INTRODUCTION.This subject is one of intense interest from whatsoever point it is viewed. Through the pages of history one finds in almost every chapter that there have been persons capable and wiling to perpetrate frauds. Perhaps one of the earliest instances of deceit or imposturefor this is the meaning assigned to the word ” fraud” in the ordinary dictionaryis that of Jacob, who by means which are familiar to all, deliberately deprived his brother Esau of his birthright, with the intention of reaping the benefits which were not his by right. And this is really the motive underlying the majority of frauds, namely, to obtain some advantage which could not be gained by means other than dishonourable. The above incident was one of comparative simplicity in execution, but in the course of time, as nations developed and society became more complex, fraud has also developed and assumed other phases. The simple fraud and plain embezzlement, whilst continuing to a great extent, have also been combined with misstatement and falsification of accounts. It is this modern development of fraud which it is proposed to deal with in the present article. To the professional man engaged in the investigation of the fraud, whether he be counsel, solicitor, or accountant, the preparation of the case against, and possibly the prosecution of the defaulting party, the matter is not only full of interest, but frequently taxes his skill to the utmost, whilst underlying all is the human elementthe pathos and the tragedyin the case. It is in this direction that possibly the accountant has an advantage over his professional friends of the two branches of the legal profession, in that, unless the delinquent has temporarily disappeared, or has passed beyond the bounds of punishment by his fellow men, the accountant must come into closer personal contact with him, and probably also at an earlier stage, than either the solicitor or counsel. In such cases it is the accountant who ascertains where and when the first step was taken which has led to the degradation and social ruin of the delinquent; it is he who ascertains what was the first temptation which led to the falling away from the paths of rectitude, and hears of the vain attempts made to cover up and possibly correct the earlier lapses; to him are probably confided the hopes and ambitions which buoyed up and spurred on the unfortunate defaulter in his earlier days, before the temptation or opportunity came to attain his ends by easier but less honourable means, which have led to such disastrous results, and to him is poured out the poignant sorrow and vain regrets of the broken home and the blankand dismal futureall realised, unfortunately, when it is too late to make amendswhen the one flaw in the possibly otherwise skilfully conceived fabric of fraud has been discovered. It is on this account that the work of the accountant in connection with investigations to discover or unravel fraud is of such deep interest, often tempered with sadness at the causes which led to its inception, and in most cases also tempered with sympathy with the delinquent and those whom he 1 may have also ruinedfinancially and socially 1 in his own fall.

This celebrated statute, probably better known, by name at least, than any other Act of Parliament, was passed in 1677, and it still remains one of the keystones of English law. Its professed object was the requirement that certain transactions should be evidenced by writing to make them enforceable in a court of law, in order to act as a preventive against fraud and perjury. How far it has attained that end and how far it has failed to accomplish it is a much debated point. The earlier part of the statute deals with conveyances and leases of land, and in combination with the provisions of the Act to amend the Law of Real Property, 1845, the law may be summed up as follows, namely, that leases for more than three years, and those for a less period when the rent is not equal to two-thirds of the annual value of the land, must be by deed, and so must all assignments, grants, and surrenders of leases, even though the leases themselves might have been created by parol. A lease for three years or less may be made by word of mouth if the lessee goes into possession at once; but if there is only an agreement for a lease, this must be evidenced by writing in order to be enforceable, in accordance with the terms of the 4th Section of the Statute of Frauds, which will be noticed directly. Although it was no doubt intended that all interests in real property should be brought within the scope of the Act, an exception has been held to exist in the case of an equitable mortgage (q.v.). As to trusts, the Statute of Frauds provides that ” all declarations or creations of trusts or confidences of any lands, tenements, or hereditaments shall be manifested and proved by some writing signed by the party who is by law enabled to declare such trust, or by his last will in writing, or else they shall be utterly void and of none effect.” Any trust as to personal chattels, however, may be created by parol, provided it is to take effect in the lifetime of the creator of the trust. But a transfer of any trust must be evidenced in writing. The sections relating to wills have been repealed and re-enacted by the Wills Act, 1837. The fourth section of the statute is as follows : ” No action shall be brought whereby to charge any executor or administrator upon any special promise to answer damages out of his own estate ; or whereby to charge the defendant upon any special promise to answer for the debt, default, or miscarriage of another person ; or to charge any person upon any agreement made in consideration of marriage; or upon any contract or sale of lands, tenements, or hereditaments, or any interest in or concerning them; or upon any agreement that is not to be performed within the space of one year from the making thereof ; unless the agreement upon which such contract shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other party thereunto by him lawfully authorised.” Here it will be noticed that there are five special kinds of contracts which are required to be evidenced by writing. The first and second are dealt with more especially under the head of Guarantee (q.v.) ; the third refers to any agreement to be executed in consideration of a marriage, but does not mean a promise to marry, which upon satisfactory evidence can be proved without any written document being in existence. The fourth shows the importance of having written evidence whenever an interest in land is concerned. There are many cases in which very fine distinctions have been drawn between what are and what are not interests in land; but it is unwise to rely upon these exceptions. If a person wishes to be secure he should never enter into any agreement which has anything to do with land or an interest in the same unless he justifies his position by some document signed by the person who is to be charged. The fifth kind of contract, that is, any agreement not to be performed within a year, refers only to those contracts which cannot, according to their provisions, be wholly performed within a year. Though so much stress is laid upon evidence in writing, it is to be remembered that it is not any particular formal document that is required. Any note or memorandum is sufficient provided that it complies with the following points : It must contain the names of the parties, it should set out the subject-matter of the contract; it should also name the consideration (unless in the case of a guarantee); and it must be signed by the party to be charged or by his duly authorised agent. Many nice and interesting points have arisen as to the sufficiency of the memorandum or note which can be utilised for the purpose of providing the requisite evidence in writing, but sufficient has been said to indicate what is essential, and it is useless to enter into details as to the exceptions which may arise. The memorandum of agreement, or any agreement made under hand only, and not otherwise specifically charged with duty, must be stamped with a sixpenny stamp. An adhesive stamp may be used, but it must be cancelled by the person first signing the agreement. Fourteen days after execution are allowed for the stamping of an agreement under hand, and such post-execution stamping must always be by an impressed stamp. The following agreements are exempted from stamp duty (1) Where the subject-matter is of less value than

Under Section 154 of the Bankruptcy Act, 1914, there is provision made for dealing with debtors and bankrupts (whether discharged or not) who deal or who have dealt with their property in such a manner as to prejudice their creditors and so to defraud them. It would be impossible to go through all the offences enumerated in the section in detail, but a summary of them may be given by stating that the matters dealt with and most of which are punishable with imprisonment up to two years as a maximumare (1) failure to make a full discovery of property, (2) failure to deliver up property, (3) failure to produce books, (4) concealment of property, (5) removal of property, (6) omissions in statements of affairs, (7) failure in disclosing fraudulent claims on the estate, (8) concealment, mutilation, or falsification of books, (9) obtaining credit by false representations, (10) fraudulently carrying on business, and (11) fraudulently pawning or pledging property obtained on credit. Under the former law it was for the prosecutor to prove any of the above offences, if they were alleged against the debtor; now the burden of proof is shifted, and it is for the debtor to show that his dealings with his property were not of a dishonest character. Closely connected with fraud are various other offences set out in the Bankruptcy Act, 1914, on conviction for any of which a debtor may be imprisoned. They are gambling, failing to keep proper books, absconding with property, and obtaining credit whilst being an undischarged bankrupt, to the extent of j

This signifies the payment by a debtor to some one or more of his creditors with a view of putting him or them in a more favourable position than the rest of his creditors. By Section 44 of the Bankruptcy Act, 1914, it is enacted (1) ” Every conveyance or transfer of property, or charge thereon made, every payment made, every obligation incurred, and every judicial proceeding taken or suffered by any person unable to pay his debts as they become due from his own money in favour of any creditor, or any person in trust for any creditor, with a view of giving such creditor or any surety or guarantor for the debt due to such creditor, a preference over the other creditors, shall, if the person making, taking, paying, or suffering the same is adjudged bankrupt on a bankruptcy petition presented within three months after the date of making, taking, paying, or suffering the same, be deemed fraudulent and void as against the trustee in the bankruptcy. ” (2) This section shall not affect the rights of any person making title in good faith and for valuable consideration through or under a creditor of the bankrupt.” It will be seen that the section (as an amendment upon the Act of 1883) brings in as fraudulent a preference to a surety for the bankrupt’s debt to a bank. If a debtor pays off the debt and becomes bankrupt within three months the trustee will require payment of the money; and if money belonging to the debtor’s estate is used to release a surety, the trustee will call for that money, and in the meantime the banker will have cancelled, or given up, the guarantee he held for the security. The doctrine of fraudulent preference has become extremely technical, and although in a general way it is easy to see what is aimed at, it is not always so simple to bring the matter home to the person charged. In any case it is to be observed that the consequences must be entirely voluntary, otherwise no fraudulent intent will be presumed. The burden of proving that a preference is fraudulent is always on the trustee in bankruptcy. Fraudulent preference arises in the case of the winding up of a joint stock company as well as in the bankruptcy of individual persons. By Section 210 of the Companies (Consolidation) Act, 1908, it is provided ” (1) Any conveyance, mortgage, delivery of goods, payment, execution, or other act relating to property which would if made or done by or against an individual be deemed in | his bankruptcy a fraudulent preference, shall, if made or done by or against a company, be deemed, in the event of its being wound up, a ‘ fraudulent preference of its creditors, and be invalid accordingly. (2) For the purposes of this section the pre, sentation of a petition for winding up in the case of a winding up by or subject to the supervision of the Court, and a resolution for winding up in the case of a voluntary winding up, shall be deemed to correspond with the act of . bankruptcy in the case of an individual. (3) Any conveyance or assignment by a company of all its property to trustees for the benefit of all its creditors shall be void to all intents.”

Although the name freehold property is most J commonly applied to estates in fee simple, that is, j those estates in which the holders have, as far as the English law will allow, an absolute property ‘ and can dispose of them almost exactly as they i please, by conveyance or will, estates of a less ] degree are equally entitled to the name of freehold. Thus, a tenant for life or a tenant in tail has a j freehold, but when the holding is for a limited I period, as under a lease, the estate is not one of I freehold. The name appears to be derived from ‘ the fact that the person who holds the estate holds it direct from the Crown, and that the estate : was formerly held on services that a free man | 1 could perform. In almost every case, whatever I services were once due to the Crown have been 1 terminated. (See also Auditing, pp. 91 and 96 ; Balance Sheet, p. 144.)

These are societies which are formed for the benefit of the members of the same during periods of illness, in old age, and for the assistance of the widows and orphans of the members, and also for other similar purposes. These societies are governed by various statutes, the principal of which are the Friendly Societies Act, 1896, the Collecting Societies Act, 1896which has, however, only a modified applicationand the Friendly Societies Act, 1908. It was the scandal so often mixed up with societies of a mutual benefit character that led to the introduction of legislation upon the subject, and consequently it is to the Acts of Parliament themselves that reference must be made in order to learn the various rules which are applicable to these combinations. All friendly societies are now supervised by a central office, with a chief registrar and assistant registrars, and this office prepares forms, approves rules, publishes statistics, and generally controls the working of the Acts. The rules are the basis of everything connected with the working of the society in every detail, and these alone can give full information as to the rights and benefits to be 1 enjoyed by the individual members.

The cost of fuel is a manufacturing expense, and the balance of the account, after being credited with the stock of fuel on hand, should be charged against the Manufacturing Account. The outlay on fuel should bear a fairly constant ratio to the output of manufactured stock, and this fact enables the auditor to make an additional test of the accuracy of the charge. It is necessary in applying the test to take into account the rise and fall in prices of fuel. Consequently, the test would be more effective if applied to the quantity of fuel consumed, rather than to the value. Where there is no direct relation between the fuel consumed and the output, then the cost or quantity consumed ” per week” may be compared for checking purposes.

Accounts which will in the future be due to the owners, owing to the carrying on of their business.

A price too high for the time; not consistent with existing conditions or with prices of similar or other securities.

Money which a government declares shall be accepted as legal tender at its face value; money issued by a government which is supposed to have the power to enforce its acceptance, within its own dominions, in payment of debts. As geierally understood fiat money has no real value, or at least lesser value than its face. In the latter case, the difference between the real and face value is fiat money.

This term as commonly understood in reference to the coinage question, means the right on the part of any person to deposit standard silver bullion at any of the United States mints in any amount, and have the same coined at the Government’s expense; the depositor receiving in return for his bullion silver coins containing in total the same weight of fine silver as brought by the depositor. Free Tontine Insurance. See Tontine Insurance. Freight Density. The same as ton miles per mile of line. It measures the general volume or density of business done. To find the freight density, as it is called, of a railroad* divide the total number of tons (for a given period) carried one mile (or the ton mileage ) by the number of miles of line operated. Example: Take a railroad 100 miles long. Suppose, to make it as simple as possible, that all freight carried was for half its length, and that in a year 1,000,000 tons were hauled the 50 miles. This would give 50,000,000 tons hauled one mile; i.e. 1,000,000 tons hauled 50 miles is the same as 50,000,000 tons hauled one mile. Dividing this ton mileage by 100

Another name for a paying teller

High priced stocks which are looked upon as safe and desirable investments are what the investment banker understands by this term, but the stock exchange man thinks of a stock high in price and the quotations of which fluctuate widely as the result of manipulation.

A term sometimes used to designate the four great banks of Germany having D for the first letter of their corporate names, viz., the Deutsche Bank, the Dresdener Bank, the Direction der Disconto-Gesellschaft and the Darmstadter Bank, ordinarily known as the Bank fur Handel & Industrie.

In general this refers to foreign exchange, as explained under Exchange; but legally in this country, a foreign bill is any bill of exchange drawn outside of the State in which it is made payable. For example: One drawn in San Francisco and payable in Sacramento is an inland bill, but one drawn in San Francisco and payable in Salt Lake City, or drawn in Salt Lake City and payable in San Francisco, is, in each instance, a foreign bill from this standpoint.

During the winter of 1905-1906 there was a considerable agitation on the subject of forged municipal bonds, and numerous instances occurred causing serious loss and inconvenience. There are several ways in which this sort of forgery can be accomplished. As a municipal bond is not customarily executed upon protective paper, such as must be used for securities to be listed upon most stock exchanges, many being lithographed and perhaps only printed, any ordinary printing establishment being employed for the purpose, there is very little standing in the way of the reproduction of the actual form of the bond itself, the signature of the coupon being’almost invariably a facsimile of that of the official required to sign the same, and not a pen and ink signature. Again, a good many smaller municipalities may leave the furnishing of the form of bond entirely to the banker, who may, with ease, have more bonds printed than required. Now, as to the attaching of the signature and seal. The latter is of no great difficulty, as a reproduction of the seal can most generally be made without much trouble. The signature, or several such, upon the face of the bond may be easily accomplished, as there is not great need of a careful imitation of the genuine. Bonds are not like a check, and the signatures ordinarily do not have to pass the scrutiny of some one familiar with the handwriting of the proper signers. It will be seen that all the above is easily within the ability of a fairly clever dishonest person. When the first coupons mature, however, if collected through some other source than the party who forged them, the forgery will be detected; but, in the meantime, dishonest ends may have been accomplished. There is one way which the purchaser of a municipal bond may reasonably satisfy himself as to the genuineness of the signatures. When the bonds are taken up and paid for by the banking house originally purchasing them, they should be accompanied by a paper, known as a signature certificate, upon which should be the pen and ink signatures of each official required to sign the bonds, which signatures should be attested as genuine before some bank official in the city or town from whence the bonds emanated or by a notary public located therein. This signature certificate, when carefully compared with the signatures upon the bonds, will prove pretty conclusively as to whether or no they are spurious. Bonds which have been outstanding for some years, and upon which it is reasonable to suppose that the coupons have been collected from time to time, would hardly require the taking of such precautions as above suggested, as it would be a reasonable certainty that forgery would have been long before detected. This all, therefore, applies to bonds of comparatively recent issue, or what may be termed new issues. The proper remedy for all this is for the several States to enact laws, as has already to a limited extent been done in at least one of our States, which should provide for the examination of each issue as to its legal status by the attorney-general, or some proper authority, and thereafter should bear a certificate to the effect that each bond had been so approved. Or, at least, laws should be passed whereby each bond issued by a municipality in any given State should be examined and found genuine by the proper State official and attested to that effect and sealed accordingly. Whereas, such bonds) perhaps, would not be entirely beyond forgery, it would make such an act difficult. This having them countersigned, as it were, is worth attention, as it brings into play the same precaution as taken by many banks and corporations in countersigning all checks. The question may be raised: Why does not the same argument apply to corporation bonds? It will be observed that corporation bonds bear a certificate of the trustee, which is a safeguard somewhat similar. to that suggested above. The purchaser of bonds of any kind should examine them very carefully to see that all signatures are attached, or seals placed thereon, if any are required, and that any certificates, such as a trustee’s certificate, are signed. It is uncommon to find that any bonds have passed through the hands of reputable bankers with any of the above essentials omitted.

Puts-and-calls and spreads at prices considerably at variance with current market quotations.

A rising and falling in prices. Fluctuations were narrow; this indicates that the changes in prices by advancing or declining were very slight.

The English term for all foreign railroad securities, although the London stock broker is usually a little more explicit, using the term Cuban Rails for railroad securities of Cuba; American Rails for our own; and so on.

Same thing as a two-dollar man. Floor Traders. Those upon the floor of the stock exchange who buy and sell securities for their own account, being members, of course, of the exchange. They are sometimes called room traders.

Prices for bar silver, or for any commodity for future delivery.

These letters stand for free on board. F. 0. B. Detroit, meaning that the shipper in Detroit will make no extra charge for delivering the goods on to the vessel or car.

Strong; tending upwards; not declining. The stock market is said to be firm when there is no tendency towards a decline in prices; a condition of stability existing. Money is firm when interest rates for loans are higher than the average. Prices are firm when inclined to rise, or at least, remaining stationary. (See Offered Firm.) A partnership of two or more persons for the carrying on of any business, as distinguished from an incorporated company. An agreement, generally to exist for a specified time, is drawn up and signed by the several partners, setting forth the rights of each. This .is called a partnership agreement. (See also Special Partner.)

The floor of an exchange; the place where the trading is done.

To float a company means to sell its stock or securities; thus raising needed money for capital, etc.