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Engagement Letter: Bookkeeper or end client?

Whilst I am comfortable in preparing and issuing engagement letters to 'normal' clients that contact my small practice directly, I now have a quick query regarding the role of the bookkeeper.

A bookkeeper (MAAT) contacted me with a view to me taking their bookkeeping data and preparing LTD Accounts, CT600 and SA100 for their client.

The bookkeeper has requested that all documentation go through her as she does not particularly want the client to be aware that she is outsourcing the year end work, and wants to add a mark-up to our fee etc.

My question is will I (ICAEW practice) still have to issue an engagement letter to the end client company, or can I instead form a contractual agreement/engagement letter with solely the bookkeeper? My initial instincts tell me that I will need to send an engagement letter (along with the normal identity checks) to the end company. Presumably, even if the engagement letter can be addressed/signed by solely the bookkeeper, identity checks on the end company would still need to be performed for ML purposes?

I am sure that this is a common occurance for many here, and am wondering what their views are?

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I'm not sure, but ....

Surely this is just the same as subcontracting? If I engaged a subcontractor I wouldn't expect them to contact my clients, issue my client with an engagement letter, etc.

I would say your client is the bookkeeper, but it may be worthwhile getting something in writing that you can rely upon their MLR checks, etc.

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Even if...

Thanks a lot for the input Shirley.

To me, the difference is that I would be signing off on the accounts, whereas an accountant's subcontractor would not. Perhaps it may have to be the case that an accountant's report is not included in the accounts, although I am not comfortable with that being the case to be honest.

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Are you sure that is what is required of you?

The bookkeeper has requested that all documentation go through her as she does not particularly want the client to be aware that she is outsourcing the year end work, and wants to add a mark-up to our fee etc.

It sounds like she wants to sign them off herself!

If you are not comfortable with that, then you need to discuss it with her.

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Watch your PI position

Check with your Insurer as subbies are a grey area if you are 'engaged' to end user, is the  contract with end user ? clearly not, presumably your sign off will be seen by the end user and you could well be in the firing line 'in the event' something is amiss in the future.

Read Subcontractor clause in your PI Proposal form and consider the implications.

Qualified 'sign off's (practioner not the 'accounts') have long been a custom and practice in the Profession Shirley M makes a good point.

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Firstly ...

... I would not do this, and secondly, ask ICAEW members services, they will tell you definitively, that is what you pay your subs for!

Sorry Shirley, I tthink it is more what the ICAEW rules allow than what the OP is comfortable with (it'll be a full case soon ;o) )

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I admit my ignorance, OGA!

There are quite a lot of ICAEW accountants touting for, and completing, subbie work. I didn't realise this went against ICAEW rules.

(A full case would still be very nice, though :))

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Depends ...

... on the level of work, I suppose I am lucky enough to be in the position that I would do subbie work, but this sounds like the book-keeper is doing the leg work and wants the CA to rubber stamp.

Call me a snob, and whilst i have the utmost respect for good professional book-keeprs, but this dog ain't being wagged by no tail. At best I think it would be gross mis-representation fro a book-keeper to hold out to do what is asked without having the ability to do it themselves.

I always thought subbies were to do work you could do but either don't have enough hours for, or have more efficient use to put your time to.

 

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Clarification

If you are signing an accountants' report, which is addressed to the directors, or an audit report, addressed to the members, you have an engagement with the company and must follow the appropriate procedures - MLR checks and engagement letter with the company.  However, this would appear not to be the case from your statement "that she does not particularly want the client to be aware that she is outsourcing the year end work".

If you are preparing statutory accounts and a company tax return as a sub-contractor to a book-keeper who deals with the company, you have an engagement with the book-keeper, who will be responsible for signing any report to the directors on the accounts and for the corporation tax return which you prepare.  The risk (and apparently, the rewards) for the work she has sub-contracted to you remain with the book-keeper.  It is the book-keeper on whom you need to do MLR checks and have an engagement letter.  There is nothing in the ICAEW rules to ban this.  Indeed, it seems an eminently sensible arrangement for someone who does not have the necessary expertise or perhaps, software, to sub-contract the work to someone who does.

We do this sort of sub-contract work for a couple of other ICAEW members.

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Disagree Euan ...

... so CA falls out with book-keeper, or gets busy enough with own clients and stops working for book-keeper, then the queries come in, book-keeper will look a bit stupid, also, probably wrong, but I thought you should make the customer aware you are out-sourcing under Data Protection rules?

Occassionally I have outsourced, I have either had the client and specialist contract separetly, or have explicitly told the client I was getting specialist advice, got a quote and agreed a fee with them for my intermediary work beforehand.

The OP's situation is to me deceitful and bordering on fraudulent mis-representation, and if the CA is pricing correctly the book-keeper will be massively over-chargiing if she is adding a mark-up, and won't be in a position to deal with any follow up situation

A far better arrangement would be a reciprocal arrangement to pass book-keeping work to the book-keeper, and her pass top end work to the accountant.

If the book-keeper isn't competent to produce limited company accounts and CT600, or even SA100's how will she be able to deal with queries and give best advice during the year?

As a client I would not be happy with the situation if I found out, which they will, and then it will spread round her clients and she risks losing many of them.

On the other hand, if I was told up front I wouldn't have a problem, the CA could even pay a "retainer" or whatever to the book-keeper  for her mark-up.

 

 

 

 

 

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Disagree OGA

Old Greying Accountant wrote:

The OP's situation is to me deceitful and bordering on fraudulent mis-representation,

 

If the OP has no contact with the book-keeper's client and deals only with the book-keeper, to whom is the OP being deceitful and what is the OP mis-representing, fraudulently or otherwise?  These are allegations that you could make of the book-keeper, but not of the OP.  His dealings with the book-keeper are entirely open and transparent.

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Clarification, sorry ...

Euan MacLennan wrote:

Old Greying Accountant wrote:

The OP's situation is to me deceitful and bordering on fraudulent mis-representation,

If the OP has no contact with the book-keeper's client and deals only with the book-keeper, to whom is the OP being deceitful and what is the OP mis-representing, fraudulently or otherwise?  These are allegations that you could make of the book-keeper, but not of the OP.  His dealings with the book-keeper are entirely open and transparent.

... sorry if ambiguous, I was referring to the book-keeper not the OP as mis-representing their firm (meaning the situation in the opening post, not what the opening poster was doing), and if I was in the OP's position I would want no part of it.

To put it bluntly, why the hell would you work your nuts off qualifying as an ACA to prostitute yourself in such a manner. It is one thing subbing to another accountant, even doing book-keeping work for a book-keeper, but changing my mind a bit as I write, if the OP takes this work, knowing what is happening he is complicit somewhat too.

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Many thanks to all who have commented. I will discuss with the ICAEW and report back my findings.

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Depends on scope of the work

If you are completely invisible to the end client, (ie you are not signing off or being identified with the accounts, CT600 etc in any way), the bookkeeper is your client and should receive the engagement letter.

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To me ...

... this is re-labelling and devalues the work of the accountant and the accounancy profession. Might as well put on a short skirt and stilletoes and stand on a street corner!

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OGA ... you get worse!

When you disagree with someone, or want to point out the errors of their ways (in your opinion) ... WHY ... do you always make your point by comparing it to something derogatory about the female of the species????

It's getting on my wick! (ps. it must be a full case by now 'cos you gave me wrong info above!)

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@ Shirley ...

... I wasn't, there are plenty of men who wear short skirts and stilletoes and stand on street corners, but , working such a scenario is professional prostitution, sorry, but that is how I see it, nothing anti-feminist about it.

Would you you be happy paying someone to do a job at a premium when they are not competent to do it. Imagine going to the doctors and HE says hang on a sec, disappears out the back, and then comes back and asks you a few more questions, disappears, comes back, more questions and so on and so on ... as he has to go and talk to the "proper" doctor he is paying a percentage of the fee to?

Show me a better metaphor and I'll use it?

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I'd do it...

Old Greying Accountant wrote:

...  there are plenty of men who wear short skirts and stilletoes and stand on street corners

 

...if it wasn't so damn cold!

 

actually its very similar to accountancy, you can choose your clients and charge them what you think you're worth;)

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Outsourcing

Morally is this really any different to bona-fide firms outsourcing to Asia / Latin America without their clients knowledge?

The bookkeeper in question has outsourced to a firm of Chartered Accountants - not someone down the pub, so I assume that the work will be of high quality.

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the BIG difference ...

jndavs wrote:

Morally is this really any different to bona-fide firms outsourcing to Asia / Latin America without their clients knowledge?

The bookkeeper in question has outsourced to a firm of Chartered Accountants - not someone down the pub, so I assume that the work will be of high quality.

is the firm outsorcing has the competence to do the work, but chooses not to.

The client is at risk because their "accountant" will not be able to give them best advice (or may be even correct advice)

My understanding though, feel free to correct me if wrong, but as I said above, I thought you had to make the client aware if their work was outsourced, certainly if trading under a chartered badge, but also by Data Protection regulations?

And for the record, morally, I do not agree with outsourcing overseas - the effects of this are already starting to show in the UK accountancy world.

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Oh come off it.

Work in these times is work.

Providing you have a sensible contract with the MAAT nothing is wrong with this. What profit or loss the MAAT makes is not your business. Include a clause that the MAAT may not approach any of your clients.

Just ensure that your name does not appear anywhere on the paperwork.

Thousands of us "Sub out" work outside of our expertise in order to give our clients best service.

PWC, KPMG, to name just two that will happily work for you.

What perhaps you should do is make sure that the MAAT has the AAT practising cert, and carries a PI policy which includes any subcontractors. Also, make it abundantly clear in writing that you rely solely and exclusively on information provided by the MAAT.

Your liability to the MAAT is then is set by paragraphs 13 & 14 Provision of Services and Goods Act 1982 et seq.  

Last but not least, be careful- as soon as you are in direct contact with the client- even one telephone call- you could cause your self grief.

Make sure the MAAT is indeed your sole port of call.

 

 

 

 

 

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and as we are feb 1st never count your self as so f****g posh.

As tis is Feb 1st and I am feeling a bit relaxed:

Some ten years ago I took over a batch of clients from a Snap-on tool salesman, who as a service to some of his mechanic and subbie customers also did their SA tax returns for them.

Actually he made quite a good job of it. This because he sensibly recognised what bits he could not safely do.

Anyway he thought "Blow this for a lark" and went off to open the

"Lloyds Bank Girlie Exchange Bar" on a beach in Thailand.

Front painted up similar to a bank branch complete with black horse.

I had a photo thereof.

 Just shows, there are other thing in life besides tax returns and accounts.

-and I have been in the a/c business since October 1961.

 

 

 

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Yes, we all outsource ...

... but openly.

I use a company formation agent, but I tell my client that, i tell them how much they charge me, but i also tell them what I will add on to that as part of my fee for incorporation a company for them.

If they need changes to Mem and Arts or whatever I again will outsource, i wil tell them the cost I am paying and what I will charge to liaise between the parties.

I had a technical VAT query recently, again, I was open with the client, told them I recommended specialist advice, and what it would cost and my fees for acting a go between.

I could go on, good business is done openly and honestly. I am not saying you should not do the work, but the OP has a practice, he is not a subbie looking for work wherever.

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David Gordon FCCA

David - I love your attitude and you have been practising since the month and year I was born!  You have shown you are not an old stick-in-the-mud but are willing to accept opportunities that others may be seemingly too arrogant or condescending to accept.  Go you ;-)  

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He didn't say that ...

teresaweezer wrote:

David - I love your attitude and you have been practising since the month and year I was born!  You have shown you are not an old stick-in-the-mud but are willing to accept opportunities that others may be seemingly too arrogant or condescending to accept.  Go you ;-)  

... he said he had been working in the accounting business since then, a different thing entirely!

It is little about arrogance and condescension and lots to do with honesty and openness. It is not about whether to do the work or not, it is about how to do the work or not.

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Engagement letter

I had this issue aboyt a year ago and ICAEW advised me to deal directly with the end client in terms of invoicing and enagement letters. The book-keeper wasn;t keen on this and didn't come back to me, and I could see her point of view - she must have found someone who was willing to prepare and file the accounts and CT return on the basis she  wanted. I

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engagement letter

 You will not be doing an audit. The bookkkeper wants you to do the Statutory Accounts because she can not do it.

Very Simply you do it as a subcontractor but her name goes on the Accounts as the one who has prepared the accounts.

If she wants your cover instead then you will have to have client contact and ML checks to do.

 

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So

philfromleeds wrote:

 The bookkkeper wants you to do the Statutory Accounts because she can not do it.

Very Simply you do it as a subcontractor but her name goes on the Accounts as the one who has prepared the accounts.

You do the work and I'll sign it off even though I don't know how the fec to do it!

Brainless - would leave the bookkeeper wide open to legal action if it goes wrong.

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The AAT specifically tells its members in practice not to take on work they are not qualified to do and if subcontracting to inform the client. I suspect this MAAT has got the AAT qualification but is not registered or lincensed as a MIP. Surely she would know the rules if she was a MIP. Sounds like she is leaving herself wide open to some rather serious professional negligence problems.

 

 

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Yes, but ...

It is not the OP's problem whether the book-keeper is following the rules of her professional body or leaving herself wide open to legal action.  Provided the OP deals correctly with the book-keeper as a client in terms of MLR, engagement letter, etc., the OP is in the clear.

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I agree...

I agree with you Euan. I guess the post is really about the OP and whether or not the bookkeeper is doing the right thing is secondary.

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Sorry, but ...

... still think OP would be complicit as he knows what is going on. Whether or not in law, certainly morally. The term aiding and abetting springs to mind.

If you saw a drunk fumbling at the lock of his car, would you help him open the door, put the keys in the ignition and let him drive off?

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I think a lot of assumptions are being made

... about the MAAT bookkeeper. Everyone is assuming she wants the OP's help because she is incapable of doing it herself. This may not be the case at all.

To the OP: if you are not comfortable with the scenario, simply turn it down. Lots and lots of ICAEW members take on subcontract work, so if you want to accept the work there is no reason why you shouldn't.

 

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Yes, not the OP’s problem

but the AAT licences members for a list of specific areas of work, so it is possible the book-keeper is not licensed for Corporation Tax or managed to included it without being competent in that area.

 

I can see how the book-keeper wants to make a few extra bob but as OGA points out there are potential dangers in the arrangement suggested, especially as there is a hint of deceit by the book-keeper if she is letting the client think she is doing all the work.

 

I agree with many of the comments and as a specialist book-keeping and payroll company we always refer clients to an accountant, if they don’t already have one, for tax advice and the year end work. The clients appreciate this and the accountants we deal with refer book-keeping work our way. We both have Letters of Engagement with the clients so the areas of responsibility are well defined and there are no problems with rules of professional bodies and MLR, etc.

 

It would prevent any problems in the future if the OP speaks to the book-keeper and agrees a deal which means that clients are referred each way.

 

Horses for courses at the end of the day!

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Who is engaging?
Who is your contract with? Who is paying you? Does the bookkeeper pay you herself...think not! Then take care , her employer might not approve and then you might nt get paid.

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Does the bookkeeper pay you herself...think not!

Actually I had assumed that the bookkeeper was paying the bill!

 

 

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bookkeeper

assume nowt! get an order and agreement in her name first.

sue

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It does make me smile....

....clearly this is a case where the bookkeeper should know his/her place....how dare he subbie work to a CA?!?!  Of course many CA's don't have a problem with passing the work to juniors in the firm who have problems adding 2 and 2 without a calculator....but thats different...the CA then reviews the work in detail (of course he does....?.)

 

 

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Nothing to do with snobbery ...

justsotax wrote:

....clearly this is a case where the bookkeeper should know his/her place....how dare he subbie work to a CA?!?!  Of course many CA's don't have a problem with passing the work to juniors in the firm who have problems adding 2 and 2 without a calculator....but thats different...the CA then reviews the work in detail (of course he does....?.)

... not from me anyway - it is about honesty and clarity. If CA's don't review work of juniors properly they are in breach of their rules and open to action if they sign off work that is incorrect. Not naive enough to think it doesn't go on but there is at least some form of comeback.

At the end of the day, if I was the client I would be pretty miffed if I thought I was paying someone to do something they couldn't - very much the emperors new clothes to my mind!

This is actually the blight of the UK as a whole, but that's another thread for another day!

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Who owns the data?
If a company uses a professional firm to maintain their records on SAGE and produce regular accounts, who "owns" the SAGE data file? A director ( of a 2 director - 3 shareholder business )has requested a copy of the file to interrogate the data and extract information. The professional has said "It is his SAGE program and the data is his"! So short of asking for a complete print out what next?

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IMHO ...

... the accountant is wrong to a degree, the data belongs to the company - accounting records of the company must be available to the directors under CA2006 otherwise the accountant will be stopping them fulfilling their statutory duties, which is illegal.

Admitedly , the accountant could provide it as a print out, or as a pdf, but they must have access to it in some readable form, but not necessarily as a SAGE back up.

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Who owns the data?

The prime records (invoices, cheque books etc) are definitely owned by the company and must be kept to comply with the Companies Acts; but derivative records?

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Who paid @berfcca?

Was the accountant paid for the records to be transferred to Sage, or did the accountant do it as a goodwill/charitable gesture?

If the accountant has been paid to produce the data, why does he think it belongs to him? Obviously the software belongs to the accountant, and nobody else can demand use of his version, but they can buy their own and restore the data backup.

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Subcontracting?

Don't think so. Sounds like hypercontracting to me.

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