Constructive Auditing Services
by THOMAS B. HOGAN Partner, New York Office
Presented before the Iowa State Society of Certified
Public Accountants, Davenport, Iowa—May 1961
THE TRADITIONAL FUNCTION of the auditor has for many years been regarded as the verification and the interpretation of financial information.
This was the accountant's function as early as the medieval period. During the last half century, however, the auditor has become increasingly preoccupied with other functions. The introduction of the income tax statutes shortly after the turn of the century and the increasing complexity of both the federal and state income tax laws has required the auditor to spend a considerable part of his time and effort on tax matters. The introduction of various types of bookkeeping
machinery to handle accounting records—and I am here thinking not only of punch-card and electronic data-processing equipment but also of cash registers, bookkeeping machines, adding machines and so on—has also required the accountant to become something of what one of my partners has called a "hardware specialist." The enactment of renegotiation legislation by the federal government during both World War I and World War II has required the accountant to spend some part of his time on renegotiation matters and the complications of cost accounting. Within recent years we have seen grow up in our profession Management Advisory Services or Systems Services which have taken a considerable part of the time and effort of the Certified Public Accountant attempting to keep abreast of systems and procedures
relating to the accounting, financial, and production functions of his clients. This preoccupation with income tax matters, systems work, renegotiation work, and machine accounting has tended, I think, to dull somewhat our sense of what I believe to be our primary function
; that is, the interpretation for our clients of the financial information
that we have developed in the course of our audit.
I am not attempting here to downgrade the importance of these new functions. Certainly advising clients on tax matters, on systems work, on the use of modern accounting machinery, on the use of the techniques of renegotiation is an important part of our work, but what I am trying to do, really, is to re-emphasize what I think is one of the primary functions of the auditor.