My client has purchased a part from a supplier for their pool car. They have then generated a sales invoice for the part and added a labour charge plus vat. Why would you do this? The Accountant has told them this is the correct method but i am just plain confused. Surely yu just post the supplier invoice to vehicle expenses?. Why would you create a sales invoice and add labour charges?.
Are yu sure that the accountant told them to do this or is that just your clents understanding / wishful thinking of what the accountant told them to do?
I've got similar problems myself at the moment of a client treating rates refunds as income (rather than a reverse expense) in their management accounts. Their reasoning. "But it's always been done that way". My response "not any more it isn't".
Think that you need to look into this one further Nikole as to my way of thinking it's a false sale.
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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.
Yes the Accountant has told them to do it this way. I picked them up on it a few months ago and told them that they shouldn't be generating a sales invoice. However the owner has since had a meeting with the Accountant to run through year end and must have mentioned that i'd said they shouldn't be generating the invoices and apparently the Accountant has said it's the correct way to do it. I have been to see my Client today earlier today and told them its a false sale. The daft thing about it is the output vat is higher than the input vat.
-- Edited by Nikole on Saturday 17th of February 2018 02:13:50 PM
Leger wrote:I can't think of any conceivable reason as to why a sales invoice would be raised.
Hi John,
Not saying that this is the case here, but in answer to that question, where a director is attempting to bolster turnover to take out a loan they will use everything within their power to improve the top line (and reduce expenses) even when that includes things that shouldn't be there (such as that reversing of an expense mentioned in mine earlier) and transactions that are taken out with other companies shortly before the period end and then reversed directly afterwards.
Completely illegal and banks will pursue fraudulently acquired loans. In the famous case of RBS vs Bannerman, Johnston, Macklay and others (2002). The only person to be sent to jail from the accounting firm that confirmed their clients figures was the unfortunate junior who did the data entry!!!
Thankfully Nikoles on the ball and knew that something here smelt like a bucket of month old herrings, but how many others would have just accepted at face value that "The accountant says to do it that way"... The reality is that the buck cannot be passed to the accountant if we do something wrong. As professional bookkeepers we are expected to know what is right and what is not, and where we stray from that expected level of knowledge then PII is unlikely to cover one for what follows (Insurance companies, like all businesses, only like to receive money!).
Cynicism goes a long way in this business.
All the best matey,
Shaun.
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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.
My client has purchased a part from a supplier for their pool car. They have then generated a sales invoice for the part and added a labour charge plus vat. Why would you do this? The Accountant has told them this is the correct method but i am just plain confused. Surely yu just post the supplier invoice to vehicle expenses?. Why would you create a sales invoice and add labour charges?.
who did they invoice? themselves?
invoice now in receivables? So how are they planning on paying that?
I saw the reference in your first post about falsely boosting profit but, unless there are other anomalies taking place, it hardly seems worth the effort unless there is a significant boost. Still, as you say, it pays to have a healthy dose of cynicism, as long as we remember our duty is to the business we are acting for, and not HMRC. I always ensure that I am happy with any accounts and I'm pleased to note that I would have picked up on both yours and Nicola's examples if they had arisen. I'm maybe fortunate that the majority of my clients just accept my word, although non have accountants as I'm a one stop shop.
I've had a brief look at the case you mentioned. The only person I can see who was convicted of fraud was the Director of the construction Company audited by the firm of accountants. The Accountants were in turn accused of defrauding the banks, who gave overdrafts and loans based on the audited accounts. The allegation of fraud by the Accountants were dismissed by the courts. The bank itself doesn't seem to have come out smelling of roses either, as they fell over backwards to pump some £13m into the firm concerned. Seems it was like a mini Carillion in some respects.
I was down your neck of the woods on Tuesday, watching Donny Rovers play Wallsall. Didn't realise until later that we probably traveled within 10 miles of your town, not that you would have wanted 4 football hooligans supporters turning up on your doorstep lol.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
if you were travelling to Walsall down the M6 at some stage you would have been within three miles of me. Or at least where I live. Likelihood is that when you passed I would still have been in the office in central Brum.
Your right of course about the single item in isolation but these discoveries are often the tip of an iceberg.
Been a long time since I looked at the RBS vs BJM case (it's part of the study of disclaimers in audit reports) but its one of those that stands out. Yes, it was overturned in 2005 but the original 2002 fraud ruling found in favour of RBS and that was the one where a firm junior went down. I remember that bit as there was quite a debate and much constanation of the issue in the lecture. I can't find any mention of the case against the firm junior in the online case notes (including in technical fact sheet 84) and really don't have time to look it up at the moment, but I will come back to this as it's an important concept that I've wielded more than once that the buck stops with the individual who should know better and if the lecturer lied to us then I've got to find a whole new example of it.
The case against the construction firm itself was quite seperate to that against the auditors and I've no knowledge of that one.
As for the duty to clients rather than HMRC... Difficult one in that in ensuring that we play by HMRC's interpretations of regulations we are putting our clients interests (and ability to sleep at night) first. The time to come out fighting is when HMRC apply their interpretations inconsistently.
Laters matey,
Shaun.
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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 didn't have a thorough look at the case but have delved further and found that the employee concerned was appointed financial controller within the clients business and was involved in the fraud that took place. The accountants argue in the 2002 case that the person wasn't an employee of theirs as such, as they had taken over internal duties. The case was found against RBS. As far as I can ascertain this person has not been tried in a court of law, but the Director was and given 4 years.
If you're feeling insomniac anytime soon have a butchers https://www.scotcourts.gov.uk/search-judgments/judgment?id=385587a6-8980-69d2-b500-ff0000d74aa7
I take your point about being responsible for our client's accounts and probably didn't express myself well in the previous post, but unless we spot something and ignore it, or fail to report if it's a MLR issue, then ultimately the client signs to say the accounts are a true reflection of their business for the period stated. I don't see how we can be convicted of a crime in that respect.
PS we came down the A38 so probably not as close as 3 miles
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
My client has purchased a part from a supplier for their pool car. They have then generated a sales invoice for the part and added a labour charge plus vat. Why would you do this? The Accountant has told them this is the correct method but i am just plain confused. Surely yu just post the supplier invoice to vehicle expenses?. Why would you create a sales invoice and add labour charges?.
who did they invoice? themselves?
invoice now in receivables? So how are they planning on paying that?
speak to the Acountant. sure he never said that.
Yep, they have invoiced themselves and then paid for the sales invoice from the business bank account.
Yep, they have invoiced themselves and then paid for the sales invoice from the business bank account.
Oh you couldnt make it up could you?
Although I do recall someone on here saying about a client who paid themselves, via a debit card if I recall correctly - was that this same client Nicola? Wasnt sure if it was you or someone else/another forum!!
How did you get on with talking to the Accountant?
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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
Hi Joanne
Yes it was me who posted previously about generating an invoice and paying with debit card. After that incident I specifically told them not to do it. However the owner has obviously mentioned my instruction to the accountant who has overridden my instruction. I've not spoken to the accountant yet. That's a job for when the children are back at school and the house is nice and quiet ð
However the owner has obviously mentioned my instruction to the accountant who has overridden my instruction.
Hi Nicola, I can also think of two other scenario's as well. The client has told you that when they haven't spoken to the accountant or they have misunderstood what the accountant has said. The only other possibility is the accountant is as thick as two short plank s (my apologies to any thick short planks who may be offended by that) and really has given that advice!
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
However the owner has obviously mentioned my instruction to the accountant who has overridden my instruction.
Hi Nicola, I can also think of two other scenario's as well. The client has told you that when they haven't spoken to the accountant or they have misunderstood what the accountant has said. The only other possibility is the accountant is as thick as two short plank s (my apologies to any thick short planks who may be offended by that) and really has given that advice!
Hi John,
I think the client hasn't explained himself correctly to the Accountant. Either way all will be revealed on Monday..... And here's me thinking working in distribution used to be challenging.
