Good afternoon everybody.
A client is seeking mortgage borrowing from a well-known high street bank. The borrowing is 70% of the property value.
The bank is asking for financial statements that I previously prepared and submitted to HMRC and Companies House.
I signed the normal disclaimer that accounts were prepared without an audit but that i formed a true and fair view of the figures.
Unusually the Bank is requesting that I sign to each page of the accounts including Balance sheet, Balance sheet notes, profit and loss account and directors report.
I am finding this deeply depressing as I feel that the risk of lending is being transferred to me.
Needless to say the client is harrassing me to sign to each page of the financial statements but I am not interested in this.
Do colleagues think that I am being overly cautious by denying this request?
What do colleagues think that i can attach to my signature to each page so that I am not personally responsible?
Replies (33)
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You are simply being asked to identify the accounts you have prepared unambiguously. You are not being asked to guarantee the client's loan repayments. I would do so without further delay.
Signature
Do you or any other member find that by my signature to each page I should refer to standard disclaimer 'that accounts are prepared without carrying out an audit' or does this seem superfluous?
No. You are just signing by way of identification. The accountant's report, which you have already signed and issued, will speak for itself. Just identifying the accounts that your report relates to doesn't add anything to the report itself.
As an aside, I am puzzled by your use of the phrase "true and fair view" in your question. It sounds almost as if your report says that you have not carried out an audit but you have not let that stand in the way of reporting that the accounts give a true and fair view. Surely that's not what your report said.
No John
The OP formed a true and fair view. It was not the accounts that showed a true and fair view. pay attention!
True and fair view
I read the actual words with great care, and their literal meaning was not lost on me. I did pay attention. Very close attention in fact. But I am left unable to discern what the OP actually said in his report. I simply do not know what forming a true and fair view of figures means, unless it means forming a view that the view the figures themselves give is true and fair.The OP formed a true and fair view. It was not the accounts that showed a true and fair view. pay attention!
Proceed with caution
I agree with John, there should be no problems.
But like the OP this would make me very uneasy. Personally, I would be inclined to go back to the lender and ask them to outline (in writing) specifically why they want each page of the financial statements signed by the accountant? It's not normal practice, is it?
Perhaps they simply want to ensure that each page, as presented, formed part of the original accounts - if so, fine.
But experience has taught me that you absolutely cannot take anything on trust from the major financial institutions.
Proceed with extreme caution.
Normal practice
Personally, I would be inclined to go back to the lender and ask them to outline (in writing) specifically why they want each page of the financial statements signed by the accountant? It's not normal practice, is it?
It may not quite be normal, but it's certainly fairly common. I have done it, and seen it done by others, many times. It's normal practice when there is a special need to identify a particular document unambiguously.
If the OP goes back to query the request he risks alienating his client even more than he already has by his prevarication to date.
I wonder
If the bank will check that the signature is, in fact, that of the OP.
Will they then want a photograph of him signing - will it need to be witnessed?
Where will it end?
Fudge
Whilst not what they ask, just write on each page that it is a true copy of the original submitted to Companies House and to HMRC, then sign.
In this way it is clear exactly what you are confirming and i doubt they will query it, if they do you get to find out exactly their purpose re the exercise.
I don't blame you for being nervous
And the above comment is very sensible as what you want to do is avoid the argument (of you being personally liable potentially) in the 1st place and I think an alternative way to do that is to sign not in your personal name, but in the name of your Ltd or LLP (assuming you operate as one).
Unless
I am being shockingly dense (which is entirely possible at this time of day!) I am reading this as if the bank are simply trying to ensure that the accounts your client is presenting are, in fact, the accounts to which you attached your report. It is, after all, possible that your client could have taken your report page and shoved it in to a dodgy set of accounts that he/'his mate down the pub' had knocked up in an attempt to gain a larger loan...
You signed the standard report so are, presumably, happy with the accounts you've prepared? I don't see how writing your name on each page would make you any more or less at risk than you are already.
I think
We have all read enough ludicrous judgments over the years from judges finding liability for negligence for bonkers reasons to know that you cannot be too careful and why not avoid the argument in the 1st place? I certainly would not use my personal signature (as happened in a well known case of a surveyor who was found personally liable for his report yet had he signed in his firm's name then all would have been fine probably).
Yes of course you use the same signature as the one you signed the report with. If that was your personal signature, and that makes you somehow liable for something, which I doubt, then you are already liable by virtue of having signed your report in that name.
But
It is rather dangerous to assume that the law works in that way (with or without a nutty judge), especially if you have a potential claim from a bank that can use its financial clout to pummel you into the ground. Hence it is best to avoid the argument.
Perhaps I am being naive
but isn't all this caution a bit OTT?
As rwb suggests the bank are probably just ensuring that the accounts they have been given are not of the DIY variety, but with your report.
Or an earlier draft version that were not marked as such.
If the accounts are sent with a covering letter then that can carry all the disclaimers, but what if the letter and the accounts get separated - I know!
I do get nervous
but isn't all this caution a bit OTT?
Couldn't agree more!
Unlimited personal liability.
Surely this is just analogous to the common practice of signing each age of a will
The intention is to confirm that the document is complete an that nothing has been added or removed
Can't see it's any more than that
Power to the people (and accountants)
As it happens I have never been asked for this, and, in fact, can't remember the last time I sent a set of accounts, signed or unsigned, to a lender, it's all done via number/text confirmation forms/requests on email.
Whilst I can understand why the bank want it, at some time a line has to be drawn over what is silly, and, for me, this would be one of those occasions. I've sent back many requests from banks either empty or incomplete with the sort of response "this may be the way banks do business but it's not how we do business" and certainly in this case, if they wanted 10 bits of paper signed then they can print it on their printers and one of their staff can bring it to me, when i'm having a cup of coffee, for me to sign.
(This will all be academic in a month's time when I will no longer be "qualified" to do it)
Lenders reasoning
I have never been asked to do this, nor I am aware of coleagues being asked either.
As these appear to be Ltd Co / LLP accounts (submitted to Companies House), I would normally expect the lender to be able to undertake a reasonableness check against the Abbreviated Accounts on public record.
It does make me wonder whether they have a particular reason for being concerned about one or more of the pages they have received. Normally, if the accounts are sent from the accountant direct to the lender, there should be no reason for doubt about individual pages.
I agree with the OP that I would be reluctant to do so. The comparision with initialling each page of a will seems OTT, a will is something which you need to be sure of perhaps many years later. If lender has a specific concern, they can ask now.
Abbreviated Company Accounts
tell next to nothing - certainly not the ability to repay a loan, as earnings are not disclosed.
Abbreviated Accounts
My reason for referring to the abbreviated accounts is that they provide a Balance Sheet (and some notes) which can be cross-checked to that in the full accounts the lender is given and therefore some comfort that they are the correct final copy.
Apologies
My reason for referring to the abbreviated accounts is that they provide a Balance Sheet (and some notes) which can be cross-checked to that in the full accounts the lender is given and therefore some comfort that they are the correct final copy.
Okay - understood - apologies.
I agree with John. I can't see how this could increase the scope of any liability that you already have for these accounts. It is indeed common practice when a covering letter or document that forms part of contract refers to another document that this other document be initialled on each page to ensure that it the one to which reference is made.
For this reason I once had to initial all 157 pages of a SPA - and my initials on page 157 was nothing like that on page 1!
Like John, though, and despite Portia's rather leftfield interpretation, I am slightly concerned by the use of the term "true and fair view" in the context of unaudited accounts.
I too would be nervous
The bank's motives probably are innocent and for identification only but......
The introduction to ICAEW AUDIT 4/00 paras 1 to 6 make interesting reading. Although it relates primarily to audts, it actually extends wider than that.
The difference between a straight initialling for identification and the current circumstances is that the accountant now knows that the accounts are going to be used for a purpose that was not extant at the the time the accounts were prepared.
At the very least I would add "for identification purposes only" to each initialling and a disclaimer in a covering letter,.
Have a read
Of this case and you too will think twice about signing anything with your personal signature: http://www.bailii.org/ew/cases/EWCA/Civ/2001/214.html
The bank will have just had a risk review which has meant that fir the moment this needs to happen with all loans in this area. I don't think it is anything sinister just how the bank has learnt from having been caught out in the past.
However i think you need to cover yourself. As was said earlier the key fact is you now have knowledge of the purpose of your signature. In the modern world of banking, this loan will probably be amalgamated with others into a securitisation pool and turned into a tradable asset. You therefore have no idea who will be relying on your signature.
I think many of the suggestions about signing are sensible. If it was me I would sign but sign in blue ink so that it is less likely to be copied and annotated. I would add a reference that you are signing confirming the opinion on page x is that of Y, and then date and place a circle around my writing.
i cannot really see why you are so concerned. Your t+f opinion in the first place is where the risk lies not with identification and referencing.
Risk
Isn't the real risk still with the client, as if they chose not to give you all the information you needed, then as long as you have a signed and dated letter from them attesting that they have told you everything you should have some sort of cover?
Of course but the opinion is still what the bank relies on. The bank will not pursue the borrower as it is too late by then so it the PI of the professional every time.