Classification and appropriate certificates;

              4 HASKINS & SELLS July
Classification and Appropriate Certificates
THE IDEA of classifying accountancy
services originated some seven years ago.
A palpable need preceded the idea. The
need was for some device which would over­come
confusion. The results of confusion
were wasted time, unnecessary expense,
and annoyance.
The confusion arose from diversity in
technical concept, technical performance,
understanding, undertaking, and reference
in relation to professional engagements.
Those who contributed to the diversity
were principals who took engagements
from clients, supervisors who observed the
execution, in-charge accountants who
planned and gave instructions to assistants
concerning the work, and general execu­tives
charged with technical administration
of the organization as a whole.
The results of diversity were conflicting
opinions, uncertainty as to technical policy,
unwillingness to accept responsibility, un-evenness
in service and reports. Each prac­tice
office served its clients, according to
the best judgment of those responsible for
the office. Each accountant in charge of an
engagement did the best he could under the
circumstances, or as he was directed by his
superior. How widely the judgment and
direction differed is too sad a memory to be
recalled or recounted.
The correction of these conditions may
be attributed to a service classification. The
classification was conceived in theory. It
was born in trial on five thousand engage­ments
coming from all parts of the world
and from all lines of business, as they flowed
by a central point. Its practical usefulness
has been demonstrated by application in
some twenty-five thousand additional en­gagements.
Few changes have been re­quired
since the classification was first
prepared. Those were minor in character
and were made in the early years.
The organization now has a common lan­guage
relating to engagements. Those who
deal with engagements have only to learn
the language. The newest member of the
staff may learn in a short time as much
about the firm's policy concerning classes
and general specifications of work as the
oldest accountant or executive.
The person who takes an engagement
from a client, whether the person is a staff
accountant, or a partner; whether the client
is an individual, or an officer of a corpora­tion;
whether the location is New York, or
Shanghai, China, has a definite outline for
discussion, a helpful guide in considering
the client's needs, and a prescribed basis on
which to arrange the undertaking, once
the type of service desired is ascertained.
With this start, uniformity follows nat­urally.
The type of service is indicated by
number and name on the engagement mem­orandum.
Records are kept and statistics
are compiled accordingly. A basis is af­forded
on each engagement for checking
performance from executive offices, down
the line through practice offices to the field
where the engagement is in progress, and
back, in reverse order, to culmination in
reports. Technical administration is facili­tated.
Unnecessary discussion and corre­spondence
are eliminated. Order replaces
disorder. Every one has a standard for
guidance.
One particular advantage of service class­ification
has been the almost complete dis­appearance
of differences with clients con­cerning
the kind of service undertaken.
Clients understand now, apparently, that
the greater the limitations placed by them
on the scope and character of the work, the
less chance the auditor has of uncovering
irregularities, or discovering errors in prin­ciple
and practice. This may be attributed
to the fact that the classification is dis­cussed
with the client before he decides on
the service to be engaged. Thus, he is af­forded
an opportunity of understanding
the scope and limitations of the various