I haven't come across this situation before so any pointers would be handy please.
I've just taken over some Ltd accounts from a ACMA member; to say they are wrong would be an understatement. (Interestingly, he also doesn't get clients to sign a terms of engagement letter or carry out MLR procedures but that's another story.) The accounts have been accepted at CH and the CT paid. Do I just leave well alone and iron out the errors in this years accounts to get to correct balances or should the previous year be redone and resubmitted?
Have only previously had this situation in regard to sole trader accounts so this is a new one for me.
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
I suppose it depends how fundamental the changes would be, and whether the client would be willing to pay - again - to get the figures right.
Thing is, you may not know how wrong the accounts/tax are without doing the work!
Strcitly speaking, if they are wrong under the CH, they should be done again. HMRC don't really care, they're just bothered about getting the CT. If the tax has been understated, they may launch an investigation to get the tax, but they're not fssed about the accounts being redone.
You may want to point out some of the risks to the client, one of which being that the previous accountant is found out and HMRC launch investigations in repsect of all accounts prepared by this person.
Ultimately, my gut feeling would be that the client won't want to pay to get them done again. You then have to risk the ML implications.
I have to agree with gbm. I've even had draft accounts sent to me by a FCA, who refused to finish them due to a falling out with a client. He very kindly gave me his working papers and there were errors, but cause by his not asking the client questions. Because these accounts were late I was able to correct them etc. Sometimes its simply because the client does not supply enough information to the accountant, who in turn just does not ask enough questions.
But it is best to move on and just make sure the accounts you do are correct. Making sure you note any adjustments which should have gone into the previous year in case HMRC find out. That unless the amounts involved are large and the client is prepared to pay for it.
I have never used formal letters of engagements in the 25+ years of being in practice and never had a problem. I have ML procedures, but many clients would not be aware I have simply because of the way I do them - as my procedures depends on the client.
These are pretty glaring errors, for instance he has used a balance as the closing bank balance which was actually from 6 weeks prior to the date, not accrued his accountancy expense, missed out expenses etc. I appreciate that the clients are often to blame but not in this case. He also had the wrong date of birth for the director on the AR which as he never got the client to check it, or had any ID from the directors has only now been picked up. It's a catalogue of errors really.
Thanks both for your advice, I will discuss with the client and more than likely amend in the current year as the cost of redoing it all would be greater than the cost of the CT they would get back by the accounts being correct.
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
