneous. and came to the conclusion that the Insti tute had an obligation to the public to present its views on what after all was L egislative fundamentally a question of sound and It will be remembered that council, at its effective auditing. The committee offered meeting on October 21, 1943, passed a to appear before the House Committee on resolution for presentation to Congress Naval Affairs (Vinson Committee) and was dealing with the participation of the office given the opportunity of testifying on of the Comptroller General in termination Friday, April 14, 1944. procedures and taking the position that the Acting under authority of the council termination settlements should be made by resolution above referred to, the committee the procurement agencies, that such settle took the position that the Comptroller ments should be final and binding except General and the General Accounting Office for fraud, and that the Comptroller General should not participate in the determination and his General Accounting Office should of the amounts that would be allowed on have no further authority than the tradi termination claims but that the activities tional one of examination for legality and of that office should be limited to reviews for fraud. This resolution and an accom for legality and fraud. This position was panying statement were presented by the not new, but the main emphasis in presen committee on October 22, 1943, to the tation was made on the point that exami Murray subcommittee of the Senate Com nations for fraud, if they were to be mittee on Military Affairs. The propriety effective, required examinations by the of testimony by the Institute on matters General Accounting Office of the records within the special province and experience of the various settlement agencies dealing of the independent accountant was recog with termination claims. It is the com nized, the testimony was well received and mittee’s position that such examinations was noted and referred to many times were inherent in the provision that the 102 American Institute of Accountants Yearbook General Accounting Office should examine no selfish interest. After some initial for fraud, but, in view of the misunder scepticism the Vinson Committee recog standing that seemed to exist, the com nized the peculiar right of the profession mittee suggested that such inherent rights to speak on the subject, and for an hour could be written into the law. The com and a half took full advantage of the oppor mittee pointed out that it was repugnant tunity to question. The incident provided to the theory of independent auditing for additional evidence of the fundamental the General Accounting Office to par importance to society of the independence ticipate in the administrative decisions in of viewpoint of the accounting profession. any way and then to audit procedures and decisions at a later date. A dministrative The statement filed by the committee pointed out how effective had been the There have been and still are many per standard auditing procedures of the public plexing and difficult problems in connection accountant in making postaudits and re with procedures and policies to be adopted porting on procedures and policies to by the procurement services in respect of boards of directors for general commercial termination claims. The services of the practice and suggested that it would be committee have been offered to various equally effective if the Comptroller General administrative agencies such as the War were to operate in the same manner. This Department, the Navy Department, the position was well received by all the ad Joint Contract Termination Board, and ministrative agencies of the government others. Particularly has the committee had and was accepted in principle by the House representation in various civilian advisory Committee on Naval Affairs, although its groups called in by the various subcom effect was partly vitiated by a provision mittees of the Joint Contract Termination that a representative of the Comptroller Board. General might be present at all settlements Several members of the committee met as an observer, a position which our com with the officers of the Fiscal Division of mittee had condemned. Senate bill 1718, the War Department in Washington on called the Murray-George bill, meets the November 2, 1943, to consider proposed entire approval of our committee in so cost interpretations. This was a two-day far as it deals with the function of the meeting, the results of which probably Comptroller General. would have been made public long since The committee believes this question had it not been for the establishment of to be of paramount importance and will the Joint Contract Termination Board and present to council a resolution on this sub the transfer of the responsibility for indivi ject which will be supplementary to the dual cost releases to a subcommittee of resolution approved by council last fall. that Board. On December 7th a represen It may be necessary and desirable for the tative of the committee met with other Institute to make its position known to all civilians in Washington to consider with members of Congress, and a resolution of the procurement agencies the definition of council offers the most convenient and costs subsequently released by the Joint effective vehicle for that purpose. The Contract Termination Board under date statement presented by the committee to of December 30, 1943. The basic problem the House Naval Affairs Committee and involved in this release was whether to the more important parts of the testimony define costs generally with specific para are expected to appear in The Journal of graphs only on a few quite unusual items Accountancy. or whether to have a long and complete The appearance before Congress again definition. The recommendations of the demonstrates the soundness of the basic committee were toward the former, and policy of the Institute to make itself heard this philosophy was finally adopted. On on matters of public policy where the ex February 2nd representatives of the com perience and training of the independent mittee met with subcommittees of the Joint public accountant particularly qualify him Contract Termination Board which dealt to speak. Not only did this problem involve respectively with the termination article auditing in a great degree, it needed partic for subcontracts and with the problems of ularly an expression from someone with company-wide direct settlements. A uni Midyear Reports 103 form termination article for subcontracts other certified public accountants by has been made available to the contractors, President Stempf also should prove to be but the problem of over-all company-wide helpful. It is, in the opinion of the com settlements is so complex that no definitive mittee, one of the most important letters procedures thereon have yet been decided ever sent out by the Institute. The prepa upon. ration of and assistance in termination On April 19, 1944, representatives of the claims by independent public accountants committee and others met with other sub is bound to offer a unique opportunity committees of the Joint Contract Ter for the independent public accountant to mination Board, one dealing with the demonstrate to the public his independence question of forms and one dealing again and objectivity of viewpoint, while failure with individual cost interpretations to be to do so may have far-reaching effects on issued by the permanent subcommittee on the profession. costs of the Joint Contract Termination The relationship of termination and Board. It is understood that the tenta renegotiation has come before the com tive forms considered at that time are to mittee several times in various ways. It is be further revised. The cost interpretations the committee’s position that termination cover a number of highly controversial and renegotiation should not be combined points and it may be that the actual re but that it is necessary that there be the leases will be held up for some time. It is closest cooperation between the two expected that the committee will be called branches of the various services. upon frequently in connection with these A question was raised as to the propriety and other points as the administrative pro of the use by the government of the regular cedures are being developed. independent public accountants of indivi It is gratifying to note that positions dual contractors for certifying to cost taken by the committee and recommenda data in a special instance not connected tions made in April, 1943, and at various with termination. The committee made times since, are, in all important aspects, representations that both equity and speed being recognized as desirable; and those will be best served ordinarily by the use of which the committee believes to be of reports of the company’s own regular inde major importance are being worked into pendent public accountants acting in their the procedures now being developed. conventional capacity.
C o o p e r a t io n w it h O t h e r s C o n c l u s io n Representatives of the committee at The importance of the independent pub tended several meetings of an advisory lic accountant in termination procedures is group of the National Association of Manu not yet fully appreciated either by the facturers. It has also cooperated with war government, the contractors, or by the contract termination committees of other accountant himself. The committee believes groups. that there will be increasing participation by public accountants in these procedures as M iscellaneous time goes on. It believes also that it is the obligation of the Institute to continue to The committee has been concerned with information which it has received with disseminate all possible information on this subject to its members and to other ac respect to the inadequacy of the average termination claim as it was filed with the countants, and to assist in discussion of settlement agency, including those claims termination problems by the various state societies. that were prepared by certified public ac countants or accompanied by their reports. Respectfully submitted, Bulletin No. 20 of the committee on audit ing procedure, dealing with accountants’ G e o r g e D . B a il e y , Chairman reports on termination claims, which had Sa m u e l J. B r o a d the hearty endorsement of our committee, J o h n B . I n g l is should prove to be helpful. In this connec C h a r l e s W. J o n e s tion, the letter sent to members of the D o n a l d M. R u s s e l l American Institute of Accountants and May 8, 1944 APPENDIX B
Annual Reports of Officers, Auditors, Council, Board of Examiners, Committees, Boards of Trustees of Foundation and of Benevolent Fund, Advisory Council of State Society Presidents Report of the President of the American Institute of Accountants A prominent accountant said to me last will it also become more and more the week: “ The Institute has plenty of tech target of attack, either by those jealous nicians; what it needs is statesmen.” The of its preferment, or by the drooling wolves need is obvious, but the more I ponder the before an imagined strikesuit feast. We challenge the more firmly do I conclude must guard our right to determine what that the Institute never lacked statesmen, are generally accepted accounting prin and has no reason to fear the future. ciples and generally accepted auditing Show me another profession which can standards. As a profession, we have an point with equal pride to life-long, active, inalienable right to set for ourselves and loyal interest of its finest minds. Forty objective standards of independence, in years ago, in this fair city, the first Inter tegrity, and competence. We must present national Congress of Accountants included a strong, united front against the imposi a number of men who are present today. tion of far-fetched unreasonable responsi Then, as now, these men were leaders, bilities beyond the scope of those which fighting to establish a true profession. They the profession has declared itself ready to did so fearlessly and proudly then; they assume. do so today. They have planted the same Leadership in these matters must be ideals in all who have known them and expected, and shall without question be have worked with them. What better found, in the administrative bodies of the schooling in professional statesmanship Institute. Our elder statesmen have built could one desire? a firm foundation; their disciples are Statesmanship in the profession looks numerous, competent, and ardent. The beyond immediate selfish interest or Institute does indeed need statesmen, and expedience toward the long-range develop let us not forget it; but I firmly believe ment of the influence, recognition, and that it has bred them for the past forty prestige of the profession, through unmis years at least. Leadership for the profession takable service in the public interest. seems well assured, and I admonish the Statesmanship demands constant vigilance younger men in the profession that we and vigorous action. It demands an aware look to them for such leadership in the ness of opportunity and a willingness to future. For that leadership they will act promptly, fearlessly, and diligently, as require years of training and experience have all of the Institute’s special wartime in the affairs of their respective state committees during the past three years. societies and the Institute. Do not post It demands vigilance concerning deliberate pone the period of preliminary training. or inadvertent attacks upon the integrity, Accept and discharge with care every capacity, or authority of the profession; opportunity to serve the profession. Your and prompt action to counteract such ability, judgment, and staying-power will attacks, and to clear the record. soon be measured by those with whom you The administration of the Institute has serve, and they will eagerly transfer to had both praise and criticism within the worthy younger shoulders the responsibili profession; praise for prompt action and ties which have been borne by those who constructive contributions; criticism of so- have served long and faithfully before. called appeasement, on the one hand, or of I shall forego the privilege of presenting undue aggressiveness on the other hand. a preview of the Institute’s accomplish These are all healthy signs of widespread ments during the past year. This will be interest in the Institute’s activities, and done thoroughly in the report of the council recognition of our responsibility to lend a which will be presented this morning, hand in shaping public policy. We are supported in greater detail by many becoming more sharply aware that account vitally interesting reports of committees ing is a potent social force; that its use or to be published shortly. abuse may radically affect the destinies of Despite serious losses in personnel dur our economy. ing the year, our resourceful secretary has As the profession grows in influence, as kept the office at a high level of efficiency; it gains public respect and recognition, so and has goaded, aided, and abetted the 107 108 American Institute of Accountants Yearbook committees, with foresight, wisdom, and and well, and have gained such high ardor which evoke the highest respect and respect in the nation’s capital and among admiration of all who fall within his spell. the general public. For that privilege, I I am happy to have shared in the admin shall always be grateful. istration of the Institute in a year in which its committees have served so faithfully V ic t o r H. St e m p f , President
Report of the Secretary
To t h e C o u n c il o f t h e may be found in the increasing frequency A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : with which the Institute is mentioned in the public press, particularly in editorial G e n t l e m e n : comment; in the frequency with which individual members of the profession have P u b l ic A f f a ir s been called to testify as experts in cases The fiscal year 1943-1944 will be a before regulatory bodies; in the example notable one in the history of the Institute. of a corporation which in a recent report Not only in the volume and variety of the to stockholders explained a decision on work done, but in the high level at which financial policy by citing a recommendation much of it was done, the past year’s results of the Institute; in the quotation of a are impressive. statement by the Institute in a debate on Accounting and auditing have come the floor of the Senate; and in the recent to be recognized by policy-makers as proposal by a taxpayers association, which vital elements in war procurement, war- received favorable comment from a mem contract termination, wartime controls, ber of the House Ways and Means Com federal income taxation, public-utility mittee, that reports of taxable income rate regulation, regulation of publicly certified by certified public accountants be owned corporations, and the federal accepted by the Treasury without further government’s operating procedure—all audit. matters of major interest to the community as a whole. The experience of the past year P rofessional A f f a ir s indicates that the American Institute of Accountants is rapidly coming to be recog However, the Institute has not been nized by policy-makers as a principal wholly preoccupied with public affairs. source of authoritative opinion on account Problems of immediate interest to the ing and auditing. Institute representatives practicing certified public accountant have offered their views on these subjects of had their share of attention. broad public interest before Congressional In the formation of the National committees, the United States Supreme Conference of Lawyers and Certified Court, and the National Association of Public Accountants a foundation has been Railroad and Utilities Commissioners; and laid for close, continuing cooperation with in conferences with many individual the American Bar Association, whose com members of Congress, with staffs of Con mittee on unauthorized practice of law gressional committees, with staffs of war recently recorded the opinion that certified agencies and other government depart public accountants may properly prepare ments, and with the New York Stock income-tax returns. Exchange. These appearances and con An ambitious program of research in ferences unquestionably have had a con selection of accounting personnel has been structive effect. undertaken, which may lead to far reach It may fairly be said that the account ing improvements in personnel policies ing profession, which in the past has often and training, accounting education and been consulted on problems of administra C.P.A. examinations. tive procedure, is beginning to play a part, Refresher courses for war veterans are though as yet a modest one, in the formu being prepared, in recognition of the lation of public policies. Additional evi Institute’s responsibility to provide former dence of widening respect for the profession public accountants who have served in the Annual Reports 109 armed forces with a ready means of have attended state society meetings else reorientation in their profession. where, and have reported most favorably An intensive study of problems related on the way in which they were received. to the concept of independence has been All these visits confirm the impression undertaken. which has been growing in recent years, Drafts of model accountancy laws, of that the state societies are deeply inter both the regulatory and permissive types, ested in the work of the Institute, that they have been completed. gladly accept its leadership in national affairs, and that they appreciate the help S t a t e S o c ie t ie s it has been able to give them in meeting Plans for coordination of activities of the their local problems; but that they feel a state societies and the Institute have good deal more help could be given, and advanced to a point where a detailed out they would like to participate to a greater line of a proposed program is before the extent in the Institute’s work. Advisory Council of State Society Presi dents for consideration. If it is approved R e g u l a r S e r v ic e s and put into effect, the staff believes the The regular work of the Institute has results will surpass all expectations. been carried on as usual. The active and continuous cooperation of The standard certified public accountant the state societies can vastly increase the examination is now adopted by 47 states Institute’s ability to get things done on a and territories, and other states are con national scale. On the other hand, the sidering the possibility of adopting it. Institute is in a good position to serve The committee on professional ethics has as a clearing house of information and continued its quiet but effective advisory ideas which could be tremendously helpful and disciplinary activities. to the state societies in carrying out their The library staff has produced the Sixth own programs. Supplement to the Accountants Index, and The formal plan of coordination is really has answered 13,000 inquiries, received only an extension and refinement of what 5,500 visitors, and circulated 4,000 publica has been going on in the past eight years. tions during the past year. The Institute’s relations with state societies Paper limitations have necessitated some today are universally friendly, and mu reduction in the size of The Journal of tually helpful. Accountancy, but a careful selection of the In April, the five officers of the Institute material to be published has apparently and the chairman of the committee on succeeded in holding the approval of federal taxation attended a series of after members and subscribers. The circulation noon and evening meetings arranged by has increased from 19,869 to 23,452 in the state societies, or their chapters, in Pitts past fiscal year, and advertising revenues burgh, New Orleans, Houston, Tulsa, have risen from $18,160 to $22,679. Kansas City, Missouri, Omaha and Minne A change in policy in publication of apolis. The Institute’s representatives The Certified Public Accountant, so as to spoke on various wartime problems and permit its publication at shifting dates other matters of current interest. The within each month, has made it possible to attendance at each meeting was surpris use this bulletin to convey to members ingly large (the aggregate was about without delay events of importance to the 2,000), and the reception everywhere was profession. Instead of producing a bulletin most cordial. on a fixed date, the staff publishes each In May, the president and secretary issue as soon as possible after the receipt attended a meeting of the Massachusetts of any information which it is desired to Society of Certified Public Accountants, transmit to the membership immediately. and in June they visited the west coast, Publication of the regular Yearbook was speaking at state society and chapter omitted the past year as a wartime meetings at Seattle, Portland, San Fran measure, and the executive committee has cisco, Los Angeles, Salt Lake City, and decided that in the future members will be Denver. They were received in the friend best served by the separate publication liest possible manner. of an annual membership roster and a Other representatives of the Institute Yearbook containing lists of officers, council 110 American Institute of Accountants Yearbook and committees, proceedings of the annual assistant in the mailing department, has meetings, reports, financial statements, been reported missing in action in Italy. by-laws and rules of conduct. It has been extremely difficult to find Nine special items of wartime informa replacements for vacancies in stenographic tion, such as Selective Service and contract and clerical positions, and there are con termination regulations, have been sent tinuous shortages in these departments. to the membership. Altogether, aside from Efforts to secure additional personnel The Journal of Accountancy and The whose employment has been authorized Certified Public Accountant, 633,381 books, to assist the committee on membership bulletins, pamphlets and reports bearing have not yet been successful. Additional the Institute’s name, have been distributed personnel will also be required if the sug during the year. gested state society service department is The Benevolent Fund has continued to formed. At August 31, 1944, the total assist members of advanced years who have number of the staff was 43. encountered financial difficulties. Last spring the council approved a plan Prizes and awards will be presented by of staff organization recommended by the the Institute at the annual meeting to executive committee, which called for a candidates who obtained the highest grades full-time research director and created a in the examinations and to certified public new post, that of educational director. accountants who have made outstand Since the present research director, James ing contributions to the welfare of the L. Dohr, could not give his full time to the profession. Institute, and wished to return to Columbia University where his services were urgently M e m b e r s h ip needed, the position was offered to Carman The membership is increasing at the rate G. Blough, who has accepted. Mr. Blough of about ten per cent a year. Losses from is a certified public accountant, a member resignation and failure to pay dues are less of the Institute, and president of the than one-half of one per cent. The total American Accounting Association. He has membership was 7,996 at August 31st, and been a teacher of accounting, chief account it is now over 8,000. Of this number, 807 are ant of the S.E.C., and a partner of a now in the armed forces. Tests show that public accounting firm. He is now Chief of the average age of new members has always the Contract Review Branch, Procurement been and continues to be well above 30 Policy Division, of the War Production years. It is believed that the methodical Board. He will assume his duties with the program which has been undertaken by the Institute in November. Mr. Blough’s membership committee, to be put into experience and qualifications will prove effect in the current year, will materially most helpful in developing the Institute’s increase the rate of growth. program of technical research. Thomas W. Leland accepted the position S t a f f of educational director in August. He has Of the 43 persons who composed the staff been head of the accounting department of of the Institute at the time the United Texas A & M College, and has served as States entered the war, only 20 remain. For both president and secretary of the Texas the most part, the department heads and Society of Certified Public Accountants. key assistants whose names were mentioned He is a vice president of the American gratefully in the secretary’s report of Accounting Association. The preparation October 13, 1943, are still on the job; but of the standard C.P.A. examination, the a few have withdrawn. H. T. Winton, program of refresher courses for veterans, assistant secretary, and George N. Farrand, and other educational activities of the research assistant, have accepted commis Institute are being greatly facilitated by sions in the Navy. Willima Robinson, his assistance. editorial assistant, required leave of ab As reported to the council last May, sence during the summer because of ill Miss Elizabeth Arliss is serving as acting health, but has now returned. Nine former assistant secretary in Lt. Winton’s absence. members of the staff are now in the armed Mrs. Rebecca Newman Golub, a member services, and one, Murray M. Mern, Jr., of the New York Bar, was appointed early who was employed as a messenger and in the year as technical assistant to the Annual Reports 111 committee on federal taxation. It is ex major problems of the profession itself. It pected that a research assistant to act in contributes substantially to the mainte Lt. Farrand’s place will soon be employed. nance of high professional and technical While a few key positions remain empty, standards. It is now taking a more active the structure of the staff has been greatly interest than formerly in accounting educa strengthened. It now includes experienced tion. It is encouraging a strong sense of specialists skilled in problems of organiza- unity within the profession, and closer tion and administration peculiar to the coordination of activities, through cooper Institute, editorial work, library work, ation with the state societies, the American public relations, legislation, education, Accounting Association, and the Associa technical research and taxation. tion of Certified Public Accountant It should be possible soon to extend to Examiners. Through its meetings, library, all committees the type of staff assistance, research department, and publications it that has already been available to many, provides its members and others with relieving committee members of detail helpful information. work and freeing them to plan, decide The Institute’s membership and conse questions of policy, and supervise staff quently its revenues, are now large enough activities. Several desirable results may to permit maintenance of a staff organiza reasonably be expected: increased volume tion equipped to deal with all aspects of the of production, greater continuity of effort work. The future holds promise of even in all phases of activity, and better inte greater opportunities for service than the gration of the Institute’s program as a past. There is every reason to believe that whole. the Institute will accept them, and will discharge its responsibilities with credit to C o n c l u s io n the accounting profession. The Institute is acting effectively as spokesman for the accounting profession on Respectfully submitted, questions of national policy in which J o h n L. C a r e y , Secretary accounting is involved. It is making prog ress toward the solution of some of the October 3, 1944
Report of the Auditors
To t h e M e m b e r s of t h e generally accepted auditing standards A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : applicable in the circumstances and in cluded all procedures which we considered G e n t l e m e n : necessary. We have examined the attached balance In our opinion the accompanying finan sheets and related statements of income cial statements and schedules present fairly and principal transactions of (1) The the financial condition of the organizations American Institute of Accountants; (2) named above as of August 31, 1944, and the the American Institute Publishing Co., results of their operations for the year Inc.; (3) the American Institute of Ac ended at that date, in conformity with countants Foundation; (4) the American generally accepted accounting principles Institute Benevolent Fund, Inc., and the applied on a basis consistent with that consolidated financial statements of the of the preceding year, except that a change American Institute of Accountants and in the method of prorating unexpired the American Institute Publishing Co., subscriptions of The Journal of Account Inc. as of August 31, 1944; have reviewed ancy resulted in a decrease of $4,200.00 in the system of internal control and the the income of the publishing company. accounting procedures of these organiza tions and, without making a detailed audit Respectfully submitted, of the transactions, have examined or tested their accounting records and other H o w a r d A. W it h e y supporting evidence by methods and to the H e n r y A. H o r n e extent we deemed appropriate. Our exam ination was made in accordance with October 10, 1944 112 American Institute of Accountants Yearbook _ Exhibit A Exhibit August 31 139.53 139.53 2,034.61 953.76 953.76 862.83 277.50 277.50 419.75 1,711.50 1,711.50 1,701.56 1944 1944 1943 17,921.36 17,921.36 17,921.36 66,654.50 66,654.50 63,250.05 _____ $304,544.28 $304,544.28 $297,675.37 $ $ 6,856.30 $ 6,244.93 $344,478.59 $330,504.93 $ 31,707.22 $ 31,707.22 $ 23,267.44 $218,256.92 $214,802.40 $ $ 8,227.09 $ 9,562.12 ______...... Total principal Total Total liabilities Total principal
and
...... Total liabilities and principal and liabilities Total .....
liabilities heet S Subscriptions and advertising dues unearned; advertising and Subscriptions orders... Institute; unfilled to and admission paid in advance; fees pending applicants, of fees in paid advance; Accrued expenses and taxes and expenses Accrued Endowment fund Endowment Accounts payable Accounts bonds war S. U. for deductions Payroll fund contingency for Appropriated Taxes withheld from salaries from withheld Taxes fund...... scholarship Watt Elijah Sells Unappropriated Principal: Deferred income: Deferred Liabilities: alance B
_ onsolidated C August 31 August 3.00 3.00 3.00 64.78 ...... 2,291.33 2,291.33 1,493.97 1944 1944 1943 3,865.90 3,865.90 4,595.67 14,699.08 14,699.08 14,699.08 13,924.63 13,924.63 7,217.75 282,619.19 282,619.19 247,365.21 344,478.59 344,478.59 $330,504.93 ______
$ $ 27,010.68 $ 55,130.25 ...... ASSETS AMERICAN INSTITUTE AND INSTITUTE AMERICAN AMERICAN OF PUBLISHING INC. ACCOUNTANTS CO., ...... Accountants, for which the invoices were received subsequent to the balance sheet dates, have not been reflected in the above statement; the cost of the statement; cost the above in reflected been not have dates, sheet balance to the subsequent received were invoices the which for acquisition. at of time Accountants, to expense charged been has sale for hand on pamphlets and bulletins Total Total assets —Following the practice in prior years, income accrued on investments but not received, and ordinary operating expenses of the American Institute of the American of expenses operating ordinary and but received, not investments on accrued income years, prior in practice the —Following . ($721.44)...... Sixth Sixth Supplement of Accountants Index— 371.82; 371.82; 1943—$248,095.63) $5,461.04)...... Inc...... nominal nominal value; paper stock, cost; including supplies, in 1944 etc., net unrecovered at cost of for for employees’ portion of pension plan costs, ote Goodwill Goodwill of American Institute Publishing Co., N Securities Securities (quoted market value Accounts receivable 1944—$296,- (including in 1944 advances Interest accrued on bonds purchased Cash...... Prepaid expenses...... Inventories Inventories (books and unbound sheets, at cost or Library Library books, furniture and equipment...... Annual Reports 113 9.94 ship Sells Fund Watt Elijah Scholar $1,711.50 $1,701.56 $1,711.50 Exhibit B Exhibit 412.14 412.14 for Con Fund 1,153.67 1,153.67 1,177.18 1,177.18
Appro priated 5,908.40 5,908.40 tingency $ $ 4,422.66 $ 4,834.80 $63,250.05 $71,489.30 $66,654.50
31, 31, 1944 5,934.06 5,934.06 3,454.52 5,984.05 ment Fund Endow $214,802.40 $218,256.92
$218,256.92
priated 11,892.46 11,892.46 Unappro $17,921.36 $17,921.36 $17,921.36 412.14 412.14 1,177.18 5,918.34 4,608.19 Total $ $ 4,834.80 $ $ 4,422.66 $297,675.37 $309,379.08 $304,544.28 ...... Principal Transactions for the Fiscal Year Ended August ...... of of Total ...... Total ...... Consolidated Statement AMERICAN INSTITUTE OF ACCOUNTANTS AND AMERICAN INSTITUTE PUBLISHING CO., IN C . —Italics indicate red. indicate —Italics . ote N Net cost of “Proceedings of Government Accounting Conference” Accounting Government of “Proceedings of Net cost Special legal expenses...... legal Special Net income from securities and savings banks savings and securities from Net income securities of sale on Profit Transfers...... Excess of income over expenses for fiscal year fiscal for expenses over income of Excess Deduct: Balance—September 1943 1, Balance—September Add: Balance—August 31, ...... 1944...... 31, Balance—August 114 American Institute of Accountants Yearbook
Exhibit C AMERICAN INSTITUTE OF ACCOUNTANTS AND AMERICAN INSTITUTE PUBLISHING CO., INC. C onsolidated S t a t e m e n t o f I n c o m e a n d E x p e n s e s Year ended August 31 1944 1943 Income: Dues...... $153,320.32 $141,473.53 Earned subscriptions to monthly publications—nonmembers only.. 48,501.97 42,791.42 Sales of books...... 9,917.38 9,540.23 Advertising...... 22,679.29 18,159.56 Fees from state boards...... 11,863.90 11,200.20 Income from securities and bank balances...... 10,703.29 9,992.96 Application fees...... 1,940.00 1,440.00 Proceeds of 56th annual meeting...... 3,377.43 Contributions to library from American Institute of Accountants Foundation...... 2,807.64 2,789.63 Profit on other publications, services rendered, and other items...... 14,861.86 13,240.02 Total income...... $279,973.08 $250,627.55 Expenses: Salaries and technical service fees...... $111,907.97 $ 93,348.86 Expenses of research department...... 314.91 Prime costs of monthly publications (paper, printing, etc.)...... 39,044.05 32,872.34 Rent, electricity, and building supplies...... 19,503.53 18,208.56 Board of Examiners expenses...... 20,269.08 15,068.13 Prime cost of books (paper, printing, purchases, royalties, etc.). .. . 4,726.09 5,344.36 Postage and expressage...... 11,638.62 9,404.63 Honoraria...... 5,000.00 7,500.00 Stationery, printing, and supplies...... 6,514.91 4,861.69 Publications in lieu of yearbook...... 3,469.68 Yearbook...... 6,160.56 Traveling...... 7,273.13 3,928.64 Legal fees...... 6,503.75 6,282.34 Special report to members...... 10,386.52 5,531.14 Telephone and telegraph...... 4,014.10 3,567.23 Employer’s contribution to cost of employees’ pension plan...... 3,367.50 3,174.71 Social security taxes...... 3,473.62 2,907.40 Advertising and promotion of publications...... 1,088.58 2,086.49 Annual meeting...... 2,041.45 2,484.47 Books and magazines purchased...... 3,344.65 2,693.68 Purchase of equipment...... 572.59 99.74 Other items...... 9,914.92 6,827.64 Total expenses...... $274,054.74 $232,667.52 Excess of income over expense...... $ 5,918.34 $ 17,960.03
N o t e .—Following the practice in prior years, income accrued on investments but not received, and ordinary operating expenses of the American Institute of Accountants, for which invoices were received subsequent to closing, have not been reflected in the above state ment; the cost of bulletins and pamphlets on hand for sale at the end of a year has been charged to expense at time of acquisition. Annual Reports 115 Exhibit D Exhibit $ 480.00 August 31 August ,75.76 ,75.76 1,360.54 179.93 179.93 169.99 277.50 277.50 419.75 194.17 194.17 203.40 392.25 392.25 300.81 950.00 950.00 1,360.00 1944 1944 1943 19,477.17 19,477.17 19,084.50 $ $ 4,277.90 $ 4,043.58 $ $ 5,203.34 $ 6,294.67 $ 555.00 $ 66,654.50 $ 66,654.50 $ 63,250.05 $ 86,131.67 $ 82,334.55 $ 93,034.18 $ 90,672.62 $ $ 1,699.17 $ 2,043.40 ...... Institute Total ...... bonds ...... LIABILITIES AND PRINCIPAL Taxes withheld from salaries from withheld Taxes Accounts payable Accounts Accrued expenses and taxes and expenses Accrued of for U. purchase S. war Payroll deductions fund. scholarship Watt to Elijah Due Sells . advance in paid Dues Fees of applicants, pending admission to Unfilled orders Unfilled fund contingency for Appropriated Unappropriated Principal (Exhibit E): (Exhibit Principal Liabilities: Deferred income: Deferred 1.00 general fund _ Balance Sheet
August 31 August 1.00 1.00 1.00 1.00 1944 1944 1943 5,000.00 5,000.00 5,000.00 2,372.81 2,372.81 2,660.83 2,291.33 1,493.97 63,551.46 63,551.46 34,567.72 AMERICAN INSTITUTE AMERICAN OF ACCOUNTANTS $ 93,034.18 $ 93,034.18 $ 90,672.62 $ 19,816.58 $ 19,816.58 $ 46,948.10 ______9,846.64 ...... ASSETS ...... Total...... (quoted market value 1944—$64,440.32; 1944—$64,440.32; value market (quoted nal value pending dissolution corporation) of dissolution pending value nal quoted market value 1943—$35,941.25) 1943—$35,941.25) value market quoted 135 Cedar Street Corporation (carried at nomi (carried Corporation Street Cedar 135 Appropriated for contingency fund fund $ 9,969.94 contingency for Appropriated Unappropriated Appropriated for contingency fund fund contingency for 56,684.56 Appropriated Inc Co., Institute Publishing American Unappropriated...... Unappropriated...... em for advances 1944 in $380.80) (including items costs, plan other pension of portion ployees’ 6,866.90 Furniture Furniture equipment...... and Cash: Stocks of subsidiary corporations: subsidiary of Stocks Securities (Schedule 1): (Schedule Securities and services examination for receivable Accounts Prepaid expenses...... Prepaid 116 American Institute of Accountants Yearbook
74.77 74.77 73.99 $313,092.53 $313,092.53 $307,265.67 . $ . $ 15.16 15.10 . . 218,256.92 214,802.40 . $ 1,112.50 $ 1,112.50 599.00 589.06 . $218,346.85 . $218,346.85 $214,891.49 . $ 1,711.50 $ 1,701.56 ...... Total ...... Total ...... Total liabilities and Total and liabilities principal ...... Taxes withheld from from withheld salariesTaxes Unexpended (Exhibit income E)Unexpended Principal Principal (Exhibit E) Accrued taxes Accrued Principal—Restricted (Exhibit E)...... SCHOLARSHIP FUND 1.00 ENDOWMENT FUND
1.00 ELIJAH ELIJAH WATT SELLS 64.78 179.93 179.93 169.99 217,536.16 217,536.16 211,265.92 $ $ 744.91 $ 3,624.57 $ $ 1,531.57 $ 1,531.57 $218,346.85 $218,346.85 $214,891.49 $ 1,711.50 $ 1,701.56 ...... Total ...... Total Total assets Total ollowing ollowing the practice in prior years, income accrued on investments but not received, and ordinary operating expenses for which invoices were has been has been charged to expense at time of acquisition. received received subsequent to the balance sheet dates, have not been reflected in the above statement; the cost of bulletins and pamphlets hand on for sale .—F ...... 1943—$1,608.75)—(Schedule 1) 1943—$1,608.75)—(Schedule 255.25; 1943—$210,545.63) (Schedule 1)...... (Schedule 1943—$210,545.63) 255.25; ote Cash Due from fundDue from general Securities Securities (quoted market value 1944—$230,- market (quoted value 1944—$1,676.25; Securities N Interest accrued Interest in accrued bonds purchased Library Library furniture, books, and equipment...... Annual Reports 117
Exhibit E AMERICAN INSTITUTE OF ACCOUNTANTS Statem ent of P r incipal T ransactions for th e F iscal Y ear E nded Au g ust 31, 1944 Contin gency Unappro GENERAL FUND Fund priated Total Balance, September 1, 1943...... $63,250.05 $19,084.50 $82,334.55 Add: Excess of income over expenses (Exhibit F). .. 12,285.13 12,285.13 Net income from securities and savings banks. 1,153.67 1,153.67 Net profit on sales of securities...... 1,177.18 1,177.18 $65,580.90 $31,369.63 $96,950.53 Deduct: Special legal expenses...... $ 4,422.66 $ $ 4,422.66 Contribution to endowment fund to meet loss. 5,984.06 5,984.06 Transfer...... 5,908.40 5,908.40 Net Cost of “ Proceedings of Government Accounting Conference ”— Cost...... $946.46 Less: Income from sales...... 534.32 412.14 412.14 $ 1,073.60 $11,892.46 $10,818.86 Balance, August 31, 1944...... $66,654.50 $19,477.17 $86,131.67
AMERICAN INSTITUTE OF ACCOUNTANTS Statement of Principal Transactions for the Fiscal Year Ended August 31, 1944 Current Balance Year’s Balance September 1 Trans- August 31, endowment fund 1943 actions 1944 Contributions, including proceeds from sale of books for which copyrights were donated to the Institute...... $191,264.09 $ $191,264.09 Initiation fees of its members contributed by the Institute 24,175.00 24,175.00 Net profit on sales of securities...... 6,530.04 3,454.52 9,984.56 Net cost of publication of “Accountants’ Index” and first supplement...... 9,922.62 ______9,922.62 Balance in principal accounts (per books)...... $212,046.51 $3,454.52 $215,501.03 Excess in fund, composed of excess of income over expenses; contributions from general fund; and special contribu tions for current expenses...... 2,755.89 ______2,755.89 Totals...... $214,802.40 $3,454.52 $218,256.92 ELIJAH WATT SELLS SCHOLARSHIP FUND— RESTRICTED Balance, September 1, 1943 and August 31, 1944...... $1,112.50 ELIJAH WATT SELLS SCHOLARSHIP FUND— UNEXPENDED INCOME Balance, September 1, 1943...... $589.06 Excess of income over expenses (Exhibit F)...... 9.94 Balance, August 31, 1944...... $599.00 N o te .—Italics indicate red. 118 American Institute of Accountants Yearbook
Exhibit F AMERICAN INSTITUTE OF ACCOUNTANTS Statem ent o f I ncome and E x pe n se s
1944 1943 GENERAL FUND OPERATIONS— (GENERAL ACTIVITIES) Income: Dues (of which $19,031.95 for 1944 and $16,877.92 for 1943 prorated to The Journal of Accountancy and The Certified Public Account ant—see below)...... $153,320.32 $141,473.53 Fees from state boards...... 11,863.90 11,200.20 Profit on publications sold...... 10,770.25 9,030.50 Application fees...... 1,940.00 1,440.00 Income from securities and interest on bank balances...... 925.69 286.07 Net profit on sales of securities...... 381.23 Proceeds of 56th annual meeting...... 3,377.43 Sundry income...... 215.89 192.75 Total income...... $182,794.71 $163,623.05 Expenses: Salaries and technical service fees...... $ 65,867.72 $ 54,923.90 Expenses of research department...... 314.91 Portion of dues covering subscriptions of members and associates to The Journal of Accountancy and The Certified Public Accountant. . 19,031.95 16,877.92 Board of examiners expenses...... 20,269.08 15,068.13 Rent, electricity, and building supplies...... 9,370.15 8,233.51 Publications in lieu of yearbook...... 3,469.68 Yearbook...... 6,160.56 Traveling...... 7,273.13 3,928.64 Honoraria...... 2,500.00 4,100.00 Stationery, printing, and supplies...... 4,634.14 3,751.52 Postage and expressage...... 5,531.38 3,581.08 Special reports to members...... 10,386.52 5,531.14 Annual meeting...... 2,041.45 2,484.47 Legal fees...... 4,503.75 4,282.34 Telephone and telegraph...... 2,805.31 2,439.49 Purchases of equipment...... 396.37 Employer’s contribution to cost of employees’ pension p lan...... 2,211.63 2,004.94 Social security taxes...... 1,870.53 1,583.18 Other items...... 8,346.79 5,517.36 Total expenses...... $170,509.58 $140,783.09 Excess of income over expenses...... $ 12,285.13 $ 22,839.96 Annual Reports 119
Exhibit F (continued) AMERICAN INSTITUTE OF ACCOUNTANTS Statem ent of I ncome and Ex p e n se s Year ended August 31 1944 1943 ENDOWMENT FUND OPERATIONS— LIBRARY Incom e: Income from securities and bank balances...... $ 9,331.57 $ 9,642.08 Contributions from American Institute of Accountants Foundation (E xhibit K)...... ;...... 2,807.64 2,789.63 Sales of Accountants' Index Supplement...... 191.34 149.63 Other item s...... 10 Total income...... $ 12,330.55 $ 12,581.44 Expenses: Salaries...... $ 9,321.60 $ 9,060.00 R e n t...... 4,266.68 4,200.04 Books and m agazines purchased...... 3,344.65 2,693.68 Furniture and fixtures purchased...... 97.22 99.74 Social security ta x es...... 344.07 333.60 Custodian fe e s...... 370.14 384.04 Telephone, stationery, postage, insurance and other items...... 570.25 463.85 T otal expenses...... $ 18,314.61 $ 17,234.95 Excess of income over expenses (loss met by transfer from general fund— E xhibit E ) ...... $ 5,984.06 $ 4,653.51
ELIJAH WATT SELLS SCHOLARSHIP FUND----UNEXPENDED INCOME Income from securities...... $ 64.80 $ 64.81 Less—Cost of medals for awards...... 54.86 53.66 Excess of income over expenses...... $_____ 9.94 $ 11.15 Excess of income over expenses of all funds of American Institute of Accountants...... $ 6,311.01 $ 18,197.60
N ote.—Following the practice in prior years, income accrued on investments but not received, and ordinary operating expenses for which invoices were received subsequent to the balance sheet dates, have not been reflected in the above statement; the cost of bulletins and pamphlets on hand at the end of a year for sale has been charged to expense at time of acquisition.
N o t e .—Italics indicate red. 120 American Institute of Accountants Yearbook
Exhibit G AMERICAN INSTITUTE PUBLISHING CO., INC. Balance Sheet August 31 1944 1943 ASSETS Cash...... $ 6,449.19 $ 4,557.58 Accounts receivable (including advances for employees’ portion of pen sion plan costs, in 1944—$340.64)...... 1,493.09 1,934.84 Inventories: Books and unbound sheets, at cost or nominal value (including in 1944 net unrecovered cost of Sixth Supplement—$5,461.04)...... 7,967.33 3,069.86 Paper stock, supplies, etc., at cost...... 5,957.30 4,147.80 Furniture and equipment...... 1.00 1.00 Goodwill...... 14,699.08 14,699.08 Total assets...... $••• $36,566.99 $28,410.25 LIABILITIES AND CAPITAL Liabilities: Accounts payable...... $ 2,578.40 $ 2,201.35 Taxes withheld from salaries...... 48.61 658.97 Accrued expenses and taxes...... 486.74 488.03 Total liabilities...... $ 3,113.75 $ 3,348.35 Deferred income: Subscriptions and advertising unearned...... $30,008.05 $21,224.04 Capital: Capital stock—1,000 shares, no par value...... $ 5,000.00 $ 5,000.00 Paid-in surplus...... 1,375.00 1,375.00 Deficit, August 31, 1943...... $2,537.14 2,537.14 Net loss for the fiscal year (Exhibit H )...... 392.67 Deficit, August 31, 1944...... 2,929.81 ______Total capital...... $ 3,445.19 $ 3,837.86 Total liabilities and capital...... $36,566.99 $28,410.25
N ote.—Italics indicate red. Annual Reports 121
Exhibit H AMERICAN INSTITUTE PUBLISHING CO., INC. Statement of Income and Expenses Year ended August 31 1944 1943 Income: The Journal of Accountancy and The Certified Public Accountant— Subscriptions earned: Members and associates of American Institute of Accountants (paid by Institute)...... $19,031.95 $16,877.92 Other subscribers...... 48,501.97 42,791.42 Advertising...... 22,679.29 18,159.56 Sales of magazines...... 2,017.70 2,287.99 Sales of bound volumes, binding, and other items (less cost of binding)...... 1,575.35 1,402.23 $93,806.26 $81,519.12 Prime costs—paper, printing, and other costs...... 39,044.05 32,872.34 Income, less prime costs...... $54,762.21 $48,646.78 Books: Sales...... $ 9,917.38 $ 9,540.23 Prime costs—paper, printing, purchases, royalties and other costs.. 4,726.09 5,344.36 Excess of book sales over prime costs...... $ 5,191.29 $ 4,195.87 Journal of Accountancy Index—net proceeds...... $ 91.33 $ 176.82 Income from magazines and books...... $60,044.83 $53,019.47 Expenses: Salaries...... $36,718.65 $29,364.96 Rent...... 5,866.70 5,775.01 Postage and expressage...... 5,974.70 5,710.66 Honoraria...... 2,500.00 3,400.00 Advertising and promotion...... 1,088.58 2,086.49 Legal fees...... 2,000.00 2,000.00 Employer’s contributions to cost of employees’ pension plan...... 1,155.87 1,169.77 Social security taxes...... 1,259.02 990.62 Stationery, printing, and supplies...... 1,795.86 1,034.26 Telephone and telegraph...... 1,046.54 974.01 Equipment purchased...... 79.00 Insurance, taxes, discounts, and other items...... 952.58 751.26 Total expenses...... $60,437.50 $53,257.04 Net loss for the fiscal year...... $ 392.67 $ 237.57
N o t e .—Italics indicate red. 122 American Institute of Accountants Yearbook
Exhibit I AMERICAN INSTITUTE OF ACCOUNTANTS FOUNDATION Statement of Assets August 31 1944 1943 Assets: $ 17,284.19 $ 540.86 Securities (quoted market value 1944—$90,136.13; 1943—$60,- 068.25) (Schedule 2 )...... 89,851.80 63,473.05 Total assets...... $107,135.99 $64,013.91 Liabilities...... Principal (Exhibit J)— Foundation fund...... $ 64,979.14 $64,013.91 Unexpended balance of contributions for special research...... 42,156.85 Total principal...... $107,135.99 $64,013.91
E x h ib it J St a t em en t of P r in c ipa l T ransactions fo r t h e F isca l Y e a r E n ded A u g u st 31, 1944 B alance Current Balance S eptem ber 1, Y ear’s A u g u st 31, 1943 Transactions 1944 Foundation fund: Initiation fees of its members contributed by the American Institute of Accounts...... $49,775.00 $ $ 49,775.00 Contributions from others ...... 11,515.00 10.00 11,525.00 Profit on publication of “ A Statement of Accounting P rin c ip les” ...... 6,028.73 263.05 6,291.78 Excess of income over contributions (to American Institute of Accountants endowment fund) and exp en ses...... 3,918.65 3,918.65 N e t loss on sales of se cu rities...... 7,223.47 692.18 6,531.29 T o ta l...... $64,013.91 $ 965.23 $ 64,979.14 Unexpended balance of contributions for special research $ $42,156.85(a) $ 42,156.85 $64,013.91 $43,122.08 $107,135.99 (a) Contributions received for special research project on selec tio n of p erso n n el...... $43,742.80 Less—Expenses of committee on selection of personnel...... 1,585.95 Balance, August 31, 1944...... $42,156.85
N ote.— I talics indicate red. Annual Reports 123
Exhibit K. AMERICAN INSTITUTE OF ACCOUNTANTS FOUNDATION Statem ent of I ncome, E x p e n s e s , and C ontributions general activities Year ended August 31 1944 1943 Income from securities...... $3,011.44 $2,978.89 Less—Fee of security custodian...... 203.80 189.26 Excess of income over expenses...... $2,807.64 $2,789.63 Contribution to American Institute of Accountants Endowment Fund (Exhibit F) ...... $2,807.64 $2,789.63
Exhibit L AMERICAN INSTITUTE BENEVOLENT FUND, INC. S t a t e m e n t o f A s s e t s August 31 1944 1943 Assets: Cash...... $ 2,919.24 $ 4,119.19 Securities (quoted market value 1944—$15,179.69; 1943—$8,162.19) (Schedule 2 )...... 15,186.72 7,970.00 Total assets...... $18,105.96 $12,089.19 Liabilities...... Principal (Exhibit M )...... $18,105.96 $12,089.19
Exhibit M S t a t e m e n t o f P r i n c i p a l T ransactions f o r F is c a l Y e a r E n d e d A u g u s t 31, 1944 Balance, September 1, 1943...... $12 089 19 A d d - Net profit on sale of securities...... 393.75 Excess of income over expenses and distributions (Exhibit N )...... 5,623.02 Balance, August 31, 1944...... $18,105.96
Exhibit N AMERICAN INSTITUTE BENEVOLENT FUND, INC. S t a t e m e n t o f I n c o m e , E x p e n s e s a n d D istributions Year ended August 31 1944 1943 Income: Contributions (including donations for specific purposes)...... $7,840.00 $5,985.65 Income from securities...... 271.02 108.20 Interest on savings accounts...... 34.77 49.56 Recovery on payment previously made...... 200.00 Total...... $8,345.79 $6,143.41 Expenses and distributions: Payments made for assistance...... $2,650.00 $2,400.00 Stationery, printing, and other expenses...... 72.77 74.63 Total...... $2,722.77 $2,474.63 Excess of income over expenses and distributions...... $5,623.02 $3,668.78 1 2 4 American Institute of Accountants Yearbook
Schedule No. 1 AMERICAN INSTITUTE OF ACCOUNTANTS S c h e d u le o f M arketable Securities A ugust 31, 1944 Quoted Par value market value or Rate Ma August 31, No. of shares Description % turity 1944Cost general fund 140 shares Pacific Gas & Electric Co. 6% first preferred...... $ 4,764.90 $5,215.00 20 shares Consolidated Edison Company of New York $5.00 preferred...... 2,102.00 2,132.50 80 shares Consolidated Edison of New York— $5.00 preferred (held in contin gency fund)...... 8,408.00 8,530.00 $ 5,000. Dominion of Canada (held in con tingency fund)...... 3 1967 5,175.00 5,125.00 $ 2 ,000 . New York, N. Y., City of, corporate stock (held in contingency fund).. 3 1979 1,937.50 2,255.00 $16,000. United States Treasury bond (held in contingency fund)...... 2½ 1969/64 16,000.00 16,050.01 $25,000. United States Treasury bond (held in contingency fund)...... 2½ 1972/67 25,164.06 25,132.81 $ 63,551.46 $ 64,440.32 endowment fund $10,000. Argentine Republic external con version loan...... 4 1972 $ 9,100.00 $ 8,812.50 $ 5,000. Atlantic Coast Line Railroad Com pany, series A...... 4½ 1964 3,912.50 4,375.00 $ 5,000. Canadian Pacific Railway Company 4 perpetual 4,862.50 4,725.00 $10,000. Chicago and Northwestern Railway Company, first and general mort gage bonds...... 4 1989 10,425.00 10,500.00 $ 5,000. Dominion of Canada...... 3 1967 5,173.75 5,125.00 $10,000. Erie Railroad Company first con solidated mortgage, series B...... 4 1995 10,372.19 10,575.00 $ 1,000. Gatineau Power Company series A first mortgage...... 3¾ 1969 982.50 1,000.00 $10,000. Great Northern Railway Company gold bonds, series E general mort gage...... 4½ 1977 9,257.50 10,950.00 $10,000. Louisville & Nashville Railroad Company gold bonds, series D first and refunding mortgage.. ... 4 2003 10,280.00 10,475.00 $ 5,000. Macon Terminal Company guaran teed first mortgage gold bonds. . . . 5 1965 5,400.00 5,337.50 $ 5,000. New York Central Railroad Com pany refunding and improvement mortgage A ...... 4½ 2013 $ 2,912.50 $ 3,318.75 $ 5,000. New York Central & Hudson River Railroad Company Lake Shore collateral...... 3½ 1998 4,257.50 3,750.00 $12,000. New York, N. Y. City of, corporate stock...... 3 1979 11,747.50 13,530.00 $ 5,000. Pennsylvania Railroad Company general mortgage, series E ...... 4¼ 1984 4,998.75 5,762.50 $ 5,000. Pere Marquette Railway Company first mortgage gold bonds, series C 4½ 1980 3,187.50 4,818.75 $ 5,000. Reading Company series A general and refunding mortgage gold bonds...... 4½ 1997 5,262.50 5,243.75 (Forward) Annual Reports 125
Schedule No. 1 (continued) AMERICAN INSTITUTE OF ACCOUNTANTS S c h e d u le o f M arketable Securities A ugust 31, 1944 Quoted Par value market value or Rate Ma August 31, No. of shares Description % turity Cost 1944 endowment fund (continued) (Forward) $ 5,000. St. Louis-San Francisco Railway Company series B prior lien mort gage—stamped (interest i n de fault) ...... 5 1950 4,377.50 2,237.50 $ 5,000. Southern Pacific Company gold bonds...... 4½ 1981 4,471.25 3,718.75 $17,000. United States of America savings bonds, series G...... 2½ 1953 17,000.00 16,252.00* $ 9,000. United States of America savings bonds, series G...... 2½ 1955 9,000.00 8,802.00* 50 shares Allied Chemical & Dye Corporation, common...... 7,412.25 7,575.00 50 shares American Telephone and Telegraph Company, capital stock...... 7,564.26 8,200.00 100 shares Bethlehem Steel Corporation 7% cumulative preferred...... 12,325.00 12,350.00 200 shares Commonwealth & Southern Corpora tion $6.00 preferred...... 11,036.00 17,525.00 100 shares Consumers Power Company $4.50 preferred...... 10,383.18 11,000.00 200 shares General Electric Company, common 7,155.29 7,600.00 100 shares General Motors Corporation, com mon...... 4,912.22 6,212.50 50 shares P. Lorillard Company preferred. .. . 7,839.55 8,087.50 15 shares Pacific Gas & Electric Company 6% first preferred...... $ 510.53 $ 558.75 100 shares Standard Oil Company of New Jersey...... 5,036.94 5,400.00 50 shares United States Steel—7% cumu lative preferred...... 6,380.00 6,437.50 Total—endowment fund...... $217,536.16 $230,255.25
ELIJAH WATT SELLS SCHOLARSHIP FUND 45 shares Pacific Gas & Electric Company 6% first preferred...... $ 1,531.57 $ 1,676.25 Totals—general, endowment, and Elijah W att Sells scholar ship funds...... $282,619.19 $296,371.82 * Current redemption value. 126 American Institute of Accountants Yearbook Schedule No. 2 AMERICAN INSTITUTE OF ACCOUNTANTS FOUNDATION Schedule of M arketable Securities August 31, 1944 Quoted Par value market value or Rate Ma August 31, No. of shares Description % turity Cost 1944 $10,000. Canadian Pacific Railway Co. deben ture stock consolidated...... 4 Perpetual $ 9,200.00 $ 9,450.00 $ 4,000. Gatineau Power Co. series A first mortgage...... 3¾ 1969 3,930.00 4,000.00 $ 5,000. Illinois Central Railroad Co. and Chicago, St. Louis & New Orleans Railroad Co. series A joint first refunding mortgage...... 5 1963 4,525.00 3,525.00 $ 5,000. New York Central Railroad Co. re funding and improvement mortgage series A...... 4½ 2013 2,912.50 3,318.75 $ 5,000. Pennsylvania Railroad Co. series E general mortgage...... 4¼ 1984 4,900.00 5,762.50 $ 5,000. Southern Pacific Co...... 4½ 1981 4,251.25 3,718.75 $ 3,000. United States of American Savings bonds series G...... 2½ 1953 3,000.00 2,868.00* $ 5,000. United States of America Savings bonds series G...... 2½ 1955 5,000.00 4,890.00* $25,000. United States Treasury Notes series B (held for Special Research Project).. 1¼ 1947 25,000.00 25,078.13 100 shares Kennecott Copper Corporation com mon...... 3,241.00 3,212.50 50 shares P. Lorillard Company preferred...... 7,839.55 8,087.50 100 shares New Jersey Zinc Company capital stock...... 6,269.00 6,062.50 100 shares Pacific Gas & Electric Company 6% first preferred...... 3,403.50 3,725.00 50 shares U. S. Steel 7% cumulative preferred. . 6,380.00 6,437.50 Total...... $89,851.80 $90,136.13 * Current redemption value. AMERICAN INSTITUTE BENEVOLENT FUND, INC. $ 5,000. Dominion of Canada...... 3 1967 $ 5,175.00 $ 5,125.00 $ 5,000. United States Treasury bonds...... 2 1953/51 5,011.72 5,039.06 $ 5,000. United States Treasury bonds...... 2½ 1969/64 5,000.00 5,015.63 Total...... $15,186.72 $15,179.69
Report of Council To the Members of the formed on the affairs of his profession A m erican I n stitu te of A cco un ta nts: unless he reads the reports of officers and committees of the Institute, which will Gentlemen: This has been a year in which so much has happened that it is soon be published. difficult to sort out the pieces and put them together in an orderly pattern. It would M ajor A ctivities take all day to describe even briefly the The most striking feature of the past activities of Institute committees, officers year’s work has been the increasing par and staff which have been reported to, and ticipation of the Institute in discussions of passed upon, by the council. In this report matters of public policy in which account it is possible to mention only the high ing is involved. Our representatives have lights, and to add the admonition that no appeared formally before Congressional member can consider himself well in committees, the United States Supreme Annual Reports 127
Court, administrative agencies of the experts and many of its suggestions have government, and the National Association been adopted. There have also been con of Railroad and Utilities Commissioners; ferences with Bureau and Treasury officials and have met informally with individual on various matters. Members of the Insti members of Congress and staffs of Con tute have been appointed on important gressional committees, the staffs of govern advisory groups which are studying tax ment agencies, and officials of the New policies. It is still hoped that the amended York Stock Exchange. These appearances rules of the Tax Court, requiring examina and meetings were devoted to discussions tion of certified public accountants who of accounting questions related to war- wish to be admitted to practice before it, contract termination, federal tax policy may be amended. Consideration is being and administration, federal government given to ways and means of bringing the accounting, public-utility rate regulation, rules of tax authorities into conform and financial reports of corporations. ity with generally accepted accounting All this is highly significant for two principles. reasons: first, it demonstrates the increas The activities of the Institute in the field ing recognition of accounting as an instru of taxation have expanded, and it is the ment of public policy, or as a “ social purpose to expand them still more. force,” as one of our members has expressed Taxation is a field in which accounting is it; and second, it implies acceptance of the of prominent importance, and the profes certified public accountants as the principal sion should make its voice heard in the source of authoritative opinion on account determination of policies and procedures. ing principles and auditing standards. There may be some significance in The future opportunities and responsibili the recent proposal of an outside group ties of practicing certified public account which received favorable comment from a ants may be foreshadowed by the activities member of the House Ways and Means of the Institute in the field of public Committee, that taxable income as certified affairs. by a certified public accountant be accepted by the government without further audit. Termination There is no doubt that the Institute Cooperation with Bar Association exercised a perceptible influence on the The profession welcomes a recent expres accounting and auditing provisions of the sion of opinion by the American Bar War-Contract Termination Act of 1944, Association committee on unauthorized which incidentally is one of the very few practice of the law, that certified public federal statutes which specifically mention accountants may properly prepare income certified public accountants. The appear tax returns. The statement followed dis ances before Congressional committees cussions in the newly-created National on this matter have been followed by Conference of Lawyers and Certified requests for the assistance of Institute Public Accountants, consisting of five representatives in formulating rules and representatives of the Bar Association and devising procedures under the act. War- five representatives of the Institute, which contract termination is a matter of major gives promise of serving as a strong link public importance and the Institute has between the two professions. made a valuable contribution to the A decision of the Supreme Court of formulation of orderly and practicable Massachusetts in a case in which the policies and procedures. Massachusetts Society of Certified Public Accountants, in cooperation with the Insti Taxation tute, filed a brief as amicus curiae, also The vigorous campaign which the Insti clarified to some extent the relation of tax tute has waged and is waging for creation practice to the practice of law. of a non-partisan commission to overhaul The tax section of the American Bar the federal tax system made a distinct Association cooperated closely with the impression upon Congress and upon the Institute in the effort to persuade Congress public. The committee on federal taxation to create a non-partisan body of experts has appeared twice before government staff to aid in tax revision. 128 American Institute of Accountants Yearbook
Regulatory Agencies A statement by Institute representatives Accounting has proved to be an indis relating to audits of federal government pensable element in government regulation corporations was cited on the floor of of various areas of industry and commerce, Congress and later quoted in the Congres such as public utilities, investment com sional Record in a debate on the question panies, and corporations distributing secur whether an appropriation for audit of a ities to the public. Since the several federal corporation by independent certified public accountants should be eliminated. agencies exercising regulatory authority in the different fields have somewhat different It was decided that the appropriation purposes (such as assuring consumers of should stand. fair rates on the one hand, or assuring investors against over-statements of profits Independence on the other), there sometimes appears to A special committee has been appointed be a tendency to make accounting rules to study the various concepts of the ac which will facilitate achievement of the countant’s independence. There have been immediate objective, without due con questions in recent years which indicate sideration of generally accepted accounting that official bodies and individuals outside principles. If such a tendency became the profession may have assumed the widespread, accounting chaos might result. accountant’s position to be different from There is already a great disparity among that which he himself has always assumed the accounting rules of various government to be sound. Since independence is the basic agencies and among decisions of the courts economic justification for the public ac on accounting matters. The Institute has countant’s existence, the question deserves considered it a duty to the general public careful study. to point out divergencies from generally accepted accounting principles on the part Uses of Financial Statements of regulatory bodies and to encourage At the suggestion of the committee on conformity to the full extent possible. postwar problems, a special study has been During the past year, this policy has led authorized of the possibility of new forms to a number of discussions with the Securi of financial or statistical statements to ties and Exchange Commission and its serve varying social and economic purposes. staff, to an appearance as amicus curiae before the Supreme Court in a case in Small Business which an accounting rule of the Federal At the invitation of Representative Power Commission was involved, and to an Wright Patman, Chairman of the Select appearance before the National Association Committee on Small Business of the House of Railroad and Utilities Commissioners of Representatives, the Institute is cooper with respect to a proposed definition of ating with the staff of that committee in depreciation. consideration of measures which might aid small business in postwar readjustment. Federal Government Accounting Accounting and auditing procedures of Professional Affairs the federal government are far behind Not all the major activities of the Insti those of private business and the tax tute have been in the field of public affairs. payers suffer thereby. The Institute suc A number of important steps have been ceeded in focusing attention on some of the taken to improve professional standards, deficiencies by arranging a conference on personnel, education and organization. An federal government accounting in New ambitious research project in selection of York last fall, in which representatives of accounting personnel has been undertaken the General Accounting Office, Bureau of which it is hoped may indicate means of the Budget and Treasury Department, as selecting candidates best* qualified for the well as representatives of a number of profession, and may indirectly result in administrative agencies, participated. The improvement in staff training and employ proceedings of this conference will serve ment policies, accounting curricula in as the basis for further study of the colleges and the form and content of C.P.A. problem. examinations. Annual Reports 129
Refresher Courses individual members through continuation Recognizing the profession’s obligation of the regular program of activities which to provide a way for public accountants are basic justification for the organization’s who have served in the armed forces to existence. The major part of both com reorient themselves in the profession, the mittee and staff work is devoted to these Institute has undertaken to provide re regular activities. fresher courses in accounting, auditing and taxes. The work has begun in earnest. It Standard Examinations is planned to offer the course material to The board of examiners has constantly schools and colleges and to make it avail improved the Institute’s standard exam able also for home study. The experiences ination, which now has been adopted by acquired in preparing these refresher 42 states, 4 territories, and the District of courses may lead to opportunities for Columbia, and the Treasury Department. service in the field of adult education in accounting. Professional Conduct
State Legislation The committee on professional ethics has published interpretations of some of Model accountancy bills, of both the the rules of professional conduct, has regulatory and permissive types, have been answered many inquiries from individuals, prepared by the committee on state legisla and has considered complaints. tion and circulated for criticism of the The most important matter presented council, state boards of accountancy and by the committee during the year was the state societies. Final drafts of these bills will Associated Gas and Electric Company soon be ready for approval. case, on which a report of the council’s Council has concurred in the executive action was published in The Journal of committee’s expression of preference for Accountancy for August. 1944. “regulatory legislation, provided that restrictions of interstate practice are Publications eliminated.” The circulation of The Journal of Manpower Rules Accountancy has increased from 19,869 to 23,452 during the current year, and adver In the early part of the year, Institute tising revenue has risen from $18,160 to representatives spent a great deal of time $22,679. The Certified Public Accountant and effort in conferences and communica has been published monthly. Committee tions with government officials, with the reports, research bulletins and other object of preserving the essential status of special publications have appeared. Mem certified public accountants and accounting bers will recall having received during the firms, to the extent that their professional year, data related to federal income services were rendered to essential indus taxation, Selective Service requirements, tries, under the rules of Selective Service contract termination, O.P.A. reports and and the War Manpower Commission. other wartime regulations of immediate interest. Gasoline Rationing Through the efforts of the Institute, Research regulations of the O.P.A. were amended Although the research department has so as to recognize the essential nature of suffered from loss of personnel, the program public accounting services for purposes of of research in accounting and auditing has supplementary gasoline rations. continued and bulletins have been issued. Provision has now been made for publica R e g u l a r S e r v ic e s tion of tentative statements on current The special activities which have been accounting and auditing problems which recited are impressive, but they should may serve as a basis for discussion and not be permitted to obscure the services criticism by the membership and the state which have been rendered by the Institute societies before the technical committees to the profession as a whole and to its report their final conclusions. 130 American Institute of Accountants Yearbook
P u blicity Finances The activities of the Institute this year As the revenues of the Institute increase have been widely noted in the public with the growth in membership, the money press. Newspaper references to the Insti is expended for purposes which seem tute, which were once a curiosity, have now likely to produce benefits to the profession. become commonplace. It is a regular part Beyond a modest contingency fund, it is of the day’s work to inform the press of not the policy of the Institute to accumu actions or opinions of the Institute which late any reserves. It has been the practice relate to matters of general public interest. to use the money contributed by members in a given year for the greatest service to State Societies those members. The limits of the oppor For eight years, it has been one of the tunity for further service by the Institute major purposes of the Institute to assist are still far distant. Each single undertak and cooperate with the several state ing opens the way to even larger projects. societies of certified public accountants So long as its revenues are in approximate and there have been many gratifying balance, the council is content. testimonials to the success of the efforts in Last year, there was an excess of revenues that direction. Now it has been proposed over expenditures of $5,900, but there that an attempt be made to achieve even were expenditures from the contingency closer coordination of the activities of the fund of about $4,800. The budget for the state and national organizations by crea coming fiscal year indicates that expendi tion of a special department in the Insti tures will exceed revenues by about $14,000. tute’s staff, whose duty would be to clear The estimates of revenue are conservative information to state societies, assist them and may exceed expectations, but if not, in developing activity programs, seek their the council has authorized the difference views on important questions before the to be made up from the contingency Institute, provide speakers for meetings, fund. and in a word, act to the full extent possible Detailed financial statements, as certified as a central secretarial staff of state by the Institute’s auditors, and also lists societies. of charges in the securities portfolio will be published for the information of members. C o n d it io n o f t h e I n s t it u t e
Membership Staff The membership of the Institute has Like most organizations, the Institute passed 8,000, a rather striking figure when has suffered losses of staff personnel during one recalls that only 8 years ago, following the year and has found difficulty in finding the merger of the American Society of suitable replacements. This has added Certified Public Accountants and the greatly to the burden of those who re Institute, the combined organization had a mained at their posts. To these the council membership of about 4,000. In the past is grateful for the extra effort which they year, and the preceding two years, the have put forth, and which has prevented average net gain has been 10%, whereas any loss in effectiveness. before that time the average was nearer Since the United States entered the war, 5 %. One gratifying fact is that losses from the Institute has lost 23 staff employees. resignations and non-payment of dues in Nine of them have entered the armed recent years have been less than one-half forces. In replacing those who have with of 1%. The accelerating rate of increase in drawn, it has been necessary to employ membership is probably due to a combina 58 new assistants, so rapid has been the tion of factors: the need of accountants for turnover. information on wartime problems, the During the past year H. T. Winton, widening knowledge of the Institute’s work assistant secretary, and George N. Farrand, among certified public accountants, and research assistant, accepted commissions the important services to the public, to the in the Navy. Mr. Winton’s work has profession and to its members which the been assumed by other members of the Institute has recently rendered. staff. Paul J. Graber, associate professor Annual Reports 131 of the Oklahoma A and M College, has kosh, Wisconsin, and the University of been employed as research assistant. Wisconsin. He has taught at the University Last May the council approved a plan of Pennsylvania and Northwestern Uni of staff organization recommended by the versity, as well as Texas Agricultural and executive committee as necessary to meet Mechanical College. He is a past president the requirements of the Institute in the of the Texas Society of Certified Public light of present and expected demands. Accountants, and has served as secretary The plan called for a full-time director of of the Texas Society for a number of years. research, a position which had previously He has served as a member of several been held on a part-time basis. James L. Institute committees and recently as chair Dohr, who held the position for three years, man of the committee on education. indicated that commitments to the law The new plan of staff organization will be firm of which he is a member, and to in full effect when several additional assist Columbia University of whose faculty he ants for which it provides can be secured. is a member, are such that he cannot give The council believes that the Institute will the Institute his full time. It is with the enter the postwar readjustment period with greatest regret that we see him terminate a staff organization composed of specialists his services as director of research, and in the various aspects of the work who are we wish to record this expression of our competent to deal with problems of any appreciation of the valuable services nature that may arise. The Institute com rendered the Institute by Mr. Dohr. The mittees may expect greater staff assistance post of full-time director of research was than ever before, and the prospect of in offered to Carman G. Blough, and the creased accomplishment is immeasurably council is happy to report that he has widened. accepted the appointment. Mr. Blough is a member of the Institute and has served Activities of the Council on some of its important committees, To many members, the council which including the committee on accounting governs the Institute may seem a remote procedure. He has been a teacher of and impersonal body. It should be borne accounting, chief accountant of the Securi in mind that it consists of 48 members ties and Exchange Commission, a partner elected by the membership as a whole, from of a public accounting firm, and for the all sections of the country. Your neighbors past two years has been with the War compose the council. Production Board, of which he is Director The council has held three meetings, two of the Procurement Policy Division. He of which lasted one day, and one of which is now president of the American Account lasted two days, at which all the matters ing Association. Under his direction, the discussed in this report and many others council is confident that the plans for in addition have been submitted for review expansion of the technical work of the and action. The council has received copies Institute after the war will be carried out of the minutes of all meetings of the execu in a manner which will receive the enthusi tive committee and full detailed reports astic approval of the membership. from the committees and the staff. Council The new plan of staff organization also has adopted a number of resolutions during called for creation of a new position, that the year which have been published. It has of educational director, to carry on the staff debated and discussed many questions of work related to the preparation of the policy. standard C.P.A. examination, refresher Continued uncertainties as to the effect courses for returning veterans, the project of the war on travel and hotel accommoda in selection of accounting personnel, and tions indicate the desirability of suggesting other educational activities of the Institute. again that the membership empower the This new position was accepted in August executive committee to choose the time by Thomas W. Leland, head of the depart and place for the next annual meeting of ment of accounting and statistics of the the Institute and determine the scope of Agricultural and Mechanical College of the program. Texas, and a vice-president of the American The undersigned committee designated Accounting Association. Mr. Leland holds to prepare this report on behalf of the degrees from State Teachers College, Osh council believes that it expresses the sense 132 American Institute of Accountants Yearbook of the entire body in stating that the spect with which it is regarded by the council is fully satisfied with the manner in public. which the responsibilities it has delegated Respectfully submitted, have been discharged and with the accom Special Committee plishment of the Institute in the past year. J. A. Phillips, Chairman It looks forward with great confidence to an even more ambitious program which Thornton G. Douglas F r e d J. P e t e r s o n will help to strengthen and unite the accounting profession and add to the re October 16, 1944
Report of the Executive Committee
To the Council of the responsibility, under the direction of a A m erican I n stitu te of A cco untants: committee, for preparation of refresher course material to assist in the reorienta Gentlemen: The executive committee tion of public accountants who have served has held two meetings since rendering in the armed forces; he will participate in its report to the council last May: one on the research project under the direction of July 6th, the minutes of which were sent the committee on selection of personnel; to all members of the council, and one on and will coordinate these projects with October 15th at St. Louis. other educational activities of the Institute. M em bersh ip Professor James L. Dohr, who has been serving as research director on a part-time The membership at August 31, 1944, was basis, could not give full time to the work, 7,996, a net gain of 859 for the year. and asked to be permitted to return to Deaths of 23 members and associates have Columbia University, which was in urgent been reported since May as follows: need of his services in planning its postwar Members program. Daniel Badger John D. Murphy Carman G. Blough has accepted the Albert C. Bischel Edward J. Murray position of full-time director of research, Samuel W. Brown Ernest O. Palmer and will take up his duties about November E. Harold C. Clark Kester J. Peers 15th. Mr. Blough’s qualifications are well W. H. Cullen W. Havard Perkins known to the council. He is admirably Harry Einbund Mark B. Schreiner equipped to assume this position. P. G. Goode I. J. Schulte George N. Farrand, research assistant, Sidney J. Hayles John C. Scobie accepted a commission in the Navy, as was John F. W. Heinbokel Guy Miller Scott expected, early in August. Paul J. Graber, F. S. Jacobsen W. W. Vincent George D. Wolf Associate Professor of Accounting at Oklahoma A & M College, has recently Associates been engaged as research assistant. O. C. Horn H. B. Lingle Elizabeth Arliss is serving as acting assistant secretary in the absence of H. T. St a ff Organization Winton, assistant secretary, who is now an Progress has been made in rounding out officer in the Navy. the staff organization outlined in the plan submitted to the council with the report A uditors of the executive committee last May. The executive committee was empowered Thomas W. Leland, head of the depart by the council to deal with the question of ment of accounting and statistics at the compensating the auditors of the Insti Agricultural and Mechanical College of tute, and has recommended an amendment Texas, accepted the new staff position of to the by-laws providing for the appoint educational director and began work in ment each year of a single firm of certified August. He will direct the staff work public accountants to audit the Institute’s relating to activities of the board of accounts for compensation and submit its examiners, including the preparation of the report to the membership. The executive standard examination; he has assumed committee resolved to offer the present Annual Reports 133
auditors an honorarium of $1,000, for The statement was published in The which provision has been made in the Journal of Accountancy for August, 1944, current budget. and was transmitted to the Securities and Exchange Commission. T e n t a t iv e S t a t e m e n t s o n T e c h n ic a l Q u e s t io n s P o st w a r P r o b le m s Following the meeting of council in May, The. report of the committee on postwar the executive committee approved modifi problems which had been referred by cations submitted by the committee on council to the executive committee, was accounting procedure in the plan for discussed at length. The question of issuance of tentative interim studies of adaptation of corporate reports to various accounting and auditing problems of broad social purposes was referred back to the professional interest, on which no final committee on postwar problems for further conclusions had been reached by the Insti study and elaboration, with the assistance tute’s technical committees. The plan, as of the research department. modified, is as follows, and will be put into effect as soon as occasion arises: I n d e p e n d e n t St a t u s o f P rofessional P u b l ic A c c o u n t a n t s 1. The present procedure of the two committees with respect to Accounting A special committee was authorized and Research Bulletins and Statements on later was appointed by the president to Auditing Procedure should be continued carry out the suggestion that the problems as heretofore. related to the independent status of the 2. As an additional and separate activity professional public accountant be studied of the Institute a series of memoranda intensively. The special committee has should be initiated dealing with accounting outlined a program and has made a report and auditing questions. They are not to be of progress to the executive committee. issued as definitive pronouncements of the Institute but primarily as an educational R e f r e s h e r C o u r se s activity of the Institute. (a) Such memoranda should deal A special committee was authorized with subjects believed of current interest and appointed to deal with the proposal to the membership generally. that refresher courses be prepared to (b) The issuance of any memorandum assist in the reorientation of public to be prepared by the research depart accountants who have served in the ment and published in The Journal of armed forces. This committee has been very Accountancy, or otherwise, should be under the supervision of either the com active; it has had two meetings, has con mittee on accounting procedure or the ferred with the Veterans Administration committee on auditing procedure, accord and with educational institutions, and has ing to the content of the memorandum. prepared a program to accomplish its (c) Although the memoranda might purpose. discuss questions pro and con, stating various aspects of the subject considered, N o n -P a r t is a n T a x C o m m issio n they should not undertake to express the The committee on federal taxation will views of any committee or officer of the Institute. report the present status of the Institute’s (d) In the first memorandum of the proposal that a non-partisan tax commis new series the plan of issuance should be sion be created by Congress, to assist in outlined. overhauling the federal tax system. The executive committee recommends that the A ss o c ia t e d G a s C a s e Institute continue its efforts to bring about The executive committee reviewed and adoption of this recommendation. approved a statement prepared by a sub committee appointed for the purpose by P r a c tic e b e f o r e T a x C o u r t authority of the council, reporting the Efforts have been continued to bring action of the council in the matter of about reconsideration of the rules of the Associated Gas and Electric Company, United States Tax Court, adopted more which was presented by the committee on than a year ago, providing that certified professional ethics at the May meeting. public accountants applying for admission 134 American Institute of Accountants Yearbook to practice before the Court must sit for public accountants in preparing the best written examination. possible bill to accomplish the results which the state society had decided it A c c o u n t in g in T a x C a s e s wished to achieve. Since that time, the The executive committee approved a committee on state legislation, with the suggestion from the committee on federal assistance of counsel for the Institute, has taxation that the Institute endeavor to prepared model bills, of both the permissive encourage the application of generally and regulatory type, to serve as a guide to accepted accounting principles in the state societies which may desire either determination of taxable income by the type of legislation. The draft model bills administrative agencies of the federal will be presented by the committee on government and the courts. state legislation for consideration by the The executive committee considered a council. suggestion which had been made by a It has been reported that two state taxpayers’ organization to certain Con societies are working on regulatory bills for gressmen that reports of income, certified introduction in their state legislatures, and by certified public accountants, be accepted two others are actively considering the by the Bureau of Internal Revenue without question. Regulatory laws are now in further audit. It was reported that this effect in 14 states. matter was on the agenda for discussion The executive committee, for the infor at a joint meeting of the Advisory Council mation of the council, expresses its pref of State Society Presidents with the council erence for regulatory legislation, provided of the Institute Monday evening, October that restrictions of interstate practice are 16th. It was resolved that the matter be eliminated. referred to the incoming executive com mittee in the light of the discussion at that Sm a ll B u s in e s s joint meeting. The executive committee authorized the president and secretary to cooperate to R e l a t io n s w it h B a r A s s o c ia t io n the full extent possible with the Select The National Conference of Lawyers and Committee on Small Business of the House Certified Public Accountants, organized of Representatives, whose chairman, Rep last spring under authority of the execu resentative Wright Patman, had invited tive committee and the House of Delegates the Institute to submit suggestions for of the American Bar Association, held its legislation which might be helpful to small second meeting in Chicago, September business in the postwar readjustment 10th. A resolution was adopted expressing period. The secretary of the Institute has the opinion of the Conference that both since corresponded with the staff of the lawyers and certified public accountants Select Committee, and a conference is may properly prepare income tax returns. expected in the near future. A full report of the activities of the Con ference will be submitted to the council by A m e r ic a n A c c o u n t in g A ss o c ia t io n the co-chairman representing the Institute. The executive committee authorized the president to appoint official representa R e g u l a t o r y L e g is l a t io n tives of the Institute to attend the annual The lawyer members of the National meeting of the American Accounting Conference have urged the advantages of Association in Chicago, September 8th and regulatory legislation as a means of con 9th. Five official representatives of the fining the practice of public accounting to Institute attended the meeting, where licensed practitioners. The subject of Edward A. Kracke, member of the execu regulatory legislation has been the center tive committee, was introduced as the of much controversy within the accounting head of the delegation. profession in past years. The Institute’s position since 1940 has been one of com Y e a r b o o k plete neutrality. Council, by revoking an After discussion of the problem of pub earlier resolution at that time, in effect lishing the Institute’s yearbook at a date laid down the policy that the Institute sufficiently early, so that its contents would would assist any state society of certified be of current interest, it was resolved that Annual Reports 135 henceforth the list of members and asso Institute have taken place during the ciates of the Institute be published sepa current fiscal year: rately in stiff paper covers and as early as possible in the fiscal year, and that the G e n e r a l F u n d yearbook in cloth binding, be confined to proceedings of the annual meeting, com Purchases mittee reports, lists of officers, council and $50,000 United States Treas committees, by-laws and rules of pro ury bonds, 2%, 1953/51, fessional conduct, and similar data of @ 100 7/32...... 50,117.19 current interest. 20 shares Consolidated Edi son Company of New York, @ 104¾...... 2,102.00 A n n u a l M e e t in g 52,219.19 The executive committee decided to Sales carry out the plans for the 1944 annual $ 2,000 New York City, 3%, meeting, in spite of transportation diffi 1967, @ 112⅜...... $ 2,242.50 culties, in the sincere belief that the 50,000 United States Treas technical discussions would assist mem ury Bonds, 2% 1953/51 @ bers in the discharge of their wartime 10015/32...... 50,235.94 responsibilities. 52,478.44 In view of continuing uncertainty as to the availability of transportation and C onting ency F u nd hotel accommodations in various sections Purchases of the country, it is recommended that discretion be left with the executive com $25,000 United States Treas mittee to select the place for the 1945 ury Bonds, 2½%, 1972/67 meeting and determine the scope of the @ 10021/32...... 25,164.06 5,000 Dominion of Canada, program. 3%, 1967, @ 103¼...... 5,175.00 80 shares Consolidated Edi P e n s io n P l a n son Company of New The American Institute Pension Plan, York, @ 104¾...... 8,408.00 adopted by the council in May, 1943, was 38,747.06 put into effect before the latest regulations Sales on the subject had been issued by the $5,000 New York City, 3%, Bureau of Internal Revenue, and the 1957, @ 111⅞...... 5,581.25 Bureau refused to pass on any plans prior 5,000 New York City, 3%, to the issuance of those regulations. Follow 1977, @ 109⅞...... 5,481.25 ing publication of the regulations, counsel 11,062.50 of the Institute submitted the plan for Bureau review, and a number of amend E n d o w m e n t F u n d ments have been suggested. The executive committee has reviewed the proposed Purchases amendments and recommends their adop $ 2,000 Erie Railroad first tion by the council. They do not alter the consolidated mortgage, Se fundamental structure of the plan, but ries B, 4%, 1995, @ 105⅜ $ 2,112.50 merely alter administrative procedures. 6,000 Erie Railroad first consolidated mortgage, Se While the American Institute of Account ries B, 4%, 1995, @ 105½ 6,345.00 ants is exempt from federal income 750 Erie Railroad first taxation, the Publishing Company, whose consolidated mortgage, Se employees are also benefited by the plan, ries B, 4%, 1995, @ 105⅞ 795.94 is taxable, and it seems desirable as a 1,000 Louisville & Nash matter of policy for the Institute’s plan to ville Railroad Co. first and conform with the government’s regulations. ref. mtg., 4%, 2003, @ 105 1,052.50 4,000 Louisville & Nash S e c u r it ie s ville Railroad Co. first and ref. mtg., 4%, 2003, @ The following purchases and sales of 105⅛...... 4,215.00 securities in the several funds of the 2,000 Southern Pacific 136 American Institute of Accountants Yearbook
Company, 4½ %, 1981, @ F oundation 83...... 1,670.00 4,000 Dominion of Canada, Purchases 3% , 1967, @ 103¼ ...... 4,140.00 $5,000 Canadian Pacific de 1,000 Dominion of Canada, benture, 4%, perpetual, @ 3%, 1967, @103⅛ ...... 1,033.75 95¼ ...... 4,775.00 10,000 Chicago and North 50 shares United States Steel Western Railway Co. first Corp., 7%, cum. preferred, and general mortgage, 4%, @ 127¼ ...... 6,380.00 1989, @ 104¼ ...... 10,425.00 11,155.00 20 shares Consumers Power Co. preferred stock, @ Sales 104½ ...... 2,097.00 $1,000 New York City, 3%, 5 shares Consumers Power 1967, @ 112⅜ ...... 1,121.25 Co. preferred stock, @ 105 527.05 1,000 New York City, 3%, 50 shares United States Steel 1979, @ 110...... 1,097.50 Corp., 7% cum. preferred, 5,000 Baltimore & Ohio @ 127¼ ...... 6,380.00 Railroad Co. secured notes, 25 shares American Tele 4%, 1944...... 4,985.00 phone and Telegraph Co., 3,000 New York State Elec @ 158⅞ ...... 3,982.13 tric & Gas Co., 3¾ %, 10 shares Consolidated Natu 1964, @ 109⅛ ...... 3,264.68 ral Gas Co., @ 26⅜ ...... 263.75 10,468.43 45,039.62 C ommittee on Selection of P e r so nn el Sales $5,000 Michigan Consoli $25,000 United States Treasury dated Gas Co. first mort bonds, 1¼ %, 1947, @ 100.. 25,000.00 gage, 4%, 1963 called, @ 104...... 5,200.00 B enevo lent F und 4,000 New York City, 3%, Purchases 1967, @ 112⅜ ...... 4,485.00 5,000 New York City, 3%, $5,000 United States Treas- 1977, @ 109⅞ ...... 5,481.25 sury bonds, 2% , 1953/51 5,000 New York City, 3%, @1007/32;...... 5,011.72 1979, @ 110...... 5,487.50 5,000 Dominion of Canada, 4,000 New York City, 3%, 3%, 1967, @ 103¼ ...... 5,175.00 1979, @ 110...... 4,390.00 $10,186.72 9,000 New York City, 3%, 1979, @ 113⅜ ...... 10,181.25 Sales 5,000 New York State Elec $3,000 New York City, 3%, tric & Gas Co., 3¾ %, 1967, @ 112⅜ ...... $ 3,363.75 1964, @ 109½ ...... 5,452.39 17% shares Erie Railroad, Respectfully submitted, preferred, @ 56⅝ ...... 983.29 V ic to r H. S tem p f, Chairman 10 shares Consolidated Natu ral Gas Co., @ 30½ ...... 299.47 J o h n L. C a r e y , Secretary 41,960.15 October 15, 1944
Report of the Board of Examiners
To the Council of the A pplications a nd A d m issio ns A m erican I n st it u t e of A cco untants: During the past fiscal year the board of Gentlemen: The board of examiners examiners has received 961 applications presents herewith a report of its activities for admission to the Institute, and since since the spring meeting of council. The September 1, 1944, has received 116 addi board held one regular meeting August 8, 9 tional applications. Four hundred twenty- and 10, 1944, with all members attending. seven applications were pending at the Numerous subcommittee meetings have beginning of the fiscal year and 389 been held. remained pending as of August 31, 1944, of Annual Reports 137 which 70 have been approved by the board are Maryland, New Jersey, New York, and submitted to council. Ohio, Pennsylvania, and Wisconsin. The work of the board of examiners One cooperating state and one cooperat relating to admissions is reflected in the ing territory offered no examination in following statistical record for the fiscal November 1943 and five states and two year: territories did not offer an examination in Mem A ssoci May 1944. Eleven states used the questions bers ates Total but not the grading service in the Novem Admitted on Insti ber 1943 examination and seven states tute examination.. 288 475 made a similar arrangement in the May Admitted on other 1944 examination. The charges for those examinations...... 224 475 states using the questions only are as Admitted on oral ex follows: amination ...... __ ___ 1 512 951 $2.00 for first hundred candidates $1.00 for second hundred candidates $0.50 for all in excess of two hundred Twenty-six associates have been advanced candidates to membership. $0.10 for each set of questions ordered Examinations but not used. The standard examination prepared by The charges to jurisdictions using the the board of examiners is now used by the uniform examination and the grading boards of forty-two states, the District of service are an amount equal to 50% of the Columbia, four territories, and by the charges made by the state board but not Treasury Department. The list of cooper exceeding $10.00 for each candidate. The ating states and territories using the last costs of the services rendered by the two uniform examinations follows: Institute in connection with the examina tions are approximately $17,500 a year. November 1943 The receipts from state boards for the Alabama, Alaska, Arizona, Arkansas, service are approximately $11,500 a year. California, Colorado, Connecticut, Dela The cooperation of boards with the Insti ware, District of Columbia, Florida, tute is on a voluntary basis and it is Georgia, Hawaii, Idaho, Illinois, Indi essential for the Institute to supply satis ana, Iowa, Kansas, Kentucky, Louisiana, factory examinations and render acceptable Maine, Massachusetts, Michigan, Minne service in order to maintain the cooperative sota, Mississippi, Missouri, Montana, Ne plan. Under the arrangements made with braska, Nevada, New Hampshire, New the boards the Institute recognizes their Mexico, North Carolina, Oklahoma, Ore sovereignty in the grading of examinations gon, Rhode Island, South Carolina, South of candidates for certificates and the final Dakota, Tennessee, Texas, Utah, Ver decision with respect to grades lies with the mont, Virginia, Virgin Islands, Washing boards and not with the examining staff ton, West Virginia, Wyoming, and the of the Institute. Treasury Department. Papers for the November, 1943, exam ination were submitted by 1689 candidates, M ay 1944 and papers of 684 candidates were graded Alabama, Arizona, Arkansas, California, by the examining staff of the Institute. In Colorado, Connecticut, Delaware, District the May, 1944, examination 1289 papers of Columbia, Florida, Georgia, Hawaii, were submitted, of which 722 were graded Idaho, Illinois, Indiana, Iowa, Kansas, by the Institute. Statistics of the candidates Kentucky, Louisiana, Michigan, Minne passing these two examinations follow: sota, Mississippi, Missouri, Montana, Ne No. of Percentage braska, Nevada, New Hampshire, New Candidates Passing Mexico, North Carolina, North Dakota, Nov. May Nov. May Oklahoma, Oregon, Puerto Rico, South Subject 1943 1944 1943 1944 Dakota, Tennessee, Texas, Utah, Vermont, A uditing...... 436 377 64.5 66.0 Washington, West Virginia, Wyoming, and Commercial Law... 480 437 49.2 48.5 the Treasury Department. Theory of Accounts 520 433 67.3 68.4 The non-cooperating states at present Accounting Practice 644 713 9.8 10.2 138 American Institute of Accountants Yearbook
It frequently has been stated that the Following the established custom in time required for the solution of the prob previous examinations, a small group of lems in accounting practice is more than the certified public accountants sat for the time available for their solution. In recogni May, 1944, and the November, 1944, tion of this objection the board has decided examinations in Accounting Practice, using upon the use of only two problems in each advance printer’s proofs. These pre-testing session of the November, 1944, examina arrangements are designed to check the tion, whereas formerly it was the practice requirements of time in solving problems to require the solution of three problems. and to make certain that the factual data The Institute’s board of examiners has and directions for the various problems are cooperated with the executive committee correctly stated. of the Association of Certified Public The board has given some consideration Accountant Examiners in the preparation to the method of grading examinations and and distribution of a questionnaire to state instructed the chairman to appoint a boards of public accountancy with the committee to outline a plan for testing the objective of ascertaining the educational grading system. This plan, after approval and experience background of the candi by the members of the board of examiners, dates in the CPA examinations and the will be followed in testing the grading of the influence of these factors on the success or papers in the November, 1944, examina failure of the candidates in accounting tion. Twelve states have reported that no practice. This questionnaire was mailed changes were made in the grades awarded to the secretaries of the state boards of the candidates by the Institute’s examiners accountancy on September 14, 1944, and in the May, 1944, examination. To date to date 20 replies have been received. The only seven papers from three states have board will analyze the replies received to been returned for re-grading and in all this questionnaire. cases the state boards involved and the The November, 1944, examination has examining staff of the Institute have been approved by the board of examiners agreed upon final grades. and is now in the hands of the printer. The board approved November 8, 9 and Questions and problems for the May and 10, 1944, as the dates for the November November, 1945, examinations have been examination and tentatively selected the selected and tentatively approved by the following dates for future examinations: board. The material is now being prepared for submission to and final approval by Spring 1945 May 16, 17 and 18 Fall 1945 November 7, 8 and 9 the board. Subcommittees of the board Spring 1946 May 15, 16 and 17 have received for review a group of ac Fall 1946 November 6, 7 and 8. counting problems for use in future exam inations. These problems have been selected On August 14, 1944, five representatives under a plan that insures that there will of the board of examiners met with the be no undesirable duplication of problems members of the New Jersey State Board of and that the principal subjects upon which Public Accountants for the purpose of problems should be presented will be informing the New Jersey Board of the covered over a reasonable period of years. general features of the plan of cooperation The board has not overlooked the interest in the conduct of examinations. The board of members of the Association of Certified of examiners is mindful of the advantages Public Accountant Examiners and mem of adoption of the standard examination bers of the various state boards of account by the six states not presently using the ancy in the task of selecting problems and Institute examination and is desirous of questions. T. Dwight Williams, a vice cooperating fully with them should they president of the Association of Certified desire to adopt the Institute examination. Public Accountant Examiners, circularized them requesting that they supply the board E lijah W att Sells A w ards of examiners with some problem or ques The following candidates in the Novem tion suitable for use in the examinations. ber 1943 and the May 1944 examinations The replies to this request have been made obtained the highest grades, using the available to the board of examiners, and, weighting plan approved by the board of in so far as feasible, the material submitted examiners, and were selected to receive the will be used in future examinations. Elijah Watt Sells scholarship prizes: Annual Reports 139
November 1943 approximately 50% of the applicants for John N. Newland, Montana, first prize admission to the Institute are seeking Robert Gray Murdoch, District of associateship. The increase is due in part Columbia, second prize to a growing interest in the Institute on the Elin Frances Sondergard, Massachusetts, part of younger certified public accountants honorable mention on the staffs of public accounting firms, but Irving Richardson, Illinois, honorable is also largely due to a desire on the part mention of certified public accountants in the Willis A. Leonhardi, Illinois, honorable employ of private corporations to become mention affiliated with the Institute. Many state T. A. Waites, Jr., South Carolina, honorable mention. CPA laws do not require public accounting experience before the issuance of CPA M ay 1944 certificates. The condition created by these laws constitutes an important factor in the William Harmon Simmons, Texas, first prize increase in applications for associateship. Thomas Bernard Donahue, Missouri, The by-laws of the Institute provide that second prize an applicant may be recommended for Theodore Thulstrup, Illinois, honorable associateship if he has satisfied all other mention requirements and shall have been in Maurice D. Atkin, Illinois, honorable practice on his own account or in the mention. employ of a practicing public accountant for not less than two years, or shall have Qualifications for A dm ission had experience which in the opinion of the to the I n stitu te board of examiners is equivalent to two The board has continued its policy years of public accounting practice, and at adopted at the meeting of October 31, the date of application shall be engaged in 1941, of considering service in the armed work related to accounting. The proper forces of the United States as not breaking determination of equivalent experience to the continuity of public accounting experi be accepted from applicants in lieu of the ence for purposes of meeting eligibility two years of experience in public account requirements for admission to the Institute. ing is primarily a matter of judgment and Under this policy applicants serving in the in many instances there are factors which armed forces are considered as engaged require consideration entirely apart from in the public practice of accountancy the accounting experience offered by the provided that they were in practice imme applicant. For this reason, the applications diately prior to such service, but the term of persons offering equivalent experience of service in the armed forces is not in lieu of public accounting practice are considered as public practice in computing brought to the attention of the board at a the period of practice. meeting. In its endeavor to construe the In case of persons serving in the armed by-laws in accordance with what it believes forces of the United States, the board to be their intent, the board has found it recommends to council that the period of necessary during the past year to reject service in the armed forces should not be the applications of 29 certified public considered for the purpose of applying the accountants who had sought admission as automatic feature of advancement to associates on the basis of equivalent membership. experience. The board has adopted the policy of Respectfully submitted, accepting for admission applicants receiv ing CPA certificates under section 4, H e n r y E. M e n d e s, Chairman paragraph (a)2 of the Illinois Accountancy Roy Andreae Act of 1943 provided the candidates meet Robert P. Briggs other qualifications for admission. This Harold R. Caffyn policy was adopted after a review of J. W illiam Hope the Illinois examinations taken by such Kenneth M. Montgomery applicants. R aym ond E. N o r t h There has been a trend toward a sub G e o r g e E. P e r r in stantial increase in the proportionate N o rm a n E. W e b s te r number of associates. At the present time, October 11, 1944 140 American Institute of Accountants Yearbook
Report of the Committee on Nominations
TO THE Oscar R. M artin, Nebraska A m erican I n stitu te of A c co un ta nts: Theodore Krohn, New Jersey K arl K. Morris, Ohio Gentlemen: The committee on nomi nations hereby nominates the following for Paul W. Fitzkee, Oklahoma officers, auditors, and members of council I. D. Wood, Oregon of the American Institute of Accountants, John N. Aitken, Jr., Pennsylvania to be voted upon at the annual meeting John H. Zebley, Jr., Pennsylvania at St. Louis, October 17, 1944. James A. Rennie, Virginia C a r l E. D ietze, Wisconsin For Officers: Each of the nominees has expressed his President: willingness to serve if elected. These S a m u el J. B r o a d , New York nominations have been approved by the Vice Presidents: committee on nominations. Two of the R o d n e y D. W h ite , Washington nominees are members of the committee. E d w a rd B. W ilc o x , Illinois These members did not vote for nominees in Treasurer: their respective states, but the vote cast M a u r ic e E. P e lo u b e t , New York by the Institute members in these states For Auditors: was so largely in favor of these candidates that the committee recommends their F. M errill Beatty, New Y ork election. Henry A. Horne, New York Respectfully submitted, For Members of Council: G e o r g e S. O live, Indiana, Chairman (Three year term): C a r l E. D ietze, Wisconsin Oscar M oss, California Roy Andreae, Illinois James I. K eller, Jr., Florida I. R ussell Bush, Pennsylvania W illiam Jackson Carter, Georgia H al Canary, Tennessee Roy Andreae, Illinois E. Ober Pride, Massachusetts J a c k so n W. Smart, Illinois T. Dwight W illiams, Oklahoma E d w a rd S. R ittler, Louisiana J. H arold Stewart, Massachusetts August 18, 1944
Report of the Committee on Professional Ethics To the Council of the quiries have been received from members A m erican I n st it u t e of A cco un ta nts: and associates with regard to the com Gentlemen: Since the May meeting of mittee’s views on the question of listings in council the New York members of the directories, and after considerable study committee on professional ethics have held and discussion, the committee has issued several meetings to discuss questions the following statement on the subject, arising from the special report on the which was printed in the September 30th Associated Gas case, in order that the number of The Certified Public Accountant, matter might be satisfactorily disposed of and in the Official Decisions and Releases in accordance with council action thereon. section of the October issue of The Journal No meeting of the full committee has been of Accountancy: held since the May meeting. “ The question has been submitted to the American Institute of Accountants com Listings in Directories mittee on professional ethics whether the A publisher of directories, proposing to name, address, and professional qualifica tions of a member of the Institute may be issue “The American Accountants Direc listed in a directory without violation of tory,” has circulated material concerning the rules of professional conduct. this proposed publication to accountants “ I t is the opinion of the committee on throughout the country. Numerous in professional ethics that it would be a viola Annual Reports 141 tion of Rule No. 10 of the rules of profes the members and the state societies in this sional conduct if descriptive information connection. about the professional qualifications of a member or an associate were published with his name and address in a directory, Analysis of Cases in consideration of any payment, direct or indirect, by such member or associate. 38-14. This case, arising from a court “ This opinion is based upon the language decision involving alleged conspiracy, has of Rule No. 10, which states that ‘members been reported to the council at numerous or associates shall not advertise their pro meetings. The committee, and the technical fessional attainments or services.’ In the assistant to the committee, have devoted opinion of the committee, the publication considerable time and study to the avail of descriptive material in conjunction with able records in this case. The New York the listing of the name of a member or an members of the committee have met several associate in a directory, in consideration times with the members of the Institute of any payment by him, would consti tute advertisement of his professional concerned in the case, and have found it attainments. impossible to reconcile conflicting testi “ The committee believes that the listing mony as to the partnership relationship of the name and address of a member in a of the members involved. This has made directory with the designation ‘Certified it impossible to fix responsibility on any Public Accountant,’ firm affiliation, and member of the Institute. The committee ‘Member, American Institute of Account has therefore voted to close the file in the ants,’ where appropriate, but without any case because of insufficient evidence. further descriptive language, would not be 42-2. This case involves a member who a valid basis for complaint. “However, the committee has already was the object of a suit in a civil pro expressed the opinion (see The Certified ceeding, and has been reported at several Public Accountant, March 15, 1944, page meetings of the council. Information has 8) that Rule No. 10 prohibits such listings recently been made available to the com in bold type or in any other form which mittee in this case, which should enable differentiates them from other names and it to reach an early conclusion. addresses in the same list.” 42-5. The committee has reported at five previous meetings of the council on Subsequent to the release of this ruling, this case, which involves a member who a member of the Institute received a letter has been indicted by a federal grand from the publishing firm which proposes jury. In accordance with its established to produce the new directory, from which policy in cases of this kind, the committee the following is an excerpt: is deferring formal action in the mat ter until the court record may become “As many members of the American available. Institute of Accountants have indicated that they are highly in favor of the Ameri 42-11. This case, reported to the council can Accountants Directory and wish to be at several previous meetings, involved listed in it, they will bring up at the conven allegations by a non-member of the Insti tion in St. Louis the matter of amending tute against an accounting firm, of which Rule 10 so that members of the American partners are members of the Institute, to Institute of Accountants may ethically be the effect that said accounting firm had listed in this directory, just as the American certified misleading financial statements. Bar Association has made it possible for The committee received an explanation lawyers to be listed in certain directories from the firm involved, and after a thor they have approved.” ough study of the published annual reports of the corporation concerned, the Rules of Professional Conduct committee has reached the conclusion The committee is pleased to report that that the charges are not substantiated by as a result of its interpretation of Rule No. the record, and has therefore closed the 10, as amended December 27, 1943, several file in the matter. cities have discontinued display or bold 43-3. The attention of the committee type listings for accountants in the classi was drawn to a civil case in which a firm fied section of telephone directories. The of accountants, of which a partner is a committee has had the full cooperation of member of the Institute, was sued for 142 American Institute of Accountants Yearbook alleged negligence. The committee has Summary of Inquiries and Responses considered an explanation from the member of the Institute involved, and is awaiting P ossible P ractice of L aw answers to further questions before pro Q. Our firm has been requested by a num ceeding with its investigation. ber of clients to create a fund that would 44-1. Complaint was made that a be used for the payment of costs neces member of the Institute had permitted sary in prosecuting federal and state tax cases, which fund would be estab the use of his name in an advertisement of lished by periodic assessments of mem a business college, carried in the public bers of the group. We would be neither press. Upon an explanation from the mem trustee nor custodian of the fund, but ber concerned that he had no proprietary our authority would be limited to decid interest in the college, and his assurance ing the merits of each case, the extent that he would not permit his name to be to which each should be prosecuted, used in similar advertisements, the com preparation of the accounting informa mittee has closed the file in the case. tion, and the selection of the attorney. 44-2. The committee received a com Would such a plan be in violation of plaint that a member of the Institute the Institute’s rules of professional conduct? had distributed announcements, indicating A. The committee is of the opinion that specialization in a particular field of the proposed activities might constitute accounting, to others than clients or per the unauthorized practice of law; and sonal acquaintances of the member con that, in any event, unless your services cerned, in violation of Rule No. 7. The were restricted to your own clients, committee received assurance from the your activities might result in com member that distribution of the announce plaints from members that their clients ment complained of had been discon had been approached by another tinued, and that there would be no further accountant. Therefore, the proposed undertaking is not favored by the distribution of similar matter. The com committee. mittee thereupon considered the matter closed. D e sk Calendars 44-3. Complaint was made that a pamphlet, bearing the name of a firm of Q. Various accountants in our state have which partners are members of the Insti customarily given desk calendars to tute, containing explanatory tax material, their own clients at Christmas. Some of these calendars have been rather large had been received by the client of another and have been displayed in various member. An explanation has been received places, such as banks. Does this consti from the accountants concerning dis tute a violation of Rule No. 10 as tribution of the material, a copy of which amended? has been made available to the com A. The rules of professional conduct of the plainant, and the committee has voted to Institute do not deal specifically with close the file in the case unless information distribution of calendars. While wide received from the complainant indicates latitude is permitted members in their that the matter should be further pursued. communications with clients, there are limits based on a sense of reality and 44-4. A non-member of the Institute propriety. The committee is of the has complained that a circular letter, opinion that the spirit of Rule No. 10 bearing the name of a member of the is violated when members advertise Institute, has been received by one of his otherwise than in the form and under clients. The committee has informed the the circumstances set forth in Rule member of the complaint, indicating that No. 10 as amended. distribution of the circular appears to be a Q. We have been mailing out desk calen violation of Rule No. 7 and Rule No. 10. dars bearing our firm name and address. The committee has requested the assurance Is this a violation of the rules of profes sional conduct of the Institute? of the member that he will not in the future A. The committee is of the opinion that issue communications of the type com the distribution of desk calendars by a plained of to others than his own clients, member constitutes a violation of Rule and is awaiting a reply before final dis No. 10 of the rules of professional position of the matter. conduct of the Institute. Annual Reports 143
P ractice as E n g in e e r Survey of P rospective Clie n t e l e Q. I am considering association with a firm Q. I propose to make a survey of business of management engineers, which op establishments in a certain section of erates differently from a public account the country to discover, by calling on ing firm. Please advise what effect such and interviewing banks and prospective an association would have on my mem clients, whether there would be suffi bership in the American Institute of cient interest and activity to justify Accountants, and whether it would be the formation of a public accounting necessary for me to withdraw from firm in that locality. Is this permissible? the Institute if I decide to join the A. Any member of the Institute who would engineering firm. conduct or participate in a survey of A. Your attention is called to Rule No. 15 this type would become subject to sus of the rules of professional conduct. It pension or expulsion for violation of the is the committee’s opinion that if in by-laws and rules of professional con your new arrangement you cannot, or duct. Such activity would constitute do not observe the Institute’s rules you “an act discreditable to the profes should resign in order to avoid exposing sion” ; it would involve direct or indirect yourself to the risk of charges of un solicitation; it might constitute adver professional conduct. tising of professional attainments or Q. If a member of the Institute becomes a services in a prohibited manner. principal in an industrial management organization, the other members of I ndependence which are not members of the Institute, Q. A firm of certified public accountants is is the concern bound by the rules of regularly engaged as accountants and professional conduct of the Institute? auditors for a client, the report being A. A member of the Institute in public issued under the firm name but the accounting practice and simultaneously actual audit and responsibility and engaged in another occupation must in preparation of the report being in both capacities abide by the rules of charge of Partner A. The report does professional conduct of the American not contain an opinion paragraph. The Institute of Accountants. report is used solely for the information of the client’s management and stock M a ilin g N otices of F ormation holders, the latter consisting of three of P a rtn er sh ip individuals. Partner B has been a director of the client concern and re Q. Three members of the Institute are cently was made assistant general contemplating forming a partnership to manager at substantially increased com practice as certified public account pensation so as to enable him to take a ants. One is a member of the staff of a much closer interest in the client’s firm of C.P.A’s at the present time. affairs and management. In his capac Would we be permitted to mail cards ity, Partner B was in effect represent announcing the formation of a partner ing the principal stockholder who was ill ship to (a) clients served entirely by the and not able to supervise and protect staff accountant, including signing of his interest. Can the firm of C.P.A’s be reports and fixing fees; (b) clients deemed independent? Is Rule No. 4 of obtained by the staff accountant? the rules of professional conduct of the A. Under Rule No. 10 as amended mem Institute violated? bers are permitted to announce the A. On the basis of the facts disclosed it is formation of a new partnership in the not believed the work to be undertaken form of a card in a newspaper; also to by Partner B would be a violation of send similar announcements to freinds Rule No. 4. It is the opinion of the and acquaintances, including organiza committee that the accounting firm tions served while employees of other would be wise not to continue in the accountants. However, the committee capacity of auditor for the concern, but feels it might be in bad taste to refer to since the stock is held by only three former affiliations and it might cause stockholders, there does not seem to be resentment on the part of former em any impropriety in the firm’s accepting ployers. The committee wishes to draw appointment as auditors so long as all your attention to the fact that sending the stockholders desire the appoint announcements to clients of former ment, and the audit reports rendered by employers might be regarded as a form the firm clearly disclose the positions of solicitation in violation of Rule No. 7. held in the concern by Partner B. 144 American Institute of Accountants Yearbook
“B o il e r pl a t e ” whether this would be in violation of Q. Please furnish a ruling as to the use of Rule No. 3. imprints by accounting firms on book A. There appears to be nothing objection lets prepared by various tax services, able from the point of view of the rules of professional conduct of the Institute explaining features of new tax provi in the proposed provisions of the sions, to clients and others who request partnership articles submitted by you. them. A. If a member desires to furnish his clients with material prepared by C lient in I llegal B u sin e ss others, there is no Institute rule which Q. Please advise whether an accountant forbids such distribution; but distribu auditing the books and preparing the tion of tax bulletins and similar mate tax returns for illegal businesses would rial should be confined to clients be considered an ethical practitioner? presently served by members. The com A. There is no specific rule of conduct mittee believes the distribution of such which would apply to this situation, material is intended as advertising, but in the opinion of the committee however, and would be glad to see the association with illegal businesses might discontinuation of printed material bring an accountant under disciplinary bearing the names of Institute mem proceedings under Rule No. 5 of the bers. Information can be conveyed to rules of professional conduct of the clients by letter or memorandum, or Institute; also, such service might lead by referring them to publications to situations which would justify readily available which contain such charges under Article V of the by-laws information. of the Institute, which deals with acts “ discreditable to the profession.” R elian c e on P art-tim e E mployee Q. One of my clients has a bookkeeper, B u sin e ss I ncompatible w ith who is keeping books on a part-time A ccounting P ractice basis for another client under my Q. I desire to enter into a business which supervision. I shall prepare quarterly will be operated so as not to interfere financial statements for the latter client with my public accounting practice. from the records prepared by said part- This business will be to devise and sell time employee. Is this permissible? through the mails specialized account A. If your supervision will be sufficient to ing forms for small businesses. The new be equivalent to the type of audit that business will be operated under a trade would normally be required in order to name and my name will not appear on justify your preparation and submission the letterhead or any other advertising of reports, there is no objection to your used, and it is my present intention rendering the services mentioned. How that my name will not be used in any ever, if your supervision is nominal and of the company’s correspondence. It is you accept the records as correct with not my intention to sell these forms to out audit, you should not render a any of my clients nor to use the sale of report; under such circumstances you these forms to obtain new clients. could prepare statements completely Would any rule of the Institute prohibit qualified so as to indicate clearly that my entering into this enterprise? they were based on unaudited records A. It is our belief that an independent and that you do not assume responsi accountant should not engage in the bility for their correctness. activity outlined because there is danger of violating Rule No. 4. It is the opinion P articipation in P rofits b y P arty of the committee that the proposed Q. We are attorneys, and have been re activity could not be conducted without tained to draw new partnership articles violating Rule No. 15, inasmuch as the for a firm of accountants, the partners proposed enterprise would indulge in of which are members of the Institute, advertising and solicitation in a manner whereby on the death of any partner, forbidden by the rules of the Institute. his capital, as shown on the books at The fact that your name would not date of death, shall be repaid within appear in any form in connection with one year from the date of the appoint the enterprise, and the anonymity with ment of a representative of his estate. which you propose to cloak the venture, Also, the deceased partner’s estate shall seems to constitute, if anything, a be entitled to share in the profits of the greater offense against the Institute’s firm for five years. My client questions rules than open violation thereof. Annual Reports 145
E m ployer-E m ployee R elationship C.P.A. to practice public accounting Q. Some years ago I was offered a position All income earned by either one of us on the staff of a public accounting firm. is to be treated wholly as his own; all The owner stated he had an agreement office overhead is to be paid equally, with his employees that in the event and all office equipment used wholly by they left his employ they would refrain one is to be paid for by himself, and from going into public accounting equipment used jointly to be paid for practice in the same city, either as jointly. If either of us works with the individuals or for another accounting other on any particular work, the net firm. At that time I declined the offer. income is to be divided equally. Our Later I accepted his offer, but nothing letterhead will read “ _____ , ______was said regarding the agreement re and Company,” and will bear my name ferred to earlier in our discussions. I as C.P.A. and the other accountant’s as anticipate going into public practice tax counselor. Is this in accord with in the near future, and will give my the Institute’s rules of professional present employer ample notice. Periodi conduct? What is the proper form in cally my employer has called attention signing audit and other reports? to this agreement and our responsibility A. The suggested letterhead appears to be in the event we seek other employment. somewhat misleading. A client or In the event my present employer prospective client not informed as to claims he has a verbal contract, do you your agreement would be led to believe believe he has any professional grounds that you were co-partners, contra to to bar me from pursuing my accounting the fact. Clients of the other accountant activity in the city in which he would be justified in assuming that practices? they had the benefit of the knowledge, A. The conditions and limitations imposed training and experience of a C.P.A., on you by the contractual relation whereas in fact this would not be true between you and your employer is a unless you had been engaged to co legal question on which we cannot operate in a particular matter. The attempt to express an opinion. Whether most important objection is that if or not you are under a moral or actual reports for clients of the other account professional obligation depends on all ant were signed in the name of the firm, the facts. In view of your employer’s credit grantors and others would have periodic announcements of his policy, no way of knowing you had not partici which you do not say you openly pated in the examination in any way. objected to, he might claim that “ si lence gave consent” and that you T eleph o n e D irectory L istin g tacitly accepted his conditions of employment. In the absence of an agree Q. Is it permissible to have our firm name ment or understanding, we know of no listed in the telephone directory of a ethical precept which should prevent nearby town, in which there are no an employee of a public accountant resident public accountants? from seeking employment elsewhere or A. If the directory regularly lists account undertaking practice on his own ac ants and others located in neighboring count. In the latter event, the rules of cities, there would appear to be no professional conduct of the Institute objection to the inclusion of your name. would prohibit solicitation of clients of other public accountants, including F ilin g P a rtn er sh ip P a pers those of your former employer. Q. In forming a partnership between two Advertising certified public accountants, has the Q. Does a card printed in a weekly circular Institute any requirement with refer of a service club constitute advertising? ence to the filing of papers concerning This is the usual circular issued by such partnership? service clubs announcing weekly A. No. programs. A. The insertion of a card in a weekly Respectfully submitted, circular of a service club would consti Joseph J. Klein, Chairman tute a violation of Rule No. 10 as amended. Frederick H. Hurdman H o m er N. S w e e t A ssociation of A ccountants Edwin H. Wagner not P artners Ross T . W a r n e r Q. I have recently entered into an agree ment with an accountant who is not a September 28, 1944 1 4 6 American Institute of Accountants Yearbook
Report of the Committee on Budget and Finance
To the Council of the this recommendation in the belief that the A m erican I n stitu te of A cco untants: increased expenditures proposed this year, particularly for salaries of the full-time Gentlemen: The committee on budget directors of research and education, will and finance presents herewith a report for result in increased service to the profession the fiscal year 1944-1945, covering esti and, in due course, in increased member mated revenue and expenditures of the ship. It has been the experience of the American Institute of Accountants and Institute that expansion of the scope of its various departments and subsidiary service has always been followed by in corporations. creases in membership dues sufficient to A condensed consolidated budget for support the new projects. Your committee 1944-1945, with transactions for 1943- believes that by next year revenues may be 1944, has been distributed to members expected to increase sufficiently to provide of council in mimeographed form for for all expenditures. their convenience in reviewing proposed Moreover, the contingency fund has appropriations. been created by setting aside at the end of The total revenue is estimated at $295,- each year the excess of revenues over ex 900, an increase of $15,787 over actual penditures. It thus represents an accumu revenue for last year. An increase in dues lation of current revenues not expended. of $13,680 is expected, additional revenue The contingency fund has grown to an from sales of The Journal of Accountancy amount sufficient to meet any likely emer estimated at $11,801 will be reduced by an gencies. It seems fitting that a part of this increase in the printing costs of the maga fund should be utilized to strengthen the zine. A decrease of $8,445 is expected in organization in preparation for greater miscellaneous income, principally in the service after the war. sales of books and other publications. It should be borne in mind that at pres Expenditures to be appropriated total ent the Institute is waiving dues of 807 $309,625, an increase of $35,420. The members and associates in the armed forces principal increases in expenditures are of the United States which would amount salaries and fees for professional services of to about $15,000. $20,037 (due to the employment of a full The committee also recommends that time director of research and a full-time the council appropriate $5,000 from the educational director, recommended in contingency fund to be expended only on creases in salaries of the present staff, and authority of the executive committee for allowances for additional clerical assist extraordinary expenses for which no pro ants); $3,085 in operating expenses (includ vision has been made in the budget. ing $1,300 for additional office space, which The United States Trust Company has is available to us under the terms of our continued to advise the committee on the lease); $9,954 in the cost of publications. investment program and several changes The budget shows that the general fund were made during the past year, the details will have to meet estimated deficits of of which are included in the report of the $6,467 in operation of the library and executive committee. $2,271 in the Publishing Company. The committee requests that the several The estimated expenditures for the year budgets submitted herewith be adopted. exceed the expected income by $13,725, and the committee recommends that the Respectfully submitted, council appropriate from the contingency C. Oliver W ellington, Chairman fund, which is now $66,654, an amount G e o r g e D. B a ile y sufficient to meet the actual deficit at the S a m u el J. B r o a d close of the fiscal year. The committee feels justified in making October 12, 1944 AMERICAN INSTITUTE OF ACCOUNTANTS AMERICAN INSTITUTE PUBLISHING CO., INC. C onsolidated a n d S u m m a r iz e d B u d g e t —1944-1945 Budget Revenue, Estimated: 1944-1945 Dues...... $167,000 Income from The Journal of Accountancy...... 86,575 Income from sales of books...... 8,000 From investments...... 13,025 Fees from state boards...... 11,000 Application fees...... 1,800 Miscellaneous...... 8,500 Total income...... $295,900 Expenditures To Be Appropriated: Salaries and fees for professional services: Secretary and managing editor...... $ 14,000 General Institute administration...... 17,100 Editorial, advertising and promotion...... 15,960 Research staff...... 21,080 Library staff...... 10,380 Educational department staff and board of examiners’ fees...... 30,200 Provision for auditors’ fee...... 1,000 Accounting, purchasing and office services...... 39,240 $148,960 Honoraria...... $ 5,000 American Institute Pension Plan...... 3,000 Social security taxes...... 4,090 Legal fees and expenses...... 6,600 Administrative expenses: Stationery and printing...... $ 3,060 Postage and express...... 13,150 Telephone and telegraph...... 4,215 Rent...... 17,000 Electricity...... 2,300 Insurance and taxes...... 830 Supplies and equipment...... 4,100 Building expenses...... 1,600 $ 46,255 Traveling expenses: President...... $ 1,000 Council...... 3,000 Secretary...... 1,800 Public relations...... 600 Others...... 900 $ 7,300 Publications: Direct cost of The Journal of Accountancy...... $ 46,870 Advertising and promotion...... 1,500 Direct cost of books...... 3,300 Yearbook...... 7,000 Special reports to members...... 10,000 $ 68,670 Library books and magazines...... $ 3,300 Legislative and newsclipping services...... 625 Board of examiners’ expenses...... 3,300 Annual meeting...... 3,000 Council and executive committee expenses...... 3,000 General expenses...... 6,525 Total expenditures...... $309,625 Contingency fund...... Excess of expenses over income...... $ 13,725 $295,900 147 148 American Institute of Accountants Yearbook
General F und Budget 1944-1945 Revenue, Estimated: Dues...... $167,000 From investments...... 900 Fees from state boards...... 11,000 Application fees...... 1,800 Miscellaneous...... 7,500 Total income...... $188,200 Expenditures To Be Appropriated: Salaries and fees for professional services: Secretary...... $ 7,500 General Institute administration...... 17,100 Research staff...... 21,080 Educational department staff and board of examiners’ fees...... 30,200 Provision for auditors’ fee...... 1,000 Accounting, purchasing and office services...... 19,240 $ 96,120 Honoraria...... $ 2,500 American Institute Pension Plan...... 2,000 Social security taxes...... 2,275 Legal fees and expenses...... 4,600 Administrative expenses: Stationery and printing...... $ 2,500 Postage and express...... 6,500 Telephone and telegraph...... 3,000 Rent...... 6,867 Electricity...... 2,300 Insurance...... 300 Supplies and equipment...... 2,700 Building expenses...... 1,600 $ 25,767 Traveling expenses: President...... $ 1,000 Secretary...... 1,800 Council...... 3,000 Public Relations...... 600 Others...... 900 $ 7,300 Publications: Special reports to members...... $ 10,000 Yearbook...... 7,000 The Journal of Accountancy...... 21,200 $ 38,200 Legislative and newsclipping services...... $ 625 Board of examiners’ expenses...... 3,300 Annual meeting...... 3,000 Council and executive committee expenses...... 3,000 General expenses...... 4,500 Total expenditures...... $193,187 Add: Estimated deficit of: Endowment fund...... 6,467 American Institute Publishing Co., Inc...... 2,271 $201,925 Excess of expenditures over income...... 13,725 $188,200 Annual Reports 149
E n d o w m e n t F u n d Budget 1944-1945 Revenue, Estimated: From investments...... $ 9,000 Contributions for library from the Foundation...... 2,915 Miscellaneous...... 1,000 Total income...... $12,915 Expenditures To Be Appropriated: Salaries of library staff...... $10,380 Social security taxes...... 365 Administrative expenses: Stationery and printing...... $ 50 Postage and express...... 150 Telephone and telegraph...... 165 Rent...... 4,267 Insurance...... 30 Supplies and equipment...... 200 ~$ 4,862 Library books and magazines...... $ 3,300 General expenses...... 475 Total expenditures...... $19,382 Estimated excess of expenditures over income to be absorbed by general fund 6,467 $12,915
AMERICAN INSTITUTE OF ACCOUNTANTS FOUNDATION Budget 1944-1945 Revenue, Estimated: From investments...... $3,125 Total income...... $3,125 Expenditures To Be Appropriated: Contributions to endowment fund—library...... $2,915 Stationery and printing...... 10 General expenses...... 200 Total expenditures...... $3,125
To t h e D i r e c t o r s o f t h e A m e r i c a n I n s t i t u t e P u b l i s h i n g Co., I n c .:
G e n t l e m e n : The committee on budget and finance of the American Institute of Accountants submits herewith a budget for your corporation for the year ending August 31, 1945: AMERICAN INSTITUTE PUBLISHING CO., INC. Budget 1944-1945 Revenue, Estimated: Income from The Journal of Accountancy for subscriptions earned, advertising, and sales of single copies...... $107,775 Income from sales of books...... 8,000 Total income...... $115,775 Expenditures To Be Appropriated: Salaries and fees for professional services: Secretary and managing editor...... $ 6,500 Editorial, advertising and circulation...... 15,960 Accounting, purchasing and office services...... 20,000 $ 42,460 Honoraria...... $ 2,500 American Institute Pension Plan...... 1,000 Social security taxes...... 1,450 Legal fees...... 2,000 150 American Institute of Accountants Yearbook
Budget 1944-1945 Administrative expenses: Stationery and printing...... $ 500 Postage and express...... 6,500 Telephone and telegraph...... 1,050 Rent...... 5,866 Insurance and taxes...... 500 Supplies and equipment...... 1,200 $ 15,616 Publications: Direct cost of The Journal of Accountancy...... $ 46,870 Advertising and promotion...... 1,500 Direct cost of books...... 3,300 $51,670 General expenses...... $ 1,350 Total expenditures...... $118,046 Excess of expenditures over income to be absorbed by general fund...... $ 2,271 $115,775
Report of the Committee on Accounting Procedure
To the Council of the I ncome a nd E xcess P rofits T axes A m erican I n stitute of A cco untants: For a long time your committee has been Gentlemen: Since the time of its 1944 considering a series of problems arising in midyear report, your committee on ac connection with income and excess profits counting procedure has been concerned taxes in the financial statements. It is largely with several basic problems in the manifest that the high rates of taxation determination and reporting of corporate have, of necessity, influenced managerial income. The uncertainties of the war have policies in many ways, and that constant increased the difficulties encountered in the attention is directed, particularly in the preparation of the income statement, while case of unusual transactions, to the possible wartime conditions have greatly limited tax consequences of various alternative its significance as a measure of either courses of conduct. Unfortunately there normal or wartime earning power. In view are substantial differences between the of the widespread use of the final figure of determination of net income for general net income and compilations of “ earnings purposes and the computation of net per share,” in the exercise of financial income for tax purposes. In a variety of judgments, your committee has been par situations, unfortunate inferences may be ticularly concerned with the necessity of drawn if income items are included, or promoting a more intelligent and exhaus deductions taken, in the income tax tive analysis of income data as a basis for returns, which do not appear in the income an adequate understanding of the implica statement, or vice versa. As a result the tions of the income statement. With this tax shown due by the return is not fairly objective in mind, extensive consideration related to the net income reported in the has been given to the reporting of income income statement. A typical example is and excess profits taxes, to the accounting the situation where a substantial item, for war contract termination, and to the deductible in computing taxable income, is determination of compensation under stock charged to surplus. The tax shown due option agreements. These problems involve by the return is not fairly related to the net matters of form and arrangement in income shown in the income statement. presentation as well as matters of account There is complete agreement that these ing principle in the strict sense of the term. distortions should be disclosed but a Annual Reports 151 serious question arises as to the method of Securities and Exchange Commission has disclosure. On the one hand the position is been requested to modify Regulation S-X taken that footnote disclosure is adequate. accordingly. On the other hand it is argued that foot Your committee has drafted a bulletin notes, particularly those which in a sense on the subject matter and the Securities impeach or “bark at” the item to which and Exchange Commission has proposed they relate, are to be avoided; that proper two releases involving the general questions correlation of the tax with various items in which are now under consideration by your the income statement requires allocations committee. A request has been made for which are not adequately indicated in an opportunity to discuss the situation footnotes; and that the income statement with the members of the Commission. should be prepared so as to reflect on its face a rational relationship between net W ar C ontract T erm ination income and tax provision. A recent illustration of the problem was American business has already faced provided in connection with an issue of problems arising out of the termination of debentures for which a company had filed a government contracts: in the near future registration statement with the SEC. The it will face these problems on a tremendous company had charged the costs of retire scale. A special committee has been ment annuities related to past services, less appointed, under the chairmanship of the reduction of income tax resulting George D. Bailey, to consider the account therefrom, to earned surplus. It treated ing problems of contract termination in the charges for federal income taxes cooperation with your committee on applicable to income as being the amount accounting procedure. There seems to be estimated to be actually payable plus the agreement that generally accepted account amount that had been credited to surplus. ing principles are adequate to deal with The results for the year 1943, on various these situations and that, in the final bases, were as follows: analysis, the problem is one of applying existing principles to unusual states of fact. Income reported...... $4,689,564 The importance of adequate and reasonable Income if all pension costs had settlements can scarcely be overestimated, been charged to income ac and a preliminary memorandum has been count...... 4,416,533 issued and widely distributed in which the Income if past service pension costs had been charged to situation is discussed and in which requests surplus and only actual in have been made for suggestions. come tax payable had been charged to income...... 5,702,823 Stock Options There is scarcely room for doubt that Your committee has for some time been the charge of the past pension cost to concerned about the accounting for stock surplus is justified according to accepted options. Recent developments in the use accounting principles. The question is of stock option agreements to attract therefore whether, considering all of the managerial services indicate the necessity circumstances, the net income of the of a bulletin. It seems clear that in many company is most fairly represented by a fig cases these agreements are made with the ure of $4,416,533, $4,689,564 or $5,702,823. intent that the stock options will represent In connection with the single-step form compensation for services, either wholly or of income statement in which, among other in part. Difficult problems arise in the things, no figure of “ income before income determination of the time when such tax” is given, the suggestion had been compensation should be reflected in the made to the Securities and Exchange Com accounts and in the determination of its mission that such form of statement be amount. Through the committee on coop employed and that Regulation S-X be eration with stock exchanges, an inquiry modified accordingly. Your committee be has been received from the New York lieves that the use of such alternative Stock Exchange as to the Institute’s forms of presentation is permissible and opinion on the accounting for stock options. it has adopted a resolution under which the A preliminary reply has been made to the 152 American Institute of Accountants Yearbook Stock Exchange and a subcommittee chairmanship of William A. Paton is under the chairmanship of William H. Bell considering this subject. is engaged in formulating a bulletin on the subject which will be a basis for a full Quasi-reorganization reply. Through the committee on cooperation with stock exchanges, your committee has O t h e r M a t t e r s received an inquiry from the New York Stock Exchange as to the proper treatment Surplus of earned surplus account where a sub A subcommittee under the chairmanship stantial amount of preferred dividend of Maurice E. Peloubet has been consider arrears has been eliminated by a modifica ing a number of problems in connection tion of the capital structure and the issu with accounting for surplus. These prob ance of cash and shares to the preferred lems are important in that they involve an stockholders in discharge of their claims. A adequate understanding of the basic question is raised as to whether such a functions of the financial statements. transaction should be treated as an ac Current practice in the classification of counting reorganization and whether the corporate proprietary capital as between earned surplus accumulated thereafter capital stock, capital surplus, and earned should be “ dated.” It seems to have surplus is unsatisfactory in many respects. been widely supposed that an account There has been much criticism of these ing reorganization involves, among other titles as a matter of terminology. In things, a downward revaluation of assets addition, the content of the three accounts and the elimination of a deficit. The ques has never been adequately defined. As an tion is therefore whether the term quasi illustration, the question of redemption reorganization should be extended to cover premiums paid on the retirement of pre transactions such as those involving the ferred shares has given rise to much elimination of substantial preferred divi difference of opinion. A comprehensive dend arrears, and perhaps to cover situa bulletin on surplus accounting would tions where the accounts are reorganized probably be as far reaching as any which to recognize substantial amounts of appre your committee could issue. ciation. A reply to the Stock Exchange inquiry has been authorized by your Cost and Value committee and sent to the Exchange. The significance of the surplus accounts depends to a large extent upon the basis of Amortization of Intangibles asset valuation. Accountants are generally In its last report your committee persuaded that cost is for the most part the referred to the adoption of a policy by the proper basis for recording assets, although Securities and Exchange Commission de many problems of cost determination and signed to encourage the writing off of allocation remain to be solved. It is intangibles. The problem is a difficult one recognized, however, that departures may and a subcommittee, under the chairman be made therefrom, and the inventory ship of Warren W. Nissley, is now engaged rule of cost or market—whichever is in a study of the problem with a view to lower—illustrates such a departure. It drafting a bulletin. would seem further that there are situa tions where, owing to the substantial Investment Company Accounting appreciation or decline in value, cost loses The Securities and Exchange Commis much of its significance. The basic question sion has proposed basic changes in the is whether recognition may be given to accounting for investment companies. current value where there is evidence of a These changes have been studied exhaus substantial and permanent change in the tively by a special advisory committee levels of value. Current value is recognized under the chairmanship of Homer N. in legal reorganizations or upon change of Sweet, in cooperation with the National ownership; it is suggested that similar Association of Investment Companies, and recognition should be made possible a report has been made to your committee through the medium of an accounting of which a copy has been furnished to the reorganization. A subcommittee under the SEC. A major issue is whether the invest- Annual Reports 153 ments of these companies should be stated: cooperation with the committee on ac (a) at cost with market shown paren counting procedure, has expanded to such thetically, (b) at market with cost shown an extent (including services to the com parenthetically, or (c) at cost or market mittee on auditing procedure and other at the option of the company. In addition, committees) that it has been decided the investment companies recommend a by the executive committee of the Institute special form of financial statement in lieu that the full-time services of a director of of the conventional balance sheet and research are now required. Unfortunately, surplus analysis. Mr. Dohr’s commitments to the law firm of which he is a member, and to Columbia Committee Procedure and Director of Research University of whose faculty he is a mem The committee has been fortunate in ber, are such that he cannot give our having had for three years past the benefit Institute his full time. It is with the great of the services of James L. Dohr, the est regret that we see him terminate his Institute’s director of research, in carrying services as director of research, and we on its work. Mr. Dohr’s unusual back wish to record this expression of our ground of training and experience as appreciation of the valuable services certified public accountant, lawyer and rendered this committee and the Institute educator, and his well balanced judgment, by him. have been of inestimable value to the committee. Respectfully submitted, The work of the director of research, W a l t e r A. S ta u b , Chairman which office was initiated six years ago as a part-time undertaking, and primarily for October 16, 1944
Report of the Committee on Accounting under State Highway Construction Contracts To the Council of the (5) Require access to books. ... 1 “ American Institute of Accountants: (6) No prequalification require m ents...... 9 “ Gentlemen: This committee has limited T otal...... 49 its activities to a survey of the prequalifi cation requirements of contractors doing In the following schedules are listed work for state highway departments in the the states as classified above: forty-eight states and the District of Columbia. (1) Requiring financial statements of cer Such a survey was conducted by the tified public accountants (or approved independent public ac committee in June, 1941, as disclosed by countants, marked*): its report dated November 26, 1941. Since that date only a few changes have been Arizona—Certified with prescribed made in any of the state highway depart affidavit, Arkansas—Prescribed auditor’s cer ment regulations. tificate, This report is limited to the subject of California—Certificate with pre financial statements as a prequalification scribed affidavit if over 50 M. requirement of contractors doing state Colorado—Certificate with pre highway work. A summary of the states scribed affidavit if over 50 M. classified as to such requirements follows: Idaho—Certificate with prescribed affidavit, (1) Requiring financial state Illinois—Prescribed auditor’s Certifi ments of certified public cate, accountants...... 20 States Indiana—Prescribed auditor’s Certifi (2) Prefer certified accountants cate, statements, but will accept Iowa—Prescribed auditor’s Certifi company statement or re cate, if over 10 M, quire access to books...... 5 “ Kansas—Prescribed auditor’s certi (3) Require company state ficate if net worth over 5M ments on prescribed form. 13 “ Kentucky—Prescribed certificate (4) Required to be licensed...... 1 “ and affidavit, 154 American Institute of Accountants Yearbook Louisiana—Certificate with pre (6) No prequalification requirements: scribed affidavit to secure license, Michigan—Prescribed auditor’s cer Maine—No statement required when tificate, experience satisfactory, Missouri—Prescribed auditor’s cer New contractors required to tificate, submit statements, Montana—Certificate with pre Massachusetts—None required to scribed affidavit, bid, *Nevada—Certificate with prescribed Mississippi—None required to bid, affidavit, New Hampshire—None required to New Mexico—Prescribed auditor’s bid, certificate, New York—Low bidder required to Nebraska—Prescribed auditor’s cer furnish satisfactory qualification, tificate, Pennsylvania—None required to bid, Oklahoma—No prescribed form, Rhode Island—None required to bid, *Texas—Prescribed auditor’s certifi Utah—Surety letter, statement, etc., cate, submitted at time bid opened. Wisconsin—Prescribed auditor’s District of Columbia—None re certificate if over 15 M. quired to bid. Questionnaires were sent to the forty- (2) Prefer certified accountants statement, but will accept company state eight states and to the District of Colum ment or require access to books: bia. Six states did not respond, and the classification given these was taken from Alabama—Auditor’s certificate or the committee’s report of November 26, company statement, 1941. These states were Delaware, Idaho, Florida—Auditor’s certificate or com Mississippi, Missouri, Oklahoma and West pany statement, Virginia. Georgia—Auditor’s certificate or As disclosed herein some of the states company statement, waive prequalification statements where Ohio—Auditor’s certificate or com the amount of contract does not exceed a pany statement, Wyoming—Auditor’s certificate or certain amount or where the highway access to books. commission is given access to contractors books. (3) Require company statement on pre The required forms vary in the several scribed form: states and some do not require a prescribed form. Connecticut—No exception, Variation in the requirements of the Delaware—No exception, different states for prequalification of Maryland—No exception, contractors and in the form of statements Minnesota—No exception, and audit certificates prescribed, together New Jersey—No exception, with many states not having prequalifica North Dakota—No exception, Oregon—If contract over 10 M, tion requirements, presents an opportunity South Carolina—If contract over for this committee to do constructive work. 10 M, This can be done in conjunction with South Dakota—When demanded, committees of the various state societies— Tennessee—No exception, in cooperation with the state highway Vermont—No exception, departments. Virginia—No exception, Washington—No exception. Respectfully submitted, (4) Required to be licensed: J. R. Nelson, Chairman K. J. C a r p e n te r North Carolina—Must submit finan Aloysius Congdon cial statement. Robert N. Dennis C la ir e S. D o b so n (5) Require access to books: H e n r y S. O w en s H e n r y M. T hom son West Virginia—State Road Com missioner to have access to books. October 2, 1944 Annual Reports 155
Report of the Committee on Auditing Procedure T o the Council o r t h e the accountants’ responsibility; but every A m e r ic a n I n s t it u t e of A c c o u n t a n t s : effort should be made to maintain this Gentlemen: Bulletin No. 21 of the distinction so that the committee may committee on “ Wartime Government avoid expressing opinions on questions Regulations” was issued in July, 1944, and regarding which the practitioner really discussed the responsibility of the inde requires the advice of a lawyer. pendent accountant with relation to pos A number of more or less routine matters sible violations of the many kinds of and matters not of general interest have government regulations now in force. been referred to the committee during the This was one of the most difficult sub period since the midyear report and have jects with which the committee had to been dealt with by the chairman or the deal, principally because of the difficulty research department. These, however, were in drawing a line between questions of not considered of sufficient general interest practice and questions of legal responsi to justify a formal statement by the bility. Similar questions had previously committee. arisen in connection with consideration by Respectfully submitted, the committee of the responsibility of auditors under the Securities Acts and S a m u e l J. B r o a d , Chairman particularly the effect of various methods J. N. A it k e n , Jr. of dating the accountants’ report. F r e d J. D u n c o m b e Generally speaking, the committee has George P. E llis taken the position that while it can prop I r a N. F r is b e e erly discuss the practical aspects of a situ P . W . R. G l o v e r ation it should not attempt to give advice P a u l G r a d y on questions which may require judicial Carol F. H all determination for their settlement. At Edward A. Kracke times it is difficult to draw a sharp line N o r m a n J. L e n h a r t between questions which involve the John A. Lindquist application of generally accepted auditing Frank W ilbur Main procedure (and thus come within the George W agner realm of “ trade practice”) and what are more specifically legal questions affecting October 2, 1944
Report of the Committee on By-Laws
To t h e with the understanding that such firm A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : would be compensated for its services. The committee on by-laws has prepared Gentlemen: At its- May meeting the council of the Institute expressed itself as the following amendments to give effect favoring compensation of the auditors to this proposal, and recommends their who conduct the annual audit of the Insti adoption: tute’s accounts. The matter was referred to the executive committee. The executive Amend Article VII of the by-laws by committee has recommended that the eliminating Section 4 and changing the number of the present Section 5 to Sec by-laws be amended so as to permit the tion 4, and of the present Section 6 to appointment each year of a firm of certified Section 5. public accountants to conduct an inde Amend Article VIII, Section 3 by pendent audit of the Institute’s accounts, adding the following sentences: 156 American Institute of Accountants Yearbook “ The council shall, at least three first and second sentences, and the words months prior to the annual meeting of “ or auditors” from the fourth sentence. the Institute, appoint certified public Amend Article XI, Section 3 by delet accountants to audit the accounts of ing the words “ and auditors” therefrom. the Institute and its affiliated organiza tions for the current fiscal year. The Respectfully submitted, report of the auditors shall be submitted L. C. J. Y e a g e r , Chairman to the members of the Institute at the R oy F. G o d f r e y annual meeting and shall be published R o l a n d B . K e a y s for the information of the membership.” W a l t e r D . W a l l A r t h u r A . W e n d e r Amend Article XI, Section 2 by delet ing the words “ and auditors” from the August 18, 1944
Report of the Committee on Cooperation with Bankers
To t h e C o u n c il of t h e purported to show the bank’s experience A m e r ic a n I n s t it u t e or A c c o u n t a n t s : with accountants. Such a procedure might lead to a “ black list” of certified public G e n t l e m e n : In April the committee on cooperation with credit men and our accountants. After considerable corre committee sent a letter to state society spondence with members of our committee, presidents calling their attention to the we reached the conclusion that no action desirability of joint meetings with credit should be taken. However, the article in grantors. question will be published in the November Recently we have considered an article issue of The Journal of Accountancy, and appearing in the August, 1944, issue of the our successor committee may wish to con bulletin of the Robert Morris Associates. sider the article further. This article was entitled “ Maintaining Respectfully submitted, Files on Accountants.” The writer of the article said that many large banks main C l if t o n H. M o r r is , Chairman tained a card record on accountants which October 16, 1944
Report of the Committee on Cooperation with Credit Men
To t h e C o u n c il o f t h e war conditions, it will be interesting to A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : watch the progress being made by those societies which have accepted the proposal. G e n t l e m e n : The committee on cooper ation with credit men in its interim report Moreover, the experience thus acquired to the countil in May of this year, advised may be helpful in the further development the council that it was continuing to of the committee’s work. prosecute its efforts to establish closer Five states responded as follows: Michigan—Requested that no letters be country-wide coordination between ac sent to credit grantors in their section. countants and credit grantors—both com Connecticut—Letters were sent to: mercial and bank. This took the form of a New England Chapter of Robert Morris letter to the presidents of state societies in Associates. The Chapter replied that it which the Institute offered to contact was turning the letter over to committee (with the approval of the societies) local for cooperation with accountants. chapters of the Robert Morris Associates New Haven Association of Credit Men. and local commercial credit groups; and They replied they were turning letter to supply them with copies of the compre over to chairman of program committee. Waterbury Association of Credit Men. hensive program on cooperation with bank Bridgeport Association of Credit Men. and commercial credit men, prepared by Hartford Association of Credit men. No your committee in 1942. replies. While the responses thus far have not West Virginia—Letters were sent to: been too encouraging, probably due in large Wheeling Association of Credit Men. measure to the extraordinary burdens They contacted Mr. Hutzell, president placed on the profession stemming from of the West Virginia Society of C.P.A’s. Annual Reports 157 Parkersburg-Marietta Association of over to Chicago Association as they Credit Men. They turned letter over to handle only coordination of association program committee for consideration. work. Tri-State Association of Credit Men. Chicago Association of Credit Men; Charleston Association of Credit Men. Peoria Association of Credit Men; Central West Virginia Credit and Ad Springfield Association of Credit Men. justment Bureau. No replies. No replies. California—Letters were sent to: Los Angeles Association of Credit Men. The credit grantors who replied all They replied they were turning letter expressed interest. over to chairman of war and postwar Respectfully submitted, activities committee. Association of Credit Men of Central S im o n L o e b , Chairman and Northern California; Fresno Divi C l in t o n W . B e n n e t t sion of Association of Credit Men of M a u r ic e L . B l a n c h a r d Central and Northern California; Whole W a l t e r C . B u r e r salers Credit Association of Oakland; J a m e s B . C a r s o n Sacramento-Stockton Chapter of Credit R oy C . C o m er Mens Association of Central and North ern California; San Diego Association of G r o v e r C . G r e w e l in g Credit Men; San Francisco Chapter of E d w in W a r r e n H a r t Robert Morris Associates; Southern H e n r y C . H e l m California Chapter of Robert Morris H a r r y E . J u d d Associates. No replies. K a r l K . M o r r is Illinois—Letters sent to: L o u is H . P e n n e y Chicago Chapter, Robert Morris Asso J a m e s A. R e n n ie ciates. They replied they were placing E d w a r d J . S t e g m a n the matter on agenda for discussion. R ic h a r d C . S t r a t f o r d National Association of Credit Men (Central Division). They turned letter September 28, 1944
Report of the Committee on Cooperation with Other National Accounting Organizations
T o t h e C o u n c il o f t h e Representing the Controllers Institute A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : of America: G e n t l e m e n : During the past year, D. J. Hennessy, chairman, committee on your committee on cooperation with other cooperation on mutual problems with national accounting organizations has been American Institute of Accountants in direct communication with only one T. H. Hughes other accounting organization, the Con H. P. Thornton trollers Institute of America. Early in the R. P. Kaesshaefer fiscal year, the chairman of the Controllers Members of same committee Institute committee of cooperation on Arthur Tucker, managing director mutual problems with American Institute Representing the American Institute of of Accountants, Mr. D. J. Hennessy, Accountants: communicated with the chairman of the American Institute committee, and a Victor H. Stempf, president luncheon was arranged at which the areas P. W. R. Glover, chairman, committee on of mutual interest to the two organiza cooperation with other national account tions were discussed. ing organizations Largely as a result of that preliminary Hermon F. Bell meeting, arrangements were made later J. P. Friedman Members of same committee in the year for a luncheon meeting of the John L. Carey, secretary cooperative committees of the two organi zations. This meeting was held at the The discussion was general in character Bankers Club, New York, May 25, 1944. and was directed at the question of how The following were present: the two organizations might best work 158 American Institute of Accountants Yearbook together in the public interest, and for or other committees of the respective their mutual benefit. It was pointed out organizations. that committees on federal taxation and While your committee as such had no war contract termination of the American formal contact with accounting organiza Institute and the Controllers Institute had tions other than the Controllers Institute conferred and cooperated in the past, and during the past year, it is pleased to report it was the consensus of opinion that other that through the Institute’s officers, committees dealing with specific problems members, and staff, cordial cooperative of mutual interest might do likewise in relations have been maintained, as in the the future. past, with the National Association of The discussion also touched on the Cost Accountants, the American Account problem of financial reporting to govern ing Association, the Institute of Internal ment agencies and the accounting rules of Auditors, and the Controllers Congress of regulatory bodies, as matters of interest the National Retail Dry Goods Association. to both the Controllers Institute and the American Institute. Respectfully submitted, It was the sense of those present that it P . W. R. G l o v e r , Chairman would be desirable from time to time for the cooperating committees of the two organ H e r m o n F . B e l l C l em W. C o l l in s izations to meet for general discussion J. P . F r ie d m a n of the sort which had taken place at this A l e x a n d e r J. L in d s a y meeting, with the possibility that specific suggestions might be developed which in C h a r l e s P ic h e t t i urn could be referred to the officers September 8, 1944
Report of the Committee on Cooperation with Stock Exchanges
To t h e C o u n c il o f t h e The questions were generally discussed A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : with the members of the Exchange present and we advised them that we would refer G e n t l e m e n : The principal activity of the committee on cooperation with Stock their inquiries to the committee on ac Exchanges during the year was a luncheon counting procedure. This was done, and meeting attended by members of the the resulting opinions were sent to the Committee and representatives of the Stock Exchange. New York Stock Exchange on July 18, Respectfully submitted, 1944. The Stock Exchange was repre sented by Emil Schram, president, and W a r r e n W . N is s l e y , Chairman W il l ia m H . B e l l Phillip L . West and J. E. Gray, of the department of stock list. P e r c iv a l F . B r u n d a g e At this meeting questions were presented W il l ia m R. D o n a l d s o n to us relating to the accounting treatment J o h n F . F o r b es of certain stock options, and as to whether P e r c y M. H e n d r ie or not earned surplus should be dated W a l t e r M. L e C l e a r after the consummation of a plan of clear P r io r Sin c l a ir ing arrears of dividends in a particular case. October 16, 1944
Report of the Committee on Cooperatives
To t h e C o u n c il o f t h e doing business, especially in its relation to A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : the fields of agricultural marketing and G e n t l e m e n : The rapid and wide-spread purchase of farm supplies, renders it of growth of the cooperative method of ever increasing importance that our profes Annual Reports 159 sion shall keep pace with this development. of course, to the confirmation and ap It is of supreme importance to the coop proval of the appropriate standing com eratives in order that they may have the mittee within the Institute, devoted to technical advice and counsel, and services matters of audit procedures. which they so greatly need, from those 2. To suggest to the profession appro priate terminology and forms of statements, best equipped and able to give it. It is of especially adapted to the cooperative form equal importance to our profession, not of organization, in order properly to reflect only because of the tremendous opportuni the particular cooperative character of a ties for service and substantial potential business enterprise; and to state its opera revenues, but that we may maintain the tions in such a manner as to conform to prestige of our profession in exercising and reflect the non-profit principle. It is leadership in this field of professional our intent to do this in cooperation with endeavor. the Institute’s standing committee on Our responsibility in this matter and the terminology. To these we add a third phase of the demands upon our professional services proper work of this committee and that is have increased during the current year in “ to utilize every available opportunity to view of the requirements of the Revenue impress upon the management and directors Act of 1943 under which all so-called of cooperative associations, the important exempt farmer cooperatives are now re requirements of proper audit in this highly quired annually to file with the Commis specialized field, and the absolute necessity sioner of Internal Revenue an information of availing themselves of the security return. Coupled with this requirement which only such an audit and the counsel there has been a ruling by the Commis of competent and informed accountants sioner that the filing of this information can give.” return, revised Form 990, will operate to * * * * * start the running of the Statute of Limita tions with respect to such exempt cooper In furtherance of the purposes of the ative associations, providing it is properly committee, its performance during the filled in and all of the information called year just closing has embraced these for, including supplemental data, is fur major activities: nished. Leaders in the cooperative field have stressed the importance of strict com 1. The dissemination of articles on pliance with the Commissioner’s require terminology and forms of statements and ments in this matter and have emphasized the preparation for publication in The the importance of the use of proper termi Journal of Accountancy of an article on nology and forms of statements in order that important subject. that the true facts with respect to the cooperative’s organization and operation 2. Numerous platform appearances by may be reflected. This single development committee members to discuss technical has resulted in a substantial increase in the problems, among which were: demands for the services of our profession, and as management of cooperatives be a. Presentation of a paper and discus comes more familiar with the requirements sion of terminology and forms of state and comes to realize more fully the conse ments at a conference of attorneys and quences of inadequate compliance, it is a accountants held in conjunction with the certainty that their demands for our National Council of Farmer Coopera professional services will increase. The tives in Chicago, January 3, 1944. program of your committee has therefore b. Presentation of a paper and discus been designed to be helpful to. the profes sion of the question of terminology and sion in meeting its responsibilities in this forms of statements at a conference of field. Two of the primary purposes of the senior officers of regional banks for activities of your committee were stated cooperatives held under the auspices in our last report. We repeat them here: of the Central Bank for Cooperatives of Kansas City, February 14, 1944. 1. To make recommendations with re c. Discussion of technical problems re spect to required audit procedures, subject, lating to accounting for cooperatives at 160 American Institute of Accountants Yearbook regional meetings of cooperative man of the United States Government in agement and accountants in Salt Lake furtherance of the war effort.
City, February 18, 1944, and Idaho * * * * * Falls, Idaho, February 19, 1944. d. Participation by the New England With respect to the future program of the member of the committee in a joint committee, we offer the following sugges conference on Cooperative Accounting tions for the consideration of whatever and Financial Problems, held in Boston new committee may take over during the in January, 1944, under the sponsor ensuing year: ship of the regional Springfield Board 1. Organization of regional conferences for Cooperatives, of the Farm Credit under joint sponsorship of the American Administration. Institute of Accountants, the National Council of Farmer Cooperatives, and the Regional Banks for Cooperatives under the 3. The handling of a considerable volume Farm Credit Administration, for the pur of inquiries from members of our profession, pose of discussion of the technical problems especially with reference to the preparation relating to Cooperative accounting and of Form 990 which was required to be filed taxes. In this respect we will say that by all exempt cooperatives under the arrangements are now pending for con terms of the Revenue Act of 1943. ducting four of these conferences in the 4. Collaboration with the tax and law northeast area of the United States; committee of the National Council of namely, Boston, New York City, Syracuse, Farmer Cooperatives with respect to and Buffalo. If this initial effort is as accounting and tax problems as they cur successful as we hope, then perhaps confer rently arise. ences in other areas will doubtless prove 5. Collaboration with the National So worthwhile. ciety of Accountants for Cooperatives in 2. We recommend a continued liaison furtherance of their constructive program with the national organizations of farmer of education of accountants administering cooperative associations to keep abreast the accounts of cooperatives, which in of developments and requirements, which cluded the attendance of your chairman should redound to the mutual advantage of at their annual meeting for the conduct the cooperatives and of our own profession. of a round-table discussion on terminology 3. We recommend continued close coop and forms of statements. eration with the various units in the Farm 6. Collaboration with the office of the Credit Administration, and collaboration Commissioner of Internal Revenue in the in their research work on cooperative revision of Form 990 to meet the require accounting and finance. These people have ments of the Revenue Act of 1943. In this always indicated a great willingness to matter the chairman of your committee cooperate with our profession and accept appeared jointly as representative of the our leadership in those technical matters American Institute of Accountants and the on which we are best equipped to counsel. tax and law committee of the National We believe continuance of this relation is Council of Farmer Cooperatives. It was important to our profession and will felt that our professional body had a valid result in the mutual benefit of all parties interest in the subject matter and should concerned. be credited with the constructive work which was then accomplished. Respectfully submitted, 7. Active participation by certain mem bers of the committee in discussions W a l t e r L . B r a d l e y , Chairman with renegotiation boards to determine J o s e p h C. B r a u e r what might equitably be determined as J o h n J. H a r r in g t o n income subject to renegotiation in the L e w is L il l y instances of non-profit cooperative asso R o b e r t L . P e r s in g e r ciations of both marketing and purchasing O sc a r C. S t r a n d type, engaged in supplying departments September 28, 1944 Annual Reports 161
Report of the Committee on Federal Taxation
To the Council of the ton, D. C., with representatives of the American Institute of Accountants: Joint Committee on Internal Revenue Taxation, the Treasury Department and G e n t le m e n : On behalf of the committee the Bureau of Internal Revenue. The on federal taxation, I am pleased to submit meeting was attended by Maurice Aus the following report of its major activities tin, chairman of the subcommittee on during the past six months. current legislation, who presented the The work of the two subcommittees committee's recommendations, Harry E. of this committee, the subcommittee on Howell, chairman of the subcommittee current legislation and the subcommittee on research, John L. Carey, secretary, on research, has been closely coordinated. and the general chairman of this committee. Individual projects have been received and Arrangements have been made for public reviewed by members of the entire com release of the committee’s report of its mittee and agreement on many problems recommendations, and for delivery of has been achieved. copies to appropriate government officials. The committee’s work has included three The text of the report will be published major aspects of the tax picture. in the November, 1944, issue of The Journal of Accountancy. 1. Formulation of recommendations for The Institute also received an invitation tax revision for the reconversion and from the Select Committee on Small immediate postwar period, designed to Business of the House of Representatives to remove or mitigate the more important submit suggestions designed to help small tax factors tending to discourage pro business. The committee on federal tax ductive activity and employment and to contract consumer demand by diminish- ation made no separate set of recommenda ing spending potential. tions addressed to the problems of small 2. Preparation of “ Recommendations for business, those of its recommendations Revision of the Internal Revenue Code ” which bear on this subject being included by the subcommittee on current legisla among its afore-mentioned recommenda tion, designed to correct errors and tions for postwar tax revision. Copies of inequities in existing law deemed of the committee’s report thereon, have been sufficient importance to outweigh gen sent to the Congressional committee eral undesirability of continuous techni cal changes. concerned. 3. Continuance of efforts to achieve the It is indeed with gratification that we objective of the Institute’s resolution note the extent to which, in the past year, urging the creation of a non-partisan tax the federal tax committee has found oppor commission as the most practicable in tunity to be of service by presenting its strument for achieving long-range tax views on recommendations on tax legis reform and simplification. lation to the appropriate authorities. Problems upon which the Institute has Details of numbers two and three above, acted in this manner during the year have will be discussed by the respective sub included recommendations for simplifica committee chairmen. tion of the individual income tax, postwar The postwar tax recommendations were tax revision, and important technical assembled after careful study by the amendments. The program in favor of the members of the committee, and thorough non-partisan tax commission has received discussion at an all-day meeting of the widespread support and recognition. Of entire committee on August 18, 1944. the matters which have been given exten The recommendations of the committee sive study and consideration but which are embodied in its report, which is incor remain for further action by the next porated herein by reference. committee, the most important is the On September 21, in response to an invi long-standing, but increasingly important, tation received by the Institute, these matter of conformity of tax accounting recommendations were presented and dis procedure with generally accepted account cussed at an all-day meeting in Washing ing principles. 162 American Institute of Accountants Yearbook Our program of cooperation with the that the specific program inaugurated committee on federal taxation of the state this year may serve as a foundation for societies has continued. From time to time increasingly extensive cooperation in the the presidents of the state societies have future. been invited to have their tax committees submit recommendations and suggestions Respectfully submitted, for recommendations for tax revision, G e o r g e P. E l l is , General Chairman dealing both with technical and with broader tax policy matters. It is hoped October 16, 1944
Report of the Subcommittee on Current Legislation
To the Council of the concerned principally with recommenda A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : tions for technical revisions in the tax law deemed of sufficient importance to out G e n t l e m e n : The subcommittee on cur rent legislation of the committee on federal weigh the general undesirability of con taxation submits the following report of tinuous technical changes in the tax laws. its activities for the year just ended. The work of the members of the subcom mittee in connection with the recommenda A c t iv it ie s f o r t h e F ir s t H a l f o f t h e tions respecting postwar taxation are Y e a r described in detail in the report of the committee’s general chairman. Further The activities of the subcommittee for description of the subcommittee’s activities the first half of the year are described in follows: its midyear report dated April 14, 1944, The subcommittee held a meeting on to which reference is made for a detailed June 23rd to consider its recommendations specification. Said activities included con for technical revisions of the tax laws, as sideration of and/or action upon the fol the result of which the subcommittee lowing matters: prepared a report, which was subsequently (1) Extensions of time for filing 1943 tax adopted by the entire committee, embody returns. ing 21 specific recommendations for changes (2) Extension of time for election of retro in the existing law. Copies of this report active application of Sections 760 and will be sent to representatives of the 761. appropriate Congressional committees, the (3) Use of privately printed tax return Treasury Department and the Bureau of forms. (4) Regulations regarding certificates of Internal Revenue. Annexed hereto is a non-necessity under Section 124(d) (1) copy of the foreword to said report, and a of the Internal Revenue Code. summary of the recommendations made, (5) Changes in taxable years. which will indicate their scope. (6) “ Mushroom ” tax experts. In connection with the preparation of (7) Recommendations re Revenue Act of the said recommendations, a report from a 1943, with particular reference to sec special subcommittee appointed to exam tion dealing with tax avoidance acqui ine into the depreciation adjustment sitions, tax return simplification and questions raised by the Virginian Hotel computation of excess profits tax post war refund for fiscal years beginning in Corporation case was received and adopted. 1941 and ending after June 30, 1942. Further suggestions for technical tax (8) Recommendations for simplification of revision have been solicited from the entire the individual income tax in connection membership of the Institute and the state with the Individual Income Tax Act of societies, and all suggestions received were 1944. given due consideration. The subcommittee gave consideration A c t iv it ie s f o r t h e S e c o n d H a l f o f t h e to the question of whether the Institute, Y e a r or its committee on federal taxation, should The activities of the subcommittee as adopt a policy of intervening in tax liti such for the second half of the year were gations where major accounting prin Annual Reports 163 ciples, such as the treatment of prepaid Your subcommittee has also dealt with income, were involved. A memorandum extensive correspondence from members presenting various possible alternative of the Institute and others. methods for such intervention was pre In closing this report we wish to express pared and submitted to the executive our sincere appreciation for the cooperation committee for an expression on the policy and assistance which we have received issues involved. from the Institute staff. The subcommittee has also been in com munication with the Bureau on various Respectfully, technical matters, including the treatment of postwar excess profits tax refund bonds M a u r ic e A u s t in , Chairman in consolidated return cases, the final ruling E d w in F . C h in l u n d on which was in accord with the procedure W a l t e r A . C o o p er suggested by one of the committee mem J a m e s A . C o u n c il o r bers, and on the question of Bureau policy T h o m a s J. G r e e n with respect to permitting changes in J. K. L a s s e r taxable years. With respect to the latter V ic t o r M a r k w a l t e r question, the cooperation of the natural R o b e r t M il l e r business year committee has been en J. A . P h il l ip s listed—to the end of assembling case P a u l D . S e g h e r s history material as the basis for further discussions with the Bureau. October 16, 1944
Recommendations for Revision of the Internal Revenue Code
F o r e w o r d accomplishment of which the American The committee on federal taxation of the Institute of Accountants has committed American Institute of Accountants presents itself and for which this committee will herewith certain recommendations for continue to work. amendatory federal tax legislation, de The recommendations made herein do signed to correct errors and inequities in not purport to be complete in the sense of the existing law, which are deemed of dealing with everything requiring correc sufficient importance to outweigh the tion in the existing law, but represent, general undesirability of continuous tech rather, the results of the committee’s work nical changes which make it difficult for to date on this phase of the subject. taxpayers and practitioners to obtain a Questions of technical revision are receiv working acquaintance with the law. They ing the committee’s continuous attention, do not seek to deal with postwar tax and from time to time, as and if further problems as such, upon which a separate recommendations are formulated, they report has been made, nor with the funda will be embodied in appropriate reports. mental need for a recasting and simplifica tion of the entire structure and law. The S u m m a r y of R ecommendations committee cannot emphasize too strongly I. Recommendations with Respect to Cor that while the measures recommended are poration Taxes needed so long as we continue to operate under the existing tax structure, the basic 1. All federal taxes on corporate income should be consolidated so as to con crying need is for a complete overhauling stitute elements of a single tax. of our federal tax laws, and their recon 2. Capital-stock tax should be repealed. struction and recodification along simplified 3. If not repealed, the capital-stock tax lines, expressing a permanent and con should be deductible in the year paid sistent policy of federal taxation, to the or payable. 164 American Institute of Accountants Yearbook 4. Consolidated returns should be per 13. Extension of “ fiscal year” to include mitted without penalty. thirteen 4-week periods, etc. 5. Deductions and credits limited to 14. The basis of property should not be percentage of income should be reduced by excessive depreciation uniform for the purpose of the which resulted in no tax benefit. normal tax, surtax, excess-profits 15. Accounting procedure for tax pur tax, and declared-value excess-profits poses should be conformed to tax. generally accepted principles. In 6. The tax on long-term capital gains particular, accrual-basis taxpayers should be limited to 25% where the should be permitted to defer the 80% over-all tax limitation applies. reporting of prepaid income in accord 7. The provisions preserving the in ance with such principles. vested capital status of reincor 16. The penalty for substantial under porated deficit corporations should estimating of tax should not apply if be extended to mergers and con the original declaration is at least solidations where all of the stock of the amount of the preceding year’s the continuing corporation is held tax. by the stockholders of the predeces 17. When loss on the sale of property is sor corporations. disallowed by reason of the relation 8. The provisions preserving the in of the parties, the future basis of the vested capital status of reincor property for purpose of determining porated deficit corporations where gain should be the transferor’s basis. the new corporation is formed for the 18. Employees trusts—taxability of purpose should be extended to cases beneficiary. where the successor corporation is a pre-existing corporation utilized III. Estate-tax Recommendations for the same purpose. 19. The basis of property, acquired by 9. Recommendations with respect to gift but subjected to estate tax, adjustments for abnormal base- should be made the same as in the period deductions. case of property passing by death 10. Recommendations with respect to and not previously made the subject deficiency dividends of personal of a gift. holding companies. 20. The credit for gift taxes previously 11. The deduction of the federal income paid on property transferred inter tax, in computing undistributed sub vivos should be determined by apply chapter A net income, should be the ing to the gift property the highest tax for the taxable year, whether the gift-tax brackets of the decedent corporation is on the cash basis or rather than the average gift-tax rate the accrual basis. prevailing in the year or years of the II. Other Income-tax Recommendations gift. 21. Estate tax on remainder to charity 12. Expense of preparing individual subject to power of invasion of income-tax returns and prosecuting principal, etc., should be determined or defending tax cases and securing by the ultimate event. advice in tax matters should be allowed as deductions. October 1, 1944
Report of the Subcommittee on Research
To t h e C o u n c il o f t h e N o n -P a r t is a n T a x C o m m issio n A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : At the meeting of council in May, G e n t l e m e n : Your subcommittee on 1944, your subcommittee reported in some research is pleased to submit the following detail, the steps which had been taken to report of its activities during the last half encourage adoption of the Institute’s of the current year. recommendation that Congress create a Annual Reports 165 non-partisan commission, composed of certified public accountants and addressed accountants, lawyers, economists and other by officers and committee chairmen of experts in taxation, to write a relatively the Institute, George P. Ellis, general simple revenue law expressing a permanent chairman of our tax committee spoke on and consistent policy of federal taxation. the subject “ What is Wrong with our Tax We reported that several bills had been Laws?” and reiterated the need for a introduced in Congress to give effect to non -partisan tax commission. Several state this suggestion, but had not been acted societies in the conference adopted resolu upon, and that the Joint Committee on tions endorsing the Institute’s proposal. Internal Revenue Taxation was consider It is also of interest to note that the ing a modification of the original suggestion Georgia Society of Certified Public Ac proposed jointly by representatives of the countants has informed us that as the Institute and the American Bar Associa result of the work of their committee on tion; i.e., creation of an advisory council state taxation the appointment of a non to the Joint Committee which might assist partisan state-wide committee for clari in the development of long-range tax fication and revision of the state tax laws policies. has been made, and that the Georgia tax The Joint Committee held a meeting on committee will take a prominent part in June 15, 1944, at which a memorandum the project. submitted by representatives of the Insti Although this subcommittee has taken an tute and the American Bar Association was active part together with the subcommittee considered. No action was taken, but the on current legislation in formulating recom matter was held in abeyance for later mendations for immediately necessary tax consideration. In the meantime, the Joint revisions to facilitate postwar adjustment, Committee decided to make a study of the committee’s postwar tax recommenda postwar taxation through the Committee tions, as well as the “ Recommendations staff, the Treasury staff, and a special staff for Revision of the Internal Revenue in the Bureau of Internal Revenue; and, Code” prepared by the subcommittee on as you know, the Institute, along with current legislation, are prefaced with the many other organizations, has been invited need for achieving long-range objectives to submit suggestions. of over-all simplification and coordination. In view of the pressure of wartime and Similarly, the October, 1944, issue of The postwar legislation, Congressional com Journal of Accountancy contains a summary mittees have been prevented from consider of four current postwar tax studies by ing the bills which had been introduced to Rebecca N. Golub, technical assistant to provide for the creation of a non-partisan the tax committee, and an editorial on commission. Congress recessed in the sum the article, which repeat that, although mer, and after sitting for a relatively short postwar tax changes are necessary, the period in the fall recessed again until after basic need remains for a complete over the election. hauling of our federal tax laws and the It became quite clear that the proposals enactment of a simplified structure expres for a non-partisan commission or an sing a permanent and consistent policy of advisory council of experts could make no federal taxation which can best be accom further headway until after the election. plished through the establishment of a Continued efforts have been made to non-partisan tax commission. utilize appropriate opportunities to keep In the meantime, conference with mem this proposal before the public. The July bers of Congress who are interested in the issue of The Journal of Accountancy con idea, indicates the desirability of renewal tained a forceful editorial entitled “ The of efforts, when Congress reconvenes in Incubus of the Tax Law” which received November, to bring about the creation of favorable attention in the press. Reprints a non-partisan commission or an advisory of this editorial and the newspaper com council on taxation. ment as well as other news clippings were In the belief that the urgent need for sent to government officials who have long-range simplification and revision of evidenced interest in the subject. the federal tax system should not be At the 1944 Wartime Accounting Con obscured by the present pressure for ferences held by various state societies of immediate modification of the tax laws to 166 American Institute of Accountants Yearbook facilitate postwar readjustment, your sub of court decisions on the general subject, committee on research recommends that and will serve as a sound basis for further the incoming committee on federal taxation study and definitive action on this subject continue the drive for creation of a non by the next committee. partisan commission or advisory council. Respectfully,
A c c o u n t in g v e r s u s T a x C o n c e p t s H a r r y E. H o w e l l , Chairman W il l ia m L. A sh b a u g h As reported in our midyear report, Charles Melvoin, a member of this sub M ic h a e l D . B a c h r a c h committee, has had under study the T h o m a s J. D o l a n subject of divergences between tax ac S cott H . D u n h a m H a r o l d L. K l a g st a d counting procedure and generally accepted accounting principles. His excellent report, R a y G . M cK e n n a n which is being presented in his address at C h a r l e s M e l v o in this meeting, entitled “ Reconciliation of T ro y G . T h u r s t o n Conflicting Accounting and Tax Concepts F r a n k Y o u n g m a n of Income,” contains an extensive review October 16, 1944
Report of the Committee on Liability of Professional Men in Government Service
To t h e C o u n c il o f t h e neys and others have entered the civilian A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : service of our country, both full time and part time, with and without compensation; G e n t l e m e n : Your committee was ap WHEREAS, Certain federal statutes, pointed by the executive committee last including sections 109 and 113 of the spring to consider a problem which had Criminal Code (USC Title 18, sections 198 already been widely discussed in the and 203) and section 190 of Revised Statute profession. (USC Title 5, section 99), impose harsh Certain federal statutes enacted many and unnecessary burdens and penalties on years ago seem to impose unnecessarily such officers and employees who serve their country during the existing emergency; harsh and rigorous penalties on individuals WHEREAS, The said federal statutes who serve the government voluntarily tend to discourage trained persons from or for compensation, full time or part serving the government and, in a substan time, while they or their firms then or tial number of instances, have caused per thereafter engage in professional practice sons to resign from their positions to the in which claims against the government detriment of the government; therefore are involved. The basic purpose of these be it statutes is sound, and in peacetime little RESOLVED, That the council of the question has been raised with regard to American Institute of Accountants, in semi-annual meeting assembled, petitions them; but it seemed possible that they the Congress of the United States to sus would seriously penalize lawyers, account pend the said federal statutes during the ants and possibly other professional men existing emergency in so far as may be who, as a patriotic service, had accepted found consistent with the protection and positions in government war agencies to integrity of the public service. assist the prosecution of the war. The committee was later informed that Analysis of the pertinent statutes by the suggestion had been made by the counsel of the Institute was studied by Institute’s representatives in the National your committee, and the question has been Conference of Lawyers and Certified discussed with well-informed officials in Public Accountants that the American Bar Washington. At the suggestion of the Association might take similar action. chairman of your committee, the council Your committee did not send the of the Institute at its spring meeting council’s resolution to members of Con adopted the following resolution: gress, with the thought that if the Bar Asso WHEREAS, Many accountants, attor ciation took similar action, the two bodies neys, and others are now in the armed should report to Congress simultaneously. forces of our country; Through the good offices of the lawyer WHEREAS, Many accountants, attor- members of the National Conference, the Annual Reports 167 matter was brought before the resolutions consideration by counsel for the Institute, committee of the American Bar Associa and after learning his opinion, your com tion, at its annual meeting in Chicago, in mittee may be able to take steps which September. No action was taken, however, will result in parallel action by the Amer because in the opinion of the resolu ican nstitute of Accountants and the tions committee, while it was entirely American Bar Association, next winter or sympathetic, a different approach was spring. preferable. It was suggested that specific Respectfully submitted, amendments to specific statutes be sug gested, which would accomplish the desired Joseph J. Klein, Chairman purpose, without removing the ordinary J. A. L e a c h , J r . safeguards which Congress had set up. J. A. P h illip s The matter is at present having further October 4, 1944
Report of the Committee on Membership To the Council of the part of the program has been tabled for A m erican I n stitu te of A c co un ta nts: the time being. The following tabulation indicates the Gentlemen: The membership at August 31, 1944, was made up as follows: growth in membership of the Institute from 1916 to August 31, 1944. The pattern of Members...... 5,925 the last three years is not matched in any Associates...... 2,071 other three-year period either in numbers Total...... 7,996 or percentage. This represents a net increase of 858 for Net Gain or Loss the year with 973 admissions and rein Member In In Per statements and 115 lost through death Year ship Numbers centage and resignation. 1916 1,150 1,150 100.0 Associate Membership comprises nearly 1917 1,220 70 5.7 26% of the total compared to 231/3% a 1918 1,225 5 0.4 year ago. One reason for this is that many 1919 1,252 27 2.2 accountants not in public practice are now 1920 1,363 111 8.1 seeking associate membership. 1921 1,484 121 8.2 1922 1,606 122 7.5 The armed forces think well enough of our 1923 1,809 203 11.2 organization to require the services of 805 1924 1,905 96 5.0 of its members or more than 10 % and of 1925 2,008 103 5.1 these men approximately 600 are holding 1926 2,061 53 2.6 commissions. 1927 2.098 37 1.8 The quality of applicants remains high, 1928 2,158 60 2.8 it being necessary to reject only 29 during 1929 2,185 27 2.7 the year, most of which were based upon 1930 2,196 11 0.5 1931 2,182 -1 4 - 0 .6 lack of public accounting experience. 1932 2,183 1 0.05 Applications pending on August 31, 1944, 1933 2,169 -1 4 - 0 .6 numbered 389 and the time for processing 1934 2,316 157 6.8 has been brought to approximately three 1935 2,386 70 2.9 months which probably cannot be safely 1936 2,649 263 9.9 reduced. 1937 4,890 2,241 45.8* The committee’s program, quite fully 1938 5,047 157 3.1 reported upon at the spring meeting of 1939 5,184 137 2.6 council has been put into effect, except 1940 5,437 118 2.2 1941 5,722 285 5.0 for those parts which depended upon the 1942 6,453 731 11.3 ability of Institute office to engage clerks 1943 7,137 684 9.6 suited for the purpose. It has been found, 1944 7,996 859 10.7 however, to be rather fruitless to canvass * Merger of American Society of Certi earlier inquiries which did not then result fied Public Accountants with American in applications being filed; therefore that Institute of Accountants, January 1, 1937. 168 American Institute of Accountants Yearbook Number of Number of Certified Total Certificates Public Accountants Number of Issued Non-members Members C.P .A.'s Percent Alabama...... 108 40 41 81 50.0 Arizona...... 86 32 30 62 48.3 Arkansas...... 193 42 41 83 50.1 California...... 1,771 828 570 1,398 40.7 Colorado...... 271 100 52 152 34.2 Connecticut...... 364 140 114 254 45.0 Delaware...... 50 21 31 52 60.0 District of Columbia...... 346 243 230 473 48.5 Florida...... 282 132 81 213 38.0 Georgia...... 435 225 93 318 29.2 Idaho...... 60 20 11 31 35.5 Illinois...... 2,218 1,205 683 1,888 36.1 Indiana...... 1,079 210 140 400 47.5 Iowa...... 138 73 49 122 40.1 Kansas...... 175 62 51 113 45.1 Kentucky...... 268 56 90 146 62.0 Louisiana...... 710 177 147 324 45.3 Maine...... 87 38 13 51 25.5 Maryland...... 667 452 109 561 19.4 Massachusetts...... 1,074 489 349 838 41.6 Michigan...... 1,004 473 282 755 37.3 Minnesota...... 364 113 97 210 46.1 Mississippi...... 277 59 38 97 39.9 Missouri...... 672 169 217 386 56.2 Montana...... 114 52 23 75 30.9 Nebraska...... 106 48 31 79 39.2 Nevada...... 37 5 3 8 37.5 New Hampshire...... 409 13 15 28 53.5 New Jersey...... 1,162 759 231 990 23.3 New Mexico...... 45 9 13 22 59.0 New York...... 10,687 7,047 1,798 8,795 19.9 North Carolina...... 616 162 73 235 31.0 North Dakota...... 38 13 7 20 35.0 Ohio...... 1,198 487 336 823 40.8 Oklahoma...... 417 122 110 232 47.4 Oregon ...... 311 130 66 196 33.9 Pennsylvania...... 1,725 817 594 1,411 42.0 Rhode Island...... 116 36 41 77 53.2 South Carolina...... 108 40 29 69 42.0 South Dakota...... 18 7 8 15 53.3 Tennessee...... 647 157 110 267 41.2 Texas...... 1,036 374 280 654 42.8 Utah...... 128 35 58 93 62.4 Vermont...... 33 12 5 17 30.0 Virginia...... 330 148 112 260 43.1 Washington...... 435 235 157 392 40.0 West Virginia...... 87 29 36 65 55.0 Wisconsin...... 1,087 473 137 610 22.4 Wyoming ...... 72 22 10 32 31.3 33,661 16,631 7,842 24,473 32.0 United States Possessions 132 101 49 150 32.9 Foreign...... 46 22 68 32.3 33,793 16,778 7,913 24,691 32.0
N ote.—Members of Institute not certified public accountants—83. Certified public accountants are shown in the state in which they reside, but not necessarily a holder of a certificate issued by that state. Certified public accountants whose mail has been returned are included in the above tabulation at the last known address. Annual Reports 169 The tabulation on page 168 indicates have been received and all of them indicate that 7,913 certified public accountants or that such joint effort is desirable in bring 32% out of a possible 24,691 are members ing worthy practicing certified public of the Institute. accountants into membership. The American Bar Association reports This subject and other matters are to be 32,000 members or less than 18% of discussed at a meeting of the committee 179,554 attorneys in the United States later in the week. (based on 1940 census). Your committee has had the utmost in Under date of September 18, 1944, your cooperation from executives and staff chairman wrote to the chairmen of the during the entire year. membership committees of the various state societies so that their ideas might be Respectfully submitted, obtained relative to joint effort in strength ening the membership of both the state C l a r e n c e L . J o h n s o n , Chairman and national organizations. Many replies September 1, 1944
Report of the Committee on Meetings
To t h e C o u n c il of t h e to the Jefferson Hotel management and A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : staff, to other participating hotels, and to many others for splendid cooperation in G e n t l e m e n : The fifty-seventh annual meeting of the American Institute of making the meeting possible under very Accountants is now under way in the City trying conditions. We also want to ac of St. Louis. Registrations are not yet knowledge the help which we have received completed but, as we have hotel reserva from the Institute’s secretary and staff tions for 800 to 900 people, we confidently without which we would have floundered expect a registration of more than 1,000 hopelessly in the dark. Perhaps we have persons for the technical sessions. imposed too heavily upon the time of the In keeping with the times and following Institute’s staff but, if so, the uncertainty the wishes of the council, entertainment of practically everything made such help an has been kept to the minimum. The annual absolute necessity and we are thankful dinner on Wednesday, October 18, has for it. been the only concession to past customs. It has been a pleasure to serve the Insti Some of our members may experience tute and we trust that the excellence of the some inconvenience in housing and trans program committee’s work, upon which portation, which your committee sincerely we have received many favorable advance regrets. Every effort was made to prevent comments, will more than offset any such difficulties and early hotel reserva deficiency in our arrangements. tions were requested this past May. But, Respectfully submitted, with all of the demand for hotel rooms and the limited space available, it has been H . C. H e l m , Chairman impossible to give every one the kind of A l b e r t A . A r m st r o n g accommodation he has desired. We trust A . W. H e b r a n k that those who have been disappointed will L o u is J. K e r b e r bear with us. J. H . O ’C o n n e l l Your committee is indebted to the St. Louis Convention and Publicity Bureau, October 16, 1944
Report of the Committee on Natural Business Year
To t h e C o u n c il of t h e “ Natural Business Year Changes A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : The chairman reported that during a G e n t l e m e n : An excerpt from the min recent conversation with Mr. Norman utes of the June 23, 1944, meeting of the Cann, Deputy Commissioner of Internal Institute’s committee on federal taxation Revenue, the latter indicated that the follows: Institute would be invited to discuss the 170 American Institute of Accountants Yearbook question of changes of taxable years and requests for changes to fiscal year closings suggested that the Institute compile and followed no consistent pattern which would submit case histories indicating the diffi indicate a shift to the natural business culties which are being experienced at year. He seemed to feel that the Bureau present. Mr. Cann advised that the Bureau was desirous of formulating a policy that should have some approved yardstick to was not unduly restrictive but which apply to applications for changes in closing would protect the Treasury against un dates, and suggested that the Institute warranted manipulation. It was noted that assemble data which might serve as the the Bureau of Internal Revenue at present basis for Bureau adoption and publication takes the attitude that the natural business of official natural fiscal year closing dates year end should be at, or immediately for the various subdivisions of industry. after, the peak of business, possibly because With the help of the Institute’s staff, it feels that in such cases it cannot suffer a your committee is now preparing data to loss of revenue. The subcommittee agreed, after careful discussion, that the proper submit to the Bureau pursuant to the policy should be to allow changes in tax request of Mr. Cann. The following pub able years freely, where the change is lications are being reviewed: made to a natural business year, or for a Publications of Natural Business Year substantial business purpose, and where Council: there is no evidence of attempted tax avoidance. It was the feeling of the sub 1. The Natural Business Year—A Means committee, however, that this policy should to Efficiency be more appropriately urged by the natural 2. The Natural Business Year—Its Ad business year committee as a proper vantages to Business Management method of determining accounting period 3. The Natural Business Year—Sug rather than by the committee on federal gested Natural Fiscal Year Closing taxation. It was voted, therefore, to refer Dates this problem to the natural business year Publication of American Institute of committee with the views of the committee Accountants: on federal taxation and to request them to assemble case material for possible con 1. Public Information Series—The Na ference with Mr. Norman Cann in the near tural Business Year—Its Advan future. The group voted to cooperate in tages to Business Management. this project to the fullest extent possible Publications of Dun & Bradstreet, Inc.: with the natural business year committee. Series of bulletins on natural business It was agreed that Mr. Norman Cann year. would be advised accordingly upon receipt The committee hopes to complete this of the natural business year committee’s work before the annual meeting in October. disposition of the matter.” Respectfully submitted, The chairman of this committee later discussed the matter of natural business W m . J . C a r t e r , Chairman years with Mr. Cann and he states that the September 25, 1944
Report of the Committee on Publication
To t h e C o u n c il o f t h e ous time. In August, 1944, sales reached a A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : total of 23,452 copies, compared with 19,869 for the corresponding month of the G e n t l e m e n : This report relates ex preceding year—an increase of 18 per cent. clusively to The Journal of Accountancy, About one-third of the persons regularly The Certified Public Accountant, and the receiving The Journal are members of the sale of books by the American Institute American Institute of Accountants. The Publishing Company. References to other balance are subscribers who purchase this Institute publications are included in the magazine at a price of $4 a year. The semi reports of appropriate committees. annual analysis of circulation prepared for the Audit Bureau of Circulations, based T h e J o u r n a l o f A c c o u n t a n c y on the May, 1944, issue, indicates that 47 per cent of all copies distributed go to Circulation accountants, including Institute members; The circulation of The Journal of 14 per cent to executives of business Accountancy is greater than at any previ corporations, including presidents, vice Annual Reports 171 presidents, controllers, and treasurers. anticipated, a continued rise in revenue for Other substantial groups of subscribers are the fiscal year 1944-45 is predicted. accounting students; members of school and Advertising rates were increased as of college faculties; federal, state, and munic July 1, 1944, on new contracts. These ipal officials. A total of 1504 copies or about increases were amply justified by larger 7 per cent, according to this analysis, were circulation. In accordance with standard distributed to Institute members and sub- advertising practice, contracts which were scribers in military service. About 350 of in effect on July 1, 1944, will continue these magazines were directed to “ un at the old rates to their expiration. The known destinations,” in care of Army Post new rates will apply to all advertising after Offices. Letters received from members and July 1, 1945. subscribers now with the armed forces in all parts of the world indicate that these T h e C e r t if ie d P u b l ic A c c o u n t a n t magazines are being received and are read Early in 1944, the policy of publishing with keen interest. The Certified Public Accountant on a fixed Normal efforts to increase circulation of date, the fifteenth of each month, was The Journal have necessarily been re abandoned. This change was introduced stricted during the past year to prevent to make this bulletin a more flexible subscription requirements from exceeding medium of information, available for the quota of paper authorized by the War reporting developments of vital interest to Production Board. Communications from Institute members as they occur. Between accountants and business executives re January 1 and September 30, 1944, eight garding subscriptions tell of their definite issues have been published. In no instance need for the informative articles and has an interval of more than six weeks editorials published. Such interest justifies elapsed between consecutive issues. the plans which have been formulated to The Certified Public Accountant, like acquaint all potential subscribers with the The Journal of Accountancy, is subject to value of this publication as soon as paper wartime restrictions upon the consumption restrictions are lifted. of paper. To comply with these require Reprints of articles and editorials pub ments, the title page has been omitted, lished in The Journal of Accountancy are several sections have been discontinued, distributed extensively among individuals and important information is presented in and groups interested in their contents, a minimum of space. Further economy including members of Congress, govern in the use of paper has been accomplished ment officials, chambers of commerce, and by restricting circulation to members and other business groups, accounting organi associates of the American Institute. At zations, the business press, and editors of the begining of 1944, when this new policy daily newspapers. Each issue of The was adopted, The Certified Public Account Journal is scanned for appropriate material ant was distributed to about 500 non and circulation of the reprints is carefully member subscribers who purchased it at planned. During the past year, 33 articles a nominal price of one dollar a year. and editorials were reprinted for such Subscriptions then in effect have been distribution. permitted to continue until their expiration date—in no case later than the end of the Advertising present calendar year—but no new sub New advertising contracts closed during scriptions have been accepted. The pages the fiscal year ended August 31, 1944, of The Certified Public Accountant are now together with renewal agreements, brought devoted exclusively to activities of the income from advertising to a new high American Institute of Accountants and level. Total advertising revenue amounted information of special interest to its mem to $22,679 against $18,160 for the preced bers. Other developments of interest to ing year—an increase of 25 per cent. The accountants are reported in The Journal business manager is constantly in touch of Accountancy. with advertisers, prospective accounts, and advertising agencies in all parts of the S a l e o f B ooks country through personal calls and cor Publication of books for general distri respondence. On the basis of new business bution, with the exception of Accountants' 172 American Institute of Accountants Yearbook
Index Supplements and Unofficial Answers in providing members of the profession and to Examination Questions, was discontinued others, including a substantial number of in 1938. During the fiscal year ended business executives and government repre August 31, 1944, a total of 5,080 volumes sentatives, with prompt and reliable were sold by the American Institute information about current developments Publishing Company, producing $9,918 in relating to accounting and auditing. The revenue. committee also believes that the printed record available in Institute publications, E d it o r s a n d A u t h o r s which reflects in part the contribution of the accounting profession to the successful The committee desires to express its prosecution of the war, will become appreciation to the editors of the various increasingly significant. The period of departments appearing regularly in The reconversion to a peacetime economy is Journal of Accountancy and to those expected to bring new responsibilities and members of the accounting profession and new opportunities for Institute publica others who have devoted their time and tions, at least comparable in scope to those energy to the preparation of articles, of the current war period. communications, or comments, some of which it has been impossible to publish Respectfully submitted, due to lack of space. F r e d e r ic k H . H u r d m a n , Chairman R e v ie w a n d O u t lo o k I. R u s s e l l B u s h P e r c y R . E v e r e t t Reviewing the accomplishment of the A l b e r t E . H u n t e r war years to date, this committee believes A l a n P . L . P r e st that The Journal of Accountancy and other Institute publications have been successful October 11, 1944
Report of the Committee on Public Utility Accounting
To t h e C o u n c il o f t h e for acquisitions of property, both tangible A m e r ic a n I n s t it u t e of A c c o u n t a n t s : and intangible; as to the method of deter mining the amounts, if any, to be included G e n t l e m e n : The past year has been full of activity in the field of public utility in Account 100.5 and Account 107 of the accounting. In addition to the matters uniform system of accounts; and as to mentioned in our midyear report there what dispositions, if any, should be made have been proceedings before public utility of the amounts includible in those accounts. regulatory bodies in which members of the A discussion by William A. Paton Institute have given expert testimony. of the accounting policies of the Federal The more important cases are outlined Power Commission as developed in the in this report. course of the accounting testimony, was printed in the June, 1944, issue of The Journal of Accountancy. Arkansas: The opinion of the Arkansas commission, The Department of Public Utilities issued on June 24, 1944, stated that the directed the Arkansas Power & Light commission decided, unanimously, against Company to show cause why the “ original the use of “ original cost” as the rate base. cost” of its electric property, less accrued Also, the commission upheld the com depreciation, should not be established as pany’s investment in intangible property its electric rate base. as a valid asset includible in its corporate Testimony was given for the utility accounts and in its rate base. company by Messrs. George O. May, The commission completely rejected the Thomas H. Sanders, William A. Paton, idea of amortization of amounts includible Henry A. Home, Walter B. Cole, and in Account 100.5. Joe Bond, and for the regulatory commis sion by Messrs. Charles W. Smith and District of Columbia: Fred Kleinman. The Public Utilities Commission of the The testimony was as to the accounting District of Columbia made an inquiry Annual Reports 173 into rates, under a “ sliding-scale arrange for fixed assets; accounting for intangibles; ment,” of Potomac Electric Power Com reasons for the accounting practices with pany. Mr. Charles W. Smith of the Federal respect to long-lived assets, tangible and Power Commission testified as a witness intangible; nature of accounting principles; for the regulatory commission. The witness and the relationship of accounting prin stated his definitions of, and his opinions ciples to the uniform systems of accounts about, the straight-line, compound interest, of the regulatory commissions. and sinking fund methods of allocating depreciation charges. Also, he stated his Interstate Commerce Commission: views on the retroactive application of a change to the straight-line method of On June 15, 1944, the Interstate Com providing for depreciation. merce Commission issued its first draft of a Professor J. C. Bonbright testified also proposed order modifying the uniform for the regulatory commission with respect system of accounts for electric railways. to recommendations for specific changes in The proposed modification is very exten the sliding-scale arrangement such as: a sive and is planned to bring the I.C.C. reduction in the Rate of Return; a change system of accounts into general harmony in the rate base; and a change to straight- with the N.A.R.U.C., F.P.C. and F.C.C. line depreciation accounting. accounts systems. Our committee has not taken any action with respect to the pro New York: posed order, in conformity with the war The New York Public Service Commis program of the executive committee which sion proposed substantial revisions of its restrains our committee from initiating any uniform systems of accounts for electric, activities. gas, water works and steam companies. The utility companies opposed some of the Securities and Exchange Commission: revisions proposed. The Public Utilities Division of the Messrs. George O. May and F. Merrill Securities and Exchange Commission wrote Beatty testified as expert witnesses on to our committee on July 18, 1944, asking behalf of certain of the utility companies. for comments on a proposal for a rule Their testimony dealt mainly with the relating to accelerated amortization. The definition of depreciation accounting; with proposed rule would call for a recognition the comparison of that method of account in corporate accounts of a tax differential ing with retirement reserve accounting; when a company, in its income and excess and with the retroactive application of profits tax returns, makes a deduction for straight-line depreciation accounting to accelerated amortization of emergency companies which previously had followed facilities but, in its corporate accounts retirement reserve accounting. makes its deduction from corporate income The order of the commission, issued in a lesser amount. June 7, 1944, amended certain of the The opinions of the members of this proposed revisions referred to in editorials committee were assembled and were for in The Journal of Accountancy, issues of warded to the committee on accounting July and September, 1944. procedure which, in conformity with Montana: Institute policy, will communicate its opinion to the regulatory commission. The Montana Power Company appeared before the Montana Public Service Com mission and the Federal Power Commis Bibliography: sion, in joint hearings, in the matter of the So much has been written recently on adjustment of the company’s accounts public utility subjects that the research to conform to the uniform system of department of the Institute asked the accounts. librarian to prepare a bibliography on the Testimony was given on a wide range of subject, covering the period from January accounting subjects by Messrs. Thomas H. 1, 1943, to June 30, 1944. For that period Sanders, William A. Paton, John H. of eighteen months the listing of the Bickley, and Henry A. Horne. Among material covers four closely spaced type those subjects might be listed: accounting written pages. The Accountants’ Index 174 American Institute of Accountants Yearbook contains a similar bibliography of material by the office of the Institute or by the published prior to 1943. bureau of information have all been answered. Miscellaneous Matters: Respectfully submitted, During this year, as heretofore, there have been occasions when it has been H e n r y A . H o r n e , Chairman possible for the chairman of this committee W. M . C o u r s e n to give some editorial assistance in the C l a u d e W. H u p p preparation of articles for The Journal of J . A r t h u r M a r v in Accountancy. E d w a r d J . M u r n a n e The requests for information or advice A l d e n C . Sm it h that have been referred to this committee September 27, 1944
Report of the Committee on Selection of Personnel
To t h e C o u n c il o f t h e be spent during the calendar year 1944 A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : to $10,000. The arrangement is that the American Institute of Accountants Foun G e n t l e m e n : The interest of the mem bers in the research project to develop dation reimburses Dr. Wood monthly for better means of identifying young men the expenses which he incurs. We believe who are likely to succeed in professional that this working arrangement is entirely accountancy is indicated by the fact that satisfactory since the treasurer of the 101 firms, and, in addition, 210 individual Foundation and the chairman of the members have subscribed a total of committee have an opportunity to review $56,313.50 for this project. the expenditures monthly. It is believed The committee has engaged Dr. Ben D. that this understanding, whereby Dr. Wood as director of the project and Wood is enabled to do those things which Dr. Arthur E. Traxler as assistant director. he feels are necessary from time to time, They are both on a part-time basis without is a more satisfactory arrangement than any particular commitment on the part an attempt to put the project in a straight of either one of them as to how much time jacket. The real trouble up to now has they will be able to give to the project. been that Dr. Wood has been unable to Inasmuch as Dr. Wood has been engaged spend as much as he would have liked, largely in work on behalf of the govern because he has been unable to obtain the ment in connection with the war effort, he necessary personnel. He is hopeful that has been able to give very little time to the some of these will be released from their project thus far. The committee has war commitments before too long. The explained to Dr. Wood and Dr. Traxler total expenditures to September 30, 1944, that it looks to them, and to the tech have been $2,080.52. nicians they obtain to help them, for the Some definite progress can be reported initiative in developing the project, i.e., with respect to one phase of the work, that the committee will review, observe and is, the discovery of a measuring stick to suggest. We have also told them that the determine whether or not an individual essential purpose of the project is to attract has the same “ interests” as those who have the finest possible type of personnel to the been successful in professional account profession and to devise means for screen ancy. Since the chairman is planning to ing out those applicants who are not likely discuss this phase of the project at a to be successful in it. They, on their part, technical session October 17, 1944, it is promise no definite results but hold out not necessary to take the time of council hope that some worthwhile measuring to repeat the details here. The members sticks may be developed. of the committee feel that the ultimate No formal arrangement has been made benefits from these tests are not yet with Dr. Wood as to the amount of conclusive, but that there is a reasonable money which he could spend for any chance that they may afford a means to particular phase of the work. The com determine whether or not a man of, say, mittee did limit the amount which should 22 has interests similar to those of qualified Annual Reports 175 practitioners. These Strong tests do not out. He is quite hopeful, however, that pretend to indicate whether or not he something may be worked out in this would be successful in the profession. direction. There are several tests available to Both Dr. Wood and Dr. Traxler are determine the over-all mental ability of a attending the Institute meetings and a young man. The committee proposes to clinic is being arranged for them tomorrow make some experiments with these but afternoon between 5 and 6 o’clock. At this nothing much has been done so far. meeting Dr. Wood will describe in some A subcommittee of our committee, detail the. various stages of the project consisting of Henry E. Mendes, chairman and he will also be glad to answer questions of the Institute’s board of examiners, and from any member. Edward A. Kracke have been working with Dr. K. W. Vaughn, director of the measure Respectfully submitted, ment and guidance project in engineering W a r r e n W . N is s l e y , Chairman education, and Royal C. Thurston, a Sa m u e l J. B r o a d member of the Institute, in an attempt to P e r c iv a l F. B r u n d a g e develop questions designed to test readily E d w a r d A. K r a c k e an applicant’s achievements along pro N o r m a n J. L e n h a r t fessional accountancy lines. This part of A. C. L it t l e t o n the program has just been started, and, as H e n r y E . M e n d e s Henry Mendes, says, there are a number of “bugs” in it which have to be worked October 16, 1944
Report of the Committee on State Legislation Members of this committee will meet with To t h e C o u n c il o f t h e counsel of the Institute on Oct. 17 with A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : the view of revising the present draft of the G e n t l e m e n : During the period since bill giving consideration to all of the sug our previous report to council few if any gestions for changes in the present draft of the state legislatures have been in which have been received by the committee. session. No legislation affecting the profes An examination of the suggestions rela sion was noted during the year other than tive to the drafts of the model bills leads that discussed in our report to council last to the conclusion that a statement is needed May. concerning the purpose for which the bills The committee has continued working are prepared. The committee believes that on the preparation of model certified there are certain basic principles that public accountant bills both of the restric should be included in any certified public tive and non-restrictive types. A digest accountants’ bill. These include the compo of the suggestions received pertaining to sition, i.e., the qualification of the members, the drafts of the bills submitted to members of the board of accountancy and its powers of council last April has been submitted to and duties, the educational and experience legal counsel of the Institute for their requirements of applicants for certificates, consideration in the preparation of revised ownership of working papers, definition drafts of the model bills. of the terms “ practice of public account Recently a revised draft of the model ancy,” “ public accountant” and other non-restrictive bill was mailed to members terms, provision for annual registration, of council, presidents of state societies and permission for accountants for other states secretaries of state boards of accountancy, to carry out interstate engagements as as well as to all the members of this com well as several other fundamental prin mittee. We had hoped to submit to ciples. There are other features of the bills, members of council a revised draft of the however, such as the provisions for com model restrictive type of bill prior to this pensation of the members of the board of meeting, but found it impossible to do so. accountancy, the number of members on 176 American Institute of Accountants Yearbook the board, the method of providing funds principles of the model bills it is not the for carrying on the work of the board which thought of the committee that the Institute may of necessity vary according to the will change its policy pertaining to re requirements of the several states. strictive legislation. It will be recalled that In the preparation of the drafts of the in October, 1934, the council adopted a model bills an attempt has been made to resolution condemning restrictive legisla prepare a bill that will, with perhaps a tion but that in May, 1940, it rescinded few minor changes in the administrative the 1934 resolution and by inference features, but without changing the basic adopted a policy which neither condemns principles thereof, meet the need of and nor approves this type of legislation. This act as a guide to state societies of certified leaves the type of bill to be adopted public accountants and others interested in entirely to the discretion of the members accountancy legislation. of the profession of each of the several Several state societies of certified public states without the benefit of any official accountants are contemplating an early expression from this organization. The revision of their accountancy laws. At least opinion of this committee as to whether or two state societies are presently engaged in not such a condition is desirable has not drafting bills of the restrictive type which been obtained. they propose to have introduced in the At the council meeting last May the legislatures of their states next year. suggestion was made that the Institute Members of the staff of the Institute have study the citizenship requirements of the worked with the committees of these state certified public accountant laws of the societies in the preparation of their bills. several states with the view of eliminating In view of the profession’s present such requirement as a prerequisite for interest in accountancy legislation it is felt taking the certified public accountant exam that approval of council should be asked ination in the United States and foreign of the basic principles embodied in the countries. The members of the committee drafts of the model bills previously pre who have expressed an opinion on this sented with the understanding that the proposal believe that it would not be exact language of the bills will be changed advisable to eliminate the citizenship to conform to opinions of legal counsel requirement from the several state laws. of the Institute. The committee believes The thought has been expressed that per that it is impossible to write these bills on haps some reciprocal agreement might be the floor of council meetings (the writing reached between the several countries, of a bill which later may be enacted into a particularly the United States, Canada and law is a highly technical legal task). The South American countries, which will allow council can, however, at this time approve qualified accountants of one country to or reject the fundamental principles which practice in the other countries for a limited have been included in the drafts previously period of time without the necessity of furnished. We request, therefore, that the becoming a citizen or taking another council approve the fundamental prin examination. Our committee feels that the ciples which have been included in the first question which must be answered is: drafts of the bills previously furnished and authorize the committee on legislation to How far is the profession of this country circulate to members of council, state willing to go in recognizing the foreign society presidents, members of the Associ accountant’s right to carry on his practice here and to what extent is it willing to grant ation of Certified Public Accountant official recognition of the resident non Examiners, and others interested the citizen accountant? revised drafts of the model bills of both types as model bills approved by the After we have the answer to this question committee on legislation. It is believed we will then know whether or not it is that a number of state societies are going advisable to attempt to ascertain how far to consider restrictive legislation next year the foreign countries will go and to what and that these societies will welcome some extent they will reciprocate. Perhaps official action on the principles embodied the question can be discussed here and in these model bills. the opinion of council obtained now. In asking for the approval of the basic The question can be presented to the state Annual Reports 177 societies through the Advisory Council of presented to them for an expression of State Society Presidents and to the state opinion. boards of accountancy through the Asso ciation of Certified Public Accountant Respectfully submitted, Examiners. Both of these groups will be in T. D w ig h t W il l ia m s , Chairman session here during the week and, if it is thought advisable, the matter might be October 9, 1944
Report of the Committee on Technical Sessions
To t h e C o u n c il of t h e beeri changed to “ Historical vs. Earning A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : Power Concept of the Income Statement.” That session as now arranged will be G e n t l e m e n : Supplementing our mid year report which contained a tentative addressed by three principal speakers. The outline of the program proposed for the papers they present will then be followed 57th annual meeting of the American by a panel discussion. Institute of Accountants, October 16-19, In our midyear report we made no pro 1944, we may now inform you as to the vision for the annual dinner. Since then names of the various session chairmen. it has been decided that such an annual The Tuesday afternoon session will be dinner is to be included as part of the conducted by Lincoln G. Kelly; the program and has therefore been scheduled evening session by Jackson W. Smart. for Wednesday evening. The Wednesday session is an all-day The printed program for the 57th annual session and the chairman thereof is meeting of the American Institute of Donald M. Russell. The Thursday session, Accountants has been distributed to the both morning and afternoon, will be under members of the Institute. the supervision of George P. Ellis. Respectfully submitted, All of the sessions conform substantially to the program as previously outlined, S t e p h e n G il m a n , Chairman except the session scheduled for Tuesday J o h n J . L a n g evening, the preliminary title of which M a r k E. R ic h a r d s o n was stated as “ The Problem of Reporting Annual Income.” This general topic has September 18, 1944
COMMITTEES ON WAR ACTIVITIES Report of the Committee on Accounting and Statistical Reports by Industry
To t h e C o u n c il o f t h e members, endeavoring to make the forms A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : as effective as possible and minimize the burden to industry through their use. We G e n t l e m e n : Since the report to council at the meeting in May of this year, the are including the following quotation from committee on accounting and statistical one of the reports made by the subcom reports by industry has held no meetings, mittee which deals with matters of par but the committee and individual members ticular interest to our profession: thereof have carried on activities as out “ There are very few businesses that lined in this report. make only one product, and even if one The chairman of the committee has product is made there are often variances continued to serve as a member of the in quality and size, which may cause sub subcommittee of the advisory committee stantial variances in manufacturing opera on government questionnaires dealing with tions and the resulting costs. In most the revision of standard procurement cases, a business will make two or more products using in part the same and in part forms of the War Department. That different manufacturing processes, or using committee has held numerous meetings some processes to a greater or lesser extent with representatives of the War Depart than others. A proper determination of ment and has submitted reports and recom costs requires calculation of all these vary mendations, based on the experience of the ing factors. An attempt to simplify the 178 American Institute of Accountants Yearbook problem by considering merely totals or by use of averages without running grave averages violates sound cost accounting danger of errors which may indicate an principles and procedures and, instead of apparent cost that is substantially greater giving a basis for sound determination of or substantially less than the cost deter the cost of the particular article under con mined on a more accurate basis.” sideration, may lead to conclusions that are grossly unfair as applied to that particular We are pleased to report that the War article. Department has adopted most of the "In contrast, renegotiation of profits recommendations made and has deter made on all war contracts can, and must, mined “ cutoff” limits for the several take into consideration the over-all picture. For such purposes, over-all cost figures are services, below which cost data as to necessary, but the same theory and the contracts will not be requested. The use same procedure cannot fairly be applied to of such limits as recommended by the com the determination of the proper cost of a mittee should result in very large savings particular article. to industry in filling out procurement “ An attempt to consider the allocation forms. to the cost of a particular article of indirect At the request of the Institute office, as factory expenses under title VI or general part of the aid to small business, the expenses under title VII appears to imply Institute committee is now engaged in that an over-all general average is fairly obtaining lists of all reports and question applicable to the cost of a particular article of indirect factory expenses or general ex naires to the government that have to be penses on an average over-all basis would made by small business concerns within a be proper cost accounting practice in only twelve-month period. When sufficient data a few cases. Allocation of such indirect are obtained, it is hoped that constructive costs as a percentage of direct labor will suggestions can be made for elimination or usually not give fair total costs of one reduction of some of this material. article in relation to another. Many of the well-managed plants determine costs by Respectfully submitted, applying machine-hour rates for the ma chines required to produce an article. We C . O l iv e r W e l l in g t o n , Chairman are not suggesting that every manufactur G e o r g e C o c h r a n e ing business should use machine-hour rates, W a r r e n W . N is s l e y but merely point out that proper determi A l b in D. St r a n d b e r g nation of costs is a difficult and complex problem, and that it cannot be simplified October 14, 1944
Report of the Committee on Accounting Manpower
To t h e C o u n c il o f t h e prospect for registrants ages 26 through 29 A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : found to be “necessary to and regularly engaged in” activities in war production G e n t l e m e n : Since the meeting of council in May, 1944, the Selective Service or in support of the national health, safety System has materially modified its induc or interest, is that they will remain in tion policies. civilian life, subject to the needs of the On May 12, 1944, Local Board Memo armed forces as such needs may change. randum No. 115 was amended to restate The prospect of registrants ages 30 through Selective Service classification policies in 37, regardless of their physical condition, the light of the requirements of the armed and for registrants of any age who are forces. The armed forces had indicated either disqualified for general military that, as the number of men necessary to service or qualified only for limited service bring the armed forces to their basic and who are “ regularly engaged in” required strength was then relatively activities in war production or in support small, their greatest immediate need was of national health, safety or interest, is for physically fit men in the younger age that they will remain in civilian life for an groups capable of the highest degree of indefinite period,—again subject to the efficiency under combat conditions. Under needs of the armed forces. the revised policies, the prospect for The deferment regulations with respect registrants ages 18 through 25, generally to registrants ages 18 through 25 were is service in the armed forces. The tightened so that deferment on occupa Annual Reports 179 tional grounds was virtually eliminated. Information as to the changes in Selec The conditions for deferment of registrants tive Service classification policies was given ages 26 through 29 remained about what to the membership of the Institute through they had been, while for registrants ages a pamphlet reprint of Local Board Memo 30 through 37, the requirements for randum No. 115, as amended May 12, 1944, occupational deferment were materially and transmittal Memorandum No. 119. relaxed. In the report to council at its May In the last few days National Selective meeting, reference was made to another Service Headquarters announced a direc problem affecting employers and growing tive under which local boards were in out of the war. That was the problem of structed to place men 38 through 44 into reemployment under provisions of the Class 4A, which formerly applied only Selective Training and Service Act, of to registrants who had reached their 45th discharged veterans of the present war. birthdays. The change in classification was It is the belief of your committee that explained as being made in order to simplify questions growing out of these provisions the classification of registrants who had of the Selective Training and Service Act reached their 38th birthday and are are so predominantly legal, that neither therefore in an age group not acceptable your committee nor the staff of the Insti for induction. Likewise the classification tute should attempt to deal with them; of men heretofore found fitted only for but that as questions arise, they should be limited service, has been canceled and submitted by members to their legal these registrants will be classified in the counsel. other deferred classifications. It is suggested that from time to time As a step in the execution of the revised the membership of the Institute should be classification policies announced in amended advised through the pages of The Certified Local Board Memorandum No. 115, Na Public Accountant or The Journal of tional Selective Service Headquarters on Accountancy of important developments June 1, 1944, announced modification of its in the administration and interpretation replacement schedule program. The effect of the reemployment provisions of the was to limit the application of this program Selective Training and Service Act. A to registrants 26 through 29 years of age, start in that direction was made, through and eventually to eliminate the entire the publication in the September 30, 1944, procedure. Replacement schedules in effect issue of The Certified Public Accountant, at the time of the announcement were to of a summary of Local Board Memorandum remain effective until their expiration No. 190, dealing with assistance for dates, with one six-months renewal period veterans in seeking employment. permitted. Establishments which had not In closing it is fitting that acknowledg theretofore been operating under replace ment should be made of the fine assistance ment schedules, were thereafter ineligible that your committee has at all times had to join the program. Local Boards were during the past year from John L. Carey, warned, however, to give full consideration the Institute’s secretary, and from the to requests for deferments filed by employ staff of the Institute. ers not using replacement schedules or Respectfully submitted, those discontinuing their use. Under the revised policies, it is still advisable for J o h n A. L in d q u is t , Chairman employers in order to continue deferments W il l ia m R. D o n a l d s o n for men 26 years and over, to file applica F r a n k W il b u r M a in tions for deferment as existing deferments L e l a n d G . S u t h e r l a n d may expire. October 16, 1944
Report of the Committee on Refresher Courses for Returned Service Men
T o the Council of the mittee on postwar problems having to do American Institute of Accountants: with a project of refresher courses for Gentlemen: At the May 9 , 1944, m e e t veterans discharged from the armed ing of council, the report of the com services was referred to the executive 180 American Institute of Accountants Yearbook committee with power. Subsequently the educational institutions throughout the executive committee approved the recom country will undoubtedly originate and mendations in such report and in July, offer such courses. 1944, the president appointed the com 2. Subject matter and its preparation: mittee on refresher courses to carry out the The committee has presently adopted a broad topical outline (it hopes to adopt at project. its next meeting a specific and detailed The council and the executive com topical outline) of the subjects to be mittee recognized that there is an obliga covered. The general outline is as follows: tion on the national professional society to make the best possible effort to meet the A—Auditing and reporting need for retraining members of the profes Bulletins on accounting and auditing sion who are discharged from the armed procedure issued by the American services after the war. The prestige of our Institute of Accountants; S. E. C. accounting releases; Federal Power professional society will be enhanced by Commission rules and regulations; such an effort and the goodwill of the men important court decisions affecting benefited will be earned. Refresher courses practice of accounting; selected should be of great value to the individual articles from The Journal of Ac veterans in re-orienting them to the re countancy and the Accounting quirements of the profession and in Review; changes in accounting reinforcing their self-confidence through machine methods. familiarizing them with the professional B—Federal and state taxes and technical developments since their Principal changes in the 1940 withdrawal from practice. to 1944 internal revenue acts; excess-profits taxes; carry-back, The committee is pleased to report that carry-forward provisions; postwar substantial progress has been made. Its credits; withholding taxes; social organization meeting was held in New York security tax changes; fiscal year on September 11, 1944. At that time the ends; important tax decisions; broad phases of the problem were carefully bureau rulings; individual in explored and agreement was reached on come tax changes; corporate tax certain policies and objectives. Thomas W. changes; special consideration of Leland, Educational Director, represented state taxes where necessary. the committee in a conference with officials C—Government relations with business Renegotiation; termination; wage of the Veterans Administration, the chief stabilization; wage and hour con of whom was H. V. Sterling, Director of trol; price control; V, VT and T Rehabilitation and Education Service. loans; bankruptcy law changes. Beyond this a subcommittee has conferred at length with Dean Robert D. Calkins Preparation of the text material will be of Columbia University. As a result of under the direct supervision of the educa these steps the general outline of our tional director, Mr. Leland. He will act as program has crystallized along the follow editor-in-chief, and outstanding experts in ing lines which, though necessarily tenta various subjects will be called upon to tive, are believed to be a fairly reliable contribute finished text material or memo forecast of the project as it will finally randa from which finished material can be materialize: prepared. Mr. Leland will be enabled to 1. Scope of the course: The committee devote his entire time to the project as he believes that the text material should be has been relieved of all other responsibili organized at the level of the semi-senior ties for the present. The committee will accountant, thus assuming that the student endeavor to have the complete refresher has had a reasonable amount of previous course available for the use of accredited experience and training in accountancy. schools by the end of 1944 in anticipation The material would embrace new profes of the flow to civilian status of war veter sional and technical subjects which have ans which will begin with Allied victory in arisen or taken on a new aspect since September 1940 when the federal selective Europe. The committee has been tendered service legislation was adopted. The com the generous offer of advice and assistance mittee feels that it need not undertake to from Columbia University and from the provide refresher courses in basic account University of Illinois. Both of these offers ing and auditing theory, as the established have been accepted and we look for such Annual Reports 181 help to add measurably to the excellence educational and training programs while of the course. in the service) is eligible for a one-year refresher course. The committee does not 3. Manner of offering course: On the contemplate that its refresher course will advice of recognized educators and repre extend for a longer time than several sentatives of the Veterans Administration months in any event and most likely for a the committee proposes to select a school shorter period than that. There are no age in each principal center throughout the limitations which apply to eligibility for country which will be permitted to give refresher courses, nor is it necessary that the course sponsored by the Institute. In the veteran prove that his education was the beginning there may be ten or twelve interrupted to establish eligibility. Officials approved schools but no effort will be made of the Veterans Administration have in to restrict the field, and additional ac effect said that a veteran who is eligible for credited schools will be added as needed. any educational benefits whatsoever under Alternative plans, such as (1) a correspond the Service Men’s Aid Act of 1944, known ence course offered directly by the Institute as the GI Bill of Rights, is entitled to one or (2) a classroom evening course given by year of education or retrainer courses. A instructors who are public practitioners tuition cost not to exceed $500 for each and using the facilities of established regular school year will be paid to ap schools, were considered by the committee proved schools. The Administration will as less desirable than the plan of having not pay transportation costs but a mainte accredited schools adopt the refresher nance allowance of $50 per month per per course as part of their curriculums. son without dependents and $75 per month otherwise will also be paid. Eligible It has been estimated that there are veterans may receive maintenance allow approximately 5,000 men in the armed ances in approved refresher courses; more forces who have been drawn from the over an accounting firm may pay a veteran ranks of the profession. These are the men a salary while he is taking a course without in whom we have our primary interest. It is disqualifying the veteran for maintenance recognized that a great many of them may allowance. This last seems to enhance not desire or have a need for the refresher greatly the appeal of residence courses as course but a large majority should welcome it is presumed that most firms will gladly the opportunity of taking the course. The carry a returned veteran on the payroll during his retraining period. committee foresees, however, that among 5. Publicity: The committee expects in those who wish to become students there due time to call upon the staff at head will be some who for various reasons cannot quarters to give suitable publicity to the take a resident course. This may be due project. Descriptive information will be to the fact that the veteran does not sent to all members of the Institute, to want to leave his home to go to college, or state society officers and to colleges offering it may be due to his preference to return courses in accounting. at once to his former job in order to Respectfully submitted, improve his economic condition. For these special cases the committee has in mind R a y m o n d E. N o r t h , Chairman offering the refresher course on a home- R a y m o n d G. A n k e r s study basis. It is hoped that an accredited J o s e p h B . B a e r n c o p f school in each region will assume the direc H ir a m T. S covill tion of the home-study program. M a u r ic e H . St a n s T. D w ig h t W il l ia m s 4. Federal assistance: Any honorably J o h n H . Z e b l e y , J r . discharged veteran with ninety days of service (excluding the time assigned to October 11, 1944
Report of the Committee on Renegotiation of War Contracts
To t h e C o u n c il o f t h e to keep in touch with progress made in A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : renegotiation of war contracts with par
G e n t l e m e n : Since the meeting of ticular reference to questions involving council in May, 1944, the committee on the work of our profession. He has also renegotiation of war contracts has held no conferred with the secretary and chairmen meetings, but the chairman has endeavored of other committees on such collateral 182 American Institute of Accountants Yearbook matters as renegotiation or repricing of renegotiation policies and practices as they individual contracts, termination of war have been developed. contracts, and the effect of renegotiation In the address in St. Louis already upon business contracts measured by sales mentioned, the chairman of the committee or net profits. He also was invited to was requested to comment upon the attend a special conference on war con practical experience of contractors, and, as tracts, renegotiation, pricing, and termina statements there made deal with broad tion sponsored by St. Louis University, questions of policy and may be valuable School of Commerce and Finance, and for reference, they are submitted as a delivered there an address entitled “ Price supplement to this report. Adjustment Prior to Renegotiation and Its Effect Upon Renegotiation.” Respectfully submitted, Since our committee report in May, C. O l iv e r W e l l in g t o n , Chairman progress has been made in various legal M. C. C oni ck cases involving renegotiation before the A. S. F e d d e tax court and other federal courts, but the R a y m o n d C . R e ik subject is new and complicated and it may P r io r S in c l a ir be some time before there will be legal decisions which will confirm or correct October 14, 1944
Report of the Committee on Termination of War Contracts
To t h e C o u n c il o f t h e capacity in the organization of the new A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : office, the formulation of its basic policies and the preparation of new regulations. G e n t l e m e n : At the May meeting of council, your committee reported its testi The chairman has spent most of the past mony before Congressional committees on two months in this work. questions related to proposed legislation The Institute committee has been con governing policy and procedure in termina sulted with respect to the new standard tion of war contracts. The committee also forms for filing termination claims and reported the work it had done in coopera a revised draft of the termination account tion with administrative agencies of the ing manual now under consideration, as government concerned with termination. well as on a number of other points. It is perhaps a fair generalization to say that the American Institute of Ac C o o p e r a t io n w it h A dministrative countants committee on termination of A g e n c ie s war contracts has had a part in every major The final legislation enacted under the decision on termination policy and pro title, “ Contract Settlement Act of 1944,” cedure in which questions of accounting conformed with the recommendations of and auditing were involved. your committee in most important re With the permission of the Secretary of spects. The committee believes that this the Navy, Captain J. Harold Stewart, a legislation provides a sound and equitable member of the council of the Institute, has basis and practicable procedure for reim been transferred from his former position bursement of war contractors whose as technical assistant to the head of the contracts are canceled for the convenience Cost Inspection Service, Bureau of Sup of the government. plies and Accounts of the Navy, to the post The Act provided for creation of an of Assistant to the Director of Contract Office of Contract Settlement, headed by Settlement, in charge of accounting. Lieut. a director, to administer the provisions (j.g.) George N. Farrand, formerly research of the law which involves supervision of assistant in the Institute’s research depart the termination procedure of the War ment, has been assigned as an assistant to Department, the Navy and other con Captain Stewart. tracting agencies. It is believed that the opportunity for Soon after the appointment of the new constructive service in the field of contract director, the chairman of your committee termination, which has been available to was invited to assist him in a consulting the Institute committee and to many Annual Reports 183 individual members of the profession, both various cities throughout the country, in government service and in public under the auspices of state societies, with practice, has been of great value to the the cooperation of the Institute’s head profession. The certified public accountant quarters staff, at which Army and Navy and the American Institute of Accountants officers will discuss with members of the are more widely known and respected in profession, technical questions which arise legislative and administrative circles where in preparation and negotiation of termina termination problems have been dealt tion claims. with. It has also been a source of gratifica tion to your committee to be able to make a C o n c l u s io n contribution on behalf of the Institute in a As the Committee has emphasized at field which has been of vital importance every opportunity, it believes that the to the continued successful prosecution of practicing certified public accountant in the war. the field of termination has an opportunity to render service of the highest value to the R esponsibilities o f t h e P r o f e s s io n country as a whole, to his client and to his From the beginning, your committee profession. In order to take full advantage has conceived of its responsibility as a of this opportunity, however, it is essential dual one—to cooperate with the govern that he do two things: ment administrative agencies and to assist 1. Familiarize himself thoroughly with the in keeping the profession informed of the government rules and regulations under technical requirements and the public which termination claims must be pre accountant’s responsibility in connection pared, in order that the accountant may with termination claims. help his client to prepare ahead of time The committee has kept the Institute’s for the filing of claims with the least headquarters staff thoroughly informed of possible delay, and also in order to avoid all new forms and regulations which were mistakes which will delay government in process so that important new releases contracting officers in processing the could be transmitted to members of the claim and may give rise to doubts as to its validity; and Institute without delay. Through the 2. Scrupulously maintain the independent editorial columns of The Journal of viewpoint which is characteristic of the Accountancy and articles in the magazine, accounting profession, in an effort to in the preparation of some of which, preclude the possibility of even a doubt members of your committee have had a as to the impartiality of any figures hand, the profession has been kept cur for which the accountant accepts rently informed of the development of responsibility. termination policy and procedure. Respectfully submitted, Members of the committee assumed responsibility for the organization of the G e o r g e D . B a il e y , Chairman termination session at the annual meeting. Sa m u e l J. B ro ad The committee has also encouraged the J o h n B . I n g l is establishment of a series of meetings on C h a r l e s W. J o n e s accounting aspects of termination, which D o n a l d M. R u s s e l l will be held in November and December, in October 16, 1944
National Conference of Lawyers and Certified Public Accountants Report of Co-chairman Representing American Institute of Accountants in Chicago on the afternoon of Sunday, To t h e C o u n c il o f t h e September 10th, and the following report A m e r ic a n I n s t it u t e o f A c c o u n t a n t s : of what transpired at that meeting will be G e n t l e m e n : At the last meeting of the of interest to the members of the Institute. council I reported the formation of the Several subcommittees which had been National Conference of Lawyers and appointed to inquire into certain phases Certified Public Accountants. of the relations between the two profes The National Conference had a meeting sions, submitted progress reports. 184 American Institute of Accountants Yearbook The meeting agreed to request the result, it is advisable that certified Michigan Bar Association and the Michi public accountants be consulted. gan Association of Certified Public Ac countants to investigate into the American The events leading up to the passing of Tax Association of Kalamazoo, Michigan, the above resolution were as follows: which association desires to set up the new The week before the meeting in Chicago professional designation of “ Certified Tax the American Bar Association issued its Consultant.” advance program for its annual meeting A resolution was passed urging the to be held in Chicago from September 11 American Bar Association to petition the to 14, 1944; and included in that advance Congress of the United States to suspend program was the report of the committee during the existing emergency and for a on unauthorized practice of the law, of reasonable period thereafter certain federal which David F. Maxwell is chairman statutes which place harsh and unneces and Ed M. Otterbourg is a member. sary burdens and penalties on attorneys Mr. Maxwell is co-chairman of the Na and accountants now serving in the armed tional Conference of Lawyers and Certified forces. This resolution is similar to the one Public Accountants and Mr. Otterbourg already passed by the council of the is a member of that conference. This report American Institute of Accountants. I of the committee on unauthorized practice understand that the Bar Association has of the law announced the formation of the not yet acted on that matter. National Conference with the accountants, The meeting also passed the following set forth the objectives of the National important resolution: Conference, and expressed the hope that this conference would reach an accord as to where the practice of accountancy ends WHEREAS, Lawyers and certified and the practice of law begins, to the public accountants are trained profes mutual benefit of the professions and the sional men, licensed by the several states, and required to bring to their public public. In discussing the activities of service qualifications both as to com unauthorized law practitioners in the tax petency and character; and field, the report pointed out the changes WHEREAS, The American Bar As which had been made in simplifying income sociation and the American Institute tax returns for the average individual of Accountants have adopted codes of under the Revenue Act of 1944 and stated ethics to assure high standards of prac in the concluding paragraph the following: tice in both professions; BE IT RESOLVED, in the opinion of “ In the opinion of your committee the National Conference of Lawyers and this law eliminates the necessity for any Certified Public Accountants— further attempts to distinguish between 1. That the public will be best served if simple and complicated income tax income tax returns are prepared either returns and the preparation of all income by certified public accountants or tax returns other than the optional ones lawyers. described above should be construed as 2. That it is in the public interest for the practice of law. Hence, local commit lawyers to recommend the employ tees are advised to act promptly to pre ment of certified public accountants vent in the future unqualified individuals and for certified public accountants to from holding themselves out to the recommend the employment of law public as income tax experts and from yers in any matters where the services making a business of preparing income of either would be helpful to the tax returns for others.” client; and that neither profession should assume to perform the func Later in the report, in discussing the tions of the other. effect of the Massachusetts case of Lowell 3. That certified public accountants Bar Association et al vs. Birdie T. Loeb et al, should not prepare legal documents, the report concluded its comments as such as articles of incorporation, cor follows: porate by-laws, contracts, deeds, trust agreements, wills, and similar “ The court made it perfectly clear documents. Where in connection with that its decision did not apply to the such documents, questions of ac preparation of complicated tax returns countancy are involved or may or to the giving of advice upon questions Annual Reports 185 of law incidental to the preparation of bers of the Conference that certified public income tax returns. It is to be noted that accountants were entitled to prepare tax this rationalization of the subject dove returns. They were quite willing to do tails with the new Revenue Act of 1944 what they could to remove any doubt on to which reference has already been made. In the opinion of your committee that score from the minds of those who this case may be used as authority in might read the report of the committee on any suit to prevent an unqualified person unauthorized practice of the law. Mr. Max from preparing a more complicated tax well as chairman of that committee offered return under the new revenue law.” to appear before the House of Delegates and explain that his report, so far as the When these statements came to our paragraphs complained of by us were attention, Mr. Carey immediately in concerned, referred solely to the unqualified formed Mr. Maxwell that we were very accountants and not to the certified public much disturbed at the action of his com accountants, and, in further support of mittee on unauthorized practice of the that view, to present to the Assembly or law in raising this question in the report House of Delegates a copy of the resolution of that committee, and that we did not which is quoted above. We were advised agree with the conclusion reached that that such a statement would be printed in the preparation of tax returns was the the official proceedings of the American practice of law. Mr. Maxwell stated he Bar Association convention and that copies had no intention of inferring in that report of these proceedings would be incorporated that certified public accountants could in the yearbook of the Association, which not prepare tax returns; that his reference would have the same amount of publicity was solely to the unqualified accountants. as the advance program of the Bar Asso He offered to furnish us with a letter to ciation meeting. that effect, or to recommend that the We endeavored to have the language of National Conference of Lawyers and the resolution changed from “ certified Certified Public Accountants pass a reso public accountants” to “ members of the lution to the effect that certified public accounting profession,” but the lawyer accountants could prepare tax returns. members of the conference declined to At the meeting in Chicago on September make this change, on the ground that it 10th we pointed out that it was our under might include the unqualified accountants, standing that the question of the tax to whom we were all opposed, and that work of the accountants would not come no such resolution could be passed in their up for discussion at this time. We were convention. We endeavored to have this therefore surprised that the committee of wording changed to include public account which Mr. Maxwell was chairman had ants, particularly in states which have undertaken to discuss and, so far as we regulatory laws under which such account could see, dispose of the question of the ants are licensed to practice accounting, preparation of tax returns without our but the lawyers declined this suggestion being consulted in the matter. We made it also, on the ground that this was a con perfectly clear to the meeting that we ference of lawyers and certified public did not agree with the opinion that the accountants and that we were not author preparation of a tax return was the practice ized to act for any one but certified public of law; we maintained that as accountants accountants. when we prepared a tax return we were After careful consideration, we accepted practicing accounting and that we had no the proposed action as evidence that the desire to practice law in any shape or Bar Association representatives on the form; nor could we agree that when we as Conference sincerely desired to remove any accountants prepared a tax return we were misunderstandings which might result practicing law under a special dispensation. from the report of their committee. We The lawyers expressed the opinion that are informed that Mr. Maxwell appeared we were drawing an unfair inference from before the House of Delegates and made the language of the report, which definitely the necessary explanation and presented was limited in their view to the unqualified the resolution quoted above, which was accountants. Apparently there was com duly accepted. The explanation by Mr. plete agreement amongst the lawyer mem Maxwell follows: 186 American Institute of Accountants Yearbook “ It has always been customary for the “ This recommendation is not pointed unauthorized practice of law com at certified public accountants. On the mittee to supplement its report by advis contrary, your committee recognizes ing the House of any developments certified public accountants as profes occurring during the convention. The sional men qualified by education and House will be pleased to hear that the training to prepare income tax returns. National Conference group of account The report rather is directed against the ants and lawyers, which you authorized thousands of unqualified persons who at the mid-winter meeting, held its first have been engaging in this practice business meeting on Sunday of this week. without any educational background or “ The meeting was most successful experience for their personal profit as a and a satisfactory basis was established business, and whose activities are un for the future cooperation of the two questionably against the public interest.” groups in the public interest. Important resolutions were adopted which I have The duties of the committee on cooper been instructed by the Conference to ation with bar association have been taken report to the House. I will therefore over by the representatives of the Institute read the resolutions. on the National Conference of Lawyers “ With these resolutions as a basis, the and Certified Public Accountants. Accord Conference looks forward hopefully to ingly, it is recommended that the com collaborating together for the benefit of mittee on cooperation with bar association the public. In this connection your atten tion is directed to the report of your be discontinued and that representatives committee which is printed on page 72 of the Institute on the National Conference of the advance program, where recom of Lawyers and Certified Public Account mendation is made to local and state ants be reappointed. committees to take vigorous and prompt measures to prevent pseudo tax experts Respectfully submitted, and other unqualified persons from W il l ia m C h a r l e s , Co-Chairman engaging in the business of preparing income tax returns. October 14, 1944
Annual Awards—American Institute of Accountants
P resentation A d d r e s s b y M a u r ic e E. P e l o u b e t Swinburne, a great constructive critic more of these will be sent to the next as well as a poet, once said, “ I have never committee. been able to see what should attract men While the work of the committee has to the profession of criticism but the noble been pleasant, it has been difficult at the pleasure of praising.” That, I think, same time. The problem was not to select describes the work of the committee on something good out of a mass of mediocrity awards. but rather to choose the best out of a great For the first time in its history the deal that was very good. The committee Institute has authorized a committee to was well distributed geographically; two decide on the best work done in several from the middle West and one from the fields of accountancy. The awards have East. The academic as well as the pro not been limited to members of the Insti fessional field was represented and the tute nor to its publications. members of the committee were well This first committee has chosen one acquainted with the members of the pro publication not by the Institute, but the fession and with accounting literature. three men to whom the awards have been Even so, the task was not easy. given are Institute members. It is quite The selection of an outstanding book on possible, however, that these awards an accounting subject was the simplest may, in the future, be the means of recog award to make, largely because the field nizing services to the profession rendered was narrower and the character and pur by men working in government, business pose of a book can be easily determined. or education. When we came to the selection of the While the committee has received a few best article on an accounting subject suggestions from members it is hoped that published during the year, we were con Annual Reports 187 fronted by a large volume of material outstanding recent book on an accounting appearing in a number of mediums. In subject. addition to the researches of the individual The article chosen by the committee is committee members, we asked the librarian of a somewhat different nature. It is the of the Institute to prepare a comprehensive sharp and pungent expression of a keen list of representative articles which had and active mind. It expresses clearly and come to her notice during the year to be vigorously views which all must respect sure that nothing which deserved con and with which most accountants will sideration would be missed. agree, but it is essentially an expression of To decide on the third award the com personal views. The committee not only mittee agreed at the outset that service saw no objection to making an award for of what might be termed a regular and such an article, but, on the other hand, felt intraprofessional nature would not be that the straight-forward expression of well considered, as, if it were, the award would considered personal views on controversial be almost sure to go to the president of questions is not only the most interesting one of the national accounting bodies or sort of professional literature to read but possibly to the president of a prominent also the most likely to provoke discussion and active state society. There is no doubt of important questions and to lead to their that these are the men whose services are ultimate solution. The way to settle con most valuable to the profession as such, troversial questions is by controversy and but the committee decided that the pur the committee hopes, and has no reason pose of the award was more to recognize to doubt, that the important accounting outstanding service of a public nature publications of the country will wish to which benefited the public as a whole as extend the hospitality of their pages to well as the profession. both parties to any controversy which is While the decisions of the committee conducted with reasonable fairness and have been unanimous we do not for a decency. The committee have chosen an moment imagine that everyone will ap article appearing in the June 1944 issue prove every award. We have tried to of The Journal of Accountancy entitled approach our task in an objective manner “ Accounting Policies of the Federal Power and we have tried to consider the interests Commission,” by William A. Paton, as the of the Institute and the profession as a best article of the year on an accounting whole in making these awards. I am sure subject. each member of the committee is glad When we came to the question of choos that he has served on it and is, perhaps, ing the accountant who had rendered the even happier about the fact that he will greatest service to the profession, our probably never have to serve again. thoughts naturally turned to those mem In selecting an outstanding and valuable bers of the profession who have given up book on an accounting subject, the commit comfortable and lucrative practices to tee considered not only the value of the serve their country, either as civilians or book to the accounting profession itself in a in uniform, in positions where their pro somewhat narrow, technical sense, but also fessional qualifications and knowledge are the value of the book as an explanation to essential. We all know that there are the business man, the lawyer and the numbers of such men, many of them our economist of what accounting really is, of own members, in the service. It is a difficult its basic philosophy, what may be expected task to single out one of the large number of it now, what its probable future is and of these capable, self-sacrificing and valu what its limits are. The book selected is able men. The committee was not guided the ripe and mellow distillation of the in its choice by these considerations alone experience of a long and useful life devoted as any choice or comparison on this basis to the practice of the profession. In later years, to the great benefit of the profession, would have been most difficult to make. the author has devoted himself to research The committee did, however, try to decide and study, the results of which have been on the services rendered by an accountant freely given to the profession at large. which probably had the most beneficial The committee has chosen Financial Ac and far-reaching effect on business and counting, by George Oliver May, as an on the public practice of accountancy. 188 American Institute of Accountants Yearbook You are all familiar with the Baruch- operating under the joint contract termi Hancock report on war and postwar adjust nation board. The profession may be ment policies. This is a sound, inspiring thankful that a man of Captain Stewart’s and clearly written summary of how we acquaintance with professional problems should terminate and reconvert and do all and sound judgment was in a position to the other difficult things which must be help to make the cost and financial sections done as the war nears its close. It is a of the report comprehensible and workable most important statement of principles and to take part in their administration. and program and will affect, in one way At present Captain Stewart is working or another, every member of an industry directly under Robert H. Hinckley, director which has war contracts and, to some of contract settlements, as his assistant extent, all other business as well. in charge of accounting matters. Here, Captain J. Harold Steward, SC, USNR, again, his work will affect almost every who was executive assistant to the director accountant in public practice and the of the cost inspection service of the Navy profession may have the comfort of know Department from February 3, 1942, to ing that these difficult and important September 1, 1944, had a large share in questions are in good hands. For these preparing the sections of this report dealing services, valuable alike to the public and with costs and financial matters and as the profession, the committee presents this such his work will affect to a greater or award to Captain J. Harold Stewart. less degree almost every practicing public [Members of the committee on awards, accountant in the country. He later acted of which Mr. Peloubet was chairman, were as chairman of the accounting committee Hiram T. Scovill and Edward B. Wilcox]
AMERICAN INSTITUTE OF ACCOUNTANTS FOUNDATION Report of the Board of Trustees T o the American Institute of Accountants for a research project to be A c c o u n t a n t s F o u n d a t io n : conducted by the American Institute of Accountants Foundation to develop apti Gentlemen: Your board of trustees has held three meetings since the annual meet tude tests for professional accountants. ing in October, 1943. Contributions to this special research pro Income from the Foundation, amounting ject, amounting to $43,743, have been re to $3,012, derived from interest on the ceived, and an additional amount of capital fund, has been contributed toward $10,725 has been pledged. Expenses of the the support of the Institute’s library as in special research project for the fiscal year the past, with the exception of $204, which amounted to $1,586. has been paid in fees to the securities $25,000 contributed to this special fund custodian. has been invested in United States Treas The changes in the securities of the ury bonds. Foundation during the past fiscal year Respectfully submitted for the board of are shown below. trustees, During the year the board of trustees authorized the treasurer of the Foundation V i c t o r H. S te m p f, President to accept voluntary contributions from members of the American Institute of October 16, 1944 Purchases $5,000 Canadian Pacific debenture, 4%, perpetual, @ 95¼...... $ 4,775.00 50 shares United States Steel Corp., 7%, cum. preferred, @ 127¼...... 6,380.00 $11,155.00 Sales $1,000 New York City, 3%, 1967, @ 112⅜...... $ 1,121.25 1,000 New York City, 3%, 1979, @ 110...... 1,097.50 5,000 Baltimore & Ohio Railroad Co. secured notes, 4%, 1944...... 4,985.00 3,000 New York State Electric & Gas Co., 3¾%, 1964, @ 109⅛...... 3,264.68 $10,468.43 Annual Reports 189
AMERICAN INSTITUTE BENEVOLENT FUND, INC. Report of the Board of Trustees To the American Institute sent to all members of the Institute with B e n e v o l e n t F u n d , I n c .: the bills for membership dues September 1, Gentlemen: During the fiscal year 19.44. Up to October 9, 1944, 885 members ended August 31, 1944, the American and associates had responded, with con Institute Benevolent Fund, Inc., received tributions totaling $8,593.84 in comparison in the form of contributions, income from with 713 members and associates who con investments, and interest on savings bank tributed $6,389.00 in the same period last deposits, $8,146. During the year the Fund year. extended assistance to members of the Your board of trustees is pleased to be Institute in the amount of $2,650, and able to report that within the last few years expended $73 for stationery, printing, an increasing number of members have postage, and general expenses. participated in this activity of the Institute. Contributions to the fund were $7,840, Respectfully submitted, an increase of $1,854 over the previous year. The principal fund August 31, 1944, John B. Niven, President was $18,106. Samuel J. Broad, Treasurer The statement of assets of the Fund as of Charles B. Couchman August 31, 1944, and August 31, 1943, and John F. Forbes an analysis of the increases and decreases Frederick H. Hurdman of the principal fund during the two fiscal Robert H. Montgomery years are submitted as a supplement to this C. Oliver W ellington report. As in recent years, a special letter was October 9, 1944 AMERICAN INSTITUTE BENEVOLENT FUND, INC. B alance Sheet August 31 Assets 1944 1943 Cash...... $ 2,919 $ 4,119 Investments (market value August 31, 1944—$15,180—August 31, 1943— $8,157)...... 15,187 7,970 Total assets...... $18,106 $12,089 Liabilities...... Principal...... $18,106 $12,089 Statement of Principal Transactions for year ended August 31, 1944 Balance, September 1, 1943...... $12,089 Add: Excess of income over expenses...... 5,623 Profit on sales of securities...... 394 Balance August 31, 1944...... $18,106 Statement of Income and Expenses and Distribution Year ended Aug. 31 Income: 1944 1943 Contributions (including donations for specific purposes)...... $ 7,840 $ 5,986 Income from investments...... 271 108 Interest on savings bank accounts...... 35 50 Repayment of loan...... 200 — Total...... $ 8,346 $ 6,144 Expenses and Distributions: Payments made for assistance...... $ 2,650 $ 2,400 Stationery, printing and other expenses...... 73 75 Total...... $ 2,723 $ 2,475 Excess of income over expenses and distributions...... $ 5,623 $ 3,669 190 American Institute of Accountants Yearbook
Report of the Advisory Council of State Society Presidents
To the Council of t h e O p e n S e s s io n s , O c t o be r 16, 1944 A m e r ic a n I n s t it u t e of A c c o u n t a n t s : Approximately 80 persons attended both G e n t l e m e n : The committee to report the morning and the afternoon open to the council expresses the great apprecia sessions. At the morning session, three tion of the chairman and secretary of the papers were presented upon the model Advisory Council for the splendid cooper C.P.A. bills. T. Dwight Williams of ation and assistance received throughout Oklahoma presented the outlines of the the past year from the staff of the American problem and the objectives of the Institute Institute office and particularly from committee on state legislation. C. F. Frank A. Gale, who was appointed Milledge of Houston, Texas, president of assistant secretary to the Advisory Coun the Texas Society and a member of cil. Mr. Gale and Mr. Carey have made Mr. Williams’ committee, presented an many suggestions for constructive action analysis of the model restrictive law and during the year and in planning for our Carl W. Lutz of Illinois presented a annual meeting held on Monday, October description of the problem encountered in 16, 1944. They have made program and Illinois—and the solution of the problem meeting arrangements, mailed circular in the new Illinois Accountancy Law. letters to the state society presidents and A general discussion followed these pre in many ways have relieved the chairman sentations. On showing of hands, the and secretary of details that would other meeting registered its consensus of opinion wise have been burdensome. They have on specific questions as follows: made the performance of the duties of 1. That the requirement of citizenship in these offices a genuine pleasure throughout the United States of America is a neces the year. sary qualification for a holder of a There have been frequent communica C.P.A. degree and that it should be tions with the presidents of state societies continued in the model acts. in the name of the Advisory Council. In 2. That it is undesirable to grant an January, assistance was sought and re automatic classification as public ac ceived in obtaining action by state socie countant in two-class legislation based ties, and publicity throughout the states, solely upon experience of governmental for the tax simplification plan promulgated employees. by the committee on federal taxation. In The afternoon session of the open meet February, letters were issued in connection ing was devoted to consideration of cooper with tax return extensions; in April, letters ation with the American Institute. George urging attendance at the May meeting of S. Olive described the objectives of his council in response to invitation by committee and details of the report which council, letters furnishing an abstract had been reported to the Advisory Council from the Congressional Record concerning by the council of the Institute. A general the appropriation for audit of the T.V.A., discussion followed and a roll-call was and letters urging participation in the taken by states, each president describing Fifth War Loan Drive. the sentiment of his society as to the In June, copies of the model C.P.A. objectives of the plan—the extent to bills were distributed and study urged. In which his society is prepared to finance September and October, several mailings the development and size of the member were made concerning the plan for cooper ship of his society. A stenotype record of ation between the Institute and state these comments will be available for the use of Mr. Olive’s committee. Of the societies and in preparation for the October thirty-one state societies present, twenty- meeting. nine expressed enthusiastic support for Members of the Advisory Council were the objectives of the plan and two expressed particularly appreciative of the opportun lack of interest. Sixteen of the societies ity to attend the May meeting of the reported that they were presently prepared council of the Institute—25 state societies to render financial support to the plan, to were represented at that meeting. the extent of $1.00 per member. Many of Annual Reports 191 the others reported that changes would be that body at its annual meeting. The required in the by-laws of the societies, chairman and secretary of the Advisory that it would be necessary to raise their Council shall be ex-officio members of dues, or that subsequent action by their said committee. Four members of the memberships would be necessary. first committee shall serve for one year and four for two years. There Eric P. Van reported concerning the after, four members shall be selected matter of the adoption of further rules annually for a term of two years to against competitive bidding, which was dis fill the expired terms. cussed at length in two preceding annual (3) The plan is to be financed by the state meetings, to the effect that this matter societies on the tentatively suggested had been dormant during the year and basis of $1.00 per member. he had nothing further to report at this time. It is the belief of the committee which has signed this report, that the sentiment E x e c u t iv e S e s s io n s , O c t o be r 16, 1944 of the 1944 meeting of the Advisory Council At the morning session, A. Frank was strongly in support of the objectives Stewart of Virginia was elected secretary, presented by Mr. Olive, and that the state in the absence of James A. Leach, Jr., societies feel the need of further coordi secretary, who had sent his regrets that nation, committee by committee, between he was unable to attend. Thirty-one states the national and state organizations. The answered the roll-call. This committee inability of the American Institute to was appointed to report to council and a finance the activity appears, however, to nominating committee was appointed— be the occasion for some hesitation. The consisting of Henry J. Pratt of Alabama, president of the California Society pointed Frank G. Short of California and Wil out, for example, that a California C.P.A., liam H. Goldberg of Colorado. At the belonging to both the American Institute afternoon session, the following officers and the California Society, already has were elected for the ensuing year: 71 per cent of his combined association dues spent, and only 29 per cent spent at the Chairman—C. F. Milledge, Texas state level. Whereas, the percentages are Secretary—M. C. Conick, Pennsylvania approximately reversed for California mem A committee to draft a resolution for bers of the legal and medical professions. report to the council of the Institute on Others expressed the opinion that if the the coordination plan, was appointed by state societies are to raise $12,000 each the chairman, consisting of Howard L. year, they should be able to make certain Mann, president of the Massachusetts that the funds are spent along channels Society as chairman, John F. Hartmann, specifically desired by the societies. president of the Louisiana Society, and It is believed that the suggestion of a William H. Goldberg, president of the committee of eight persons from the Colorado Society. The resolution as adopted Advisory Council, included in the resolu (after one amendment from the floor) was tion, recognizes (1) that there is a desire as follows: to refrain from complete integration (such as, for example, exists in the National RESOLVED, The Advisory Council of Association of Cost Accountants); (2) that State Society Presidents recommends the the Advisory Council is willing, through a adoption of a plan of coordination between state societies and the American Institute committee, to assist the Institute com of Accountants similar in objectives to the mittee to arrive at a plan which will enlist plan outlined on page 35 of the May, 1944, every state society; and (3) that some reports to council, on the basis that participation is desired in spending the money we are to raise and that this par (1) A committee of state society presidents ticipation can be achieved in the same formulate and present a definite plan for presentation to and action by state cooperative spirit that has been proved to societies. exist by our joint activities in the past. (2) The operation of the plan be super While the resolutions committee was at vised and controlled by a committee of work, an informal discussion was held eight members of the Advisory Council upon detailed problems of state society of State Society Presidents, selected by operation, including employment of public 192 American Institute of Accountants Yearbook relation’s counsel, publicity, methods of into closer agreement with the concept of following bills proposed in state legis net income, determined in accordance with latures and other topics. Some consider generally accepted accounting principles. ation was given to the proper extent of the participation by state societies in war S p e c ia l S e s s io n , O c t o be r 17, 1944 loan drives. It appeared to be agreed that this question should be decided in the The Advisory Council also held a session light of local conditions, depending prin on Tuesday, October 17, at the suggestion cipally upon whether local war loan of officers of the Army and Navy, for the drives were organized by professional presidents of twenty-two of the state groups. It was considered very undesirable societies who had indicated a desire to for C.P.A’s to be placed in any position accept the invitations of the officers to where they would be expected to solicit assist in state society meetings on war clients or to advise their clients as to the contract termination problems, to be held extent of their subscriptions. throughout the country in November and December. This meeting was addressed E v e n in g S e s s io n , O c t o be r 16, 1944 by Col. John W. McEachren, Commander An evening session was held, at which J. S. Seidman, Lt. Col. Fladger F. Tannery, the Advisory Council acted as hosts to Lt. Col. Victor Z. Brink, and Mr. Frank the council of the American Institute and A. Gale. The types of meetings to be held to the officers of the Association of Certified and the topics to be presented were dis Public Accountant Examiners. At this cussed and the plans for these meetings meeting, Victor H. Stempf, president, were further developed. and Jay A. Phillips, vice-president of A stenotype record was made of the the Institute, spoke upon the activities of open and executive sessions on October 16, the Institute and J. D. P. Arnold of 1944, which will be available for review by Alabama and William H. Goldberg of the staff of the American Institute and Colorado reported informally to council the interested committees of the Institute. upon the topics discussed at our morning Respectfully submitted, and afternoon sessions, respectively. The possibilities of bringing about a Committee to report to the council of situation where the Bureau of Internal the American Institute of Accountants Revenue could make use of C.P.A. certifi D o n a l d M . R u s s e l l , Chairman cations of federal income tax returns was A. F r a n k S t e w a r t , Acting Secretary discussed. Opinions were expressed that C . F . M il l e d g e this development is dependent upon drastic M . C . C o n ic k revision of the federal tax laws, which would bring the concept of taxable income October 18, 1944 APPENDIX C
Certificate of Incorporation. Certificate of Change of Name. By-laws of the American Institute of Accountants. Rules of Professional Conduct. Rules of the Board of Examiners CERTIFICATE OF INCORPORATION OF The Institute of Accountants in the United States of America We, the undersigned, John E. Bates, certify that John E. Bates, Howard C. Howard C. Beck and Joseph E. Sterrett, Beck and Joseph E. Sterrett, being person- all of whom are persons of full age and citi- ally well known to me as the persons whose zens of the United States, and a majority of names are signed to the certificate of incor whom are citizens of the District of Colum poration, hereto annexed, bearing date the bia, desiring to associate ourselves for the 23rd day of May, 1916, personally ap purpose of forming a corporation under and peared before me in said district, on said by virtue of the provisions of sub-chapter day and separately, severally and in 111, of chapter XVIII, of an act of congress dividually acknowledged the same before entitled “ An act to establish a code of law me, and that they severally signed the same for the District of Columbia” approved for the purposes therein set forth. March 3, 1901, and the acts amendatory Given under my hand and notarial seal thereof and supplemental thereto, do this 23rd day of May, 1916. hereby certify, as follows: First: The name or title by which such (Signed) C h a r l e s E. R io r d a n , corporation shall be known in law is “ T h e Notary Public. Institute or Accountants in the United O ffice of the Recorder of Deeds, States of America.” District of Columbia. Second: The term for which it is organ NOTORIAL ized is perpetual. SEAL Third: The particular business and ob jects of the corporation are: to unite the This is to certify that the foregoing is a accountancy profession of the United true and verified copy of the certificate of States of America; to promote and maintain incorporation of “ The Institute of Account high professional and moral standards; to ants in the United States of America,” safeguard the interests of public account and of the whole of said certificate, as filed ants; to advance the science of account in this office the 23rd day of May, A. D. ancy; to develop and improve accountancy 1916. education; to provide for the examination In testimony whereof, I have hereunto of candidates for membership; and to en set my hand and affixed the seal of this courage cordial intercourse among account office this 23rd day of May, A. D. 1916. ants practising in the United States of (Signed) R. W. D u t t o n , America. Deputy and Acting Recorder of Deeds, D. C. Fourth: The number of its trustees, directors or managers for the first year of its THE INSTITUTE OF ACCOUNTANTS existence is thirty-nine. IN THE UNITED STATES In witness w hereof, we have made, OF AMERICA signed and acknowledged the foregoing certificate this twenty-third day of May in C e r t if ic a t e o f C h a n g e o f N a m e the year one thousand nine hundred and sixteen. We the undersigned, W. Sanders Davies, president, and A. P. Richardson, secretary, (Signed) J o h n E. B a t e s , respectively, of the Institute of Account H o w a r d C. B e c k , ants in the United States of America, a J o s e p h E. S t e r r e t t . City of Washington, corporation formed under and by virtue of District of Columbia SS.: the provisions of sub-chapter 111, of chap ter XVIII, of an act of congress entitled I, Charles E. Riordan, a notary public, in “ An act to establish a code of law for the and for the District of Columbia, do hereby District of Columbia,” approved March 3, 195 196 American Institute of Accountants Yearbook 1901, and the acts amendatory thereof and subscribed our names this 16th day of supplemented thereto, do hereby certify, January, 1917. pursuant to the provisions of section 602 of said act, as follows: W. S a n d e r s D a v ie s , President. First: That the written consents to the A. P. R ic h a r d s o n , Secretary. change of name of said corporation to “ The State of New York, American Institute of Accountants” have County of New York SS. been duly given by more than two-thirds of I, W. C. Lawson, a notary public, in and the members of its governing board, known for the county of New York, in the state of as its “ council,” to wit: by 32 members of New York, do hereby certify that W. San said council, out of a total membership of ders Davies and A. P. Richardson, being thirty-nine. personally well known to me as the persons Second: That attached hereto are the whose names are signed to the foregoing original written consents of said thirty-two certificate bearing date the 16th day of members of said council. January, 1917, personally appeared before Third: That the original name of said me in said county on said day, and sep corporation was The Institute of Ac arately, severally and individually ac countants in the United States of America, knowledged the same before me, and that and the new name by virtue of such con they severally signed the same for the sents and of the filing of this certificate will purposes herein set forth. be “ The American Institute of Account Given under my hand and notarial seal ants.” this 16th day of January, 1917. Fourth: That the term of corporate existence as specified in the original certifi N o t a r ia l W. C. L a w s o n , cate of incorporation thereof, and as con s e a l Notary Public. tinued hereby, is perpetual. Notary Public, Kings County, with certifi I n w it n e s s w h e r e o f , we have hereunto cate filed in New York County 171. BY-LAWS
OF THE American Institute of Accountants
ARTICLE I (b) Persons who shall qualify for ex amination and election as provided in NAME AND PURPOSES section 5 of this article and shall be recom S e c t io n 1. The name of this organiza- mended by the board of examiners after tion shall be The American Institute of examination and shall be elected by the Accountants. Its objects shall be to unite council. the accountancy profession of the United (c) Members of the American Society States; to promote and maintain high pro of Certified Public Accountants in good fessional and moral standards; to assist standing as of August 31, 1936, who shall in the maintenance of high standards for elect to become associates. the certified public accountant certificate S e c . 4. The following persons may in the several states; to safeguard the in qualify for examination and election as terests of public accountants; to advance members of the Institute provided that the science of accountancy; to develop they be not less than twenty-one years of and improve accountancy education; to age and shall present evidence of prelim provide for the examination of candi inary education satisfactory to the board dates for membership; and to encourage of examiners: cordial intercourse among accountants (a) Associates who shall meet the re practising in the United States of America. quirements stated in the following para graphs of this section. ARTICLE II (b) Accountants engaged in public prac tice, or accountancy instruction in schools MEMBERSHIP recognized by the board of examiners, who S e c t io n 1. The Institute shall consist shall have been in practice or in account of members and associates. ancy instruction for a period of not less S e c . 2. Members shall be: than five years. The board shall satisfy (a) Fellows of the American Associa itself in each case that the applicant’s tion of Public Accountants at September experience has been sufficiently continuous 19, 1916, admitted to membership prior and of such a character as to warrant his to November 1, 1916. admission to membership. The board may (b) Persons who shall qualify for ex give credit in its discretion for accountancy amination and election as provided in work of an outstanding character which in section 4 of this article and shall be rec its opinion is clearly equivalent to public ommended by the board of examiners practice. after examination and shall be elected by (c) After January 1, 1936, no applicant the council. shall be admitted as a member unless (c) Members of the American Society he holds a valid and unrevoked certified of Certified Public Accountants in good public accountant certificate issued by standing as of August 31, 1936, who the legally constituted authorities of a shall elect to become members. state or territory of the United States of (d) Associates of the Institute in good America or of the District of Columbia. standing as of August 31, 1936, who elect (d) Any associate engaged in public to become members. practice who shall have been in posses S e c . 3. Associates shall be: sion of a certified public accountant cer (a) Associate members of the Ameri tificate for more than ten years and shall can Association of Public Accountants be eligible for advancement to member at September 19, 1916, admitted as asso ship shall automatically be advanced to ciates prior to November 1, 1916. membership. 197 198 American Institute of Accountants Yearbook
S e c . 5. The following persons may By each member...... $25 qualify for examination and election as By each associate who shall have associates of the Institute, provided, that been in possession of a certified they shall be not less than twenty-one public accountant certificate years of age and shall present evidence for less than five years...... 10 of preliminary education satisfactory to By each associate who shall have the board of examiners: been in possession of a certified (a) Accountants who shall have been public accountant certificate for in practice on their own account or in more than five years...... 15 the employ of a practicing public account S e c . 2. All dues shall be paid in advance ant for not less than two years, or shall and shall be apportioned in the first in have had experience which in the opinion stance to the end of the fiscal year. No dues of the board of examiners is equivalent shall be paid by members and associates to two years’ public accounting practice, of the Institute while they are engaged in and at the date of application shall be en military or naval service of the United gaged in work related to accounting. States or its allies during war. Members (b) Accountants who shall have been of the Institute who have reached ad engaged in accountancy instruction in vanced years may be excused from the schools recognized by the board of exam payment of dues on the recommendation iners for a period of not less than three of the executive committee. years next preceding the date of applica tion, provided ARTICLE IV (c) After January 1, 1936, no appli cant shall be admitted as an associate VOTING unless he holds a valid and unrevoked cer S e c t io n 1. Every member of the Insti tified public accountant certificate issued tute shall be entitled to attend all meetings by the legally constituted authorities of of the Institute and to cast a vote upon all a state or territory of the United States questions brought before such meetings. of America or of the District of Columbia. Se c . 2. Associates of the Institute shall S e c . 6. All credits for education and not be entitled to vote, but may attend all experience shall be allotted by the board meetings of the Institute and have the of examiners, and the board shall have privilege of the floor in the discretion of discretion to determine whether or not the chair or of the meeting in session. any applicant’s experience is of a nature S e c . 3. Any member of the Institute may satisfactory for purposes of these by-laws. be represented at regular and special meet S e c . 7. Upon election each member or ings of the Institute by another member associate shall be entitled to a certificate acting as his proxy, provided, however: setting forth that he is a member or an (a) That no person shall act as a proxy associate of the Institute, but no certifi for more than five members. cate shall be issued until receipt of ini (b) That no proxy given shall confer tiation fee and dues for the current year. power of substitution and that all proxies Certificates of membership shall be re shall be valid only for the meeting for turned to the council upon suspension or which specifically given. termination of membership for any cause except death. ARTICLE V Se c . 8. Members of the Institute shall be entitled to describe themselves as TERMINATION OF MEMBERSHIP Members of the American Institute of Se c t io n 1. Resignations of members Accountants and associates as Associates and associates may be offered in writing of the American Institute of Accountants. at any time and shall be effective on the date of acceptance. Action upon the resig ARTICLE III nation of a member or an associate in S e c t io n 1. The dues for each fiscal year good standing shall be taken by the ex shall include the cost of subscription to ecutive committee and, in the case of a The Journal of Accountancy and the Year member or an associate under charges, book of the Institute and shall be as by the council. follows: S e c . 2. A member or an associate who By-laws 199 fails to pay his annual dues or any sub (d) he is held by the council to have scription, assessment or other obligation been guilty of an act discreditable to the to the Institute within five months after profession, or such debt has become due shall automati (e) he is declared by any competent cally cease to be a member or an associ court to be insane or otherwise incompe ate of the Institute, unless in the opinion tent, or of the executive committee it is not in the (f) his certificate as a certified public best interests of the profession that his accountant is revoked or withdrawn by membership be terminated in this way. the authority of any state or territory of Sec. 3. (a) A member or an associate the United States or of the District of who shall resign while in good standing Columbia, or may be reinstated by the executive com- (g) his certificate as a certified public mittee, provided the person applying shall accountant shall have been revoked or submit with his application for reinstate withdrawn by the authority of any state ment a reinstatement fee of $5. or territory of the United States or of the (b) The executive committee, in its District of Columbia and such revocation discretion, may reinstate a member or an or withdrawal remains in effect. associate whose membership shall have S e c . 5. A member or an associate shall been forfeited for non-payment of dues be expelled if the council sitting as a trial or other sums due by him to the Institute, board finds by a majority vote of the provided the person applying shall submit members present and entitled to vote that with his application for reinstatement the he has been convicted of a felony or other amount of dues and assessments which crime or misdemeanor involving moral would have been payable by him if he had turpitude. If in such a case the conviction not forefeited his membership, plus a shall be reversed by a higher court, such reinstatement fee of $5, the total amount member or associate may request reinstate payable in any case not to exceed $30. ment and such request shall be referred (c) No person shall be considered to have to the committee on professional ethics resigned while in good standing if at the which, after investigating all related cir time of his resignation he was in debt to the cumstances, shall report the matter to the Institute for dues or other obligations. A council with the committee’s recommenda member submitting his resignation after tion, whereupon the council sitting as a the beginning of the fiscal year, but before trial board may by a majority vote of the expiration of the time limit for payment members present and entitled to vote of dues or other obligation, may attain reinstate said member or associate. good standing by paying dues prorated according to the portion of the fiscal year ARTICLE VI which has elapsed, provided obligations other than dues shall have been paid in full. TRIALS AND PENALTIES (d) A member or an associate who has S e c t i o n 1. Any complaint preferred resigned or forefeited his membership may against a member or an associate under not file a new application for admission but section 4 of article V shall be submitted may apply for reinstatement under para to the committee on professional ethics. graphs (a) or (b) of this section. If, upon consideration of a complaint, it Sec. 4. A member or an associate renders appears to the committee that a prima- himself liable to expulsion or suspension by facie case is established showing a viola the council sitting as a trial board if tion of any by-law or rule of conduct of (a) he refuses or neglects to give effect the Institute or conduct discreditable to a to any decision of the Institute or of the public accountant, the committee on pro council, or fessional ethics shall report the matter to (b) he infringes any of these by-laws the executive committee, which shall or any of the rules of professional conduct summon the member or associate involved as approved by the council of the Institute, thereby to appear in answer at the next or regular or special meeting of the council. (c) he is declared by a court of com S e c . 2. If the committee on professional petent jurisdiction to have committed ethics shall dismiss any complaint preferred any fraud, or, against a member or an associate, or shall 200 American Institute of Accountants Yearbook fail to act thereon within ninety days after to forty-eight members in practice, not such complaint is presented to it in writing, more than six of whom shall be residents the member or associate preferring the of the same state: At each of the annual complaint may present the complaint in meetings in 1940 and 1941, nine members writing to the council. The council shall in practice shall be elected for a term of make such investigation of the matter as it three years or until their successors shall may deem necessary and shall either dis have been elected; thereafter, sixteen miss the complaint or refer it to the execu members in practice shall be elected at tive committee, which shall summon the each annual meeting for a term of three member or associate involved thereby to years or until their successors shall have appear in answer at the next regular or been elected; and special meeting of the council. (b) The following officers of the In Sec. 3. For the purpose of adjudicat stitute: a president, two vice presidents ing charges against members or associates (both vice presidents shall not be residents of the Institute as provided in the foregoing of one state), and a treasurer, all of whom sections, the council shall convene as a shall be members in practice and shall be trial board. Members of the committee on elected at the annual meeting for a term professional ethics shall not be entitled to of one year or until their successors shall vote as members of the trial board. The have been elected, and executive committee shall instruct the (c) All past presidents who are members secretary to send due notice to the parties of the Institute. concerned at least thirty days prior to the Sec. 2. The same person shall not hold proposed session. After hearing the evi the office of president for more than two dence presented by the committee on pro successive years. fessional ethics or other complainant and S e c . 3. The council shall elect a secretary by the defense, the trial board by a two- of the Institute who shall act as an execu thirds vote of the members present and tive officer under the direction of the coun entitled to vote may admonish or suspend cil. The secretary may be chosen from for a period of not more than two years the without the membership of the Institute, member or associate against whom com but he shall have the privilege of the floor plaint is made or by a three-fourths vote of at meetings of the Institute, the council the members present and entitled to vote and the executive committee. may expel the member or associate against S e c . 4. In the event of a vacancy o r whom complaint is made. A statement of vacancies occurring between meetings of the case and the decision of the trial board the Institute in the membership of the thereon, either with or without the name council or in any of the executive offices of the person involved, shall be prepared of the Institute, the council shall be em by the executive committee and published powered to elect a member or members in The Journal of Accountancy. to fill such vacancy or vacancies until the Sec. 4. At any time after the publication next annual meeting or until a successor in The Journal of Accountancy of a state or successors shall have been elected. ment of the case and decision of the trial Such election shall be by majority vote board thereon the council, sitting as a trial of the council and may take place at any board, members of the committee on pro regular or special meeting of the council fessional ethics not being entitled to vote, or, in lieu of a meeting, nominations may by a three-fourths vote of the members be called for by the president and the present and entitled to vote may re names of the nominees submitted to the call, rescind or modify such expulsion or members of council for election by mail suspension. ballot. Vacancies in the membership of the council shall be filled at the next an ARTICLE VII nual meeting by election by the Institute for the unexpired terms. COUNCIL AND OFFICERS Sec. 5. Except in the case of past S e c t io n 1. The governing body of the presidents the office of a member of council Institute shall be a council consisting of: shall be rendered vacant by his absence (a) Thirty-five members in practice, from four consecutive meetings of the to be increased by the following method council. By-laws 201 ARTICLE VIII delegate to the executive committee all functions of the council except the election D U TIE S OF COUNCIL AND OFFICERS of officers and members, the right to review S e c t io n 1. It shall be the duty of the the rules and regulations of the board of president or, in his absence, of one of examiners, discipline of members, filling a the vice presidents or other members of the vacancy in the executive committee and council designated by the council to preside the adoption or alteration of a budget. at all meetings of the Institute and of the council. The president shall call special ARTICLE IX meetings of the Institute or of the council when he deems it necessary, or when re COMMITTEES quested to do so by the executive com- S e c t io n 1. There shall be fifteen regular mittee, or upon the written request of at standing committees, namely: least one hundred members of the Institute for a meeting of the Institute, or of at E x e c u t iv e least five members of the council for a P rofessional E th ic s meeting of the council. Special meetings A c c o u n t in g P r o c e d u r e of the Institute or of the council shall be A u d it in g P r o c e d u r e held at places designated by the executive A r b it r a t io n committee. B u d g e t a n d F in a n c e The duties of the vice presidents and B y -l a w s the treasurer shall be those usually apper C r e d e n t ia l s taining to their respective offices. E d u c a t io n The secretary, in addition to performing F e d e r a l T a x a t io n the usual duties of his office, shall discharge M e e t in g s such other duties as may be assigned to him N o m in a t io n s by the council or by the executive com P u b l ic a t io n mittee. The secretary of the Institute shall St a t e L e g is l a t io n be the secretary of all committees. T e r m in o l o g y Sec. 2. I t shall be the duty of the council S e c . 2. (a) The executive committee to take control and management of all the shall consist of the president, two vice property of the Institute, to elect or ap presidents and the treasurer of the In point such agents or employees as may be stitute and seven other members of the necessary for the proper conduct of the council elected by the council. Four mem affairs of the Institute, to keep a record bers of the committee shall constitute a of its proceedings and to report to the quorum of the executive committee. Institute at each annual meeting. The (b) The committee on professional ethics council shall exercise all powers requisite shall be elected by the council and shall for the purposes of the Institute. consist of five members of the council not S e c . 3. The council shall adopt an annual members of the executive committee. budget showing the money appropriated (c) The committee on nominations shall for the purposes of the Institute and esti consist of seven members. Two members mating the revenue for the ensuing year. of the committee shall be elected by the No debts shall be contracted nor money council from its membership at the meeting expended otherwise than as provided in the of council prior to the annual meeting of the budget without the approval of a majority Institute or at any adjournment thereof. of the council. The council shall, at least Officers and other members of the council three months prior to the annual meeting whose terms expire within one year shall of the Institute, appoint certified public not be elected to the committee on nomi accountants to audit the accounts of the nations. The five remaining members of Institute and its affiliated organizations for the committee shall be elected by the the current fiscal year. The report of the Institute at the annual meeting and shall auditors shall be submitted to the mem be members in practice who are not officers bers of the Institute at the annual meeting or members of the council. The member of and shall be published for the information the nominating committee first named by of the membership. the council shall serve as temporary chair S e c . 4. The council may, in its discretion, man of the committee until the committee 202 American Institute of Accountants Yearbook itself, by mail vote or at a duly called ethics shall perform the duties set forth meeting, shall elect a permanent chairman. in section 1 of article VI and may advise (d) The committee on education shall anyone applying to it as to whether or consist of five members appointed by the not a submitted action or state of facts president for a term of three years, except warrants a complaint against a member that, of the members first appointed, one or an associate of the Institute, provided, shall serve for a term of one year, two for a however, that if the committee finds itself term of two years, and two for a term of unable to express an opinion, such inability three years. Appointments to fill vacancies shall not be construed as an endorsement occurring before the end of a term shall be of the action or state of facts. for the unexpired term only. Sec . 4. The committee on arbitration (e) All other standing committees shall shall sit as a committee in equity to in be appointed by the president. The presi vestigate and decide disputes between dent shall also have power in his discretion members or associates of the Institute or to constitute and appoint special commit others which shall, by agreement of the tees as occasion may arise. parties, be submitted to the committee in (f) Except as provided above, all com due form. If the decision of the commit mittees shall consist of a chairman and tee on arbitration in any dispute be re not less than two other members of the jected by any member or associate of the Institute and shall serve until the annual Institute, the matter shall be reported to meeting of the Institute next following the council, which may instruct the ex their election or appointment. ecutive committee to prefer charges against Sec . 3. The president of the Institute the offending member or associate if it shall shall be ex officio a member of all com decide, by a two-thirds vote of members mittees. present, but the recommendation of the Se c . 4. Except in the case of the ex committee on arbitration should have been ecutive committee a majority of each accepted. committee shall constitute a quorum for S ec. 5. The committee on credentials the transaction of business. All committees shall convene immediately after the an shall be subject to the call of their respec nual meeting of the Institute shall have tive chairmen, but, in lieu of a meeting of a been called to order and at any time dur committee, the chairman may submit any ing the meeting may register proxies sub question to the members of the committee mitted to it. Only proxies validated by this for vote by mail, and any action approved committee shall be entitled to vote. in writing by not less than two-thirds of Sec . 6. The committee on publication the whole committee shall be declared an shall supervise The Journal of Accountancy. act of the committee. ARTICLE XI ARTICLE X NOMINATION AND ELECTION OF OFFICERS DUTIES OF COMMITTEES AND MEMBERS OF COUNCIL
Section 1. The duties of the various Sectio n 1. (a) Nominations for officers committees shall be as described in this and members of the council shall be made article and, in addition, such other duties by the committee on nominations at least as are indicated by their respective titles. sixty days prior to the date of the annual Se c . 2. The executive committee shall meeting at which the elections are to take administer the affairs of the Institute, place. Notice of such nominations shall be supervise the finances and exercise such mailed by the secretary to all members at other powers as may be designated by the least thirty days prior to the annual council. It shall keep minutes of its pro meeting. ceedings and shall report fully to the Before making its nominations the council at each meeting thereof. committee on nominations shall send, at No payments except for duly authorized least four months prior to the date of the salaries shall be made by the treasurer annual meeting, to all the members of the without the approval of the executive Institute in those states from which, in committee. the opinion of the committee, members Sec . 3. The committee on professional should be elected to the council in that By-laws 203 year, a questionnaire requesting the sub Sec . 2. The board of examiners shall mission within thirty days of names of hold simultaneous examinations for can members resident in the state concerned didates either annually or semiannually, for election to the council. Nominees for as it may deem expedient at such places the council shall be selected by the com in different parts of the country as it may mittee on nominations from among the select, where candidates for admission names submitted in response to this request may conveniently attend. Such examina by members of the Institute in the states tions shall be oral or written or partly entitled to representation. oral and partly written, and by this method (b) Any ten members of the Institute or such other methods as may be adopted, may submit independent nominations, the board of examiners shall determine the provided that such nominations be filed preliminary education and training and the with the secretary at least twenty days technical qualifications of all candidates prior to the date of the annual meeting. for admission before the applications shall Notice of such independent nominations be submitted to the council. shall be mailed by the secretary to all Sec . 3. The board of examiners shall members at least ten days prior to the organize by the election of a chairman annual meeting. and shall formulate the necessary rules (c) Nominations for officers and mem and regulations for the conduct of its work, bers of council may be made from the but all such rules and regulations may be floor at the time of the annual meeting amended, suspended or revoked by the only by the consent of the majority of the council. The board may appoint duly members present in person. qualified examiners to prepare examination Se c . 2. Election of officers and members questions and to grade the papers of of council shall be by ballot. The president applicants. Each applicant shall pay an shall appoint a chairman and two tellers, examination fee, which shall be applied to who shall receive and count the ballots the payment of expenses incident to cast for each officer and member of council examinations. and shall announce the result to the pre siding officer. A majority of votes shall ARTICLE XIII elect. If there be no majority on the first MEETINGS ballot for any one or more officers or mem Section 1. There shall be a regular bers of council, additional ballots shall be meeting of the Institute during the period taken at once for the particular office or included within the months of Septem offices to which there shall have been no ber, October and November of each year election until an election be effected. on a date to be fixed by the executive Sec. 3. The members present at any committee. The fiscal year of the Institute election of officers and members of council, shall end with the 31st day of August of and eligible to vote in such election, may each year. direct the secretary to cast a ballot for any Sec. 2. Special meetings of the Insti nominee or nominees for such office or tute may be convened as provided in offices, and election by such ballot shall article VIII, section 1, at such places as be valid and effective. the executive committee shall designate. No business shall be transacted at such ARTICLE XII meetings other than that for which the meetings shall have been convened. EXAMINATIONS Sec . 3. Notice of each meeting of the Section 1. The examination of candi Institute, whether regular or special, dates for admission to the Institute shall shall be mailed to each member and asso be under the supervision of a board of ciate of the Institute, at his last-known examiners, which shall consist of nine address, at least thirty days prior to the members in practice, three of whom shall date of such meeting. be elected each year by the council, at its Sec . 4. In lieu of a special meeting, first meeting after the annual meeting of the Institute in meeting assembled may the Institute, to serve for a term of three direct, or the council by a majority vote years. may direct, that the president submit any 204 American Institute of Accountants Yearbook question to the entire membership for a territories of the United States of America vote by mail, and any action approved in and the District of Columbia to form an writing by not less than a majority of the advisory council of state society presidents. members of the Institute shall be declared The advisory council shall at all times by the president an act of the Institute consist of the state society presidents and shall be so recorded in its minutes. then holding office in their respective Mail ballots shall be valid and counted societies, but if a member of the advisory only if received within sixty days after council is unable to attend a meeting of date of mailing ballot forms from the the advisory council a member of his office of the Institute. society may be designated by the society S e c . 5. Regular meetings of council to represent him at the meeting. shall be held within three days prior to At least once in each year the Institute and two days subsequent to the annual shall convene the advisory council which meeting of the Institute, and in April or shall choose its own chairman and secre May, the dates of such meetings to be tary. A majority of the members of the fixed by the executive committee. advisory council shall constitute a quorum. S e c . 6. Special meetings of the council The advisory council shall consider may be called as provided in article VIII, matters submitted to it from time to time section 1, of these by-laws. by the council of the Institute and in its S e c . 7. Notice of each meeting of the discretion shall make recommendations to council except the meeting subsequent to the council of the Institute. A full report the date of the annual meeting of the of the transactions of the advisory council Institute, shall be sent to each member of shall be submitted to the membership of the council at his last-known address the Institute at the same time as committee twenty-one days before such meeting. reports. Such notice as far as practicable shall contain a statement of the business to be ARTICLE XV transacted. AMENDMENTS S e c . 8. A transcript of the minutes of The secretary shall embody in the call each meeting shall be forwarded to each for the annual meeting all proposals to member of the council within thirty days amend the by-laws prepared by the com after such meeting. mittee on by-laws for submission to such S e c . 9. In lieu of a special meeting of the meeting, and any other proposals to council the president may submit any amend the by-laws of which he shall have question to the council for vote by mail had notice in writing signed by thirty or and any action approved in writing by more members in good standing at least not less than two-thirds of the whole sixty days prior to the date of such meet membership of the council shall be de ing. All such proposals to amend the by clared by the president an act of the laws shall be presented for vote of the council and shall be recorded in the min members at the annual meeting, and by utes of the council. consent of the majority of the members S e c . 10. Fifty members of the Institute present in person other proposals to shall constitute a quorum for the transac amend the by-laws which are made by tion of any business duly presented at any members present in person at the meeting meeting of the Institute. Twenty members may be presented for vote of the members of the council shall constitute a quorum at any annual meeting. Any proposal to of the council. amend the by-laws, if approved by a two- S e c . 11. The rules of parliamentary thirds vote of the members present at such procedure contained in Robert’s Rules of meeting in person or by proxy, shall be Order shall govern all meetings of the submitted to all of the members of the Institute and of the council. Institute for a vote by mail, and if approved ARTICLE XIV in writing by a majority of the members of the Institute shall become effective as an ADVISORY COUNCIL amendment to the by-laws. Mail ballots The Institute shall invite presidents of shall be valid and counted only if received the recognized societies of certified public within sixty days after date of mailing accountants in the several states and ballot forms from the office of the Institute. RULES OF PROFESSIONAL CONDUCT
As revised January 10, 1944 (These rules of conduct supplement the (b) He fails to report any material disciplinary clauses of the by-laws.) misstatement known to him to ap pear in the financial statement; or (1) A firm or partnership, all the in (c) He is grossly negligent in the con dividual members of which are members duct of his examination or in making of the Institute (or in part members and his report thereon; or in part associates, provided all the mem (d) He fails to acquire sufficient infor bers of the firm are either members or mation to warrant expression of associates), may describe itself as “ Mem an opinion, or his exceptions are bers of the American Institute of Ac sufficiently material to negative the countants,” but a firm or partnership, not expression of an opinion; or all the individual members of which are (e) He fails to direct attention to any members of the Institute (or in part material departure from generally members and in part associates), or an accepted accounting principles or individual practicing under a style de to disclose any material omission noting a partnership when in fact there of generally accepted auditing pro be no partner or partners, or a corpora cedure applicable in the circum tion, or an individual or individuals prac stances. ticing under a style denoting a corporate (6) A member or an associate shall not organization shall not use the designa sign a report purporting to express his tion “ Members (or Associates) of the opinion as the result of examination of American Institute of Accountants.” financial statements unless they have (2) A member or an associate shall not been examined by him, a member or an allow any person to practice in his name employee of his firm, a member or an who is not in partnership with him or in associate of the Institute, a member of a his employ. similar association in a foreign country, (3) Commissions, brokerage or other or a certified public accountant of a state participation in the fees or profits of pro or territory of the United States or the fessional work shall not be allowed directly District of Columbia. or indirectly to the laity by a member or (7) A member or an associate shall not an associate. directly or indirectly solicit the clients or Commissions, brokerage or other par encroach upon the practice of another ticipation in the fees, charges or profits public accountant, but it is the right of of work recommended or turned over to any member or associate to give proper the laity as incident to services for clients service and advice to those asking such shall not be accepted directly or indirectly service or advice. by a member or an associate. (8) Direct or indirect offer of employ (4) A member or an associate shall not ment shall not be made by a member or engage in any business or occupation con an associate to an employee of another jointly with that of a public accountant, public accountant without first informing which is incompatible or inconsistent such accountant. This rule shall not be therewith. construed so as to inhibit negotiations (5) In expressing an opinion on rep with anyone who of his own initiative or resentations in financial statements which in response to public advertisement shall he has examined, a member or an associate apply to a member or an associate for shall be held guilty of an act discreditable employment. to the profession if: (9) Professional service shall not be (a) He fails to disclose a material fact rendered or offered for a fee which shall known to him which is not dis be contingent upon the findings or results closed in the financial statements of such service. This rule does not apply but disclosure of which is necessary to cases involving federal, state or other to make the financial statements not taxes, in which the findings are those of misleading; or the tax authorities and not those of the 205 206 American Institute of Accountants Yearbook accountant. Fees to be fixed by courts or ments of any enterprise financed in whole other public authorities, which are there or in part by public distribution of securi fore of an indeterminate amount at the ties, if he owns or is committed to acquire time when an engagement is undertaken, a financial interest in the enterprise which are not regarded as contingent fees within is substantial either in relation to its capital the meaning of this rule. or to his own personal fortune, or if a mem (10) A member or an associate shall ber of his immediate family owns or is com not advertise his professional attainments mitted to acquire a substantial interest in or services. The publication of what is the enterprise. A member or an associate technically known as a card is restricted shall not express his opinion on financial to an announcement of the name, title statements which are used as a basis of (member of American Institute of Ac credit if he owns or is committed to acquire countants, CPA, or other professional a financial interest in the enterprise which affiliation or designation), class of service, is substantial either in relation to its capital and address of the person or firm, issued or to his own personal fortune, or if a in connection with the announcement of member of his immediate family owns or is change of address or personnel of firm, and committed to acquire a substantial interest shall not exceed two columns in width and in the enterprise, unless in his report he three inches in depth if appearing in a discloses such interest. newspaper, and not exceed one-quarter (14) A member or an associate shall of a page if appearing in a magazine, not make a competitive bid for profes directory, or similar publication. sional engagements in any state, territory (11) A member or an associate shall or the District of Columbia, if such a bid not be an officer, director, stockholder, would constitute a violation of any rule representative or agent of any corporation of the recognized society of certified public engaged in the practice of public accounting accountants or the official board of account in any state or territory of the United ancy in that state, territory, or district. States or the District of Columbia. (15) A member or an associate of the (12) A member or an associate shall American Institute of Accountants en not permit his name to be used in con gaged simultaneously in the practice of junction with an estimate of earnings public accounting and in another occu contingent upon future transactions in a pation must in both capacities observe manner which may lead to the belief that the by-laws and rules of professional the member or associate vouches for the conduct of the Institute. accuracy of the forecast. (16) A member or an associate shall (13) A member or an associate shall not violate the confidential relationship not express his opinion on financial state between himself and his client. RULES OF THE BOARD OF EXAMINERS OF THE American Institute of Accountants
As A m ended F e bruary 20, 1937
OFFICERS society of certified public account The officers of the board shall be a chair ants. man, a secretary, and a treasurer. (b) For certified public accountants not members of a state society...... $10 MEETINGS EXAMINATIONS Meetings of the board shall be held upon Under the by-laws of the Institute, only the call of the chairman and shall be called certified public accountants may be admit by the chairman upon the written request ted to membership and the board will not of three members of the board. One week’s accept applications from persons who do notice of all meetings shall be given by the not possess C. P. A. certificates. No appli secretary, except that the annual meeting cant may be admitted who has not passed may be held at the place of the annual an examination in accounting and related meeting of the Institute on the day follow subjects satisfactory to the board of ing the adjournment of that meeting. Five examiners. members of the board shall constitute a Written examination shall be required of quorum for the transaction of business. all applicants except as noted in paragraphs SECRETARY (b) and (c) of this section. The secretary of the Institute shall be (a) WRITTEN EXAMINATIONS the secretary of the board. The secretary When written examination is required the shall keep a record of all applications re examination given shall be identical with ceived and also the records of the meetings that offered to state boards of accountancy and transactions of the board. He shall turn examiners which cooperate with the Insti over to the treasurer of the board all tute in the conduct of examinations. moneys received by him. Written examinations shall be conducted simultaneously in all places selected by the TREASURER board of examiners, during May and No The treasurer of the Institute shall be vember, the dates to be chosen at least the treasurer of the board. All moneys re ninety days in advance of each examination. ceived by the board shall be turned over to Due notice will be given to each applicant the treasurer. Disbursements shall not be of the time and place selected for holding made by the treasurer except upon the the examination. Failure to be present and approval of three members of the board. sit for examination at the time appointed will be sufficient cause for exclusion from OFFICE any session of the examination. The office of the Institute shall be the Examinations shall include questions in office of the board. (1) Accounting practice (Parts I and II), (2) Theory of Accounts, (3) Auditing and APPLICATIONS AND FEES (4) Commercial Law. The time required Applications will be considered only shall not exceed two and one-half days. when made on blanks which will be fur Answers may be written in pencil or nished by the secretary on request. Appli ink; however, credit will not be given for cation fees shall be as follows: solutions that are illegible. All supplies necessary to the examination will be fur (a) No application fee is required of a nished by the board, and after use, shall member in good standing of a state remain the property of the board. 207 208 American Institute of Accountants Yearbook Applicants who shall have passed the (c) ORAL EXAMINATIONS examination in two or more subjects (Accounting Practice, Parts I and II, Applicants of advanced age who have is considered a single subject), at one received certified public accountant certifi sitting, shall have the right, on payment of cates without examination but have had the required fees, to be re-examined, within long experience in public accounting, or a limited period, in the subject or subjects applicants who have passed written exam in which they have failed to receive passing inations for the certified public accountant grades. certificate, or applicants who have passed written examinations for membership in (b) CREDIT FOR OTHER recognized foreign societies as a result of EXAMINATIONS which they have later received certified The board in its discretion exercised in public accountant certificates, may be the case of any individual applicant for granted oral examinations in the discretion admission as member or associate, may of the board. recognize in lieu of its own examinations: Stenographic transcripts of oral examina tions shall be approved by a majority of 1. The passing of a certified public ac those present at a meeting of the board, countant examination of satisfactory before an applicant who has taken an oral standard given by a state or territory examination may be recommended to the of the United States or the District of council for election. Columbia. 2. The passing of a satisfactory examina GENERAL tion given by a recognized foreign body, on the basis of which a certified No applicant for admission to the Insti public accountant certificate has been tute shall be admitted to written or oral issued by any state or territory of the examination who shall not have first satis United States or the District of fied all other requirements of the by-laws Columbia. and these rules, except that in extraordi nary cases the board may permit applicants In cases such as the foregoing the appli to sit for examination without prejudice to cant may at the discretion of the board the board’s decisions on the applicant’s be interviewed personally by a member eligibility on other counts. of the Institute authorized to represent The board of examiners reserves to itself the board, who shall report to the board the right to reject the application of any his opinion of the applicant’s apparent applicant for admission as member or professional qualifications, personality and associate and shall not be required to state general desirability. the cause for any such rejection. Index
P a g e P a g e Advisory Council of State Society Presi Reports (Cont ’d) dents, Members of...... 14 Cooperation with Bar Association... . 59 American Institute of Accountants Annual Cooperation with Bureau of Economic Meetings...... 19 Research...... 62 American Institute of Accountants, Pro Cooperation with Credit M en.... 62, 156 ceedings of 1944 Annual Meeting...... 27 Cooperation with Other National American Institute Benevolent Fund, Inc., Accounting Organizations...... 157 Officers and Trustees...... 14 Cooperation with Securities and Ex American Institute of Accountants Foun change Commission...... 65 dation, Officers and Trustees...... 13 Cooperation with Stock Exchanges. . 158 Annual Awards—American Institute of Cooperatives...... 66, 158 Accountants...... 186 Coordination of State and National Association of Certified Public Accountant Organizations...... 66 Examiners, Meeting of October 16, 1944 30 Executive...... 36, 132 Association of Certified Public Accountant Federal Taxation...... 69, 161 Examiners, Officers...... 14 Subcommittee on Current Legisla Auditors...... 2 tion...... 70, 162 Board of Examiners, Members of...... 2 Subcommittee on Research.. . . 74, 164 Board of Examiners, Rules of...... 207 History...... 79 By-laws of the American Institute of Liability of Professional Men in Accountants...... 197 Government Service...... 166 Certificate of Change of Name...... 195 Meetings...... 169 Certificate of Incorporation...... 195 Membership...... 79, 167 Committees, Members of...... 2 Council, Members of...... 1 National Conference of Lawyers and National Conference of Lawyers and Certi Certified Public Accountants— fied Public Accountants...... 14 Report of Co-Chairman Represent ing American Institute of Account Officers, List of...... 1 Officers, Past...... 17 ants...... 183 Natural Business Year...... 81, 169 Reports Advisory Council of State Society Nominations...... 140 Presidents...... 190 Postwar Problems...... 96 American Institute Benevolent Fund, Professional Ethics...... 41, 140 Inc., Board of Trustees...... 189 Publication...... 8 1 , 170 American Institute of Accountants Public Information...... 84 Foundation, Board of Trustees...... 188 Public Utility Accounting...... 85, 172 Auditors...... 111 Refresher Courses for Returned Serv Board of Examiners...... 40, 136 ice Men...... 179 Committees Renegotiation of War Contracts.. 97, 181 Accounting and Statistical Reports by Selection of Personnel...... 174 Industry...... 91, 177 State Legislation...... 87, 175 Accounting Manpower...... 9 1 , 178 Technical Sessions...... 88, 177 Accounting Procedure...... 52, 150 Termination of War Contracts.. 101, 182 Accounting under State Highway Terminology...... 89 Construction Contracts...... 153 War Activities...... 9 1 , 177 Annual Awards...... 186 Council...... 126 Auditing Procedure...... 54, 155 President...... 107 Bankruptcy...... 56 Secretary...... 33, 108 Budget and Finance...... 46, 146 Rules of the Board of Examiners...... 207 By-laws...... 155 Rules of Professional Conduct...... 205 Cooperation with Bankers...... 156 State Boards of Accountancy, Members of 20
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