Inventory certificates;

              ATLANTA
BALTIMORE
BIRMINGHAM
BOSTON
BUFFALO
CHICAGO
CINCINNATI
CLEVELAND
DALLAS
DENVER
DETROIT
KANSAS CITY
LOS ANGELES
MINNEAPOLIS
NEWARK
NEW ORLEANS
NEW YORK
PHILADELPHIA
PITTSBURGH
HASKINS & SELLS
CERTIFIED PUBLIC ACCOUNTANTS
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PORTLAND
PROVIDENCE
SAINT LOUIS
SALT LAKE CITY
SAN DIEGO
SAN FRANCISCO
SEATTLE
TULSA
WATERTOWN
BERLIN
LONDON
PARIS
SHANGHAI
HAVANA
MEXICO CITY
MONTREAL
VOL. VIII NEW YORK, FEBRUARY, 1925 No. 2
Inventory Certificates
THE moot question of whether there is
merit in taking inventory certificates
from clients may continue moot as an aca­demic
question, to eternity. The prac­tical
aspect of the matter calls for prompter
action on the question.
The practice of taking inventory certif­icates
is a contribution to procedure made
by our older and more experienced brethren,
the chartered accountants. Its use in this
country has been largely at the hands of
accountants whose background of pro­cedure
was laid in Great Britain. Amer­ican
accountants have been somewhat
backward in utilizing this protective ex­pedient,
on the theory that it has little
practical value. The strongest argument
against its use is found in the contention
that an unreliable company official who
would falsify or permit the falsification of
an inventory, would not hesitate to sign a
certificate in support thereof. Herein is
found a second moot question underlying
the major one at issue.
And there are other questions. Of what
value is an inventory certificate unless it is
signed by a responsible official? What
personal knowledge have the officials of
the company as to the detail facts of the
inventory? If it is the function of the
auditor to pass judgment on inventories,
why should he attempt to place the
responsibility therefor on company offi­cials?
General questions of this character may
not be answered without giving considera­tion
to the terms and conditions under
which inventories are reviewed by auditors.
Probably it is safe to assert that not more
than once in a hundred engagements does
the auditor have the opportunity of in­specting
quantities at the time the in­ventory
is taken. Too frequently the
size of the inventory and limitations of
time and expense imposed by the client do
not permit of more than a general testing
of inventory factors and results. It is be­yond
the bounds of possibility for the
auditor to satisfy himself that the inven­tory,
in its entirety, is the unencumbered
property of the client. While the auditor
is charged with possessing a reasonable
amount of general business knowledge, he
may not be expected to have all the
technical and trade information which
would enable him to pass on the question
of obsolete or not readily saleable mate­rials.
Any conscientious accountant who en­gages
in public practice must expect to