End of year accounts liability.
End of year accounts liability.
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Discussion

BGARK

Original Poster:

5,638 posts

277 months

Wednesday 8th October 2014
quotequote all
Just a moan really.

So you pay an accountant a fortune to put your accounts together and submit them. You as the company director are expected to sign them on the basis that you fully agree with them.

Then if something goes pear shaped the director is fully liable and the accountant just washes their hands of all responsibility.

Surely if the person you pay to do a job has the correct skills they should be accountable also?

If you pay a bricky to do a job and the wall falls down its generally their fault!

Or am I missing something here?

PurpleMoonlight

22,362 posts

188 months

Wednesday 8th October 2014
quotequote all
What was the consequence of the error?

Countdown

49,545 posts

227 months

Wednesday 8th October 2014
quotequote all
BGARK said:
Just a moan really.

So you pay an accountant a fortune to put your accounts together and submit them. You as the company director are expected to sign them on the basis that you fully agree with them.

Then if something goes pear shaped the director is fully liable and the accountant just washes their hands of all responsibility.

Surely if the person you pay to do a job has the correct skills they should be accountable also?

If you pay a bricky to do a job and the wall falls down its generally their fault!

Or am I missing something here?
I think you're missing something. It's not just accountancy - the liabilities faced by an Employer/Director are pretty wide ranging.

If the wall falls down and kills/injures somebody the aggrieved party won't be suing the bricky, they'll be suing YOU.


sumo69

2,164 posts

251 months

Wednesday 8th October 2014
quotequote all
If the accounts are prepared negligently, then both shareholders and creditors have the ability to sue the reporting accountant.

Did you not discuss the issue prior to signing the accounts?

David

Eric Mc

125,884 posts

296 months

Wednesday 8th October 2014
quotequote all
Most limited company accounts are no longer audited. AUDITORS do have a shared legal and statutory responsibility for limited company accounts (with the company directors) for which they sign off audit reports.

Going for the "non-audit" option effectively places the entirety of responsibility for the statutory accounts on the heads of the directors - even if a qualified accountant or a firm of registered auditors has been used to help prepare the statutory accounts.

IF there is a problem with the accounts, the directors carry the can - but they are perfectly entitled to sue the accountants if they feel that the problems were caused by the way the accountants prepared the accounts.
They can also lodge an official complaint with the professional body to which the accountant(s) belong.

Directors should be fully aware of their responsibilities for the statutory accounts BEFORE they sign them off.

BGARK

Original Poster:

5,638 posts

277 months

Wednesday 8th October 2014
quotequote all
Eric Mc said:
Directors should be fully aware of their responsibilities for the statutory accounts BEFORE they sign them off.
The Director clearly will never be as competent as the Accountant, or if they are they would generally do the accounts themselves.

I suppose its like being an "artist", you may sell music or paintings but not have a clue how to count to 10, thats why you employ help and skills in other areas.

Eric Mc

125,884 posts

296 months

Wednesday 8th October 2014
quotequote all
Sadly, competence is not what the law talks about. It only talks about legal responsibility.

Simpo Two

93,061 posts

296 months

Wednesday 8th October 2014
quotequote all
I suppose if you translate this into my business, mostly wedding photography, it means I can get the couple to sign a bit of paper and that will make any duff photos their own fault...

I wonder if I could get away with it?

anonymous-user

85 months

Wednesday 8th October 2014
quotequote all
Simpo Two said:
I suppose if you translate this into my business, mostly wedding photography, it means I can get the couple to sign a bit of paper and that will make any duff photos their own fault...

I wonder if I could get away with it?
that analogy doesn't work

this is more accurate if a couple brought you the memory card from their camera and asked you to print the photos and were then not happy with the prints, it would be their fault rather than yours wouldn't it?

Eric Mc

125,884 posts

296 months

Wednesday 8th October 2014
quotequote all
And, what's more, the accountant's signed report to the accounts states categorically where the responsibility for the accounts lies, so the directors can't say they weren't told.

But then, I know that directors don't always read what's put in front of them.

Pit Pony

11,485 posts

152 months

Wednesday 8th October 2014
quotequote all
BGARK said:
Eric Mc said:
Directors should be fully aware of their responsibilities for the statutory accounts BEFORE they sign them off.
The Director clearly will never be as competent as the Accountant, or if they are they would generally do the accounts themselves.

I suppose its like being an "artist", you may sell music or paintings but not have a clue how to count to 10, thats why you employ help and skills in other areas.
My accountant has clear wording stating he's not liable as the accounts are not audited. I understand enough (because I make it my business to try and understand by doing research) to know that if I had a complex set of accounts and creative tax avoidance, that I'd need to pay extra for him to take more responsibility.

Simpo Two

93,061 posts

296 months

Thursday 9th October 2014
quotequote all
Eric Mc said:
And, what's more, the accountant's signed report to the accounts states categorically where the responsibility for the accounts lies, so the directors can't say they weren't told.
OK, I'll adjust my analogy. I make the couple sign a form before they receive the photos which states the success of the photography is their responsibility. Bingo, home free smile

Eric Mc

125,884 posts

296 months

Thursday 9th October 2014
quotequote all
The figures in the accounts are based on what the directors did during the year, their underlying record keeping and their general stewardship of the assets of the company. No director should EVER be unaware of these responsibilities.

If they aren't aware if this, they have no business being company directors.

If the directors chose NOT to have statutory audits carried out on the records of the company, they should be fully aware that they are taking on the entire responsibility for the figures in the accounts.

This is stated categorically in the "Accountant's Report" which will be attached to the full, statutory "non-audited" accounts.

BGARK

Original Poster:

5,638 posts

277 months

Thursday 9th October 2014
quotequote all
Eric Mc said:
The figures in the accounts are based on what the directors did during the year, their underlying record keeping and their general stewardship of the assets of the company. No director should EVER be unaware of these responsibilities.

If they aren't aware if this, they have no business being company directors.

If the directors chose NOT to have statutory audits carried out on the records of the company, they should be fully aware that they are taking on the entire responsibility for the figures in the accounts.

This is stated categorically in the "Accountant's Report" which will be attached to the full, statutory "non-audited" accounts.
I agree with all of that, its just a bit frustrating to say the least that the professional that is being paid takes zero responsibility. A director might have a very good overview but again if they were as good as the accountant they wouldn't be required.

By the way I have no issue or problem with my accountant or accounts but I did in the past, this experience made me much more vigilant than I used to be.

Eric Mc

125,884 posts

296 months

Thursday 9th October 2014
quotequote all
The obvious solution is to switch to having the accounts properly audited. If you go down that route, the accountant becomes liable for problems with the accounts as he has publicly stated that they are "true and fair".

And, if he/she is conducting the audit tests and checks - which are over and above what might be done in a simple "accounts preparation" scenario - there is a higher probability that problems with the underlying record keeping might be discovered.

Of course, to have the company accounts audited, the accountant has to be a "Registered Auditor" and will no doubt charge more for the additional audit work required.

98elise

32,840 posts

192 months

Thursday 9th October 2014
quotequote all
Jimmy Carr, is that you? smile

Countdown

49,545 posts

227 months

Thursday 9th October 2014
quotequote all
Eric Mc said:
The obvious solution is to switch to having the accounts properly audited. If you go down that route, the accountant becomes liable for problems with the accounts as he has publicly stated that they are "true and fair".

And, if he/she is conducting the audit tests and checks - which are over and above what might be done in a simple "accounts preparation" scenario - there is a higher probability that problems with the underlying record keeping might be discovered.

Of course, to have the company accounts audited, the accountant has to be a "Registered Auditor" and will no doubt charge more for the additional audit work required.
The directors shouldn't be asking the accountant to audit his own work.

Eric Mc

125,884 posts

296 months

Thursday 9th October 2014
quotequote all
That is what was "normal" until the rules were changed to allow small "owner managed companies" to be exempted from the statutory audit.

An auditor carries out the audit on behalf of the shareholders, not the directors. The auditors report is addressed to the shareholders for that reason.

Of course, in an owner managed company, the owners (shareholders) and the managers (directors) are one and the same.

BGARK

Original Poster:

5,638 posts

277 months

Thursday 9th October 2014
quotequote all
Eric Mc said:
The obvious solution is to switch to having the accounts properly audited. If you go down that route, the accountant becomes liable for problems with the accounts as he has publicly stated that they are "true and fair".

And, if he/she is conducting the audit tests and checks - which are over and above what might be done in a simple "accounts preparation" scenario - there is a higher probability that problems with the underlying record keeping might be discovered.

Of course, to have the company accounts audited, the accountant has to be a "Registered Auditor" and will no doubt charge more for the additional audit work required.
Out of curiosity Eric for say a £2m t/o business what would the difference in the two costs be, with or without a full audit?

LeighW

5,386 posts

219 months

Thursday 9th October 2014
quotequote all
BGARK said:
Out of curiosity Eric for say a £2m t/o business what would the difference in the two costs be, with or without a full audit?
Hard to put a figure on that, as costs can vary greatly depending on how good, or otherwise the books are. An audit could easily double your accountancy costs though. If your accountant is competent, then you shouldn't really feel the need for an audit when one isn't required.