Report of the Committee on Professional Ethics.

The Committee on Professional Ethics have the honor to report that during the year now closing, references to them for consideration have been four in number, one of which was in the form of a request for a ruling upon a delicate situation in which a member of the Association had become involved, and the other three were in the nature of protests against the business methods of certain members as being in violation or subversive of the well-known rules of ethical conduct and comity between professional brethren.

Rather for the purpose of giving members a general idea of the beneficial character of the work of this committee and obtaining full consideration for their recommendations, than from any desire to dwell unduly upon details that have already been judicially considered, we submit herewith an abstract from our files:

DOCKET I. This committee is of the opinion that a method of doing a professional business, where the public is not informed as to the distinction between a firm itself and an incorporated audit company, is ethically, legally and practically wrong; is contrary to the spirit of this Association, and should be condemned.

.DOCKET 2. A member of an affiliated society became involved in a controversy with a Public School Board as to their demand for the modification of a report which in its terms of criticism was severe and apt to draw censure upon the Board from the community. This committee advised as follows:

"An auditor of public bodies and institutions owes his first duties to the public as tax-payers.

"The form of the modified report was correct, as a practitioner should weigh the effect of elaboration and criticism in his report upon the mind of the public, who cannot construe such circumstances as an expert or financier would. It is no part of an auditor's duty to dwell unduly upon conditions which are in the custody of trustees of average intelligence. On the other hand, it is a fundamental rule of professional ethics that the client should never be permitted to dictate or alter a report.

"An auditor at each recurring service must draw proper attention to the conditions that deserve notice, regardless of prior statements.

"It is the duty of the auditor to concern himself with the adequacy or otherwise, of any feature of the conditions embraced within the scope of the audit, physical, financial or technical."

DOCKET 3. A firm of accountants who are members of a constituent society solicit patronage by form-letter correspondence, the text of which was undignified and a parody on another profession. This committee reported, agreeing with the complainant, that this form of solicitation not only was unprofessional and wanting in regard for the dignity that is expected from members of this Association, but the direct effect upon the recipient of such letters is most harmful to the profession at large.

DOCKET 4. A member of a firm of public accountants, and a memberat-large of this Association, is complained of as using miscellaneous_and unofficial initials after his name on the printed matter of his office. This is only one instance of a pernicious practice which is far too general. It tends to belittle and, in fact, ridicule the statutory degree of Certified Public Accountant, and it does not require a great stretch of the imagination to see that eventually the business public will treat all such conceits, including the form that is officially recognized, as no more than farcical and leaning to buffoonery. This committee has, therefore, recommended that the Committee on By-Laws establish a rule dealing with this important matter. Respectfully submitted,

(Signed),

JNO. A. COOPER, Chairman,
WILLIAM A. LYBRAND,
EDWARD L. SUFFERN.

The reading of the report of the Committee on Conciliation developed considerable discussion. That portion dealing with the lamentable rivalry in California and Minnesota, in both of which States there are two accountant societies, one of which in each State is a member of this Association, was withdrawn and referred to the new Board of Trustees for their prompt action. The remainder of the report which was approved is as follows:

Report of the Committee on Conciliation.

Your Conciliation Committee begs to report as follows:

During the past year differences existing between rival societies of public accountants in California and Minnesota have been referred by the Executive Committee to the Conciliation Committee for adjustment, and, if possible, settlement.

The services of this Committee have been tendered to each of the two societies in the States named, but we regret to report that, up to this time, we have been unsuccessful in harmonizing such differences.

Your Committee begs to recommend an amendment to the present Constitution and By-Laws providing for compulsory arbitration of such differences as now exist in California and Minnesota, and in the event of the non-acceptance of the findings of such "Arbitration Committee," the forfeiture of membership in The American Association of Public Accountants, but providing for an appeal (to the Board of Trustees, or to the delegates present at any annual meeting) from the decision of such "Arbitration Committee."

There are at the present time one or more "Members-at-large" who are also members of the junior societies in both California and Minnesota; this fact should justify The American Association in insisting upon a settlement of any and all differences, such settlement being based upon an investigation of and report upon all facts connected with each case, by a fair minded and impartial committee.

Respectfully submitted,

J. S. M. GOODLOE, ERNEST RECKITT, ALLEN M. SMART, Committee on Conciliation.

The following reports were received and approved:

Report of Committee Annual Meeting, 1907.

TO THE BOARD OF TRUSTEES OF THE AMERICAN ASSOCIATION OF PUBLIC ACCOUNTANTS.

Gentlemen:-We are pleased to submit herewith program of the 20th Annual Meeting, which is being held in St. Paul, Minnesota, October 15, 16, 17, 1907.

In arranging this program, we have endeavored to follow the suggestions outlined in President Sells' 1906 inaugural address, and the subjects "Professional Ethics" and "Education" have been given every prominence.

The paper on "Professional Ethics," by Mr. J. E. Sterrett, of Philadelphia, is a masterpiece, and will be a reference and guide to the profession for many years to come.

Sincere thanks from the Association are due to Mr. Sterrett for his interest and kindness in thus contributing to our pleasure at this meeting. The Universities of New York, Pennsylvania. Illinois, Wisconsin,

Nebraska and Minnesota have, at our request, sent special representatives to this meeting, and will cooperate with us in all matters of education, as the same may relate to the profession of accountancy.

Among the special features that have been arranged, prominence may be given the interest manifested by the Consolidated Publicity Bureau of St. Paul, and under its guidance, every city of importance in the United States will be advised of our deliberations, and we owe a debt of gratitude to Mr. Curtis L. Mosher, its manager, for his energy and zeal in contributing to our educational features.

Attention is directed to the banner of The American Association of Public Accountants, which makes its first bow at this our 20th Annual Meeting. We recommend that an engrossed memorial of thanks is due to the St. Paul Commercial Club for the courtesies they have extended our Association, in permitting us the use of their beautiful parlors for the purposes of our Annual Meeting.

The entertainment features provided, with the exception of the Annual Banquet, are on the initiative of the Minnesota Society of Public Accountants, who have been ably aided and assisted by a special committee from the St. Paul Commercial Club and other Civic organizations.

The Banquet, which is the official entertainment of the American Association, will be held at the Hotel Aberdeen, and it is believed that the program provided will be found interesting and instructive, as the subjects to be treated are timely and important to the future of the profession of accountancy.

Invitations have been issued to the various Canadian Societies of Chartered Accountants, and acceptances have been received from the Dominion Association of Chartered Accountants, and for the first time we will have the pleasure of greeting representatives from the Manitoba Institute of Chartered Accountants, which is representative of accountancy in Western Canada, and from the nature of replies received to our Announcements, from our own members, it is believed that we will greet many new faces, and miss many who have heretofore been prominent in our councils.

Attention is directed to the length of our program, and it is urged that formal matters of our Association be handled with promptness and despatch, as we have at this meeting an array of papers and discussions worthy of the studious attention of every Public Accountant.

Respectfully submitted,

HERBERT M. TEMPLE,
J. PORTER JOPLIN,
HAROLD R. HAYDEN,
Committee 1907 Annual Meeting.

Report of the Committee upon Standard Schedules for Municipal Industries

and Public Service Corporations.

Your committee desires to report that it has held but one meeting since its last report to the Board of Trustees, at New York, on April 16, 1907.

Your committee is able to report progress in various practical directions, and can point to the acceptance of the principles of the tentative schedules, submitted in its last year's report, by a number of important public service corporations and by various Bureaus and Commissions controlling municipal industries, etc.

The committee, therefore, desires to express itself as having been much gratified by the interest awakened during the past year in the subject under its supervision, and would suggest that this committee be discharged with the further suggestion that as future questions arise, or requests be

received by the Association, with respect to uniform accounts for public service corporations, that special committees be appointed from time to time to deal with such questions.

Very respectfully,

HARVEY S. CHASE, Chairman.
E. W. SELLS,

H. W. WILMOT,

L. H. CONANT,

ROBERT H. MONTGOMERY,

H. BOWMAN.

Report of Committee on Department Methods of the Government.

Your Committee on Department Methods begs to report that during the past year it has cooperated with the Government's Committee on Department Methods, which was appointed by the President, and it has given considerable time and thought in reviewing the reports of the assistant committees of the Government's Committee.

Since its last report your committee has held frequent meetings in New York, a special meeting was held in Washington, and several days were spent in New York conferring with the Special Committee on Treasury Bookkeeping.

At the suggestion of your committee, as noted in a former report, a number of assistant committees were appointed by the Government's Committee. The work of making investigations and suggestions regarding the details were assigned to these assistant committees, and your committee has acted in an advisory capacity.

Reports were made by your committee, and its recommendations were adopted and included in the reports to the President of the Government's Committee. The secretaries of their respective departments have issued orders to carry these recommendations into effect.

In addition to reviewing many reports of the assistant committees on accounting methods, your committee has examined a number of reports relating to general business and office practice.

The subjects reported on by your committee which are of the most interest to the accounting profession are as follows:

First, Cost keeping in the Government service.

Second, Auditing disbursing officers' accounts by check vouchers.
Third, Treasury bookkeeping.

The results obtained from the above may be summarized as follows: First, it was recommended in the report on cost keeping that all the departments of the Government should devise proper systems of cost keeping, similar to those kept by industrial concerns generally, and particularly those branches of the service in which manufacturing is done. The secretaries of several of the departments, and a number of the Government offices are investigating and installing cost systems.

Your committee also revised a pamphlet written by the assistant committee, called "Primer on Cost Keeping," in which some of the general principles of cost keeping are set forth.

None of these committees submitted any cost systems in detail, because of the time it would take to devise such systems for the numerous kinds of business conducted by the Government.

The report to the President by the Committee on Department Methods on Cost Keeping in the Government Service is dated December 29, 1906, and the "Primer on Cost Keeping" referred to above is included and made a part of this report.

Second, the practice of reqjuiring public creditors to receipt for moneys in advance of actual payment, will be discontinued after September 30, 1907. The disbursing officers' checks will, thereafter, be accepted as the receipts or vouchers for the payments; and instead of auditing the disbursing officers' accounts with receipts obtained in advance of payments, they

will be audited with the paid voucher checks of the disbursing officers. This is fully set forth in the report, dated January 9, 1907, made to the President by the Committee on Department Methods on Assembling Disbursing Officers' Checks and Vouchers and the Verification of Disbursing Officers' Balances." Treasury Department Circular No. 52, dated July 29, 1907, signed by the Comptroller of the Treasury, and approved by the Secretary of the Treasury, has been issued to carry these recommendations into effect.

Third, under date of July 1, 1907, the bookkeeping of the Treasury Department was changed from what is commonly known as the single entry plan to what is termed the double entry plan. This is the most important change, and your committee gave considerable time and thought to the general plan and accounts with which the double entry books would be opened.

The methods of the Treasury Department were first thoroughly examined by the Special Committee on Treasury Bookkeeping, and that committee made a report, in which the system in use was outlined and changes were recommended.

This report was reviewed by your committee at conference held both in New York and Washington, and the report, dated January 19, 1907, to the President of the Committee on Department Methods on Treasury Bookkeeping was the result of these conferences. It was therein recommended that the double entry or balance system of keeping accounts be installed in the Division of Bookkeeping and Warrants of the Treasury Department.

In this report your committee offered, in the event of the adoption of the double entry system, to give consideration to the details necessary for the outlining of the system, and for its installation. The Honorable Leslie M. Shaw, Secretary of the Treasury, when the report was made, gave general orders that the double entry system of bookkeeping be adopted, and the members of the Special Committee on Treasury Bookkeeping were instructed to prepare the necessary forms for the installation of the double entry system to take effect on July 1, 1907.

This was, of course, a large task, and the Special Committee immediately went to work, and by an order of the Secretary of the Treasury that committee was directed to come to New York to confer with your committee. Following out this order, conferences were held in New York lasting several days during March, and the general plan, accounts and books were determined upon. The Special Committee was to carry out these suggestions and a further report, giving in detail the outline of the system, the classification of accounts and copies of the proposed forms, was to be submitted to your committee.

This plan of submitting the details was not, however, done in advance of having the books and forms printed, the Special Committee giving as a reason that there was not sufficient time to have these reports passed on, if the books were to be printed and ready by July 1st, the date when the new system was to be installed.

In this way the Special Committee relieved your committee of passing on the details, though during June it did submit a classification of accounts and copies of forms. Inasmuch as it was then too late to make changes, it was deemed best that your committee should not report on these details. Treasury Department_Cicular No. 38, dated June 17, 1907, signed by the Comptroller of the Treasury, and approved by the Secretary of the Treasury, has been issued for the installation of the double entry system of bookkeeping in the Division of Bookkeeping and Warrants.

It will be noted from the above that while there is considerable that should be done toward improving the accounting methods of the Government, several important steps have been taken during the past year; and it is to be hoped that the officials of the Government will continue to work in this direction.