eOOPEEATIVE OEOANIZATIOX BUSI^TESS METHODS, 19 



statute and constitutional provisions of the organization, and for a 

 certification to the correctness of assets, liabilities, and losses and 

 gains as shown by the financial statement- Such an audit also helps 

 in maintaining the highest financial standing, furnishing evidence of 

 the oi-ganization's safety and prosperity. Auditing b}^ a competent 

 accoimtant not only tests the accurac}'^ of the accounts but it secures 

 an analysis of the business which promotes practical economy, in 

 that the results of the j^ear's business, as shown by the accounts, will 

 display any weaknesses in the methods of operation and any needless 

 or excessive expenditures. No one thing connected with the lousi- 

 ness of any corporate body is more important than the proper 

 auditing of the accounts. 



A great numy cooperative organizations are inefficient in the 

 matter of auditing, and every organization should provide for a 

 sj^stem of internal audit, which can be carried on by a committee 

 of the directors or members, and for an external audit, which should 

 be made at least once a 3'ear, such external audit to be made by an 

 expert accountant. 



INTERNAL AUDIT. 



For the internal audit it is usually customary for a committee 

 of two, appointed by the board of directors from among themselves 

 or the members, to come into the office each month and make as 

 thorough an examination as possible of the receipts arfd expendi- 

 tures, and note the general policy in carrying on the business. Such 

 a committee audit brings the directors into closer touch with the 

 policy of the management and has a tendency to make them feel 

 a more direct responsibility. This examination will do much to- 

 ward instilling confidence and keeping the business open to the 

 memhei-s through the monthly repoits of this committee. 



For the internal audit, the larger organizations have an efficient 

 cjffice man who is regularly employed and who carries on a contin- 

 uous internal audit. This is an excellent arrangement when the 

 amount of business done by the organization warrants the expense. 



EXTERiXAL AUDIT. 



The numbei- of defalcations in business organizations occurring 

 annually may be traced frequently to the fact that no audits by 

 competent parties were made. The intei-nal audit by a conmiittee 

 has many advantages, but is incomplete and not suHicient in itself 

 as a i^rotection against fraud noi- for the |)ro|)ei- analysis of the 

 accotmts. Tt is ther<d'ore necessaiy that an audit conducted by ;in 

 expert public accountant be made at least once each year. 



•Many organizations have iucoiporaled in tiieii- by-laws a clau.se 

 reijuiring the employment of a ])uldic accountant to make a thoi- 



