The Express.
London, England, 1860-04-30 00:00:00

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LONDON, MONDAY, APRIL 30.

Tun startling fraud brought to light during the
last week has caused public attention to bedirected
once more—though, we fear, merely in a fitful
and lion-practical way—to the utter inefficiency of
the system of audit which prevails in the accounts
of public companies. The practice of clubbing
together a large number of individual!
capitals for a common object has made !
immense pmgress during the last thirty !
years. We have now a large number of
great associations, each possessing many millions
of capital subscribed and paid up, and revenues!
which exceed in amount those of crowned heads.
The commercial success of these associations de-
pends mainly upon a question of figures, yet,
notwithstanding the magnitude of the figures in-
voked, the machinery for testing their accuracy
is in many instances loose in the extreme. The
career of RLDPATH and other men of equal crimi-
nality has proved how lax is the system of checks
to which shareholders look for protection ; and
there is no saying how soon other revela-
tions of a similar character may be made,
for it is quite clear that very few
practical improvements have resulted from
all this bitter experience. Shareholders are a '
placid race : ax long as their attain jog on with a
tolerable degree of smoothness they are absolutely
grateful to he relieved of all trouble. They are
even disposed to resent as an impertinence any
attempt on the part of an adventurous fellow-
proprietor to rouse them to vigilance. Except
when under the influence of a momentary stimulus
to caution caused by the frauds of a Renrsni or a
Pru.ixiees, a general meeting of shareholders can
scarcely bear with common patience any conversa-
tion upon so dull a subject as that of the audit of
their accounts. It is not too much to say that
the duties ordinarily performed by auditors
are of no value wluitever. The rogue
who cannot contrive to pass the auditors'
rough scrutiny deserves to be punished almost as
much for his stupidity as for his guilt. It is the
C 011119441 fault of directors, too, to entertain a
narrow jealousy of an active and inquiring auditor,
and to endeavour, by all kinds of " snubbing," to
discourage him from doing anything beyond the
ordinary routine. The miserable pittance which
is in most cases paid to the auditors of public
companies is of itself suggestive of • merely
no sal duty. We alluded, a day or two ago,
to the case of the Great Indian Peninsula Rail-
way Company. The directors, in the re-
port recently issued, very properly recom- '
mended an increase in the salary of
the secretary upon the ground that, since be
became connected with the undertaking, its capi-
tal has been augmented from half a million to
eight millions sterling. They also recommended
that the payment to the two auditors be increased.
What does the reader suppose was the amount of
the h ~areiriees hitherto •signed to these two
officers? Five guineas each for each half-yearly
audit ! Their semi-annual allowance is now to be
raised to the magnificent sum of twelve guineas
and a half each. Two gentlemen of high chars•
ter anal business acquirements are supposed to
der• to their time to the task of investigating the
lit'o,llllt4 relating to eight millions of capital
in consideration of an average stipend of tea
shining.% per week each, or only one half of the
slim required by a mere " jobbing " labourer.
Cult anything more absurd be imagined? Are the
ahareholders really ouppinseil to sleep the more
easily on their pillows in reliance upon an exami-
nation of the merely formal character which can
al •be obtained for so paltry • sum ? In this
commercial matter, the ordinary commercial test
is the only correct one : can the auditors afford to
give more than a nominal amount of their time
for the money

Though such wretched paymasters, the Great
Indian Peninsula Railway Company, so far as the
auditors are concerned, have really had the good luck
to secure the services, in that capacity, of one gen-
tleman who takes a pride in his profession, and who
not only declines to satisfy himself with the formal I
checking of a few figures usual in such cases, but
declines to append his signature to the ordinary
stereotyped form of certificate—" examined and
approved." If these words imply that a really
trustworthy examination has been made into the
whole of the C pany's accounts, well and
good ; but how can such service pos-
sibly be purchased for tea shilling. a• week f
If, on the other hand, as is almost invariably
the case, the certificate signifies merely that the
auditors have checked a few general entries sub-
mitted to them by the company's ofticials, we say
that it is not only melees, but absolutely mis-
chievous, becanse it lulls the shareholders into a
false security. So Mr. J. A. FRANKLIN, one of
th• auditors of the Croat Indian Peninsula Rail-
way Company, seems to have thought, for he has
introduced an exceptional system, which has