ination may open their eyes, unless there is intentional dishonesty and concealment on the part of the officers. If the committee insists upon actually seeing and handling all securities and the notes for all loans, it will at least have proved that the assets called for by the books are in the company's possession at the moment; while it will also have an opportunity to observe what names of officers or directors appear as makers or indorsers on the notes. This is of some value, though of course it gives no assurance that the books are correct, nor would it detect anything that would even create suspicion against an ordinarily shrewd officer who was engaged in looting the institution. There is also some advantage in the insight into the company's affairs which the committee may gain, and in the interest which may be awakened in them. But a directors' committee examination may easily be made, and sometimes is made, of considerable value, if men are selected who are willing to give several days to the task and who have some technical knowledge which qualifies them for the work. The committee may then make some general examination of the books, examine and list all of the assets called for, with their appraisal of same, make note of items that are worthless or unmarketable or of uncertain value, point out serious flaws and tabulate loans and investments in which officers or directors are interested, giving names and amounts for each. Such a committee should not include any members of the executive committee or any of the officers, and should work independently of the latter. An examination by a committee of stockholders who are not direc tors may accomplish much good, provided, as in the case of the directors' committee, men of ability who will take the necessary time are found. Its work may well proceed along the lines just indicated, going further if possible. Such an examination has an advantage in that it is conducted by men who are not directly responsible for the policy that has been pursued. Examinations by committees of employees are practicable only ir companies having several departments. They may be made of some value as examinations and of much value in the way of education and increased interest among the men who do the work; but are evidently subject to the important objection that they are not apt to affect the work of officers; while, as the work must be done "out of hours," they impose a burden upon the men which is hardly justifiable. That the insufficiency of the different kinds of examinations just named is coming to be widely recognized is shown by the steadily increasing number of companies which either maintain a special auditing department or employ outside auditors or auditing companies to make thorough examinations of their work, some companies having even adopted both plans. It is only by such means that anything like a satisfactory examination can be made, particularly of the larger institutions. The wonder is that the fact has been so long unrecognized, and that other corporations have preceded banks and trust companies in the adoption. of thorough auditing systems. As between the maintenance of an auditing department and the employing of an outside audit company for the examination of the larger trust companies, not enough experience has been gained to determine which is the better plan, and opinions naturally differ. If, as some large companies have found to be the case, under either plan it is necessary to have a permanent force engaged in auditing throughout. the year, the choice is largely one of form, except perhaps as to cost. Of course, the smaller companies do not offer work enough for a permanent auditor, unless he puts in some of his time at other duties, in which case his value as an auditor is slight. Such companies should employ a competent and responsible accountant to put in such time as is necessary for the work. He should make complete audits at intervals of six months or a year, and in addition step in without previous notice to make special examinations. His reports should be rendered to the board of directors in person, and never to an officer of the company;. and the stockholders are entitled to an annual report giving at least his general conclusions. Whether an employee of an audit company or of the audit department of the trust company, the auditor in charge should be a man who thoroughly understands both the science of accounting and the business of the trust company. He must possess courage and force of character, be not over-trusting or over-suspicious, and be endowed with more than the average amount of tact. If he has assistants, as he must in examining the larger companies, they should also be selected with a view to their fitness for this particular work. THE AUDIT DEPARTMENT. In 1903 a committee appointed by the Trust Company Section of the American Bankers' Association reported to that body, that while excellent systems of auditing were in use, there were but few companies which had established regular audit departments. Since that time the organization of such departments has been quite rapid, but as is natural in a new department, there is little uniformity in its conduct among different companies. In some cases a department is organized with an auditor and a number of assistants; in others, there is a single official known as the auditor, or the controller, who in addition to the duties of auditor acts as chief of the clerical force or performs other duties. In such cases his work is usually supplemented by the periodical employment of an audit company. In the selection of an auditor favoritism should have no place. He should be appointed, not by an officer, but by the board of directors, and to them and them only, in regular session, should he make his reports. His work is quite as much a check upon the officers as upon the clerks, and for that reason it is manifest that he should not be in any way dependent upon the officers. For a similar reason his appointment should not be dictated by the executive committee alone, but by the full board of directors, and he should report also to the stockholders. As already indicated, an important part of the duty of the auditor is to devise or to perfect the system of the institution with the special purpose of guarding against carelessness or dishonesty. He will, for example, see that the officers or tellers who are authorized to sign or countersign drafts do not have also the right to make entries in the books; that the same employee does not both handle cash or securities and keep the books; that where there is opportunity of collusion between tellers and bookkeepers, the latter are frequently shifted to other sets of books without previous notice; that the work is so subdivided that no one man can carry through all the details of any transaction. The exact methods followed in the work of auditing must depend upon the conditions existing in each institution, and it is impossible to devise a system which will be applicable to all companies. An attempt to do this was made by a committee appointed by the Trust Company Section of the American Bankers' Association, which reported in 1903; but the committee reached the conclusion that a system applicable to all trust companies was out of the question. The report of the committee, however, and the three papers on the subject contributed by prominent trust company auditors, contain many valuable and practical suggestions.75 THE SELECTION AND TREATMENT OF EMPLOYEES. The success of many men prominent in the business world has been ascribed to their sagacity in the selection of the men who worked for and with them. The success of a trust company is often materially affected by the kind of judgment used in the selection and training of its employees as well as of its officers. The company whose entire working force, from officers down to errand boys, is uniformly courteous, obliging, accurate and capable, has a tremendous advantage over a company whose officers have these qualities, but some of whose employees are impolite, unaccommodating or prone to numerous errors. It is not always an easy matter, particularly in the larger companies where changes of employees are frequent and must often be made in a hurry, to find just the right person when a vacancy occurs. For this reason, if for no other, the officer in charge of the employment of the clerical force will do wisely to look up available timber before the moment it is needed, and always have on file information regarding a number of applicants whose record he has taken pains to learn. Most companies have more applications for positions than they have places to fill. Unless something appears at once that shows the applicant to be undesirable, he (or she) should be requested to write a letter of application stating his age, education, experience, present occupation, reason for proposed change, references, etc. It has been found useful to file such applications, together with other letters or memoranda relating to the applicant, in a specially printed envelope, represented in Figure 286. These envelopes may be filed alphabetically or grouped according to 75 See Proceedings Trust Company Section American Bankers' Association, 1903, pp. 12-25. 375 net. Vernon St. June 5, 1904 POSITION APPLIED FOR. EDUCATION AGE 18 "Just graduating from high school RECOMMENDED BY 2 teachers letters encloses positions for which the applicants are qualified. The officer notes upon the envelope the personal apearance of the applicant, and adds further data obtained by correspondence with references given; so that after a personal interview he is usually able to form a pretty definite idea as to whether the candidate is worth placing in the eligible list. If the system is faithfully followed, there will usually be on hand applications from persons about whom the officer in charge has some knowledge, and who will be available when a vacancy occurs. Of the qualifications required in an applicant who is to be considered favorably, honesty is the fundamental thing. The writer is aware that the remark is trite, but believes that there is as much appropriateness in the remark now as there ever was. The restless and hurry-to-get-rich disposition of the average American of to-day can not be seasoned too much with the good, old-fashioned virtue of absolute integrity; and certainly the premium on that virtue should nowhere be greater than in the trust company. Next to honesty and general good character, education is important. Boys who have not finished the grammar school are continually applying for positions. Girls who have taken courses in stenography before they have learned to spell or to begin a sentence with a capital letter, want to become bank stenographers. Due consideration should be given to cases in which circumstances make it impossible for the applicant to continue at school; but as a rule the welfare of the applicant and of the company alike demand that boys and girls who have not had at least a high school education be discouraged from seeking permanent positions with trust companies. Particularly is this the case in companies whose aim is to develop men for its higher clerical or official positions from the ranks. In common with the business of the banks, the business of the trust company is in a state of evolution. Civilization is growing more complex, and the United States has taken its place among the "first powers" of the world, and the business of the trust company is coming to require more highly trained minds and a broader outlook. Undoubtedly the best material for trust company work, other things being equal, is found in the man with college training, pro vided, of course, he has used his opportunities and not merely "been to college." His mind is better trained, his outlook is broader, he puts more intelligence into his work, and he does not so soon reach the limit of his capacity. The qualities which go to make up an attractive personality are next in importance-neatness in person and in dress, a cheerful disposition, and a courteous and friendly manner. Ordinary ability and willingness to work are of course assumed. If the position to be filled is advanced, previous technical experience is of course necessary; but in ordinary cases the man with the qualifications just named will pick up the technical knowledge and in a few months be of more value to the company than the experienced man who has not these qualifications. In the matter of promotions civil service rules should be, and happily in most companies are, in force. "Influence" is coming to have |