Revised S.E.C. rule on "accountants' certificates" (continued) ;

              Statements on Auditing Procedure
March 1941
No. 6
•
Issued by the
The Revised S.E.C. Rule on "Accountants' Certificates"
(Continued)
Committee on Auditing Procedure, American Institute of Accountants, 13 East 41st Street, New York, N. Y.
Copyright 1941 by American Institute of Accountants
THE COMMITTEE on auditing procedure recently issued a statement (Bulletin No. 5) in which it incorporated a modified short form of accountant's report or opinion which it understood would be accept-able to the Securities and Exchange Commission in the normal case for use in connection with financial statements filed with the Commission.
The committee also called attention to other changes in the Com-mission's revised rule on "accountants' certificates" which in special cases would have an effect upon the accountant's report. These are now dealt with in greater detail and, for convenience, the revised rule and the accompanying release of the Commission are appended herewith.
Under subsection (b) (i) "if with respect to significant items in the financial statements any auditing procedures generally recognized as normal have been omitted, a specific designation of such procedures and of the reasons for their omission" is required. The bulletin, "Ex-tensions of Auditing Procedure," issued by the American Institute of Accountants under date of October 18, 1939, stated that, if in the judgment of the auditor it was not practicable and reasonable in the circumstances of a given engagement to undertake the extended auditing procedures regarding inventory quantities and/or confirma-tion of receivables and he had satisfied himself by other methods re-garding those assets, no useful purpose would be served by requiring an explanation in the auditor's report. However, under the Com-mission's rule a specific designation of the procedures omitted is re-quired and also of the reasons for their omission. According to the Commission's release accompanying the rule "the designation of pro-cedures omitted would be confined to primary auditing requirements which have been recognized as normal auditing procedures as, for example, the circularization of receivables, and would not extend to detailed or mechanical steps." This may be regarded as defining the word "procedures" as used in the rule.
Subsection (b) (ii) of the role deals with conformity with "generally accepted auditing standards" and the release states that "in referring
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