The two things I noticed missing straight away is "Query with client what exactly the receipts with no shop name are" and "weed out all the receipts where the client is tring to stick in a snickers or new pair of shoes"
Do you have a check list for the SA? To make sure something has not been left off the form which may need to be included?
If you knew the number of times I take on a new client and find the previous accountant missed important stuff off the SA because they never asked the rignt questions and the client was not aware they should mention it. Of course clients that do SA themselves tend to have more things missed that ones from who had someone else doing it for them.
-- Edited by YLB-HO on Sunday 4th of December 2011 01:42:38 PM
YLB-HO wroteOf course clients that do SA themselves tend to have more things missed that ones from who had someone else doing it for them.
But of course less people to sue Frauke.
I would say that from your list pDm the number one most important point from your perspective (not that the other points are not important) is point 6 which in real terms is a Management Representation letter (with copy of accounts attached).
You prepare it, not the client but as though it had been written by the client and then give it to the client to sign clarifying matters in the accounts that were based on :
Management choice of accounting policies.
Accounting estimates including fair value estimates and disclosures
Compliance with laws and regulations
Issues encountered relating to errors or fraud
Knowledge of transactions with related parties.
Going concern assumption
Adherence to the prevelant financial reporting standards.
Managements responsibility for the accounts
That last point always seems to come as a real shock as clients really believe that the responsibility for accounts lies with the person compiling the information where the reality is that it lies with the person signing the accounts.
You would really think that it wouldn't come as that much of a shock as it's also in the engagement letter but it seems that clients often just sign those without reading them as well!
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Shaun
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Those are both very good points and dovetail quite nicely. Frauke, would you be able to share some kind of checklist of questions? Anything you've found to be useful would be great. And Shamus, is there a standard format for this letter? Or is it something I should get a solicitor to draw up for me? Thanks guys, pDm
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my blog "the bookkeeper's in town - learning the hard way"
it's different for every client / engagement and is very much a reaction to how the client management have conducted their affairs in the period.
There will be matters in the accounts where they have perhaps estimated the useful economic life of an asset and all that you are doing is getting in writing the justification behind management decisions made in the form of a letter from management stating why decisions were made by the business.
For very small businesses this is overkill but for larger enterprises with a few employees and bank borrowing, premises etc. there is generally more than one acceptable approach to things like finance and operating leases, when assets are capitalised rather than expensed etc.
More than anything else you are covering your own back by ensuring that the client realises that the responsibility for the financial statements lies solely with them.
There needs to be a line in there stating that the directors prepared the accounts in accordance with UKGAAP (or IFRS depending on which way they are leaning).
Also a line to state that no transactions were performed with related parties, regardless as to whether a price was charged, other than on an arms length basis.
That the client management knew of no fraud or error that they had not informed you of.
That the information that you were given was complete.
And a line stating that the management expect for the company to be a going concern for a period of at least twelve months from the date of the financial statements.
It doesn't have to be a very large document or particularly formal. Certainly not something that I would think to involve a solicitor with.
Due to the restrictions of my supervisory body I'm not allowed to produce final accounts for clients yet (I can do my own but I still have accountants anyway even though it's pretty much a rubber stamping excercise for them).
In the past these letters that I've signed for my accountants have merely refered to the going concern assumption and emphasis of responsibility for the accounts. I assume that's because mine are really simple with quite specific non related input streams with all money going through the bank before I get to see it.
The version for Audit is a bit more formal but you may find that the example letter at the bottom of ISA580 is quite a useful starting point for you. (actually, not a bad regulation to read in relation to this thread).
here's a version with the example letter attached (mostly the example gets missed off electronic copies of the standard).
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.
