The Journal of Accountancy Published Monthly under the auspices of the Vol. 6 JULY, 1908 No. 3 Accountancy Training for Lawyers. BY HAROLD DUDLEY GREELEY. At the very beginning of his practice, even when his law school training is strongest in its influence, the young lawyer becomes aware of deficiencies in his equipment. One of these is practically certain to be that of a knowledge of business. This may be discovered when the client seeks advice as to the terms of a contract of employment as manager, in which compensation is to be based on earnings after proper provision for depreciation; or it may be manifested in Supplementary Proceedings when a Judgment Debtor announces triumphantly, "I haven't a cent!" and throws his books of account on counsel's table to prove it. Some time, some way, this lack will surely reveal itself. Specialization, the order of the day, is fast making impossible the lawyer of yesterday. No longer can the aspirant at the bar dip bee-like into the numerous fields of activity; he must concentrate. Is there then no way by which he can acquire the rounding out of the old school training in the matter of business knowledge? Certainly there is none in his entering any particular business. Granted the feasibility of such course, the limited. information acquired would fall far below the broad gauge requirement. It is suggested that practice for a year or two as a junior public accountant affords the best means for supplying this particular want. Because of the widespread ignorance among lawyers of the work of the accountant, and because of their gen eral tendency to regard him as a mere bookkeeper, some elaboration of this idea is imperative. What is here understood by a knowledge of business is not a knowledge of economics, trade conditions or financial situations; for such knowledge, however essential to the jurist of riper years, is not a sine qua non to the young lawyer. The business knowledge which he requires is intelligence as to the common varied businesses actually conducted in his day and world, familiarity with their organization and administration. That this intelligence and familiarity can be acquired from experience in accountancy would be evident were it not for that general lack of information to which reference has already been made. The work of the accountant is of two kinds, auditing and systematizing. Systematizing a business is advanced work, and in the present purpose it plays no part, since ability to install a system can scarcely be developed in the time likely to be spent in accountancy as a training school. Auditing is the examination of the books and records of a business that its condition may be exactly ascertained. Incidentally it discloses any trust relations existing therein, and in consequence its function is frequently extended to include a work which logically might be left to the proprietor, namely, that of determining by a verification of the assets and liabilities disclosed by the accounts whether or not these trust relations have been sustained or violated. This extra duty varies in importance from the counting of cash at a hotel cigar stand to the examination of securities held by a mammoth trust company. The books and records of a business constitute its autobiography. If it is a corporation, its birth is recorded in the minute book and in the journal entry digesting its certificate of incorporation; if a partnership or the business of a sole proprietor, in the entry condensing the articles of co-partnership or the investment of the sole proprietor. The records show in exact detail every breath of life which the business draws, and the purpose of the audit is to determine whether or not this autobiography reveals the truth, all of it, and nothing else. It would not be worth while, even if there were opportunity, to describe the technical means whereby this determination is reached. A generalization of the work will suffice. The accountant is required to do a great deal more than to test the arithmetical execution of the books and records. In order to see that they fairly reflect the situation, he must familiarize himself with the purpose, financing and organization of the business; with the officers, their work, efficiency and compensation; with the clerical staff and the labor employed, their work, efficiency and compensation; with the financial policy of the business; with the operation of the business; and finally with the result of it all-whether or not there has been a profit. When this has been fairly done, the accountant is in a position to comply with the last requirement; that of suggesting new policies, financial and operative, which may increase the net worth of the business. Now this searching thoroughness in examination is the result of no new resolution of a young profession struggling for recognition. A quarter of a century ago it was required, we find, according to the Report of the Secretary of the United States Treasury for 1884, at page 164, where the Comptroller of the Currency outlines his instructions to national bank examiners: "This official inquiry into the affairs of a national bank does not end with the mere inspection of the cash, bills receivable, books and accounts of the association, but the examiners are instructed to closely scrutinize the business of the bank, to investigate the standing and fitness for their positions of the persons to whom the management of the affairs of the association are intrusted, and the manner in which the business is usually conducted, whether prudently or otherwise; to ascertain as far as possible the character of the loans and discounts of the bank, and what losses, if any, have been or are likely to be sustained. The examiner is also instructed to ascertain how frequently the board of directors meet together to consult in relation to the affairs of the bank, and to discover if possible any malfeasance in office or willful neglect of business on the part of the management.' This method of auditing necessarily makes the accountant master of the outlines of the business and a single audit is of great value to the young accountant, inasmuch as the same general scheme of operation is found in all businesses. But he gets much more than this in the great range of businesses examined. It is not unusual for an accountant on the staff of a large firm to be engaged upon a dozen audits in as many weeks, comprising, perhaps, the businesses of a retail shoe store, a railroad company, a hospital, a brokerage house, a manufacturing plant, a life insurance company, a newspaper office, a city government, a hotel, a church, a bank and a club. Thus his experience covers practically the entire field of modern business. It may be urged that the young accountant will not be used upon such a variety of engagements and that his work on any particular one will be the detail grind of proving figures and examining vouchers. The answer is by way of confession and avoidance, affirmatively being that when he has demonstrated his ability to put work behind him accurately and quickly he will get as wide a range of assignments as the senior-since almost every audit requires an assistant-and also that by careful examination of the papers and tactful questioning of the man in charge he can gain a really comprehensive notion of the ground covered. A result of this experience of even more value to the man who intends to return to the practice of law is the acquisition of business sense. Business sense may be said to consist of habits of thought and methods of execution found more often in the business man than in his professional brother. In this consideration of it, those characteristics equally developed in both necessarily are not discussed. Of these habits of thought, by far the most useful is that of seeking instinctively the other man's point of view. Once upon a time, a half-witted fellow found in a wayside pasture a lost horse for which the wiser townsmen had searched in vain. Being pressed for an explanation, he said, "Well, I just thought where I'd go if I was a horse, and I went there and he had." The value to the lawyer of this kind of thinking is apparent. In briefing, the number of hours that are saved by discovering the key to the digest and the index is astonishing; throughout the entire practice, the divination of the next move by the other side or by the court is a master stroke. Now the junior accountant works in three relations, each of which requires the constant exercise of this faculty. First, in relation to the man whose work he is examining, his initial inquiry is why did he do the thing in this way? This question unanswered, the books and records are a jumble of meaningless figures. Further in this connection, the auditor's second inquiry is, how could the man conceal fraud under this method of bookkeeping? The more complete the mastery of the examined's point of view, the more clearly are the possible ways revealed and the fewer are the chances of any escaping detection. Then, in the junior's relation to his senior, he must get the latter's view point in order to understand instructions. Instructions are given in the heat of the moment, tersely, usually brusquely, and the consequences of not "getting" the man in charge are disastrous on work of any magnitude. The senior is forced to rely on his juniors to prepare the figures which are finally to be put together, and time is never more of the essence than in the assembling of results. Can a man serve two masters? Here is a man whose very livelihood depends upon his ability to serve a dozen. Lastly, the junior has always to bear in mind the fact that some other accountant is to follow him. This necessitates his anticipating the point of view of the subsequent worker by keeping his working papers in such shape that, dropped at any moment, they would be intelligible to his successor. But the accountant's work on the whole is from the view point of no interested party. Unlike the lawyer he makes no case. His mission is to discover and disclose facts and only facts; not to draw inferences from them in support of one or another side of a controversy. Even when he is engaged by a lawyer to conduct a specific investigation in preparation for specific litigation, his work is completed when he reports the situation as he finds it. Thus is acquired the invaluable asset of the judicial attitude. From this independence of position comes increased responsibility. The advocate's word we assume to be tinctured with partisanship; the quasi-judicial certificate of the accountant is taken as free from it. The former we realize to be the work of a mind trained to equivocate and hence we subject it to great tests before placing our dependence upon it; the latter we take at its fair import and to that standard we hold the accountant professionally bound, regardless of his legal liability upon his certificate. Consequently there is bred in the accountant a feeling of responsibility for his work that may well be emulated by the lawyer. In the trial of a case alertness is a potent factor and the preparation is conducted to enable counsel to exercise it. In the conduct of an audit it is no less important, but there can be no preparation. The auditor goes alone and single handed to compete against the Goliath of detail mastery. Alertness must be exercised at every turn, for somewhere in that complexity of accounts, perhaps buried in "General Administration Expenses," there may be concealed facts which it is the business of the |