A client, who has previously suggested I had not given them enough support, has requested a copy of the accounts, which I have provided. They also requested to see the entries I made to arrive at the accounting figures. Never been asked for this before. Wondering if anyone had any comments or advise before I respond. My initial reaction is to give them what they ask for, as all the entries are based on the paper records they provided, but would appreciate your thoughts.
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Understanding
It goes back to the client wanting to understand the adjustments. On a separate post others complained about the multiple questions clients asked to arrive at this understanding. I would think that concise working papers is a simple solution, the client is entitled to know how figures were arrived at.
Put yourself in the client's shoes
If you had (in your own view diligently) kept your accounting records during the year and then saw that your accountant had changed the numbers at year-end time, you would want to know what they had changed for two reasons:
Do you agree with the changes? (admittedly, you might not understand why at first)Can you use this information to avoid making the same mistakes in future?
So, I think there is agreement here that the client should be able to see the year-end adjustments details. Unfortunately, compiling and reporting this information is potentially a bit of a hassle. Unless you use software to make this a "one-click" exercise.
Similar considerations also need to be given to feeding back the adjustments into the client's accounting records, so that the opening balances for the current year are correct.
Given they are no doubt required to sign the accounts and are responsible for the content of the accounts the least they ought to expect is a set of accounting records and accounts workings.
I tend to write up records and produce to ETB using excel so it is simple to send clients copies of the books, ETB, schedules etc that were prepared/used in the process . These are sent to the client as part of the routine when accounts and tax returns are forwarded; clients being asked to sign financial statements ought to have the information to see what they are signing and how it was compiled, whether they understand or otherwise.
Your accounting working papers
Your accounting Working papers belong to you.
Would provide information you would give to the next accountant.
or agree a fee for extra work.
What does your engagement letter say?
First you are accused of not giving them enough support, and now they want your working papers. I think this client is wanting to do the work themselves next year.
Often mine get this anyway...
Where clients use an accounting system (my choice is QuickBooks) there is sometimes a feature to send your accountant a file and receive an update when the accounts are finished. This means for those clients when we're all finished their own computerised accounts reflect the accounts produced and most of my changes and adjustments are there for them to see. Certainly things such as profit and the balance sheet totals will be the same. Sometimes I will need to explain how I have combined lines on their P&L into fewer lines on my final P&L.
This works too when clients are using the cloud version. In fact they can watch the process if they so wish in the day I'm doing theirs as I make the entries. This does lead to conversations on the use of the software and nature of entries to improve their book keeping and entries whilst there is a recognition that I include the year end "clever" stuff too (depreciation, accruals, prepayments etc. etc.) and that the layout will be different particularly for a company or charity.
Works well for me and has led to some lively debate and some appreciate the transparency. I like it too as when I come to the next years I have a good starting point.
I have found where this doesn't happen and there is a widening gap between their software and final accounts its a good selling point for me as I offer alignment and some of the tidying of their book keeping they don't get round to.
M
Professional Association require you to provide working papers
As one of the previous comments said, the working papers are your property.
It was also said that the client may well be wishing to use those working papers to do their own returns next year.
This was my argument to my professional association but was categorically instructed to provide them if I was not to be brought before the ethics committee.
Since that time, I have reluctantly provided the working papers but have had a couple of clients cease to employ me and do their own return.
Case made I think.
read the rule book
As one of the previous comments said, the working papers are your property.
It was also said that the client may well be wishing to use those working papers to do their own returns next year.
This was my argument to my professional association but was categorically instructed to provide them if I was not to be brought before the ethics committee.
Since that time, I have reluctantly provided the working papers but have had a couple of clients cease to employ me and do their own return.
Case made I think.
Read the rule book.
Sounds like the ethics committee hadn't either.
Your working papers in confirming and preparing your report are your own.
The bookkeeping records belong to the client if you have done these then return these.
Unfortunately the above posts are about book-keeping work not accounts working papers file probably because they don't know the difference.
We have seen complete messes created by accountants on quick books thinking that is a set of accounts.
Another good reason for cloud accounting
This thread highlights another cracking reason to use cloud accounting. Get the client to do the basic data entry. Accountant can then do the corrections, reversals, etc., directly into the same live data. Hey presto, the client has the working papers - all the journals and adjustments are there for him to see (if he can be bothered and knows what he's doing). No issue whatsoever re working papers because all the client needs to know is there within his own system.
Directly into the same live data
@Ken Hmm... yes I agree with you that continuous collaboration via cloud accounting software make sense in the modern world.
However, I am not so sure if you are talking about year-end accounts work, for the reasons I specified in my article here.
In your scenario, how does the client know what changes you have made? And why you made them? Working papers do act as the audit trail, bridging the client's numbers to yours and that bridge is almost impossible to construct from looking at just the changed live accounting records.
Just do a proper narrative
@Adrian, as I mentioned in my earlier post, I just make sure that I write a proper narrative for my journals - most systems allow a fairly long narrative these days (not restricted like a Twitter post), and also allow it on a line by line basis rather than a single narrative for the entire journal, so it's normally possible to put in an explanation for each separate line. Certainly usually enough room to include the simple time apportionment calculation for accruals and prepayments, and plenty of room to say reason for reallocations etc.
yes LOL
A full explanation is good for HMRC so they can enquire when they have access to your cloud book-keeping.