COOPKRATTVE ORGANIZATION BUSINKSS MI-Vl'MODS. 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 kelps 
in maintaining the highest linancial standing, furnishing evidence of 
the organization's safety and prosperity. Auditing by a competent 
accountant not only tests the accuracy of the accounts but it secures 
an analysis of the business which promotes practical economy, in 
that the results of the year's business, as shown b}" the accounts, will 
display any weaknesses in the methods of operation and any needless 
or excessive expenditures. No one thing connected with the busi- 
ness of any corporate body is more important than the proper 
auditing of the accounts. 
A great many cooperative organizations are inefficient in the 
matter of auditing, and every organization should provide for a 
system of internal audit, which can be carried on b}^ a committee 
of the directors or members, and for an external audit, which should 
be made at least once a year, such external audit to be made by an 
expert accountant. 
INTERNAL AUDIT. 
For the internal audit it is usually customaiT 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 and 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 
members through the monthly reports of this committee. 
For the internal audit, the larger organizations have an efficient 
office 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. 
EXTERNAL AUDIT. 
The number of defalcations in business organizations occurring 
annually may be traced frequently to the fact that no audits by 
competent parties were made, The internal audit by a committee 
has many advantages, but is incomplete and not sufficient in itself 
as a protection against fraud nor for the proper analysis of the 
accounts. It is therefore necessary that an audit conducted by an 
expert public accountant be made at least once each year. 
Many organizations have incorporated in their by-laws a clause 
requiring the employment of a public accountant to make a thor- 
