Reviewed by Bill D. Jarnagin The University of Tulsa
This copy of Pixley’s Auditors: Their Duties and Responsibilities Under the Joint-Stock Companies Acts and the Friendly Societies and Industrial and Provident Societies Acts is a desirable augmentation to the increasing inventory of reprinted historical accounting classics. Pixley’s book represents an early attempt at describing the principles, practices and general information relative to the duties and responsibilities of auditors certifying accounts of joint stock companies.
The book can be divided into the following four parts: (1) excerpts from Acts of Parliament, (2) books used by public companies, (3) nature and principles of an audit, and (4) content of the revenue statement, balance sheet and related auditor responsibilities. The first three chapters are primarily devoted to excerpts from eighteen Acts of Parliament ranging from The Companies Act of 1862 through The Companies Act of 1880. The excerpts provide information about which acts require auditors, mode of appointment, term of office, remuneration, access to records and responsibility. In addition, the extractions specify what books and accounts are required to be kept by each act and how dividends can be paid.
The second part of the book contains a brief description of the books generally used by public companies including content, purpose and the books required by each act. The books commonly used can be divided into two parts: (1) registry or statistical, and (2) financial or account. Included in the statistical books are register of members, register of mortgages and minute book. Some of the financial books are cash, petty cash, journal and ledger. Pixley states that the auditor should be more concerned with the financial books when performing the attest function.
Chapter five contains a discussion of the nature and principles of an audit. Pixley specifies that an audit should be divided into three parts to disclose three types of errors: (1) errors of omission, (2) errors of commission, and (3) errors of principle. Pixley does not define or describe the three types of errors but specifies the audit procedures required to detect each type. Errors of omission would generally be discovered by tracing each amount on the debit side of the balance sheet or cash book to the original source document. The comparison of items in one book with corresponding items in another book until they are carried into the balance sheet or revenue statement isolates errors of commission. Examination of vouchers commonly provides detection of errors of principle.
Pixley, in the last part of the book, describes in detail the format and content of the revenue statement and balance sheet as well as duties of the auditors relative to these statements. A description of the makeup of each account in both statements is given with emphasis on auditor responsibility for the propriety of each account. Pixley concludes that the balance sheet is the most important statement.
The book contains two appendices. Appendix A consists of a number of detailed statements prescribed by certain of the acts such as a balance sheet and revenue statement. Appendix B de-scribes in detail some of the forms required by Acts of Parliament.
The major criticism of Pixley’s book is the treatment of the various Acts of Parliament. Approximately half of the book is devoted to excerpts of eighteen acts, producing an awkward flow of material and contributing to difficulty in interpreting auditor responsibility and requirements in general. Another criticism deals with Pixley’s lack of definition of terms. For example, definitions are never given for the three types of errors auditors should be cognizant of in the attest function. Only a procedure to detect the errors is described.
One favorable aspect to the book is the excellent job on the appendices. The detailed statements and forms are very informative, interesting and of excellent quality.
The book deserves a place in the accounting historian’s library because knowledge of past auditing practices and principles can be an important input toward understanding better the practices and procedures of today. It reflects that even in today’s dynamic environ-ment of accounting, many of the ideas advocated almost a hundred years ago are in practice today.
(Vol. 3, No. 4, p. 10, 1976)
