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American Association of Public Accountants

Richardson, A. P.

English

eGrove (Univ. of Mississippi)

University of MississippieGroveGuides, Handbooks and Manuals American Institute of Certified Public Accountants(AICPA) Historical Collection1915Acceptability of commercial paper; Bulletin on. 1A. P. (Alphyon Perry) Richardson (1875-1949)American Association of Public AccountantsFollow this and additional works at: https://egrove.olemiss.edu/aicpa_guidesPart of the Accounting Commons, and the Taxation CommonsThis Article is brought to you for free and open access by the American Institute of Certified Public Accountants (AICPA) Historical Collection ateGrove. It has been accepted for inclusion in Guides, Handbooks and Manuals by an authorized administrator of eGrove. For more information, pleasecontact egrove@olemiss.edu.Recommended CitationRichardson (1875-1949), A. P. (Alphyon Perry) and American Association of Public Accountants, "Acceptability of commercialpaper; Bulletin on. 1" (1915). Guides, Handbooks and Manuals. 32.https://egrove.olemiss.edu/aicpa_guides/32A cceptability of Commercial P aperB U L L E T IN  N O . 1Edited byA. P. Richardson, SecretaryThe American Association of Public Accountants 55 Liberty Street New YorkC O P Y R IG H T  1 9 1 5  T H E  A M E R IC A N  A S S O C IA T IO N  O F  P U B L IC  A C C O U N T A N T SThe Federal Reserve Board uses commercial paper as a basis for issuance of currency. The accepta­bility of paper offered by member banks for rediscount depends upon the strength of the original maker and upon the evidence of validity presented by the rediscounting bank.The Federal Reserve Board de­mands that the rediscounting bank have accurate information in sup­port of statements submitted by borrowers. No banker can afford to offer commercial paper for redis­count unless he has employed every proper method of verifying the statements of borrowers. An unen­dorsed report of conditions should not be considered sufficient.Circular No. 13, November 10th, 1914, provides as follows:“ The required statement should be signed under oath and should contain a short general description of the character of the business, the balance sheet and the profit and loss account. Assets should be divided into perma­nent or fixed investments, slow assets and quick assets. On the liability side should be shown capital, long-term loans and short-term loans. Short­term loans should be in proper pro­portion to quick assets, and the state­ment should contain satisfactory evi­dence that short-term paper is not being sold against permanent or slow investments. The statement should, furthermore, show the maximum ag­gregate amount up to which the con­cern supplying this paper expects toborrow on short credit or sale of its  paper, and the concern giving the statement should obligate itself to ob­tain the member bank’s consent before exceeding the agreed limit. The affix­ing of the stamp stating such paper to be eligible for rediscount will be con­sidered a solemn and binding decla­ration by the member bank that the statement has been examined from this point of view and that the paper bought complies with all the require­ments of the law and the regulations hereby imposed.”It is impossible to conceive of any method by which satisfactory evi­dence can be given that short term paper is not being sold against per­manent or slow investments except the statement of one who has thoroughly investigated the finan­cial conditions and general methods of the borrower.Success of the Federal Reserve Bank Act depends upon the faithful co-operation of the bankers of the entire country. Tremendous possi­bilities of fiscal betterment lie in the administration of the new law—but the banking world must assist.The banker cannot afford to take chances at any time. Especially is caution imperative when the whole financial fabric hangs upon the banker’s conduct of affairs.Justice to the Federal Reserve Board, the banking system as a whole, each bank in particular and the borrower himself demands the adoption of every precaution.No man can speak impartially of his own property. No statement of condition can be accepted at its facevalue unless it bears independent endorsement.Senator Root has said that the spirit of optimism in the absence of restraint leads men to take a rosy view of the future. The earning power of properties is (innocently) overstated; the success of enter­prises seems absolutely sure, and failure impossible.”In all probability the Federal Re­serve Board will soon issue explicit rulings on the subject of certifica­tion of borrowers’ statements. The question has already been men­tioned in circulars of the board. In the meantime it is essential that bankers themselves insist upon the verification of statements presented with applications for loans. The great bankers of the country favor the universal requirement of certi­fication of borrowers’ statements. The laws of thirty-nine states call for the licensing of men who after examination shall be found qualified to investigate and report upon such statements. The modern business man believes in examination of his affairs.The American Bankers’ Associa­tion has adopted resolutions in favor of making mandatory a certi­fied public accountant’s approval of every statement presented in sup­port of application for credit. The only thing that has prevented the general adoption of the principle has been the competition among banks themselves.The Federal Reserve Bank Act presents an opportunity to work effectively in unison for the im­provement in credit relations which will follow insistence upon complete examination and unprejudiced re­port on financial conditions of bor­rowers.It is essential that the reports of auditors should go into sufficient de­tail to give an exact and trustworthy presentation of the borrower’s affairs. The scope of the auditor’s work is often specifically limited by his in­structions from the client, and the auditor is therefore obliged to give a qualified certificate, with the result that the banker is sometimes dis­posed to criticize the auditor for ap­parent omissions which are entirely beyond the auditor’s control. This condition would be remedied if bankers would insist that the audi­tor be given full power.The Certified Public Accountants Society of this state presents this important subject to your attention and requests your co-operation in bringing about a condition that will work to the advantage of both the banks and their borrowing cus­tomers.Members of theCertified Public Accountants of Massa­chusetts, IncorporatedFellows:Albee, Amos D., C.P.A.,53 State Street, BostonAlbee, Herbert H., C.P.A.,53 State Street,Basset, Horace S., C.P.A.,200 Devonshire St., “Bishop, George L., C.P.A.,27 State Street, “Boyden, Walter L., C.P.A.,6 Beacon Street, “Canning, William C., C.P.A.,953 Old South Bldg., “Chandler, Asa E., C.P.A.,905 Old South Bldg., “Chase, Harvey S., C.P.A.,84 State Street, “Chase, Arthur T., C.P.A.,84 State Street, “Chase, George S., C.P.A.,84 State Street, “Chase, Charles Dyer, C.P.A.,129 Walter Street, Roslindale Comins, Edward P., C.P.A.,200 Devonshire St., Boston Cooley, Morgan L., C.PA.,73 Tremont Street, “Crandell, J. Chester, C.P.A.,110 State Street, “Douglas, Robert, C.P.A.,  49 Federal Street, “Dysart, Robert J., C.P.A.,40 State Street, “Francis, James P., C.P.A.,27 Masonic Bldg., New Bedford French, Herbert F., C.P.A.,166 Essex Street, Boston Glunts, James D., C.P.A.,35 Congress Street, “Gray, W. Chester, C.P.A.,131 State Street, “Greeley, Henry N., C.P.A.,53 State Street, “Hall, James W., C.P.A.,53 State Street, “Hall, William Franklin, C.P.A.,53 State Street, “Harper, Richard L., C.P.A.,53 State Street, “Hartshorn, Horace C., C.P.A.,67 Milk Street,Hillman, Frederick J., C.P.A.,Court Square Bldg., Springfield Hughes, E. B., C.P.A.,73 Tremont Street, Boston Hyde, R. K., C.P.A.,60 State Street, “Lewis, Daniel B., C.P.A.,53 State Street, “Love, Henry D., C.P.A.,84 State Street, “Luther, J. Seymour, Jr., C.P.A.,932 Old South Bldg., “Lyall, George, C.P.A.,79 Milk Street, “Mannix, William H., C.P.A.,134 State Street, “Mansfield, Gideon M., C.P.A.,201 Devonshire St., “Marvin, Harold A., C.P.A.,73 Tremont Street, “Masters, J. Edward, C.P.A.,60 State Street, “Mosher, Ira, C.P.A.,110 State Street,Moyer, Orlando C., C.P.A.,516 Old South Bldg., “ Nickerson, Augustus, C.P.A.,60 Congress Street, “Oakey, Francis, C.P.A.,Board of Mun. Research, N. Y. Parker, Edward L., C.P.A.,50 State Street, Boston Parsons, Thomas P., C.P.A.,812 Tremont Building, “ Philbrick, Hazen P., C.P.A.,101 Milk Street, “Piper, Henry A., C.P.A.,952 Old South Bldg., “Pride, Edwin L., C.P.A.,40 Central Street, “Rand, Waldron H., C.P.A.,101 Milk Street, “Risley, Arthur Leroy, C.P.A.,73 Tremont Street, “Sanger, Gabriel, C.P.A.,166 Essex Street, “Sawyer, Hollis H., C.P.A.,79 Milk Street, “Setchell, Morton E., C.P.A.,Old South Bldg., “Smith, Walter I., C.P.A.,60 State Street, “Steele, F. R. C., C.P.A.,131 State Street, “Stetson, Charles A., C.P.A.,84 State Street, “Stewart, Andrew, C.P.A.,40 State Street, “Stewart, Frederic, C.P.A.,5 Arborway Ct., Jamaica Plain, “BostonStorer, Newman W., C.P.A.,27 State Street,Sweet, Homer N.. C.P.A.,73 Tremont Street,Tuttle, Charles C., C.P.A.,84 State Street,Tuttle, Charles H., C.P.A.,84 State Street,Wellington, C. Oliver, C.P.A.,110 State Street,Willis, Frank W., C.P.A.,293 Bridge St., Springfield Wright, Charles H., C.P.A.,60 State Street, Boston Wright, Richard W., C.P.A.,953 Old South Bldg., “ Wrye, Walter C., C.P.A.,84 State Street, “Wyman, Gerald, C.P.A.,131 State Street, “Associates:Albree, Edward C.,Swampscott, Mass.Bardwell, Wallace E.,124 Summer Street, PittsfieldByrnes, Arthur T.,53 State Street, BostonDysart, Hugh,40 State Street, “Edwards, Truman G.,516 Old South Bldg,, “Kellogg, Charles F.,141 Milk Street, “Woodbridge, J. M.,457 Washington Street, NewtonDistributed at the request of the Certified Public Accountants of Massachusetts, Incorporated

Acceptability of commercial paper; Bulletin on. 1

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Acceptability of commercial paper; Bulletin on. 1

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