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Unless our Association takes strong ground along the foregoing lines it will fail to accomplish its avowed purpose of advancing the profession of accountancy in our country, and any success it may attain will be dwarfed by its failure in this important feature. The history of our conventions to date gives every evidence of the recognition of this duty and a determination on the part of the membership to perform it.

We must not only advocate such laws as will regulate the issue of certificates and the safeguarding of them, but we must seek to obtain such enactments as will make examinations and certificates by public accountants mandatory in audits of accounts of all municipalities, corporations, and other bodies involving the savings and capital of the public.

These examinations and reports should be made for the general stockholders or investors; results should be made as public as conditions will admit, and the accountants engaged must in no way be under the control or supervision of the officials whose. accounts are under examination. Such laws should not only provide for examinations, as described, but also for the severe punishment of the accountant found guilty of dereliction of duty-either by the issue of a false statement, failure to report conditions as found, or otherwise be a party to an attempt at misleading the public. Such laws will be supported by all individuals or corporations who desire to conform to correct methods and give "a square deal," and any opposition can be overcome by an intelligent appeal to public opinion. Then will cease such scandals as were disclosed in the insurance investigations; secret rebates by railroads will be impossible, and there will no longer be room for doubt as to the actual value of assets and liabilities as shown by statements issued by public utility and other corporations, seeking the financial support of the investing public.

When these conditions are brought about the public accountant will occupy the place in the world of affairs for which he should be qualified, if worthy of the possession of a certificate guarded in the manner described; he will also be an invaluable addition to the safeguards thrown around the financial institutions of the country. Confidence in the stability of corporations will be strengthened and panics practically eliminated, by the greater knowledge of conditions possessed by the public, and greater faith in the statements issued by those anxious to induce investment of capital.

The accountant must also interest himself in all educational movements by which the future public accountant may be thoroughly grounded in the theory of his intended profession, and otherwise educationally prepared prior to his entrance on the practical stage of his career. As occasion arises, the qualifications necessary to obtaining certificates must be increased and thus provision made for the still further inevitable progress of public accountancy.

"In unity there is strength," and, therefore, our Association should be invaluable as an aid in bringing about the reforms and improvements which we all have in mind, and which I have so feebly tried to picture. It must bend every energy to advance the standard of educational and other requirements of applicants for entrance to the ranks of professional accountancy; to assist in the enactment of C. P. A. laws in the various states where as yet no such laws exist; to punish severely all departures from the true ethics of the profession, advance public accountancy, educational institutions wherever existing, and advocate laws by which examinations by C. P. A.'s shall be obligatory on the part of all public utility and other corporations in which the average citizen is interested or in which he is invited to invest his savings or capital.

With the described qualifications, attributes and ideals, the public accountant is certain to attain and maintain a commanding position in the affairs of the world and receive recognition for his handiwork in the upbuilding and preservation of the public and private welfare of his country by so guiding and guarding business transactions as to force methods of high moral equity by a correct and just accounting as between men.

The Public Accountant and the Banker.

BY GEO. E. Roberts,

President Commercial National Bank, Chicago, Ill.

The Public Accountant and Banker are both outgrowths of our highly organized modern business life-and of that most characteristic phase of modern business life-the development of the use of credit. In no other respect are the advanced and enlightened countries so vitally distinguished from the backward countries as in the use of credit. Credit is not a substitute for capital, but it enormously multiplies the efficiency of capital by making it readily transferable and available. The value of a country's capital is redoubled over and over again through the instrumentality of credit. If you want to see a country with vast stores of capital, but most of it unproductive, look at India. The balance of trade with the rest of the world has been in favor of India for hundreds of years, and a steady stream of the precious metals has been flowing into the country to settle it. The stock of gold and silver in India is probably as great as the stock of those metals in the United States, but it is an idle stock in India, hoarded in temples or buried in the ground. If it were utilized as money is utilized in this country, gathered into banks, and made the basis of a system of credits, conditions in India would be revolutionized. Industries would spring up, factories would be built, railroad and irrigation works would be multiplied, employment would be given to all the people, wages would rise, famines would be at an end, and the masses of the people would be lifted from misery and degradation to the level of modern civilization. So far as benefits actually realized by her people are concerned, the vast quantity of products which India has exchanged for gold and silver in these hundreds of years might as well have been thrown into the sea.

With us the banker puts enough capital into his business to establish a credit of his own, and then undertakes the custody of the thousands of sums which other people have temporarily idle, and becomes a dealer in credit. Not only is this a great economy to the community in bringing into use the idle hoards, but the

efficiency of the stock of money is multiplied several times over. There is no question about the enormous benefits to society of this modern system of credits. Its benefits are not confined to bankers or borrowers, any more than the benefits of railroads are confined to the owners or actual shippers. They reach the humblest member of society. But it is apparent that the soundness of this system of credits, and the safety of all industry based upon it depends upon value being behind every credit. As said before, credit is not a substitute for capital, but a method of transferring capital. And as our cities grow, and banks grow and industries enlarge and multiply, the granting of credits becomes for the banker a constantly more difficult task. At least it is so for the banker who relies upon the information he can gather himself. In a small community, where everybody knows everybody, and all about what he has and where he borrows money and what he does with it, where credits are purely local, the banker can sweep the whole field from his office window. But in the city no such familiarity with the business of customers is possible. Even partners in the big concerns now-a-days may not have a very accurate knowledge of the state of their own business. Furthermore the country almost everywhere has outgrown purely local credits. In the most remote communities today the banks are buying outside paper. One of the most remarkable developments of the time is the extent to which deposits belonging to the farmers of the Mississippi valley are being loaned to the merchants and manufacturers of the whole country to do business on. Money is tight in the centers and easy in the agricultural districts and the borrowers have gone to the country market. There are some good features to this development and some doubtful ones. It goes without saying that it is good to have the capital of the country fully employed. In some countries they have the branch bank system and the head office transfers idle money from the branches where it accumulates to other branches where it can be used. In this country we have a system of independent local banks, and in the past it has been the general practice for these to send idle money to the centers on deposit, or perhaps to be loaned by the brokers there. Now the practice is growing among country banks of investing it in commercial paper. I am disposed to think it is a wholesome thing to broaden the money market, rather than to concentrate the funds in one city; and to have the

borrower go direct to the lender, provided he can go with proper credentials. There is some advantage to the banking business and to the general situation in having deposits and loans entirely independent of each other, so that when a loan is made it is made for no other reason than that it is a desirable loan, and when it comes due it is paid and the bank may re-invest as it sees fit. That phase of it is pretty nearly ideal.

On the other hand, unless the floating commercial paper is good and dependable it creates the most explosive situation we have ever had since the national banking system was organized. I don't know anybody with a more acute ear for trouble than our friend the country banker, and if in a crisis a cloud should be thrown over commercial paper as a class, by the failure of several prominent houses, I am apprehensive that the market for it might be paralyzed in a day, with very serious consequences to all who had become dependent upon it.

Now if this commercial paper feature is permanent, and I believe it is, we must have a regulator, and the best regulator I know is a system that will afford full information about the paper that is offered. We should know all about it, and the people who make it, and here is the work for the public accountant. No bank should take a single dollar's worth of paper unless the issuing firm is willing to furnish a satisfactory statement of its affairs, and as a rule this statement should be supported by an independent audit. The day has gone by for borrowers to be sensitive about showing up their affairs. It is not a disgrace in these days to borrow money. It used to be considered a sign of distress. For that reason the Church in early days forbade the taking of any interest. But in our time it is a common business transaction for profit. There is no reason why a business house within proper limits should not use hired capital. There is an economy and advantage to the community in having done so, for it keeps the capital of the community fully employed. But it should be an open straightforward transaction, in which all the conditions are fully understood by all parties. And that is what we are coming to in the future and the public accountant will be a means of bringing it about.

The use of the public accountant is another step towards the elimination of uncertainty and risk in business affairs. The whole tendency of business development is in that direction.

Every step

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