Importance of audits in public utility accounting;

              76 HASKINS & SELLS October
The Importance of Audits in Public Utility Accounting
By W. L . CHAFFEE, Manager, Atlanta Office
(A Paper Bead Before the Accounting Section of the National Electric Light Association, Southeastern Division, Atlanta,
Georgia, September 14, 1922.)
HISTORY of mankind records but one
person who was infallible. As far
back as the chronicles of civilization take
us there has been account-keeping of one
kind or another. Almost concurrently
runs a history of review of these account­ings
in quest presumably of errors. The
steward of biblical times was haled to ac­count
before his master. In later years
the hearers or auditors gathered to listen
to a recital by the account-keeper of his
financial operations and results. Review
was the underlying principle.
Modern organization with its magnitude
and complexity finds need for auditing
greater than ever before. The method
has changed but the principle remains the
same. Instead of a public hearing the
accountant of today presents his work for
review by disinterested parties who make
a profession of such practice and who re­port
the results of review to those who may
be interested therein.
In the early days of modern auditing
practice, consideration was given princi­pally
to the verification of bookkeeping
accuracy and satisfaction as to fiduciary
integrity. The handling and accounting
for funds was the subject of particular
attention. Errors of commission and
omission in entering and transferring
amounts on the record loomed large in the
eyes of the auditor as demanding his best
efforts at discovery. Much ado was made
of such errors when discovered. To appre­hend
a cashier unfaithful to his trust was
the height of ambition of many auditors.
The development and financing of in­dustry,
enlarged and involved financial
relations and the great problems which
they raise, have wrought marked changes
in the auditor's idea of what constitute
matters of importance requiring attention
and report. It would be erroneous to
give the impression that bookkeeping
matters and fiduciary integrity no longer
receive consideration during an audit.
They do in fact but they have been rele­gated
to a comparatively unimportant
place since more recently accounting as
a basis for administrative control and
judgment forming action has come to the
fore.
The auditor of today considers his most
useful function that of giving consideration
to the big things where large amounts or
financial responsibility may be involved,
rather than the matters of insignificance
which even if entirely wrong in principle
or treatment would not affect results.
What profiteth it the client if the auditor
bring to his attention a ten dollar error
in an invoice while overlooking entirely
contingent or actual liabilities which may
bring about financial ruin? Is the client
interested in knowing the technical pro-