270)
MAJORITY REPORT
669. In the same statement we are told that, when regard is
had to the aggregate amount involved in the annual transactions
with State Insurance funds, the amount adversely reported upon
is almost negligible. In 1924, on an expenditure of £19,000,000
audited in that year only £3,878 was thus reported, a rate of
4s. per £1,000. This figure shows, we think, reasonable ground
for feeling that the accounting of Approved Societies is performed
with honesty and accuracy.
670. The cases of fraud or failure in Insurance Committees’
accounts are also few in number, and we think that that side
also of the financial machinery may be regarded with satisfaction.
EMPLOYMENT OF PROFESSIONAL AUDITORS.
671. In connexion with this branch of the work, one witness,
Mr. John Reid, speaking on behalf of the Chartered Accountants
of Scotland, placed before us suggestions directed to a funda-
mental change in the system of audit. (App. LXXIX; Q 20,342-
20,5634.) The provisions of the original Act of 1911 required
that every Approved Society and every branch of an Approved
Society should submit its accounts to audit by auditors to be
appointed by the Treasury (Section 35), and there was a similar
requirement in the case of the accounts of Insurance Committees
(Section 60). So far as the express provisions of the Act are
concerned, it would therefore have been possible to adopt the
procedure which in fact governs the audit of accounts of Friendly
Societies under the Friendly Societies Act, whereby, unless the
alternative of a lay audit is adopted, the audit is made by a
person selected from a list of professional auditors drawn up
by the Treasury. In fact, however, a special Audit Department
was set up for the purposes of National Health Insurance so that
the audit was conducted by civil servants and not by auditors
or accountants engaged in ordinary professional practice. The
establishment of such a department, it will be observed, was
consistent with, although not required by. the provisions of the
original Act.
672. The point urged on our notice by the Chartered
Accountants of Scotland was, briefly, that the disadvantages
inherent in the present system are so great that the National
Insurance Audit Department should be abolished and arrange-
ments made for the work to be done by professional auditors as
part of their ordinary practice.
673. In considering this question we are not a little influenced
by the fact that the determination to establish a full-time service
was not arrived at hastily or without mature deliberation. On
the contrary it was only after carefully weighing the expedience
of adopting other methods that the Inter-departmental Com-
mittee of 1912 recommended the adoption of the svstem now in
