Bank confirmations;

              22 HASKINS & SELLS March
Bank Confirmations
AMONG the oldest of many devices
employed by public accountants as a
means of obtaining independent verifica­tion
of facts and figures is that of writing
to banks for confirmation of balances.
The measure is based on the theory that
the information over the signature of a
bank official is more reliable than that
obtained from a pass book or monthly
statement. It puts the responsibility for
the certification on some official rather than
on a clerk or bookkeeper. It provides the
accountant with evidence which he may
file away with his working papers in sup­port
of his cash figures.
An outline of the historical development
of the present day form would probably
show that so effective was the original
device in confirming the balance itself, that
other matters, such as interest on balances
and indebtednesses on indorsements, were
added.
The cooperation of the bankers in these
matters has been splendid. In the face of
an ever increasing flood of requests they
have generally responded promptly and
gladly. They have hesitated only with
regard to interest, particularly when the
request covered interest for a long period
rather than the last interest credited.
Because of irregularities effected through
the manipulation of interest, the wording of
requests to banks has from time to time
been made more specific and the corres­ponding
demands upon banks who comply
more exacting.
Having in mind the irritation which
such procedure may cause to bankers, we
have decided to abandon the practice of
asking for confirmations of interest except
where the circumstances surrounding a
particular case denote the necessity of so
doing.
In the reprinting of Form 128, the lines
now reading "The last interest credit or
payment prior to was $
on " will be omitted and in the
meantime ruled out on old forms. It will
then be incumbent upon everyone who has
occasion to audit cash to exercise thor­oughness
with regard to interest on bank
balances in seeing, where the daily balance
is of sufficient size to carry interest, that
such interest is included in the accounts.
The accountant is on notice to look for
interest on bank balances. He is not ex­pected
to calculate and verify the amount
of the interest, but he should be able to
get a general line on the amount of the
interest by a glance at the balances carried.
It is the rule rather than the exception that
interest is credited on daily balances. The
minimum amount which must be kept on
deposit varies in different localities, but in
many instances is fixed at a thousand
dollars. If the accountant finds no interest
credited he is charged with the duty of
making inquiry. Depending upon the
result he may or may not be led on to in­vestigation.
Large daily balances create
the presumption of interest. The absence
of any interest credit, or marked fluctua­tions
in the amounts of credits, call for
investigation which naturally leads to the
bank. Such are some of the circumstances
surrounding a particular case which may
call for an inquiry addressed to a bank.
There have been cases in the experience
of the firm where a request to a bank for
confirmation of interest credited would not
have resulted in a satisfactory reply had
the request met with answer to the ques­tion
as stated literally, for the reason that
the banks in question either through
regular practice or in accordance with
specific arrangement paid the interest by
means of a bank check instead of crediting
the depositors' accounts. In some of these
instances, irregularities occurred through
employes of clients who collected the in-