the order of their convertibility. On the liability side I would show the liabilities in the same order, that is in the order in which they must be paid. I would place bond or long term debts next, and last of all I would show the net worth carried out in one aggregate. Some balance-sheets which show capital stock as the first item of liability and surplus as the last item of liability are not only misleading (because capital stock and surplus are not liabilities) but they require mental gymnastics in order to get at the actual net worth of the concern.

If the borrower has not put his own house in order, there has never been a better chance for the banker to do strong arm work on balance-sheets than at the present time. They should be made to reflect actual conditions and conservative values and there should be enough uniformity about the balance-sheets of a given industry to make comparisons possible and profitable. Every bank which lends money should classify its balance-sheets and not consider that each one should be expected to tell its own story. Management is just as important as capital and a balancesheet can and should reflect management. The war balance-sheet may show large net worth but it does not necessarily reflect good management, because large profits were made by the majority of concerns. Anyone could make money in most industries during war times because the demand exceeded the supply. The profits so made have been used to clean up balance-sheets. The important thing now is to prevent balance-sheets from getting into their former condition. As heretofore stated the only concerns which really cleaned house were those which were profitable from 1916 to 1918. As the tax problem was the incentive to clean house, those concerns which were not subject to high rates of taxation should have their balance-sheets more carefully scrutinized than those in the more fortunate class.

The pressure on a borrower to furnish a good statement comes not only from his own needs, but frequently from note-brokers and bankers. High tax rates, growing out of war conditions, have inclined many concerns to make up statements which can safely be trusted. Obviously, such statements are the safest ones on which to lend money. The same acid tests should be applied to all balance-sheets, and then it will be found that the influence of the war upon balance-sheets has been helpful alike to the borrower and to the lender.

Growing Responsibilities of the Public

Accountant

BY J. PORTER JOPLIN

Some four years ago I had the pleasure of appearing before you in this city and at that time I was gratified to be able to congratulate you upon the event-the first meeting of your tri-state gathering. I feel that now I can congratulate you upon the continuation of these meetings and assure you of my appreciation of being invited to attend on this occasion. At the meeting of 1915 I gave a short address in which, among other things, I referred to the possible necessity of a change in the organization to which at that time we all belonged, so as to bring about a greater uniformity in the qualifications for membership in our national body and to invest a control therein which would insure fair standards of efficiency in its members and a general improvement in the practice of the profession.

Since that time changes have been brought about, with the result that we now have the American Institute of Accountants in which we are all individual members and I feel that it can be said without danger of contradiction that much has been accomplished in the way of advancement of the profession of accountancy through its activities which would have been impossible under the old organization, which, however useful it may have been in the past, was limited in its scope because of the very nature of its organization.

I refer to this change in our national body so as to introduce the subject selected for today, and I trust that you will bear with me if I seem to touch upon matters which you consider trite, for on occasion it may be necessary to refresh our memory in certain particulars.

It may be well to make it clear at the outset that there is probably little doubt that the accountant has fully recognized his responsibilities and-with a few exceptions here and there, where members of the accountancy profession have sacrificed their sense of duty to their desire for increased business and the revenue created thereby-has endeavored to live up to his understanding

An address before the tri-state meeting of Delaware, Maryland and Virginia accountants at Baltimore, Maryland, June 25, 1919.

of these responsibilities. Nevertheless, as he is beset by so many quagmires and pitfalls on all sides it may not be amiss to emphasize the fact that these responsibilities are vital and their observance of extreme importance in his practice. A discussion of the matters related thereto may serve as an encouragement to him in the conduct of his profession.

While the client's affairs should receive full consideration and careful analysis so that they may be presented in such form as to procure for him all the benefit to which he is entitled, it is most essential at all times to remember that his interests are not the only ones to be considered. This is particularly so at the present time, inasmuch as the revenue acts have made the government to all intents and purposes a partner in the affairs of each citizen as well as in each corporation or association of citizens. In the practice of our profession I am sure that there is not one of us who when preparing a statement of partnership interests would not be most punctilious in seeing that in every particular a fair division of profits is made. It would seem that the same attitude should be maintained in the preparation of figures to be used in making income tax returns-and in most cases this is the attitude of the accountant. However, there have been cases where accountants have sent out literature stating that a saving could be made by the client through the employment of their services, giving the impression that their services were to be employed for that purpose only. Undoubtedly in many instances (perhaps in most) legitimate savings have been made by the taxpayer through the employment of the accountant; but primarily the accountant's activities are to ascertain the facts regarding the affairs of the institution he is investigating; and in general he is not swayed by a desire or an intent to reduce the figure upon which the tax is to be based except in legitimate and well recognized ways.

I do not intend to infer that one should not avail one's self of all proper advantages to the client, for the treasury department is as desirous as the accountant that the returns should be fair, and there are times when the client's view may well be accepted on a doubtful point; but in no circumstances should an accountant subscribe to a statement of conditions which is doubtful of standing the test of close investigation, and his attitude to his client should clearly show his position on this question.

The cordial relations which have grown up and now exist between the profession of accountancy and the government through its several departments, the army, the navy and the treasury, are an indication of the growth of the profession and it is quite obvious that a well recognized position in the community has been attained. This makes it necessary for members of the profession at all times to be on the alert and ethically sound so as to measure up to the requirements which this position creates. Perhaps I may be permitted to revert to the time of our entrance into the great war. From the very first, members of our profession were extremely active in helping to promote the activities which later proved so essential to the final victory. In the construction of the cantonments, the navy matters and in the treasury department were to be found men, members of this profession, doing all that lay in their power to forward the interests of the different departments. Many of these men gave their services without remuneration and all of them made great sacrifices in assuming the duties which they performed so creditably. And now that the war is won and we are back in civil life, it is more than ever necessary that we live up to the high standing attained which these activities helped to establish.

This profession has now a chance for the performance of great good, and, confident of the esteem of men high up in the councils of our nation, its members are called upon to grasp their opportunities and go forward in national affairs, building up and carrying on with the intent of fulfilling a destiny for which they are undoubtedly qualified—a destiny which will class them among those other older professions which have so nobly stood the test of time.

It is important that greater attention be paid to academic matters. The young men whom we employ in our offices should have received an education which will ensure a foundation upon which to build. Much will depend upon the character and degree of education of the young men who will be the practitioners of this profession in the future, and it is the duty of each accountant to see to it that his employees are properly equipped. Should the junior assistant be so unfortunate as to have been deprived of the advantage of a high school education he should be encouraged to make up his studies by extra effort through such sources as are available for this purpose. In addition to this fundamental

necessity, there should be close observation to make sure that the young man in the office is imbued with the right ethical thought in his work. This ethical viewpoint should prevail throughout every accountant's office, as it is of prime importance to the profession in the fulfillment of its proper functions.

The accountant of today must of necessity be more or less of a student. That a careful and prolonged perusal of the revenue acts of 1916-1917 and 1918 is an essential part of his study goes without saying. To this may be added the necessity of a thoughtful and even meticulous consideration of the regulations and decisions of the treasury department issued through the commissioner of internal revenue.

Perhaps the past year has been the most strenuous of any in the experience of some of us, and we are frequently told by our assistants that pressure of work with the resultant lack of time has prevented them from being as studious as would clearly seem desirable. However this may be-and my sympathy in many cases is with the assistant-it is absolutely necessary for the welfare and advancement of the profession that the assistants in our offices prepare themselves for higher duties, for the future is theirs. The demands of that future will be for increased attainments on their part and a further increased scope of the profession. It is our duty to do all in our power to assist the men growing up in the profession so as to prepare them to become worthy exponents of the practice of accountancy.

It must be patent to all of us that much more is expected of the accountant as the years roll by and business and national affairs take on new forms which bring us face to face with more intricate problems.

When called upon for consultation with clients and their various advisors in other matters, we invariably find that much is expected of us in the way of information, and unless we are supplied with a fund upon which to draw for the occasion we may be discredited, although perhaps unjustly. A fair allowance of time for preparation in looking up matters which are to be discussed is only right, but the better we are prepared to deal with such questions as are commonly accredited to the accountancy profession as coming within its activities, the better we can measure up to the standards we have set, even though this cannot be accomplished without diligent effort.