The writer recalls, in his own experience, a case of this sort in which the client demanded the return of all working papers, and was very much excited to think that the auditor should have the temerity to carry them away with him. To the credit of profes sional auditors be it said, that confidence reposed in the auditor is very seldom misplaced. The auditor has as much at risk as the client, and possibly more, if working papers are lost, or the details of a client's business are disclosed thru leaks in the auditor's of fice. Moreover, professional auditors are accustomed to make thoro investigation into the character and habits of their assistants. These assistants are not allowed access to the private working papers until such time as their loyalty and trustworthiness have been thoroly proved. If the proprietor has employed a reputable firm of accountants, he may rest assured that all the details of his business will be sacredly guarded. He has the further assurance that the his tory of the profession records but very few instances in which this confidence in professional auditors has been misplaced.
8. Treatment of information secured aril "leaks" in the auditor's office.—Even in those cases where .it appears that information has been disclosed thru a leak in the auditor's office, the clients should use great care before coming to a final conclusion that this has been the source of the disclosure. In a recent case that came to the observation of the author, it appeared that the wife of one of the partners of a firm who was suing her husband for divorce had, in making a claim for alimony and counsel fees pending the litiga tion, appended a statement in detail showing the ac tual income obtained by her husband from the part nership. Moreover, the statement was an exact transcript of the personal account of the partner in the private ledger of the firm. The only persons who were known to have had access to this private ledger were the partners themselves and the head bookkeeper of the firm, an employe of many years' standing, whose honesty and loyalty were unquestioned. The mem bers of the firm at once proceeded to blame the au ditors, charging them with faithlessness, and stating that the leak had occurred only thru their office: The matter appeared to be a very serious one for the au ditors concerned as they could not prove the assertions to be false. It was not until the trial of the action in court that it was disclosed how the information had been obtained. The head bookkeeper, in an un guarded moment, had left his private ledger open while he went into the factory to get some information from one of the partners, in answer to a telephone in quiry. A clerk, who knew a great deal about book keeping, had been bribed by the attorney for the wife of the partner, to secure a transcript of this ledger ac count set forth in the private ledger. The auditors were thus relieved of all responsibility in the matter, but, because of the accusation, very properly declined to have anything further to do with future audits of that firm.
Even tho the present auditor of a firm may be later displaced by another, and under conditions which per haps may reflect more discredit upon the clients than upon the auditor, the business man can rely upon the professional honor of the auditor and feel sure that any information gained by his former auditor will not be disclosed.
9. The doctrine of privileged is to be regretted that the relations between an audi tor and his client are not as yet regarded by the courts in the light of privileged communications. There is no doubt that in the near future the communications between an auditor and his client will be treated as privileged. For example, if an auditor in the course of his investigation discovered that a client was under valuing customs invoices for the purpose of avoiding payments of duties, there is no doubt that in the pres ent state of the law, the government would have the right, if it so desired, to prosecute the auditor as an accessory after the fact, for failing to disclose this information. The theory is that the accountant would have a duty to perform in disclosing the fact that a crime was being committed. That the accountant occupied a confidential relation to his client would be of little avail to him as a defense if the government decided to prosecute him also. Furthermore, in any litigation, an auditor would probably be compelled to answer questions, the answers to which might prove detrimental to his client's interests.
10. Information prepared in advance which will shorten the labors of the auditors.—Especially where the auditor is being paid on a per diem basis, the client should aid him in all possible ways in order that the progress of the work may be facilitated. This should also be the case in engagements taken under contract, as a matter of fairness to the auditor. Thus, the audi tor should be furnished with correct copies of the trial balance of the general ledger, and in certain in stances with trial balances of the subsidiary ledgers. When the number of accounts receivable is large, the custom of taking off an itemized trial balance showing the names of the various customers is not usually fol lowed. The labor involved in this operation would be very great. In many cases the practice observed is to take off an adding machine list of the open ac counts and to check that total against the controlling account. In other cases, the sales, the returns, the allowances, cash credits and credits for bills receiv able appearing in the individual customers' accounts, will be listed on respective lists and then totaled, and the controlling account of the general ledger recon ciled in this manner. It would be manifestly impossi ble to furnish the auditor with a trial balance of the accounts receivable ledger, containing names and amounts of from twenty to thirty thousand accounts, nor would any useful purpose be served by it. It is, however, customary to furnish the auditor with copies of the trial balances of the customers' and creditors' ledgers, when they are prepared in detail for the use of the proprietor.