Certifying and not;

              34 HASKINS & SELLS May
Certifying and Not
SURPRISE is sometimes expressed that
accountants give their approval and
certify to published statements, the form
of which is at variance with the generally
accepted ideas on that subject. Critics
have gone so far at times as to accuse ac­countants
of lending their names to state­ments
which literally were not true. Prob­ably
every practicing certified public ac­countant
has had the experience of attach­ing
his name to a statement that he would
have changed materially in form could he
have given expression to his own ideas in
an untrammeled manner.
A published financial statement of a
given corporation is a statement prepared
and issued by the corporation in question.
Hence, it should not be considered strange
if the financial or other officials of the cor­poration
seek, in preparing the statement,
to express in their own way the financial
affairs of the corporation. The accoun­tant
may approve it or not, as he sees fit.
Often the advice, suggestions, and guid­ance
of the accountants are sought in the
preparation of published statements.
Sometimes such aid is neither sought nor
accepted when offered, and what amounts
to an ultimatum is necessary to further
progress in the issuance of a statement
with certificate attached.
The policy of accountants generally,
however, is to accede to the wishes of
clients in matters of statement form as
long as the statement is not so constructed
as to be misleading. Whether a reserve
for depreciation is deducted from an asset
account or shown broad is a matter of
small concern if there is a reserve and it
is made to appear with proper description
on the balance sheet.
Accountants individually may have their
own notions on the subject of locating de­preciation
reserves and other equally moot
questions. Readers of statements may
have certain personal preferences, and
even deep convictions. Yet no one who
reads a balance sheet with the reserves
treated either way is justified in claiming
to have been misled about them if they
are adequately described.
There is no necessity for going to war,
so to speak, with a client who has ideas of
his own and wishes to express them in his
published statements if that procedure
does not obscure the facts or offer oppor­tunity
for anyone to be misled. There is
no reason for refusing to certify because
the form of statement may differ some­what
from the accountant's concept of the
ideal.
A statement is correct if it discloses the
facts. The order and manner in which the
facts are arranged are likely to have a
very decided bearing on the ease with
which the statement may be read and un­derstood.
If some one, in whose hands
the power rests, chooses to set forth the
facts in a statement so that they are not
as easily understood as they might have
been had they been arranged differently,
the good faith of the accountant need not
be questioned because he certifies to the
statement.
When an accountant permits an item of
importance to be classified as a current
asset, when there is no chance of its reali­zation
within a reasonably short time, he
is open to criticism on the ground of lend­ing
his approval to a misleading state­ment.
When an accountant winks at
sleight of hand manipulation at the close
of a fiscal period in order that readers of
the statements may be deceived by a con­dition
which changes with the dawn of the
day following, he is not faithful to the
trust which his title implies.
There are some cases, however, which
may be called border line cases. These
are cases where certain items do not fol­low
strict theory in their presentation in
statements. For example, the recovery of
taxes paid in prior years finds no good
accounting theory which will permit the
deduction thereof from tax expense of the
current year. Yet no one will be deceived