Kent accountant
Share this content

Got a right one 'ere!

Got a right one 'ere!

I’ve recently acquired a new client, small business owner managed lifestyle business.

Client year end is April 2012 is bit of a rush to get the accounts done, but on the face of it I received detailed information from the client and prompt and fairly detailed response from the outgoing accountant.

However, when checking the TB to the annual accounts for last year there were a number of differences.

1.       TB included a £37k overdrawn director’s loan account – accounts didn’t. I queries this with the outgoing account and received the following response:

“The net balance of directors' loan account amounting to £23k was shown as cash in hand since we were advised that the amount was returned to the company after the year end.”

This cash was not received after the year end and the director was not aware of the need to pay these funds into the business.

2.       The difference of £14k appeared in accruals in the accounts and I got this explanation:

“The £14k was a provision of director’s bonus, and therefore included in accruals.”

Suffice to say that this bonus was never paid and the client was not aware of the need to pay it. Plus the accounting entries don't work.

So I have a position where last year’s accounts are a work of fiction and the company has a significant CT liability for the overdrawn DLA for last year.

I will be advising the client that:

1.       I need to amend the annual accounts and submit an amended CT600.

2.       There will be a CT liability of £9.25k for last year which needs to be paid asap and probably interest and penalties.

3.       Judging by draft figures for the 2012 year end the DLA will be even more overdrawn and there will be further CT to pay on this – now.

I’d appreciate comments from others on this situation and my proposed plan of action. In addition what if any action the client can take against the old accountants (whose website is ‘under construction’ and don’t appear to be a member of a professional body).


Please login or register to join the discussion.

16th Jan 2013 23:22

well its just about possible isnt it? mm

one wonders why he moved accountants are the 2 related as they say. perdsonally i wouldnt bother with a new set of accounts you may find other funnies; i am sure HMRC will accept the CT with an explanation especially as it looks likely that they will gain and you will get get top marks in the honest agent scheme.

it seems that it is impossible to tell who said and did what as i suspect the accs and owners take on matters will diffe

but this and another post about an ACA getting overly worried about what to do with a person who has been (self) employed in his company leaves me thinking that we have all the responsibilities and bugger[***] all rights

PS you have till 31st jan to dividend etc so allis not yet lost one hopes re 2012 

Thanks (0)
17th Jan 2013 00:01


two sides and the client appears to be the type who takes no interest at all in the accounts and the accountant was the type who had no contact with the client until 8 months after the year end.

This is actually the third client I have gained from this accountant and there is common theme emerging...

Anyway appreciate the comments, I'll just say it as it is and get the client back on the straight and narrow.

Had 50% of the fee upfront so getting paid isn't an issue.


Thanks (1)
17th Jan 2013 08:17


Personally, when I have this sort of client I am careful to include in the close-out letter all these sorts of items, so that "You never told me about this" can never be an accusation later levelled at me.

A recent loss was just such a client, where I refused to book "adjustments" which would magically have resulted in a corporation tax bill of zero.  I was very thankful I had done these letters for the 2 years he was a client, as I was able to forward them to the new accountant with a covering explanation.

So if the new accountant gets arm twisted into any adjustments and HMRC come calling I will have all the evidence I need to defend myself.

Thanks (0)
17th Jan 2013 09:02

I have one of those too!

I have recently acquired a client just like this, where accounts for their very small limited company business had been prepared to 30 September 2011.  Outgoing accountant very helpful, happily provided full TB etc - only when I started to look into the detail of the closing balances, in order to start the accounts for 30/9/12, did alarm bells start to ring.  Cash at bank was understated by several thousand, and there were many other simple errors - it was quite obvious that no reconciliations had been prepared and when I spoke to the outgoing accountant on the phone he was happy to admit that he had delegated the accounts to a (non-qualified) employee and not reviewed them!

All of the adjustments required will produce a significant DLA debit balance with its associated tax implications.  I am just astounded that a) no bank rec was done at the year end and b) the accountant could send off the accounts without reviewing them in any way!

Thanks (0)
By Old Greying Accountant
17th Jan 2013 09:12

When I read the first line ...

... "I’ve recently acquired a new client, small business owner managed lifestyle business." I admit I made an assumption based on stereotypes. When I finished reading I realised I was totally correct in my assumption!

When I see "lifestyle" business, invariably it means the business is run by someone who should be banned from owning or running a company for life, as any income is seen as theirs to pay for the lifestyle they want, not the one they can afford; and beggar the creditors!

Thanks (2)
By Jakarmi
17th Jan 2013 11:24

Avoid redoing the accounts


I'd avoid resubmitting the accounts with a couple of queries if it were me. If the old accountant has made a couple of glaring errors on the face of the balance sheet then who knows what else is in there? The difference is your firm's name will be on the resubmitted accounts.

If you redo the last year of accounts what if you find the same problem from two years ago for example?

The overdrawn account can be cleared by dividend in your year of accounts and the actual corp tax to the Revenue is zero (excluding the interest) as the S419 would be repayable to the client as repaid in this year. 



Thanks (0)
to marks
17th Jan 2013 11:39


I would tend to focus on getting the balance sheet right at the year end I was responsible for, rather than re-doing the PY, though I appreciate you may feel you have no choice.

Also, get the client in for a meeting to lay out all the bad news for him. Check he really does want you to proceed as his accountant. If not, it's a good indication that he would have been a problem client, not listening to you, etc.

Thanks (0)
By E Scott
18th Jan 2013 11:24

I agree with your initial assessment of redrafting the previous years accounts or alternatively include a prior year adjustment in this years accounts for CH.  If it was just the cash v DLA I wouldn't as you're only moving one balance sheet item to the next (I question why HMRC have not picked up & queried such a massive cash in hand balance though!) but the bonus was assumably charged to the P&L and I'm guessing at that level is material to the company.  I would however explain the implications to the client and also the fact that as you would not be preparing a full file for these accounts you can not sign off the accountants report on them. Let's face it a signed off accountants report from his unqualified accountant is no better than no accountants report anyway!  From my experience this isn't generally an issue as the clients just want things sorted out.

I agree with the dividend situation mentioned above.....surely there has been a dividend declared at some point to help set against the DLA and reduce S419?

It seems to me that you may have got yourself a decent client here - sort out the mess and educate him on how to do things properly for the future and you should have his loyalty for a good while!

Thanks (0)
Share this content