Prompted from a comment Joanne made the other day and it set me thinking.
All but two of mine I do the bookkeeping for, and for both these (husband and wife - separate businesses) I will be dooing their year ends at the beginning of July. Up until now I've spent a few days at their house going through all the ledgers and also double checking any paperwork I think I need to, but wondered what others do. Do you check all paperwork or just the ones you feel need to be checked, random spot checks etc?
I remember when I first entered into bookkeeping in 2006 the chartered accountant would take a copy of sage on his penstick and then over a couple of half days, would check some paperwork with his assistant, and then send us the full accounts when they were ready.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Personally I'm like yourself and check absolutely everything which I know is at odds with many other accountants.
That said, I cannot recall a time when I have not found anything materially wrong with a clients books and more often than not the problem is actually in their favour.
One recently wasn't breaking out Paypal charges so had understated debtors and (substantially) overstated profit which they would have paid a hefty wedge of tax on.
I do understand the more commercially focused approach and appreciate that if the key ratio's are in line year on year on the assumption that the original accounts were correct then things should be materially correct.
My approach though is always if HMRC were to turn up on their doorstep tomorrow morning would there be anything about that client that I would not be able to argue for them (based on their last filed accounts).
The above said, my approach does not go down well with some clients who find my approach intrusive on their time and not at all what they are used to... Impression is that some clients think that passsing their data to an accountant is a legal requirement that has to be done but then absolves them of all responsibility. The accountant is then expected to just know everything about them from some shoddy record keeping and magically produce a set of accounts that perfectly represents their business.
Unfortunately however, having studied accountancy with the ACCA rather than at Hogwarts I require a lot more information from them before I'm willing to put my name to a set of accounts.
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Shaun
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.
Personally I'm like yourself and check absolutely everything which I know is at odds with many other accountants.
Sorry Shaun, I don't think I explained myself very well. Whilst I check all the ledgers, I don't check all the paperwork. If I think somethings out of place or in the wrong ledger I will pull the paperwork out but I don't check all the paperwork. Just wondered how others did it.
Thanks for your comments which make a lot of sense.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Was going to reply earlier but got engrossed watching Barry Gibb at Glastonbury, sad I know but he was actually quite entertaining.
I do try and check as much information as I can when doing year ends.
Most of my clients provide me with all their paperwork from which I compile their accounts, but I do have a few that do their own bookkeeping which I then use to produce their final accounts, I still ask for their business bank statements and use these as a check against their accounts, the problem I have found is when they have no business bank accounts set up and only use their own personal bank accounts.
Any queries I have about anything I make sure that I email them which I then save to their folder along with any replies.
I make sure that they sign a declaration that states that I am only producing the accounts from the information and explanations supplied by them
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Was going to reply earlier but got engrossed watching Barry Gibb at Glastonbury, sad I know but he was actually quite entertaining.
I do try and check as much information as I can when doing year ends.
Most of my clients provide me with all their paperwork from which I compile their accounts, but I do have a few that do their own bookkeeping which I then use to produce their final accounts, I still ask for their business bank statements and use these as a check against their accounts, the problem I have found is when they have no business bank accounts set up and only use their own personal bank accounts.
Any queries I have about anything I make sure that I email them which I then save to their folder along with any replies.
I make sure that they sign a declaration that states that I am only producing the accounts from the information and explanations supplied by them
Thanks Doug. I like the declaration, good idea. When I produce the final accounts there's a standard sign off form which mentions them being responsible but it's in with some other blurb so I will look and see if I can make it more explicit. Good point on the peeps that don't have a business account. General question, should you insist they provide personal bank statements or is it down to them to provide them?
My wife had Glastonbury on most of yesterday afternoon and evening, and she mentioned to me Barry Gibb was performing so I kept glancing across whilst watching cricket. I was a bit gutted the womens cricket wasn't on tele (the magazine said it was) but watched the T20 between England and South Africa and the ODI between West Indies and India
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
General question, should you insist they provide personal bank statements or is it down to them to provide them?
Hi John
I think it is up to you as their accountant whether you ask for them to provide personal bank statements but I certainly do not think it would be unreasonable for you to do so if this is the only means of obtaining the information needed, the few I have asked have been fine with it but had they not I probably would not have done their accounts!
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
I use a checklist at the year end which I mark off to make sure everything has been done and I'm happy with all the figures before it goes to an accountant.
Most of it's basic stuff like double checking the banks are reconciled and that suspense is cleared, but it does also include a full nominal ledger review just in case anything stands out that could be queried. If anything does, then I will scan invoices and make notes to try and save it being a query later on down the line.
Regarding your posts on requesting personal bank statements - while I generally don't have any issues with this and people are quite happy to provide them if it saves them the job of identifying transactions themselves, I do sometimes come across people who refuse to provide them.
I have, on occasion, accidentally seen some purchases I'd rather not have seen and so to a certain extent I can understand this, but then they really should keep all business expenditure in a separate account!
I wonder how much "power" we really have when people refuse to provide them to us...?
Thanks Faye, seems like we're pretty much all in agreement. Totally agree on the bank accounts, I think it should be a legal requirement that if you have a business, you should have a business bank account, simple as. I'm not as strict on seeing personal bank accounts as much as I should be, although it's mainly the subbbies that don't. Will be toughening up on that one methinks.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
From the Accountancy perspective, i would say check all on the purchases side. Business owners, as you know, are not as strict as Accountants when it comes to allocating the costs and more importantly allowable v disallowables. Plus helps you pick up on the need for accruals and prepayments which even a lot of bookkeepers don't process (depends on their levels of knowledge of course. Spot check the sales, but pay attention to those near year end. Usual control accounts stuff and vat checks. Payroll checks with the benefit of copy reports from payroll software. Almost an audit I guess.
Folk who don't use business bank accounts......tell them to open one. There is no excuse, they can get two years free banking and then low low charges. Make it part of your agreement. At the very least a separate account (did I say that?!!). Refuse to do so.....dump them. Or charge more for sorting a bigger mess.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
At the very least a separate account (did I say that?!!)
Shock gasp open mouth. I wasn't brave enough to say that, but I thought of it when i mentioned bank accounts. Definitely should be separate from their normal banking.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
We probably come at it from a different viewpoint from most of the above
At the end of the day we arent auditing clients and all we are doing is preparing the accounts based on their records. They are ultimately responsible for the accounts.
We will have back up for all the balance sheet items eg fixed asset register, copy of material asset additions, bank statement at year end to ensure agrees to accounts, list of debtors, list of stock, list of creditors, VAT rec, PAYE rec, statement for any loans, schedule for HP outstanding, analysis of movement on directors loan/drawings/cap intro etc.
The P&L will have an analysis of sales, analysis of any P&L balances more than 10% of sales and analysis of tax sensitive accounts eg motor expenses, travel, subsistence, legal fees, donations, sundry exps, repairs etc. The other balances will review for reasonableness based on variance analysis with previous year and 5 year historic info. If anything looks unusual will ask client for the reason for change.
At the end of the day we are there to help clients adhere to their filing obligations but we are also not a charity. We could go through and check everything against the backup documentation and disallow some, move some to another account, make adjustments for accruals and prepayments etc but if this ends up taking double the time to save/cost the client a little bit of tax then we wouldnt do it. Equally there might be some adjustment needed once review the accounts but if it isnt material would just note it and leave the accounts as they are if the client is happy with them rather than go and change the figures, change the schedules in file, change the tax comp etc.
There was a time when I liked to make sure everything was reconciled to the penny but that was a long time ago.
We probably come at it from a different viewpoint from most of the above
At the end of the day we arent auditing clients and all we are doing is preparing the accounts based on their records. They are ultimately responsible for the accounts.
We will have back up for all the balance sheet items eg fixed asset register, copy of material asset additions, bank statement at year end to ensure agrees to accounts, list of debtors, list of stock, list of creditors, VAT rec, PAYE rec, statement for any loans, schedule for HP outstanding, analysis of movement on directors loan/drawings/cap intro etc.
The P&L will have an analysis of sales, analysis of any P&L balances more than 10% of sales and analysis of tax sensitive accounts eg motor expenses, travel, subsistence, legal fees, donations, sundry exps, repairs etc. The other balances will review for reasonableness based on variance analysis with previous year and 5 year historic info. If anything looks unusual will ask client for the reason for change.
At the end of the day we are there to help clients adhere to their filing obligations but we are also not a charity. We could go through and check everything against the backup documentation and disallow some, move some to another account, make adjustments for accruals and prepayments etc but if this ends up taking double the time to save/cost the client a little bit of tax then we wouldnt do it. Equally there might be some adjustment needed once review the accounts but if it isnt material would just note it and leave the accounts as they are if the client is happy with them rather than go and change the figures, change the schedules in file, change the tax comp etc.
There was a time when I liked to make sure everything was reconciled to the penny but that was a long time ago.
Hi Mark,
I can see your point exactly. As I said in my earlier post "I do understand the more commercially focused approach".
My issue with clients is that they are not bookkeepers or accountants and their efforts for the most part leave a lot to be desired.
It's emphasised in my engagement letter where responsibility for the record keeping lies but at the same time I feel a certain responsibility to save them from themselves.
Their expectation when they take on our services is that we will save them from agrevation with HMRC by ensuring that their books and records are a true representation of their business which their own efforts seem incapable of achieving. For that reason my approach is that of a detailed audit that tracks to the penny and ensures that all supporting docuentation exists.
The flip side of that is that it's making me adverse to work with individuals and smaller companies as such is not cost effective. Conversely though working with larger clients it becomes more like contract work where you are spending long periods of time resolving the issues of single clients... And further to that I'm finding that more and more of my time is ending up on the management rather than financial accounting side of the fence (which is pretty much going full circle back to where I came from).
As I say, I can see your point of view and sure that you can see mine. I cold be wrong but I cannot see myself ever moving away from the mentality of accounts balancing to the penny and treating client businesses as though they were my own which is perhaps a side effect of my former career in banking operations.
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Shaun
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.
I'm not as strict on seeing personal bank accounts as much as I should be, although it's mainly the subbbies that don't. Will be toughening up on that one methinks.
Just a side note on this
I have had 2 subbies who have asked me to take over their accounts because they have been investigated and found to have understated their Income.
This came about because they only submitted on their Tax Return the Contractor payment slips that they had in paper form which did not coincide with the payments that the Contractor had submitted to the CIS, when they did actually check their accounts they realised that HMRC was right and they had probably lost the slips the Contractor had provided.
So now I do explain that I am only making their accounts up from the Contractor payment slips that they provide me with and they need to make sure that they correspond with the payments they have received through their bank accounts.
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
That's a good point Doug. I do check if there's any months missing anyway and get in touch with the contractor if possible (with the subbies permission of course) but it is a useful check back to ensure all income has been accounted for.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
We probably come at it from a different viewpoint from most of the above
At the end of the day we arent auditing clients and all we are doing is preparing the accounts based on their records. They are ultimately responsible for the accounts.
We will have back up for all the balance sheet items eg fixed asset register, copy of material asset additions, bank statement at year end to ensure agrees to accounts, list of debtors, list of stock, list of creditors, VAT rec, PAYE rec, statement for any loans, schedule for HP outstanding, analysis of movement on directors loan/drawings/cap intro etc.
The P&L will have an analysis of sales, analysis of any P&L balances more than 10% of sales and analysis of tax sensitive accounts eg motor expenses, travel, subsistence, legal fees, donations, sundry exps, repairs etc. The other balances will review for reasonableness based on variance analysis with previous year and 5 year historic info. If anything looks unusual will ask client for the reason for change.
At the end of the day we are there to help clients adhere to their filing obligations but we are also not a charity. We could go through and check everything against the backup documentation and disallow some, move some to another account, make adjustments for accruals and prepayments etc but if this ends up taking double the time to save/cost the client a little bit of tax then we wouldnt do it. Equally there might be some adjustment needed once review the accounts but if it isnt material would just note it and leave the accounts as they are if the client is happy with them rather than go and change the figures, change the schedules in file, change the tax comp etc.
There was a time when I liked to make sure everything was reconciled to the penny but that was a long time ago.
Agree its a balancing act. Bum bum!
Did you ever get your award Mark?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Interestingly enough I was doing a year end for a subbie last night (I've done the bookkeeping) but there were 9 invoices missing. Fortunately I had the bank statements to check against but it highlights the point about checking statements. To be fair this is the same guy I mentioned on another thread that the contractor issues the invoices but those 9 invoices totalled £12k
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Interestingly enough I was doing a year end for a subbie last night (I've done the bookkeeping) but there were 9 invoices missing. Fortunately I had the bank statements to check against but it highlights the point about checking statements. To be fair this is the same guy I mentioned on another thread that the contractor issues the invoices but those 9 invoices totalled £12k
Hi John
That's just it, without the statements its an easy mistake to make if the subbies have mislaid any of their Contractor payment slips, the 2 guys I was talking about (both brothers strangely enough and both understated by nearly the same amounts despite working through different contractors) were fine that they had made a mistake but were adamant that because they had already paid 20% on this amount they should have nothing more to pay, it was an absolute nightmare trying to explain that they still had to pay 9% N/I on this amount!
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
