Act of 1939 specified that the issuer of securities must show compliance with the rules and regulations and be subject to verification by accountants. The Act prescribes that, “ Each certificate or opinion with respect to compliance with a condition or covenant for the indentured shall include (1) a statement that the person making such a certificate or opinion had read such condition or covenant; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinions of such person, he has made such examinations or investigations as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with (Staub, 1942).” This provision placed the foundation of the modern independent auditor report into the mainstream business world. The issues of fraud and the Investment Company act will be the big issues of the 1940’s and 1950’s.The 1940’s and 1950’s: Issues of Fraud and More ActsThe Investment Act of 1940 was a new branch that extended from the Securities and Exchange Commission. This Act of 1940 was concerned with the function and activities of investment companies’ and trusts’ policies. Studies found abuses in these companies when they were popular during the 1920’s. The investment trust stocks values would rise rapidly, well beyond inflation and normal appreciation, during the 1920’s and fall just as hard during the 1929 Stock Market Crash. The Securities and Exchange Commission saw the need for more protective measure for the public. Now not only financial statements were to be filed with the Commission, but also they would be required to be given to the s...
