Shortly after the Birmingham Corporation Savings Bank (BCSB) commenced business on September 29th 1916, the City Treasurer (T H Clare)
presented a report to the Bank's Management Committee meeting on October 10th 1916, that included the following:
Treasurer reminds the Committee that the regulations provide for the appointment of an auditor or auditors. It would be convenient
if the appointment were made at an early date, in order that the arrangements for internal audit may be made to co-ordinate with that
carried out by the official auditor.
At the same meeting, the Manager (J P Hilton) also presented a report:
AS TO AUDIT ARRANGEMENTS.
1 The Rules require that the audit shall take place yearly and in my opinion this is adequate
for the purposes of a Savings Bank, inasmuch as there are no intricate account books to be kept, and existing arrangements provide
for daily checkings and balancing.
2 The audit should be held, say, one month after the close of the half-year, and
notice given to the Manager as to the date of commencement of same.
3 The Manager should give public notice of the audit and
depositors should be asked to bring or send their Pass Books to the audit for examination so as to procure as many Pass Books as possible
for examination and inspection by the Auditor.
4 The success of the Bank depends to a large extent on obtaining and retaining
the confidence of the depositors, and any knowledge regarding the transactions should be limited so as to minimise the risk of disclosure.
From the wording of the Rules and the general expressions in the Act and Regulations, it is implied that the Auditor should be someone
quite distinct from the Corporation, and, in my opinion such an appointment would tend to create a feeling of confidence amongst depositors.
Upon the subject of internal audit I would remark that under Rule 5 of the Regulations I must not allow access to the Bank or any
books or accounts in my custody except to officers of the Council appointed to assist in carrying on the Bank; therefore, for any
internal audit arrangement it would be necessary for such officers to be individually appointed for the purpose. Any advantage which
may accrue from an internal audit system are, in my opinion, more outweighed by the dislocation of work which such an audit would
7 Surprise visits by an internal audit staff, while being a safeguard where large undertakings are concerned,
appear to me to be totally unnecessary in connection with the Savings Bank, for the following reasons:-
(1) The coupons are kept
by the Treasurer and only a limited supply made to me for counter purposes.
(2) Any takings at the counter are banked the same
day or first thing on the following morning, while the cash book is balanced and the cash and unused coupons handed to me after each
(3) The Treasurer receives direct from Lloyds Bank particulars of any sums paid in by me, and
The Petty Cash account is too small a matter, as only £5 requests will be made to the Treasurer.
The rules shall provide to the satisfaction of the Chief Registrar of Friendly Societies for the
examination and audit of the accounts of the savings bank by a qualified accountant once at least in every year.
The committee shall appoint annually one or more chartered or incorporated accountants as
auditors, but not out of their own body, to audit and examine the books, securities and vouchers and to report in writing to them
not less than once every half-year. Such accountant or auditor shall (inter alia) examine and test the accuracy of the cash books
and ledgers, and shall certify as to the correct amount of the whole liabilities and assets of the bank. A retiring auditor shall
be eligible for re-appointment.
Although the Regulations and Rules that governed the operation of the Bank were quite specific
that a half-yearly audit was required to be conducted by a qualified accountant from an outside body, the Committee (perhaps confused
by the arguments relating to an internal audit) resolved at their October 10th meeting:
That the consideration of the half yearly
and internal audit be deferred until a later meeting.
That meeting was held a few days later (October 19th) when it was resolved:
Mr Johnson of the Treasurer's Department be appointed to audit the accounts of the Bank.
Although that resolution does not specify
whether Mr Johnson's appointment is as internal or external auditor, his employment in the City Treasurer's Department would seem
to preclude him from being the Bank's external auditor as required by the Rules and Regulations. However, at a meeting of the Consultative
Sub-Committee held on April 18th 1917, the Chairman (Alderman A D Brooks) submitted a letter received from Mr Johnson relinquishing
his duties as auditor subsequent to his being granted a commission with the military authorities, and being posted to France.
Consequently, the Consultative Sub-Committee resolved:
that steps be taken to secure the services of a Chartered Accountant as
Auditor, and that the matter be referred to Mr Chamberlain and Mr Councillor Appleby to consider and recommend the name of a suitable
person or firm.
At the next meeting of the Consultative Sub-Committee (June 21st 1917) the Chairman reported that he had been
in communication with Messrs Agar, Bates, Neal & Co, Chartered Accountants, of Edmund Street, who were willing to act as auditors. The
General Committee were recommended to approve this firm to audit the accounts of the Bank up to 31st March last, and the question
of fees be left to the Chairman and Mr Councillor Appleby to arrange.
On June 28th 1917, the General Committee approved the appointment
of Messrs Agar, Bates, Neal & Co, but the question of their fee was left to the Chairman in consultation with the City Treasurer.
The appointment of this firm of Chartered Accountants satisfied the requirements of the Bank's Rules and Regulations, particularly
as they were required to retrospectively audit the Bank's first half-year of trading to March 31st 1917.
In due course, the auditors
produced accounts for the half-year ended March 31st 1917, attached to the following letter: