Hi
Just really want to check what method most accountants follow and if I am going it about the right way. Please be gentle.
For Sole trader accounts and landlord with rental properties. I normally get a spreadsheet and then check if the costs are reasonable and then file the tax return
For Limited company - most I have access to their online accounts but for two clients I rely on their spreadsheets again and do a bank rec and check if the accounts make sense.
Should I take a sample of the receipts or perhaps for sole trader and rental properties take a look at all of the receipts
Thanks
Replies (11)
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not all the time, for me its how much I trust the clients work
If you have a good relationship and you suspect the client is trustworthy then thy will maintain their records accordingly. If they include train as travel and include a note of wat for then I have no need to look at a receipt to confirm it. If however there is a new roof repair or equipment purchase, I will quite often ask for a receipt.
If I do not feel that the client is trustworthy and honest, then I would prefer not to act for them.
With new clients, I do sometimes take a sample check of receipts, but not always.
Just to add, for limited company accounts I always like to see the bank statements, so you know and can check the transactions in and out. I had an example once, of a spreadsheet advising that money was being transferred to a second business bank account, when in fact it was the directors own personal account. You haven't mentioned vat returns, so I suspect you may not be completing these for a client yet, but, personally, for some clients anyway,I'm like to see the receipts myself.
In the event of an enquiry
Do you think HMRC might want to see the receipts?
Firstly, I want to be reassured that they exist so I ask for them. Secondly, in the event of an oddity it's more efficient to refer to the receipt than engage in email or telephone tag.
I do. Not all of the
I do. Not all of the receipts if its a remote client, but I may ask for receipts over a certain amount to be scanned and emailed over. I also like having copies of say the large repairs and maintenance ones, or fixed asset additions on file. I do ask for the receipts file for local clients so I can peruse...
tax sensitive
I generally ask for large/tax sensitive ones eg
Repairs and Renewals
Travel and Subsistence
Entertainment
Legal and Professional
Sundry Expenses
Also ensure have invoices for any material asset additions, do a bank rec and get copy of year end bank statement, do wages rec to payroll records and VAT Box 6 rec to sales. Also have back up to all balance sheet balances eg list of debtors/creditors and other reconcilations.
As an old boss once told me if the balance sheet is reconciled then the profit and loss is right with the only issuing being figures under the wrong accounts which can be identified by analytical review.
Drawings / DLA
As an old boss once told me if the balance sheet is reconciled then the profit and loss is right with the only issuing being figures under the wrong accounts which can be identified by analytical review.
That's true if the drawings / DLA figure is correct. Do you review / analyse drawings / DLA movements? Can you be sure of the completeness of income? Can you be satisfied that significant personal expenses have not been charged to P & L?
RM
Online bookkeeping
This is one of the advantages of online bookkeeping. If the clients attach pdf's of documents to transactions then it is very easy to check any transaction quickly.
PS QuickBooks desktop has a similar facility for attaching documents and importing bank feeds.
All
I ask for all the receipts and then look at the ones that might be interesting. I don't let the client choose what to send me.
I'm just looking to see that payments have been correctly classified.
On a modestly sized job, I might look at all the invoices but only vouch the "controversial" ones o the records.
On a materiality issue
...I would never simply ask for all receipts over £250 etc. as the business may only turnover £250 in the year!
For traditional clients who are bringing in their records - I ask for all of them and pick and choose at will.
For remote clients where they are not bringing in their records - I review the Excel spreadsheet, online bookkeeping etc. and pick out any invoices which seem "obscure". These will include the items listed by Marks and any others I feel may be of importance (not necessarily of material value) and request these be submitted by email, file share or via their online bookkeeping software. If they wince, take too long or refuse, I insist on seeing a larger sample or, that they send me every individual receipt by post.
As with many of the previous comments, it depends on the client, the business and the level of trust. However, "trust" alone can never be an argument - just remember Andersons!
Clearly, the above relates to receipts only. I must see all bank statements, all VAT returns, all PAYE records and any other "non-receipt" items.
Like Levelheaded, I had a client a few years ago who had a cheque receipt paid in to the bank account for £20K which he said was an opening loan from his personal account. In actual fact, it was a receipt from a secondary business account which was for a sale, put him over the VAT threshold and cost him dearly (unpaid VAT etc.) once I found out and corrected it.