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has put himself on record as being opposed to advertising by individual firms. This letter, it seems to me, is advertising of the most undignified and unprofessional kind. That such methods are adopted by quack doctors and peripatetic clairvoyants is not surprising: but that any member (especially a prominent member) of a dignified (?) profession should stoop to such practices is both surprising and discouraging to those of us who are trying to conduct ourselves in accordance with the avowed principles of the American Association.

We have a number of fully qualified accountants in this vicinity, members of the American Association, who might be excused for resenting the implication, contained in this and similar letters, that in order to secure the services of a competent accountant the business public of this benighted section must await the blatantly announced advent of eastern "experts."

Would not the profession of accountancy establish itself in public esteem much sooner if such methods were left to the quacks and beauty specialists ?

Yours very truly,

F. A. SMITH. Kansas City, October 31, 1914.

Accountancy Education Editor, The Journal of Accountancy:

Sir: In his article in the October JOURNAL OF ACCOUNTANCY on Some Scientific and Educational Problems of the Accountancy Profession Mr. John C. Duncan is apparently under the impression that his method of teaching system building is unique and original with him. While in no way aiming to detract from the value of his work and methods it seems only fair to other accountancy schools to point out that courses such as he outlines and founded on the very principles he enunciates so clearly have been in successful operation for a number of years past.

As a concrete example, let him turn to page forty-seven of the New York University School of Commerce, Accounts and Finance Bulletin for 1914-1915 and read the description of the course known as “accounting systems.” This course provides for the planning of a system; drawing and ruling forms to scale; installation, with proper instructions to employees and adjustments of the system made necessary by unforeseen obstacles and complications. Further in the course the class, by means of committees, actually undertakes the devising, installation and supervision of a complete system for an active mercantile organization. Lack of space makes a full description of the course impossible but the foregoing will serve to show that Mr. Duncan is not alone in his appreciation of the importance of laboratory work in accountancy instruction and that his methods and principles are already in use in schools other than his own.

Yours very truly, New York, October 26, 1914.

MAURICE E. PELOUBET.

Accountants and the Public

Editor, The Journal of Accountancy:

Sir: I have read with much interest the addresses delivered by Mr. R. H. Montgomery and Mr. Charles G. DuBois before the annual convention of the American Association of Public Accountants, September 15, 1914.

I believe, speaking generally, that there can be little doubt of a whole hearted concurrence by the profession at large with the views set forth by these two gentlemen in such a scholarly and forceful manner.

There is a single paragraph in each one of the addresses, however, upon which I should like to present a few further ideas which must, undoubtedly, have been in the minds of each of the speakers, but, on account of being so well known to them, were not dwelt upon with specific emphasis in the addresses.

I refer, first, to that paragraph of Mr. Montgomery's speech, appearing on page 243 of THE JOURNAL, as follows: "If I were to show the foregoing statement to bankers, I know that most of them would say: 1. 'Are you sure that your profession is equipped as to numbers and ability to take the responsibility, moral and legal, of standing between borrowers and ourselves?' 2. 'Do you realize that we do not want to have a balance sheet copied from the borrowers' books?' 3. We do not want a statement of assets valued by the borrowers with a comment by you that you are not valuers and that you assume no responsibility for values.' 4. 'We do want someone of skill and courage who will not be afraid to restate a balance sheet, who will apply his experience to the valuations and who will give us a report on a borrower's financial position which will be helpful and dependable as a basis of credit action.'”

This paragraph has special value in my mind in reference to the book issued by the American Association of Public Accountants about August 1, 1913, entitled The Influence of Accountants' Certificates on Commercial Credit.

In discussing question one let me state that I believe (and the high authorities of the association should know much better than anyone else) that our profession is equipped both as to numbers and ability to take care of the responsibility, moral and legal, of standing between borrowers and lenders. There can be no question that the profession as a whole realizes the import of question two to the letter, namely, that the lenders do not want balance sheets copied from the borrowers' books. Question three, concerning the statement of assets valued by borrowers, accompanied by comment of the accountant that he is not a valuer, in nine cases out of ten really means that the accountant has not been permitted to value, for which reason he assumes no responsibility for such values. Question four, stating what the banker does want as to ability and integrity of accountants, is directly within his power to obtain. The whole trouble is that lenders, speaking generally, accept certified statements through the hands of borrowers, and nearly all such statements are certified to by accountants employed by, and responsible to, the borrowers. If question one is admitted to be answered properly herein, in the affirmative, and our profession is, as we believe it to be, equipped with numbers of practitioners willing and able to take legal and moral responsibility in this matter, the request of the lender that he select the accountant to do the work, issuing his orders direct to the accountant for the details to be inspected from which the borrower's statement will be certified, and that this accountant so selected and directed by the lender shall report direct to him, and be solely responsible to him, there will be no difficulty in providing a proper answer to the lender's second question.

When lenders invariably dictate the employment of accountants of ability satisfactory to them question two will be answered and, obviously, questions three and four also.

The difficulty in commercial audits, as experienced by the writer over a period of nearly ten years, has been that many concerns not only do not desire their assets to be valued by the accountant, but further absolutely prohibit any attempt at such valuation, on the theory, which has been stated more than once, that such valuation of the assets is none of their accountant's business. If lenders will dictate the employment of accountant and specifically direct in their orders to him that a careful valuation of both assets and liabilities shall be made by the accountant, to be embodied as a part of the certification of the balance sheet, they certainly can and will get what they ask for, efficiently, when and if they require it and have the accountant paid for the labor involved. A number of large lenders have people in their permanent employ whom they use to make such financial investigations for them, under their direct orders, and these people, naturally, report direct to the lenders only, to whom they are solely responsible, without any thought or care concerning the point of view of the proposed borrower about the plan and scope of their work. There are numerous instances in which accountants of skill and courage are not thus free to restate values on balance sheets, applying their experience to such valuations in order to report upon the borrower's financial position from the lender's viewpoint. The fundamental requirement for efficient work by accountant, engineer, or anybody else employed in such financial investigations is that the operator shall be responsible solely to the lender and not to the borrower.

When the gentlemen who have the granting of credits comprehend and act upon this viewpoint, questions such as those which Mr. Montgomery states in his address have been asked by bankers in great number will be answered; and they could have been answered by the bankers themselves long ago. It is primarily a question of the source of authority and detailed instructions for the work, to whom sole responsibility is due by the accountant, engineer, or other practitioner, accompanied by a clear and concise statement ordering what must be done to accomplish the desires and provide the required information to the lender.

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I can think of no clearer illustration of the idea I am trying to present on this matter, as I see it, than the plan employed by the bank commissioner in Massachusetts, under the law, where accountants are employed by the auditing committees of savings banks and trust companies to do the work necessary for a proper preparation of the annual return of these institutions to the bank commissioner. The accountant is selected and engaged by the auditing committees, subject to the final approval and issuance to him of a commission to do this work by the bank commissioner. Under this commission the accountant so selected is a subordinate of, and directly responsible to, the bank commissioner, and to him only, for the completeness and accuracy of the work reported, although the several institutions must pay the cost of this work and not the bank commissioner.

If a similar plan be demanded and enforced by all lenders, that accountants certifying to borrowers' statements shall be satisfactory to them (the lenders) and under their absolute control as to plan and scope of the work required, they can get all the things apparently desired by the four questions to which Mr. Montgomery refers, but in which, so far as has come to the writer's knowledge, no effort has ever been made to assist accountants by having lenders provide them with positive orders as to what they do actually want and will not do without. When they are ready to act thus, as a unit, they will find the accountancy profession only too willing and able to promote their desires and much needed ends.

The paragraph to which I desire to draw your attention in Mr. DuBois' address appears on page 255 of THE JOURNAL, as follows: "In small towns and rural communities generally, a doctor of medicine must attend to any kind of a case. Nervous prostration, scarlet fever, and surgical operations are all part of the day's work.”

It has always been the writer's idea, and he has heard it expressed by a number of others, than an accountant occupies a position analogous to that of a general practising doctor, the accountant's field including, among other duties, the inspecting of accounts and business with a view to applying certain remedies if they appear needed. There is one fundamental difference, however, between the country doctor referred to by Mr. DuBois and the accountant doctor as the latter exists in the mind of the writer. In the first example the country doctor is called to attend to any kind of a case and must cure it or lose his reputation as an able practitioner. The accountant doctor, however, in nine times out of ten is called upon to attend a case, coupled with the demand that he prescribe medicine, or remedies, which may be palatable to the patient-client, whether these may be efficacious or otherwise. Were the accountant always called in, as the country doctor is, for the sole purpose of curing, unhampered, any difficulty existing in the patient, there would be as few cases of dissatisfaction with the work of public accountants as there are of the few medical practitioners of inferior quality. It has often occurred in the past experience of the writer that clients would state, upon the commencement of the work, their desire to know the whole truth and nothing but the truth, as shown by facts reflected in and from their records; but cases where such clients did really want to know the whole truth when the facts were not favorable to themselves have been so few as to be conspicuous, and they always took exceptional pains to limit this knowledge to themselves.

Any client-patient can get from accountants exactly what he desires, and ought to have, if he is willing to pay the cost of the legitimate work and time necessary to produce the proper results; but there are too many cases of unruly clients who will neither leave the accountant free to prescribe nor take any of the remedies prescribed by him. There is only one thing to do in such cases and that is for the accountant to state to the patient, just as the doctor would: "You will either take my remedies or I must refuse to handle the case," because in the case of either the accountant or the doctor the practitioner's reputation is obliged to suffer by persistent refusal to adopt the remedial measures prescribed.

We should all hope and work for the result that clients may be able to procure the best talent in either the doctor or the accountant; but after having learned to select either specialist or general practitioner, they should be willing, invariably, to take the remedies necessary to effect cures. Yours very truly,

HENRY D. LOVE, Boston, October 27, 1914.

Depreciation

Editor, The Journal of Accountancy:

Sir: Our attention has been called by one of our clients to articles recently published in the Wall Street Journal stating that the United States Steel Corporation would be justified in making a large reduction in its charge for depreciation for the present financial year, in order that it might be able to maintain its rate of dividends.

In the article of October 30, 1914, it even goes so far as to say, “The corporation as a result of its large unexpended balance on hand could ignore depreciation charges for a long period if it wished to do so." The justification for such action appears to be because the charges for depreciation in the past have been unnecessarily large, in effect setting up a reserve.

We would like to know the opinion of THE JOURNAL OF ACCOUNTANCY as to the propriety of basing the charges for depreciation on prosperity or the reverse. It has been our understanding that a proper charge for depreciation is an element of cost, which while it may vary with the production or activity of the various plants, is almost entirely independent of the question of profit or loss, and should be figured on some uniform basis before the profits are ascertained; also that it is a very dangerous

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