Accountancy fees
I have a client who needs his accounts auditing which has been done by a mid tier firm. Admittedly the terms of the enggement were half the fee before they started and the balance on signing off. The accounts were provided to the auditors in plenty of time for them to do the work and meeet the Compnies House filing deadline and payment of corporation tax. However the work was not actually started until a month later with the result that the accounts are now late for filing and the corporation tax payment date has also passed.
Initially they were asking for an unreasonable fee for the work and it was agreed eventually that they would look on a time basis and adjust the fee accordingly which they have done - it came in at £4k cheaper!
Obviously the late filing and corporation tax payment has meant increased costs for the client in penalty and interest charges.
The auditors are now saying that unless they get cleared funds they refuse to sign off the accounts.
As the late filing has occurred due to the delays on the part of auditors I would have thought that it would have been in their interests to get the accounts signed off as quickly as possible. Surely their stance is unprofessional and unreasonable and do I have recourse to any professional bodies with my complaint or should I seek a reduction in fees to compensate for the late filing and interest charges?
Thanks
- 668 reads
- login or register to post comments
- Add to a social bookmarking site
Latest questions on 
Seems reasonable to me
It is easy to quibble over whose fault it was that completion was late, but the one concrete condition is that there is no sign-off until payment has been made.
It looks as though the auditors do not consider your client an A client and maybe not a B. Your client can always vote with their feet.
Not "plenty of time"
From what you say I don't think they were given the accounts "in plenty of time".
Were they given the accounts at the time agreed ?
Its all well and good saying they didn't start the work immediately, but did they get the draft figures and accounting papers at the time that was agreed beforehand? Its pointless saying there was plenty of time if no staff wre available. They might have had to reschedule the work to when staff became available.
Logically, on average, you would expect a time basis for billing to lead to a lower fee than fixed fee quote, as with a fixed fee the auditor is accepting the risk of cost overuns, so this must be built in. With a time basis the client accepts the risk.
I didn't think ICAEW registered firms were allowed to withold their signature pending payment anymore.
you do not
present a remotely compelling case for saying the late accounts are the fault of the auditor. In fact, you present no case at all.
That's not to say where the fault lies ; just to say you present nothing which points a finger at them. What on earth was actually agreed by all the parties !!! Or was nothing agreed, save fees?
This sounds a hopeless last minute scramble from start to finish. Given everything you describe, I am not surprised there is a stand-off on fees. The auditors clearly anticipate the client will not pay them, or at the minimum deduct the late filing penalties !! (interest, by the way, would usually be irrelevant, so it's interesting you bring that in).
Did the client examine the letter of engagement properly? Did the auditors draw it up properly? What does it say about timing of accounts / audit turnaround?
Not late in submitting accounts
When the accounts were passd over to the auditors I was assured that the audit would commence within a week. Two and a half months later the client is only just getting draft accounts.
How long?
How long did it take from the balance sheet date to when you gave the accounts to the auditors. Why did it take so long?
Audit only or accounts preparation?
You mention that your client was waiting for draft accounts, was this extra work for the auditors to do? Whenever I have been audited, either by a mid tier or a 'top 4' firm, I always gave them the draft accounts together with corporation tax calculation and full balance sheet reconciliations before the audit commenced, not the other way around.
If the auditors were expecting to do an audit only, but found that they had extra accounts preparation work to do, would that explain some of the delays?
I'm sorry but
your further particulars only confirm there is already (let alone going to be) a raft of finger - pointing and fierce argument over who did what, why and when. Your comments do little to clarify who is responsible, and why, for missing deadlines. All of which seems to indicate only too clearly why the auditors are holding out for their money - they already know you or the client do not intend to pay in full (as someone has pointed out).
You had better start consulting your diary, your notes of phone calls, your emails, and your representations to the auditors if you intend to say they are the cause of the problem. They will surely be doing the same. And what (if anything) does the engagement letter say about timing etc? Is the client blaming you or the auditors? Are the auditors claiming it is you - or the client - who is responsible for the deadline missed, or are they simply silent? Presumably they did not start work until the fee (or its basis) was agreed. Did that cause much delay? (Puzzled that you almost seem to hold it against them that their T&M fee was way below their original fixed fee quote, by the way).
Frankly, it is going to be impossible for anyone on a blog to help you with the strength or weakness of your case, the auditors case, and the clients case, as to who is to blame, and in what proportions, for the late filing etc etc. Everything hangs on details of who did, said and wrote what. And don't be surprised if there are areas of great contention unless the letter of engagement, or the trail of correspondence, is very, very explicit.
But it sounds as if there is a definite relationship problem here - I'm sure Peter can help you on that aspect !
signature
ICAEW firm are not allowed to withold signature for non payment of fees.
What's the corporation tax got to do with it?
I can't see why the corporation tax was paid late. Presumably, accounts were given to the auditors, so that even before the audit had started, you and your client would have known the profits (or a good approximation) and could have easily calculated the likely corporation tax liabilities and made a payment on the due date of your best approximation. Unless the audit threw up some major changes to the first draft accounts, then it's absolutely nothing to do with the auditor that your client didn't make an adequate corporation tax payment at the time.