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What would you do?
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I am interested to learn what others would do in my situation.

I recently took over a client from an accountant for their end of year and SA tax return completion.  They are only a small firm with simple finances and did not wish to continue paying an accountants fee.

When I have examined the file I was shocked to see that the last years accounts were completely fabricated! This accountant has been acting for 10 years and the other years seemed fine but last years profit was reduced by £13,000.  The original set of accounts are in the file with + figures for how much has been added to each of the expenses to produce the final set which were submitted to the client and transferred to the SA return.  

Am I being completely naive or do others think this is shocking.  I really feel I should advise the client but as I am the much less experienced one I do not wish to create an issue.

What would you do?

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kjmcculloch


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Two things spring to mind.

Firstly, your client is responsible for his/her tax return regardless of who completes it.

Secondly, think Money Laundering regs!  Or rather the proceeds of crime act.  Is tax evasion a crime.  Yes.  Report 'em.

From where I'm sitting I don't think you have a choice.

And remember not to say to them!


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Kris McCulloch 
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Many thanks Kris

I do agree with you, however I feel very sorry for the clients who are blissfully unaware.  They seem as though they wouldn't have a clue how much they earned or how to read accounts and have had full faith in their accountant

They would never have seen the file, having been transferred straight to me from the accountants.

I'm amazed that an accountant would even leave that evidence in the file!

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kjmcculloch


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I don't always agree with the law. It's hardly money laundering, but seems to come under the act leaving us no real choice.

On the upside I've always fun HMRC to be helpful. If your client is as clueless as you say, they'll realise that. It's better the client pays now while there's some profit about than years down the line where times may not be as good.

The other bonus is if the tax man comes knocking now they may still be able to claim at least their fees back from the accountant.

Kris

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Kris McCulloch 
Tel: 01563 370123

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lots to learn


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You must be an early riser Kris!

Your right, I think I need to prepare myself though. Thanks for your input

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kjmcculloch


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Yeah, had a client visiting at half eight. I normally don't do mornings, lol.

The good think is, as I understand, the client wont find out who reported them.

So I don't think you'll lose the client, and you'll probably get the job putting last year right, so bonus!

Kris

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Kris McCulloch 
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orange


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have you asked your client if they know about the adjustments? it may just be a late adjustment that was made. Do you have a tb that matches the numbers submitted, you could just find the credit side sitting as an accrual for costs relating to the year in question that came in late.

the first step isn't to report this to HMRC, you'll probably be left with egg on your face and your client realising why the accountant was charging more than the bookkeeper!!



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BackOfficeGroup


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are the adjustments due to incomplete records?

please do not just jump to conclusions that may be false - there may well be a perfectly feasible explanation and unless you ask, you will never know.

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kjmcculloch


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Be wary. Tipping off is a crime too.

We only need to report suspicions, but my understand?ng is we must do it without dely.

Kris


-- Edited by kjmcculloch on Thursday 27th of August 2009 12:59:32 PM

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Kris McCulloch 
Tel: 01563 370123

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BackOfficeGroup


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so is that a suspicion with proof or just a thought?

this is obviously where it gets confusing - without delay? - you surely need to be sure and for that you need to do some due diligence, which takes time?

maybe I'm wrong, as I havent read the ins and outs as yet!

P

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kjmcculloch


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No, you don't need any proof whatsoever. I was the manager of a credit union for some time. For those who don't know a credit union is a member owned community bank. They were governed by the FSA and took money laundering very seriously.

You only need to suspect money laundering. You are obliged to report this to the Serious and Organised Crime Agency. THEY and only they investigate it. Don't concern yourself with investigating and due diligence. After the report the chances are you will hear nothing more about it.

If it's unfounded they'll deal with it. Your responsibility ends when you report it.

I think the key here is "If in doubt, report it". You wont get into any trouble if you report a suspicion that turns out to be nothing. You will if you knew and didn't report it, and it turns out to be something.

Kris

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Kris McCulloch 
Tel: 01563 370123

The views expressed in this post are my own personal (HRA protected) views, and are not representative of any organisation I have any involvement with.
lots to learn


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Thanks for all your input everyone, I want to look at these accounts very closely so I dont get egg on my face!


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rowets


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Have you done anything about this one yet?

I agree totally with BackOffice and Orange on this one and I think you should tread carefully. Every Accountant has their own way of working and there may indeed be a perfectly good and proper explanation for the adjustments, although I agree it does seem a little strange.

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Tim Rowe
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Hi Tim

I have examined the accounts with a fine tooth comb.  The simple truth is that this accountant has been doing the account for 10 years in the exact same manner and it is only the last years in question but they are certainly fabricated.  All the evidence backs up the original copy and amounts have then been added in brackets to reach the figures which were submitted on the tax return.

The accountant has now given up practice and I feel at the point in question they were aware that they were not practicing for much longer and simply didnt care.

Don't really want to be involved but as I am have no option but to make the call!

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Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
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