# Accountant responsibilities



## Madilla (19 Jul 2013)

I am just wondering what the responsibilities of an accountant are in relation to geting detail of business purchases in generating business accounts.In a farm partnership one of the partners has another business and had been writing cheques from the partnership for expenses in relation to his other business. It now transpires that the other partner has not filled in many cheque stubs or given any evidence of invoices to accountant for the bulk of transactions. These items have just been recorded in the accounts as purchases. When further information was requested the accountant says that as cheque stubs werent completed he had to record them just as purchases. Should the accountant have any duty to get further information or would it be considered to be sufficient to get an oral statement that these be recorded as purchases from the partner. The partnership is now breaking up & these matters are only coming to light now.


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## Brendan Burgess (19 Jul 2013)

Hi Madilla

Check the accountant's certificate which came with the accounts.  What did it say? It probably made a statement to the effect that the bookkeeping was not adequate and that they relied on information provided by the partners. 

If it was a limited company, which had an audit, the auditor would have had to qualify their opinion, assuming that the amounts were material. 

Did the accountant not discuss the issue at the time with both partners? 
Did the other partner not ask what the purchases were? 

If I was preparing accounts on behalf of a partnership and I had to guess what some expenditure was, I would make sure to tell both partners in a meeting and in writing. 

There could also be serious tax implications as the profits have been understated.


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## T McGibney (19 Jul 2013)

Madilla said:


> I am just wondering of responsibilities of an accountant in relation to geting detail in relation to business purchases ...
> 
> It now transpires that the other partner has not filled in any cheque stubs or given any evidence of invoices to accountant for the bulk of transactions. These items have just been recorded in that accounts as purchases. When further information was requested the accountant says that as cheque stubs werent completed he had to record them just as purchases.



Purchases of what, may I ask?  In farm accounts, livestock purchases may be verified by, and in general must tie up with, mart dockets and/or herd registers.

Unverified fertiliser, feeds etc purchase payments should tie up, at least loosely, with invoices or statements from merchants, and should also be reasonable in thr context of the scale and profile of the farm.


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## Joe_90 (20 Jul 2013)

An assumption has to be made that the business is not VAT registered.  Then the implication is that the business is a farm.

Then why does the partnership have a different accountant to the sole trader?  I would be very wary of posting unvouched cheques to purchases as there should either be checked to Coop statements or a mart invoice or the stock rec.

Perhaps the OP could qualify?


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## Madilla (20 Jul 2013)

The business is actually in the North.  Foolishly one of the partners didn't take any active part in the financial end of things. It is two brothers farming together as a partnership and not a ltd company.The business is VAT registered but it appears a lot of invoices submitted were only those with VAT paid. It seems the accountant did not tie up payments to specific items or receipts which does appear amazing. I suppose a request should be made for copies of certifications to see if anything was highlighted there. When the accountant was asked he just said this is all he was given & he just accepted it. He certainly didn't discuss any issues with the other partner.


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## T McGibney (21 Jul 2013)

Madilla said:


> It seems the accountant did not tie up payments to specific items or receipts which does appear amazing  .


It's not amazing. The accountant's role here is to compile a set of accounts and tax return based on the limited information and verbal provided by the proprietors. The fact that they were provided with incomplete records and false representations is not the accountants' fault. It's ridiculous to expect an accountant, engaged to prepare accounts by an incomplete records client, to forensically review & report on all accounting  deficiencies within that enterprise. No doubt, if they did, they would most likely be told that they had exceeded the terms of their engagement and their fees wouldn't be paid.

(On a side issue, incomplete records assignments are a major pain for accounting firms. Maybe it is time for  accountants to stand up for themselves and refuse to take on substandard assignments. If that happened, an awful lot of people would be left in the lurch.)



Madilla said:


> . I suppose a request should be made for copies of certifications to see if anything was highlighted there. When the accountant was asked he just said this is all he was given & he just accepted it..



I'm afraid you may be misunderstanding the entire context here. The accountants role here is not to make certifications. How can they - unless they're magicians?



> He certainly didn't discuss any issues with the other partner.


Did the second partner not sign the partnership accounts, nor their own tax return? If not, why not? Why weren't they, as partner in the business, failing to exercise at least a modicum of basic financial control within their own business? Why did they never look at a bank statement or a cheque book? 

There are serious questions to be answered by both partners here. 

Trying to shift blame onto their accountant, or for that matter, their agricultural consultant, merchants or vets sounds from here to be an apparent evasion of responsibility.


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## T McGibney (21 Jul 2013)

Brendan Burgess said:


> If I was preparing accounts on behalf of a partnership and I had to guess what some expenditure was, I would make sure to tell both partners in a meeting and in writing.



Brendan, are you not familiar with the concept of a managing or precedent acting partner? What you are suggesting is in the majority of cases utterly unrealistic. You normally will be lucky to get one person into a meeting, let alone two, particularly if their internal personal or business relationships are problematic or strained.


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## Paddy199 (22 Jul 2013)

Request copies of the cheques from your bank. Banks keep scans of all cheques, if you write to them they will give you printouts.


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## capnhand (22 Jul 2013)

Hi

While there is merit in both Brendan's and T McG's point of view, I believe that an accountant is bound by the rules of ethics of their respective association that they do not allow their name associated with a set of accounts that are misleading to the public or third parties. 

Thus, there should be a basic element of quality control put in place to ensure that the accounts are right and a system of review implemented over every job that goes out the door.

So, certainly if there were cheques made out to cash, the amounts were undocumented and significant, in my view it would be dangerous to allow the accounts to go out for signature in the first place. It dosent matter if there are tax deadlines, CRO etc. If I am not happy the accounts do not go out. Simple as that!

A proper review should have established this. Getting both partners into discuss the issues with the bookkeeping should have been basic and part and parcel of the agreeing of the accounts. After all they are both jointly and severely liable for the debts of the partnership. If there is a dificulty in meeting one of the partners then straight away alarm bells should be ringing.

That is why incomplete records are a pain. Endless meetings, queries telephone calls take up more and more time which cannot always be recovered. Sometimes it is better to avoid these jobs and pass on them or at least ensure that the fee/budget takes this into account. 

However this is not a excuse to throw your hands up in the air and send out figures that are wrong. I believe the accountant does have some responsibility here.

Were the accountants qualified I wonder?

capnhand


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## T McGibney (22 Jul 2013)

capnhand said:


> Hi
> 
> While there is merit in both Brendan's and T McG's point of view, I believe that an accountant is bound by the rules of ethics of their respective association that they do not allow their name associated with a set of accounts that are misleading to the public or third parties.



The issue here is not that accounts may be misleading to the public or third parties. There may be a Revenue exposure on foot of incorrect tax return(s) but once the client signs the tax return that is their responsibility.

There is no requirement for an accountant, qualified or otherwise, to vouch for the truth or fairness of a set of accounts unless they are specifically reporting such, ie as part of an audit report. 

There is a professional obligation on an accountant to act ethically at all times but this does not extend to a general vicarious liability in respect of deficiencies in client records or representations. Otherwise, no accountant in their right mind would ever take on any non-audit accounts preparation assignment.


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## capnhand (22 Jul 2013)

Where there are some parts I totally agree with other parts perhaps not.

*"The issue here is not that accounts may be misleading to the public or  third parties. There may be a Revenue exposure on foot of incorrect tax  return(s) but once the client signs the tax return that is their  responsibility."*

The partners/directors have paid the accountant to prepare the accounts of the business that are correct and accurate. Why would they pay the accountant to prepare inaccurate accounts? They are still therefore liable under contract law to the director/partner(s) even after the accounts are submitted to revenue.

What you refer to is the fact that the revenue views the taxpayer as responsible for the tax return and not the agent which is an entirely seperate issue. There are also some "aiding and abetting" rules with respect to the agent and the tax payer that may also be relevant.

*"There is no requirement for an accountant, qualified or otherwise, to  vouch for the truth or fairness of a set of accounts unless they are  specifically reporting such, ie as part of an audit report. "*

This is true up to a point. There is no requirement to carry out an audit of course. However there is a requirement to exercise a level of due care and attention. Also all accountants who are qualified and work in public practice are required to have a system of quality controls put in place and implemented (called ICQ1). This system of quality controls applies to all clients whether audit or not. There is also an ethical requirement that we do not allow our name to be knowingly associated with misleading accounts. 

So although we do not carry out an audit or verify the figures as you suggest. We are required to exercise professional judgement to some degree even for non audit clients.

*"There is a professional obligation on an accountant to act ethically at  all times but this does not extend to a general vicarious liability in  respect of deficiencies in client records or representations. Otherwise,  no accountant in their right mind would ever take on any non-audit  accounts preparation assignment.     "*

Yes. All I am saying is you have to ask the questions. If you are not happy with the answers or you have not got all the information you should not sign off. Just because it is not an audit dose not mean you are allowed to send out accounts that are wrong without consequences.

Am bowing out of this now.

capnhand


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## T McGibney (22 Jul 2013)

I can only refer you to Chartered Accountants Ireland Miscellaneous Technical Statement M48 "Chartered Accountants' Reports on the Compilation of Historical Financial Information of Unincorporated Entities".

As this is a paywalled document, I cannot post it verbatim or link to it, however note the following paragraphs: (I have highlighted certain key sentences.)



> 4.    Financial information on unincorporated entities may be compiled by accountants for a number of different purposes. *Unincorporated entities may not require full financial statements, which give a true and fair view.*





> 10.    When compiling financial information, the accountants use their accounting expertise to collect, classify and present accounting information from the sources made available to them. This normally entails summarizing detailed data into a manageable and understandable form. *There is no requirement for the accountants to test the assertions underlying the information.* This guidance is not designed and does not enable the accountants to express any assurance on the financial information being compiled. Nevertheless, users of the financial information compiled derive benefit because Chartered Accountants are required to carry out professional work with due skill, care, diligence and expedition and are subject to the Rules of Professional Conduct, the Ethical Guide for Members and other guidance of the Institute.





> 18.    Under the terms of the engagement t*he client is responsible for the reliability, accuracy and completeness of the books of account of the entity and for the provision and disclosure to the accountants of all information* relevant to the purpose and compilation of the financial information.
> 19.    *The engagement to compile the financial information cannot be regarded as providing any assurance *on the adequacy of the entity's systems or on the incidence of fraud, non-compliance with laws and regulations or weaknesses in internal controls.





> 28.    In certain circumstances, adjustments and/or disclosures that the accountants consider appropriate may not be made in the financial information, or appropriate information may not be provided to the satisfaction of the accountants. *If the accountants consider that the financial information presented is misleading then they should withdraw from the engagement* and should not permit their name to be associated with the financial information.





> 29.    In considering whether financial information is misleading, *the accountants consider whether the financial information appears to be appropriate for the purpose for which it is compiled, appropriate in respect of the basis of preparation agreed and free from material misstatements that appear obvious to them* as a result of, for example, misclassifications in the financial information or mistakes in the application of the basis of preparation.


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## capnhand (22 Jul 2013)

I agree with all this but I would also point out.

"10 ...users of the financial information compiled derive benefit because  Chartered Accountants are required to carry out professional work with  due skill, care, diligence and expedition and are subject to the Rules  of Professional Conduct, the Ethical Guide for Members and other  guidance of the Institute."

Other guidence = Follow ICQ1 and quality control.

Granted you are not giving an opinion, but you are not just churning out rubish either.

"...the accountant says that as cheque stubs werent completed he had to record them just as purchases"

I know we are probably only hearing part of the story here but do you think that the above shows due care and skill? Burying all the unidentified cheques into purchases? If he asked the partners what were all these cheques and he was told to put them in purchases that is another story. But the impression I have is that he did not.



capnhand


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## T McGibney (22 Jul 2013)

capnhand said:


> "10 ...users of the financial information compiled derive benefit because  Chartered Accountants are required to carry out professional work with  due skill, care, diligence and expedition and are subject to the Rules  of Professional Conduct, the Ethical Guide for Members and other  guidance of the Institute."



This selective quote is meaningless without the context of the previous sentence in the document. *"There is no requirement for the accountants to test the assertions underlying the information.*"




capnhand said:


> I know we are probably only hearing part of the story here but do you  think that the above shows due care and skill? Burying all the  unidentified cheques into purchases? If he asked the partners what were  all these cheques and he was told to put them in purchases that is  another story. But the impression I have is that he did not.



Yes, we are only hearing part of the story. Certainly the client involves doesn't seem to be a model character on the basis of the information given by the OP so I would hesitate before making judgments about third parties solely on the basis of allegations by this person in the context of the content of oral representations.


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## T McGibney (22 Jul 2013)

capnhand said:


> Other guidence = Follow ICQ1 and quality control.



I presume you mean ISQC 1 "_Quality  control for firms that perform audits and reviews of financial  statements, and other assurance and related services engagements_".

This is irrelevant here as M48 specifically states:



> 24.    The accountants are under no obligation to perform procedures that may be required for assurance engagements such as audits or reviews as part of this type of assignment.


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## mandelbrot (22 Jul 2013)

T McGibney said:


> I presume you mean ISQC 1 "_Quality control for firms that perform audits and reviews of financial statements, and other assurance and related services engagements_".
> 
> This is irrelevant here as M48 specifically states:


 
Ah come on lads will ye, it's like the schoolyard.

Can't we all just agree that the accountant has a responsibility to adhere to certain professional standards, that at a minimum (whether under the guise of ISCQ1 or not) would require him to at least *ask* the partner with whom he deals (since it'd be madness to expect the accountant to have to deal with all of the partners of a partnership on all matters), what the unknown cheques were for.

If he asked and was told they were purchases, he has probably satisfied his professional obligations, and if he didn't ask and just decided to claim them as purchases then he's acting the maggot.


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## capnhand (22 Jul 2013)

Gimme back my lunch money or I takes my ball and goes home


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## T McGibney (22 Jul 2013)

mandelbrot said:


> Can't we all just agree that the accountant has a responsibility to adhere to certain professional standards, that at a minimum (whether under the guise of ISCQ1 or not) would require him to at least *ask* the partner with whom he deals (since it'd be madness to expect the accountant to have to deal with all of the partners of a partnership on all matters), what the unknown cheques were for.
> 
> If he asked and was told they were purchases, he has probably satisfied his professional obligations, and if he didn't ask and just decided to claim them as purchases then he's acting the maggot.



That's indeed true. Otherwise, the whole thing is as clear as mud.


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## T McGibney (22 Jul 2013)

capnhand said:


> Gimme back my lunch money or I takes my ball and goes home



You can have your lunch money but its _my_ ball.


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## Madilla (23 Jul 2013)

At the end of the day I do understand that the one of the partners certainly did not have his eye on the ball and it was of course his business and he should have been more involved and proactive. The accounts were not signed by both partners.I understand that copies of the cheques can be obtained from the banks but we' re talking hundreds of cheques at £10 per copy so its a pretty hefty charge even if it can be negotiated down for such a large number and this is very likely what will have to be done now. Just to be clear nowhere in my post did I blame the accountant. I understand the blame lies with the partners. I merely asked what the duties and responsibilities were? I do feel that the accountant might have discussed with each of the partners deficiencies in their record keeping. Thank you all for your comments.


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