(13) Three months after the close of the fiscal year you are requested to audit a set of books to the end of the fiscal year. How do you ascertain if the cash called for by the books was actually on hand and in bank?

(14) A teller is found to be short in his cash. He has been in the position for a period of three years and has a daily record of cash on hand. His bond of suretyship antedates the discovery of the shortage by a period of six months, and it contains a clause that the surety shall not be liable for a shortage existing at the date the bond became effective. You are employed by the surety to ascertain if the shortage falls within the period of the bond.

What steps would you take?

Do you think that you would be successful?

(15) What is the objection to loose-leaf depositors' ledgers?

The following extract from the translation of Sir Walter of Henley's "Tretyce off Housebandry" (a manuscript work of the thirteenth century) is of considerable interest, as showing the remarkable similarity of the duties of the Auditor of the present day with those of the Auditor of seven hundred years ago:

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"Buy and sell in season through the inspection of a true man or two who can witness the business, for often it happens that those who render accounts increase the purchases and diminish the sales. Have an inspection of account, or cause it to be made by some one in whom you can trust, once a year, and final account at the end of the year. View of Account is made to know the state of things, as well as the issues, receipts, sales, purchases, and expenses, and for raising money. If there is any (money), let it be raised and taken from the hands of the servants. For it often happens that servants by themselves, or others, make merchandise with their lord's money to their own profit; and if arrears appear in the final account, let them be speedily raised, for often servants are debtors themselves, and make others debtors whom they ought not-and this they do to conceal their disloyalty. Those who have the goods of others in their keeping ought to keep well four things: to love their lord and respect him; as to making profit, they ought to look on the business as their own; as to outlays, they ought to think that the business is another's. But there are few servants who keep these four things altogether, as many take, right and left, where they judge that their disloyalty will not be perceived. Look into your affairs

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often, and cause them to be reviewed, for those who serve you will thereby avoid the more to do wrong, and will take pains to do better.

"In the first place, he who renders account ought to swear that he will render a lawful account, and faithfully account for what he has received of the goods of his lord, and that he will put nothing in his roll save what he has to his knowledge spent lawfully, and to his lord's profit. And the clerk shall swear that he has lawfully entered in his roll what he understands his master has received of the lord's goods, and has entered nothing in the roll but what he understands may be to the profit of the lord. And then, if he has rendered account before, see how it compares; and if he is found in arrears of money, corn, or stock, put the whole in a stated money valuation, and charge it at the commencement of his roll, also charge it with receipts of rents and many other things.

"At the end of the year, when all the accounts shall have been rendered of the lands, the issues, and all expenses of the manor, take to yourself all the rolls, and by one or two of the most intimate and faithful men you have, make very careful comparison with the rolls of the accounts rendered, and of the rolls of the estimate of corn and stock, and according as they agree you shall see the industry or negligence of your servants and bailiffs.

The lord of the manor ought to command and ordain that the accounts be heard every year, not in one place, but on all the manors, for so can one quickly know everything, and understand the profit and loss. The lord ought to command the Auditors on the manors to hear the plaints and wrongs of everybody who complains of the steward or others, that full justice be done, and that the Auditors do right at their peril.

"The Auditors ought to be faithful and prudent, knowing their business, and all the points and articles of the account in rents, outlays, and returns of stock. And the accounts

ought to be heard at each manor, to know the profit and loss, and then can the Auditors take inquest of the doings which are doubtful, and hear the plaints of each plaintiff and make the fines. The steward ought to be joined with the Auditors, not as head or companion of the account, but as sub-ordinate, for he must answer to the Auditors on the account for his doings, just as another. It is not necessary so to speak to the Auditors about making audits, for they ought to be so prudent, and so faithful, and so knowing in their business, that they have no need of others' teaching about things connected with the accounts."

APPENDIX G.

CORPORATION TAX LAW.

Text of the law, criticism thereof from an accounting standpoint, and suggestions for making the returns required from corporations.

With the exception of the period from 1817 to 1842, Great Britain has taxed incomes for over a century, the need of funds caused by the Napoleonic wars being the occasion of the first income tax law, which was enacted in 1798. The law in force at the present time was passed in 1853, having been modified in some particulars by amendments at different times since.

In the United States an income tax was proposed in 1812 as a means of raising revenue for the prosecution of the war with Great Britain, but it found no favor with Congress, and the act was never passed. In 1861, however, at the time of the Civil War, a law taxing incomes was enacted, such taxation continuing until 1872, when it was discontinued.

In 1894 there was passed by Congress, as a part of the Wilson tariff bill, a law levying a tax of two per cent. on incomes in excess of $4,000. This act was declared unconstitutional by the Supreme Court as being in conflict with clause 4 of Article I, Section IX of the Federal constitution, which reads:

"No capitation or other direct tax shall be laid, unless in proportion to the census or enumeration hereinbefore directed to be taken."