How do you tell them? - The Book-keepers Forum (UK)

Lisa Jo · Senior Member

How do you tell them?

Shamus · Forum Moderator & Expert

Hi Lisa,

As you appreciate per FRS18, accounting policies. Revenue and expenditure must be matched to the period to which it relates. To not do such is false accounting and the financial statements will not give a true and fair view of the entities affairs as of the balance sheet date.

The directors. not the accountant or bookkeeper is responsible for the preparation of the financial statements even where the work is performed by others on their behalf.

To manipulate profits in this way can see the director struck off from being a director and banned from further directorships.

Where such may be deemed a tax avoidance matter then this may be caught under money laundering regulations and penalties imposed based upon that.

HMRC is becoming stricter with imposing penalties, surcharges and interest. They will not be very lenient towards someone attempting to defer or avoid the VAT liability (I'm reading here defer).

Under money laundering regulations you are obliged to make a report of the clients behaviour but of course you are not allowed to tell him that you have made a report.

As the deed has not yet happened perhaps it would be a good idea to explain to the client that tax evasion is a money laundering offence. It might also be worth mentioning their fiduciary duty of care.

It might also be worth mentioning that acts by a director in breach of their fiduciary duty may lift the protection of the veil of incorporation and HMRC can come after the directors personally rather than the company for cases of fraud.

From the directors perspective he probably doesn't believe that he is doing anything wrong and assumes that he is just manipulating the profits for the benefit of his company. This is a dangerously misguided notion on his part.

If the client still doesn't listen after hitting him with the frighteners speak to the clients accountant about it. As you both represent the client this should not affect you duty of confidentiality but it might be worth just running that past the IAB first.

Hope that this proves helpful and more to the point hope that your having a good Easter apart from this Lisa.

Talk later,

Shaun.

Lisa Jo · Senior Member

This is exactly what I thought Shaun, I'm not one to support tax evasion as its money hes earned on top, I will speak with his accountant & he may advise me to net off and invoice the customer anyway (I hope so), I don't know what gets into some people, thinking that they don't have to pay. I can understand an invoice being put through to next quarter to level out whats being paid but this is his financial year end & I've told him how if would affect his profit & loss, if these accounts were "supposedly" put into companies house they would be on him like a ton on bricks, its obvious that things just dont add up. Will keep you posted.

Wella · Expert

Shamus wrote:

.......
The directors. not the accountant or bookkeeper is responsible for the preparation of the financial statements even where the work is performed by others on their behalf............

Hi Lisa

I personally, would not knowingly making false entries in the accounts. Regardless of the fiduciary responsibilities of the director or the guidance of the accountant (he's not the one making the entry and could deny all knowledge), I am sure he will support you though.

I think that HMRC would consider that all parties carried responsibility and at the very least would consider aiding and abetting. Then there are the MLR to consider.

I know you are IAB but there has been a case of an ICB member being "struck off" and fined (by the ICB) because he did exactly what your client is asking you to do, he made deferred entries for VAT to help his clients cash flow. They don't say if legal action was taken . I'm guessing IAB have similar penalties

I hate these type of situations, and it is totally unfair of the client to put you in this position. To go back to your question, in your situation I would do as Shaun suggested and tell him straight about the implications. If this does not change his mind, then I would tell him that I wont make the entries.

Bill

-- Edited by Wella on Monday 5th of April 2010 09:45:52 AM

Lisa Jo · Senior Member

I know exactly what you mean, Im going to give him some straight talking, he either gives me the invoices to put on & match up to the payments, I will prepare his vat for him & at the end of the day if he doesnt want to pay this then thats upto him I just want to get on putting the financial information together. I think maybe I will get something typed up whereas I advised him that invoices would have to be entered & h refused to give these to me. How ridiculous is this? No, youre right guys, I shouldnt be placed in this position.

Shamus · Forum Moderator & Expert

Hi Bill,

not suggesting that we would ever do anything that we did not believe to be completely honest, open and above board.

My comment about directors fiduciary duties is that the directors believe that by having representation in the form of an accountant or bookkeeper that they absolve themselves of their responsibility for the financial statements.

This is not true. Errors or omissions in the financial statements remain the responsibility of the director, not the accountant / bookkeeper.

After all, the director has signed the accounts to agree that they are a correct representation of the entities affairs during the period.

In the case of this proposed act of dishonesty as you state to comply with the request would make one part of the problem. However, it's probably going through the directors mind that if you do so then you are then responsible for the misleading entries in the accounts, not them.

The reality is that they never cease to be 100% responsible for the contents of the financial statements regardless as to who makes the entries and they need to be made aware of that.

I would not for one moment however suggest that any of us actually make entries that we know to be false as that would quite rightly result in our being struck off by our supervisory bodies and also suffer the financial penalties of bringing the profession into disrepute.

Hope that it's clearer this time what I actually meant by my comments which were all aimed at ensuring that the client realises that there is nothing that they can do to absolve themselves of their directors responsibilities.

Phew, take one day off and suddenly I can do big words again!

Hope your having a good one matey,

Talk later,

Shaun.

Wella · Expert

Hiya Shaun

Never took it that way, in fact I nearly put a similar statement in my reply to Lisa. After re reading it, it sounded like I was saying the same to Lisa, which I wasn't!!

As we have said before, it is difficult sometimes to explain something in a post with out it coming out all wrong but I think we all get the idea on this one.

What I was trying to convey was the opposite end of the spectrum to your point. Any bookkeeper who feels pressured to make a dubious entry, will not escape responsibility, or liability for their acts, if it hits the fan. Regardless of the fact they were pressured to make the entries. I'd rather lose the client than liberty (or my money).

I think the only way you could escape penalty would be to be to inform the relevant authority. A bit like the bank that recently got no action against them for breaches of the competition act because they turned whistle blower first. Was it RBS that got all the backlash for that?

Anyhow, I had a good weekend, thanks. How 'bout you? Did it stay a chill out weekend?

Bill

Shamus · Forum Moderator & Expert

Hi Bill,

In sunny Lincolnshire for a couple of days. My boy was supposed to go there for a few days hol with the grandparents but he got upset about it so ended up coming back with me again.

Nice in some ways that he hates leaving me so much but in others it makes it a bit difficult for when I have to work away during the week.

I'm completely with you but I think that we're in a minority of bookkeepers who approach clients from the perspective of absolute confidence that we are telling our clients what will be, not asking them.

I know however that many of our number will pretty much do as a client asks without questioning it. Its very much a case that a little knowledge is a very dangerous thing.

Hopefully this thread will be widely read and people not as well informed as Lisa, You and myself will realise the financial and other implications of blindly following the requests of the owners of the businesses that we service.

As ACCA we get ethical scenarios beaten into us in just about every exam. Does the ICB cover this important area at level III or was all your knowledge picked up in the real world and other reading Bill?

Shaun.

Rhianrach · Expert

Got to say that this thread is a bit of a worry.

From what I can see, it's not actually a good idea to start bookkeeping on a self employed basis until you've had a lot of experience and got some good sound qualifications under your belt, and a thorough understanding of your liabilities.

I didn't realise you could get in so much trouble.

Steve

Wella · Expert

More a case of real world experience in a different industry. It's an area not covered too well in the ICB syllabus.

Also my favourite mantra, "If it aint't right, it's wrong"

You may have guessed I'm also a bit OCD and do not like grey areas

Have a good evening

Bill
Only a month to go and my opinion will count

Shamus · Forum Moderator & Expert

Hi Steve,

Your not alone, I think that it would come as a surprise to many bookkeepers how many rules and regulations exist around their world.

The more that I get involved with the bookkeeping side of things the more that I feel that we all need, to some extent, to be accountants.

I really feel that the level of knowledge of the likes of Bill, Rob, Sheila, Lisa and myself is pretty much the level that is needed to work as bookkeepers on a freelance basis but it often seems that we border on the realm of accountancy and well beyond the ICB sylabus.

Thats not saying that we all need to be ACCA / ACA. Someone qualified under AAT is also an accountant. Also, the IAB seem to have embraced the wider scope of the AAT syllabus and even have exams in international financial reporting standards.

As Bill states the key though is real world experience. As you'll note from some of the debates on here there are often many different but equally valid ways of looking at a situation. I think when you can give sound and reasoned debates in the forums then your as ready as you'll ever be to work on a freelance basis.

That's not saying that one cannot have a successful career as a bookkeeper without the extra baggage that some of us carry around. But you would be in more danger of falling foul of some of the rules and regulations that are not exactly widely known beyond our business.

Personally I would never advise anyone to go straight from a bookkeeping course to self employment but it's one of those cases where one rule doesn't fit all and I am sure that there are many success stories of people who have done just that.

Maybe Bill and myself should start a bookkeepers finishing school!... Or as I've said before, just start our own supervisory body. (Don't worry, Robs "There or Thereabouts" methodology would be an options paper!).

Rhianrach · Expert

I think i'll go get a job with someone first, my methods require some polishing I think, (you really wouldn't want to see the audit trail of the books I've been doing, The accountant is going to either laugh or cry but definately charge smile

), however it does all work out (almost to the penny....... well pound ish ) which is good.

I like the "There or Thereabouts" method sounds good to me biggrin

Steve

semsley · Guru

No. no, no, no, no, there's not there or thereabouts - many's the time I've spent hours trying to find why a TB was 1p or 1d out. It's not oh it's only a penny it doesn't matter - there could be other underlying errors which lead to that penny and it's your job to find out. Mrs Pedant.

Rhianrach · Expert

semsley wrote:

No. no, no, no, no, there's not there or thereabouts - many's the time I've spent hours trying to find why a TB was 1p or 1d out. It's not oh it's only a penny it doesn't matter - there could be other underlying errors which lead to that penny and it's your job to find out. Mrs Pedant.

TB is fine (thankfully) the where or whereabouts is the cash account which is a couple of pounds over which I know full well will be a payment made but no receipt which means that they will have to put it in out of their pocket. Everything else is fine and dandy so far, of course I don't get paid so I am allowed to leave it to someone else to untangle my rather complicated yet strangely nice on the eye (red and black stripes are nice) audit trail, the reason for this is another story. wink

Given the chance though I would love to start from scratch again and make it the neatest and tidiest set of books on the planet. smile

In fact I'm sure on sage there is both cash or accrual schemes and then the third option is there or thereabouts, could be mistaken.

Steve

-- Edited by Rhianrach on Tuesday 6th of April 2010 07:56:03 PM

Shamus · Forum Moderator & Expert

Hi Sheila,

I'm with you. The whole idea of there or thereabouts sends shivers down my spine.

I even hate the fact that VAT returns make me round figures!

And as for accountancy exams where you round to the nearest hundred or even thousand when your used to banking where your working in billions but still track down penny variances! Uurgh, its just not right! Not right at all... But, for accountancy it does all come down to materiality so in a way there is a place for Robs there or there abouts... Just not at the bookkeeping stage.

Wella · Expert

semsley wrote:

No. no, no, no, no, there's not there or thereabouts - many's the time I've spent hours trying to find why a TB was 1p or 1d out. It's not oh it's only a penny it doesn't matter - there could be other underlying errors which lead to that penny and it's your job to find out. Mrs Pedant.

I am a fully paid up member of the Raquel fan club

1d - weren't they a lovely coin, made from real solid copper, unlike the steel cored, copper washed things we have now

RobH · Expert

Does anybody want TOTA after their name? I shall soon be running courses via HLC for a mere snip at £999!

Rob BA (hons) Att Mippm (Dip) TOTA

Shamus · Forum Moderator & Expert

you forgot F4AA

RobH · Expert

Ah the most important one Shaun, but I was there or thereabouts!

Lisa Jo · Senior Member

I have today called his accountant & advised that our mutual client is refusing to give me invoices (to pay vat on) & refusing to supply remittance advices (for subby tax), he advises that I have to tell customer that he MUST supply these before I can prepare year end. I have explained that I could lose my licence if I did not report client for tax evasion & he says that perhaps I should explain this to him & supply a copy of MLR to him advising that I'm covered & must report under these regulations. This client doesnt have any other debtors and on the TB the debtors are in credit, I mean, truly the customer wouldnt want these going to Companies House as its obvious hes been "cooking" the books. The balance sheet is coming up with a massive loss (obvious no assets or depreciation have been entered yet)

Thing is, this is one of the "olde worlde" clients that perhaps in the past he could have got away with. Why pay a fully qualified bookkeeper to prepare all your accounts and then dont bother listening to what I'm asking for? Yes, I agree with the comments also that a lot of "bookkeepers" just seem to think its all about just entering sales/purchases but, in my experience if you dont understand the underlying principles of accounting then you wont go far. Im going to drop in on him tomorrow, Ive already e-mailed to say that Im coming to collect the stuff I need & well take it from there. Watch this space, Im not getting into trouble for no-one..

RobH · Expert

Stick to your guns Lisa. Perhaps when you see your client suggest he calls the accountant for further advice and maybe he will listen to him/her.

Alternatively, and no doubt the purists will have me for this, tell him to raise the invoices, let you prepare things properly. If he doesn't pay the vat/tax then that is down to him. He can make a 'genuine' error on vat of upto £10k on his vat return so he will need to account for it on the next quarter. But you would have done things correctly.

I can already hear Shaun and Bill battering down my door!

Lisa Jo · Senior Member

No Rob, that is exactly what I said to his accountant & he agreed.. He is the one who writes out the cheques. I'm glad that he has to do his own vat return on line (still awaiting agent code), just give me the information to do the correct financial prep & he can shoot himself in the foot. Just glad that Im thinking along the same lines as yourself, least it gives him another 3 months doesnt it?

Shamus · Forum Moderator & Expert

Rob,

A genuine mistake cannot be planned!

that's it, Bill and myself are off to ACME rampaging mob supplies to kit ourselves out with torches and pitchfork's.

I do however agree with the treatment as suggested by all including the accountant in that you prepare everything properly and if the client decides to ignore your advice then you have done all that you can to try and save him from himself.

What follows is his own doing.

Wella · Expert

Lisa, really glad you are sticking to your guns, perhaps you can hand it over so the client can shoot himself in the foot with it.

Shaun, being a country boy, I already have ample supply of pitch forks, so don't bother buying one, you can have one of mine. I was considering chopping my burning torch for a thermal lance, as they tend to be less discriminating.

Bill

Chillywitch · Member

Hi Lisa

Sonds as if this maybe isn't the sort of customer worth having? I always find it useful in these sorts of matters(persistent "offenders"!) to back up any discussions I have had with a friendly email or something in writing "Just to confirm our discussion this morning blah blah.."At least then you have something in writing as evidence that you did point out the problems etc . Then if the proverbial does hit the fan and he denies you ever said anything.. It's not about not trusting anyone and doing a note on every little thing, it's when no action is taken by someone despite you tyring to help them get it right. I have a client now who is so persistent in failing to provide receipts etc I make sure that I put on my invoices to him"book keeping from information provided" rather than just book keping and I always make him a list each month of missing invoices and copy this to his accountant (we work together on him!). Protecting my own integrity is more valuable than any client could ever pay me- not easy to walk away, but there will be other better clients out there. Sounds as though you are worth more than he can appreciate.... At the end of the day HE is responsible for his business.

Sue T · Veteran Member

"That's not saying that one cannot have a successful career as a bookkeeper without the extra baggage that some of us carry around. But you would be in more danger of falling foul of some of the rules and regulations that are not exactly widely known beyond our business.

-- Edited by Sue T on Friday 9th of April 2010 11:33:21 AM

-- Edited by Sue T on Friday 9th of April 2010 11:34:14 AM

-- Edited by Sue T on Friday 9th of April 2010 12:05:06 PM

Sue T · Veteran Member

Sorry but my IT is letting me down on this forum hence the mess posting above - but as a comment to the above, I believe that if you are paid as a bookkeeper, thats what you should do within the realms of your capabilities, and training, you are not an lower paid untrained accountant so why would you want the extra hassle. Lets face it a builder may be great at his job and understand about construction of buildings but that doesn't make him a Surveyor. If you stay within the remit of your job, stick to what you know and are trained in you shouldn't hopefully fall foul of anything. Saying that I admire anyone who takes accountancy exams and progresses their career if thats what they want. I'll hide now till Shaun comes back, ducking now biggrin

LOL. I've joined as Marlene - has anyone else taken this as their avatar blankstare

Sue

-- Edited by Sue T on Friday 9th of April 2010 12:26:12 PM

-- Edited by Sue T on Friday 9th of April 2010 01:10:18 PM

-- Edited by Sue T on Friday 9th of April 2010 01:20:23 PM

-- Edited by Sue T on Friday 9th of April 2010 01:45:53 PM

Lisa Jo · Senior Member

Thanks Sue, his accountant says that he cant do this. I did follow up with an e-mail as well again telling him I wanted to collect his stuff & he didnt reply, not answered by call on Thursday either, Illmwait for him to call & when the VAT return doesnt go in at eom then he'll be fined, cant say I didnt warn him, year end comes 1st..

Lisa Jo · Senior Member

Well, heres an update, I went in on Saturday & collected his stuff for year end to finish it off. He said he didnt want to put throught the invoices, I explained to him, kindly, of course, that if his accounts went to companies house with a debtor in credit they would be all over his company like a rash. I explained the money laundering regulations & advised him that if he didnt want to put through the invoices then he would have to sign something stating that I had advised him to put them through. I gave him a copy of MLR and hey-ho, came away with the invoices. Ive just spent yesterday running his whole payroll for the year, advised him today what to pay (19th), he has until 22nd to pay electronically, I wasnt giving him any excuse to blame me for having his records. This will be with HMRC quicker than you can say "I havent got the money". As long as I know that Im doing everything correctly then he can do as he pleases..

littlebookkeeper · Senior Member

Good for you, glad your assertiveness has paid off and you got the result you needed

Carole