One Company using another company's bank account

One Company using another company's bank account

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One company opened two company bank accounts, but when it came time for that company's year end audit the bank did not disclose one of the accounts to the auditor of the company and so no transactions on this were recorded in the company books. However when the auditor of a unrelated company wrote to the bank the bank disclosed the other company's second account to them. What does anyone think of this, was this ok.

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Euan's picture
By Euan MacLennan
07th Feb 2012 14:24

What about bookkeeping?

"the bank did not disclose one of the accounts to the auditor of the company and so no transactions on this were recorded in the company books"

So, since when did auditors write up the company's books?  It is the statutory responsibility of the directors of the company to keep accounting records and to prepare accounts from them.  If there were no records of the transactions on this second bank account, it is the fault of the directors.

That said, it seems odd that the bank would fail to mention a second bank account in the company's name in response to a standard audit confirmation request.  It is even odder that the bank would disclose a bank account in another company's name to the unrelated company and also, a breach of data protection and client confidentiality.  It is odder still that you know both sides of this story.  Either the bank has been incompetent twice in dealing with the auditors' confirmation requests (which is not surprising on the first company, but seems to be a massive [***]-up in dealing with the request for the unrelated company) or the second account is not actually in the name of the first company.  Without some more facts, it is difficult to comment further.

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Replying to lionofludesch:
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By Quearneyj
07th Feb 2012 15:47

Thank you Euan for your reply,indeed you are correct and I'm sorry the problem here is with the bank and the directors.

It's a very odd and long story that a friend had asked me to look at, he has shown me the documents which he has in connection to his own investigation into this. 

The first company is a mortgage broker which was regulated in Ireland by IFSRA and it had the two accounts, one of which was never record nor any of the transactions on this account in the books of the company by its directors. A couple of the directors in this regulated firm formed a different unregulated company. My friend thinking he was dealing with a director of the mortgage broker gave him deposits for property he was told that the company were going to develop and after some time when he could not get any contracts he went to the office of the company only to be told by another director that no such money had gone into any account of the company, he asked that director to look into it and when he contacted him again he was told by that director that no such money had gone into any account and not to contact him again, if you feel you have a problem get a solicitor.

After spending a couple of years in and out of court he has found and has all the documents to prove that the bank were given details of one account to one Auditor and the details of the second account (which is in the name of the mortgage broker) to the Auditors of the company set up by some of the directors of the mortgage broker. When the Auditor of this company was contacted by my friend to ask the directors to explain what was going on, they could not get any answers and resigned so no returns were made for that company that year and it was dissolved for not filing any. The account had been used by the company for several years, and several million had gone through it. 

My friend asked me should someone not have made an STR (MLR) about the way this account was being used as he feels it was used for deception  

I could go on and on my friend has several hundred documents to do with this.

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By Quearneyj
07th Feb 2012 15:52

I should have also said that the Auditors of the mortgage broker have denied any knowledge of this account and to make it even more strange the two partners in the auditing firm were both directors of the Mortgage broker when the two accounts were opened.

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Euan's picture
By Euan MacLennan
08th Feb 2012 10:36

Wow!

Beware of what you wish - I never expected this!

Sounds like fraud by the two directors who set up the unregulated company.  Obviously, different rules apply in Ireland or perhaps, it is the same rules which are not enforced - in the UK, a two partner firm of auditors could not act for a company of which they are both directors.  I still do not understand how the bank could have disclosed an account in another company's name - perhaps, the bank was conned by the two directors into thinking that the name was just a trading style of the unregulated company.

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By Quearneyj
08th Feb 2012 13:31

Wow is right.

Rules in Ireland are more or less the same, the partners in the auditing firm had resigned the previous year to which they had taken over the accounts of the company. They did receive a severe reprimand and fine, because they took part in the conduct of an audit of a company where they had, within the previous two years, been officers of the company. That hasn't helped my friend, they still did not report the failure to keep proper books.

The auditing firm of the second company also receive a severe reprimand and fine, for allowing the company us a bank which was quite clearly the bank account of another company.

The bank have lost the opening mandate for the account and have still refused to give the bank that issued the bank drafts (which were the deposits of 290,000 sterling) any information as to where or what account the drafts had been lodged to. 

One of these directors is living in the UK now and the other travels back and forward week to week. They have set up many companies in the UK, when my friend went to Companies House  in London to try find out about them, he had to do several searches as they were using different address and names if you like,  x y surname, y x surname, and e h surname, h e surname. I have seen the paper work. But it seems that over here and you might feel that the same happens in the UK,  its not what you do, its who you know.

 

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