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Is there anyway to get out of a members audit

Club members voted on an audit which the club cannot afford.

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Hi All

A club (bar) that I represent had an audit last year as per their 4 year rule book rule.  Other than the club rules there are no statutory audit requirements.

The AGM was taken over last year by a disgruntled ex-employee who brought a posse and voted for another audit with >10% vote, knowing it would cost us £5k.  We offerred them an independent exam but this was voted down.  I can genuintly say that the vote for the audit was in no way a response to a poor committee or financial mismanagment in any way

The club has kept running lately on meagre reserves, but after covid-19, the club cannot afford another £5k audit.

Is there any way we can get out of the audit?  I know there is some new legislation (Corporate Insolvency and Governance Act) brought in for Covid, but I have no experience in audit and not much knowledge of the legislation.  We would be happy to go back to the members with another vote, if allowed.

If the committee choose to appoint an independent examiner, instead of a registered auditor.  What would be the consequences for not being compliant?

Thank you in advance.

Any help would be greatly appreciated and might just keep us going through Covid and beyond.

 

All the best

Ryan

Replies (26)

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RLI
By lionofludesch
02nd Jul 2020 17:23

Yes - committee resigns en bloc, citing that the club can't afford an audit and is therefore insolvent as a reason.

Sell up and move to another pub - if you can find one open.

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By frankfx
02nd Jul 2020 17:25

I suppose the committee could keep returning to members until they got the right answer

Cost and value are important.

A suggestion.

Audit does have a value.

Why not present members the areas of risk.

Cash missappropriation
Stock misappropriation
Expenditure authorised and monitored

Along with the essential daily controls to demonstrate that the management team are being responsible.

Are external stock valuers engaged.

To reconcile stock movements with takings.

Are division of responsibilities adhered too? Demonstrably so.

Deliver a cost effective process that the members buy into.
Welcome cost effective scrutiny.

There is a risk that management committee resign en masse, on grounds that the minority of members are being unreasonable,in the particular financial circumstances.

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RLI
By lionofludesch
02nd Jul 2020 17:30

As regards consequences, you need to be asking a solicitor, not an accountant.

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By Paul Crowley
02nd Jul 2020 17:47

Simple change the rules.
The rules will say how to change the rules.

Who is going to enforce the Rules?
The club

But we do not know what kind of club it is. CRITICAL to understanding.
Who is regulating the club?
FCA?
If so some compliance is required.

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Replying to Paul Crowley:
RLI
By lionofludesch
02nd Jul 2020 17:52

Paul Crowley wrote:

Simple change the rules.
The rules will say how to change the rules.

If the members have voted to have an audit, they're not likely to vote to change the rules about having an audit.

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Replying to lionofludesch:
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By Paul Crowley
02nd Jul 2020 18:23

Per question
Awkward member with Posse last year

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Replying to lionofludesch:
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By Mr_awol
02nd Jul 2020 20:33

lionofludesch wrote:

Paul Crowley wrote:

Simple change the rules.
The rules will say how to change the rules.

If the members have voted to have an audit, they're not likely to vote to change the rules about having an audit.

Probably nothing. Only chance I can think of is if the committee get a quote for the work, summarise the effect on the club’s finances, and go back to the membership for a confirmatory vote - setting out exactly how much each member will have to contribute in order to pay for the audit.

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Replying to Mr_awol:
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By Paul Crowley
02nd Jul 2020 20:57

Agree
Price it and see if 90% like the 10% opinion.
If they do, they get what they deserve.

These rubbish old rules were written in days of yore when ALL companies had an audit and an audit required zero time wasting nonsence.

I used to think audit added value, but the big group have demonstrated that audit is a worthless game of statistics with 95% confidence of no material error, but which misses everything inportant.

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Replying to Paul Crowley:
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By RM1974
02nd Jul 2020 20:32

Apologies. It is regulated by the FCA and is a Ltd Co

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Replying to RM1974:
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By Paul Crowley
02nd Jul 2020 20:46

Are you sure? The word limited does not mean definitely that it is a Ltd Co in the normal use of term.
FCA tends to be friendly societies and industrial & provident societies all using the word limited.
See other posts re was audit valid on vote.
BUT both the above need a meeting to agree no audit. See your last annual return to FCA

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By Calculatorboy
02nd Jul 2020 18:04

As someone said committee resign enbloc, if there are unhappy about affordability, let the members get themselves out of the hole they voted themselves into

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By jon_griffey
02nd Jul 2020 18:10

What is the constitution? Is it a limited company?

It may be worth closely scrutinising the rules to see if the procedures in voting for an audit has been correctly followed.

In a previous life I worked at a firm that had lots of working mens clubs etc and at the AGM's there was nearly always someone with an axe to grind against the committee and auditors.

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Replying to jon_griffey:
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By Paul Crowley
02nd Jul 2020 18:29

Yes and the standard question "what is in sundry expenses"

No longer act or will act for clubs. Committees are usually well meaning but we could usually drive a tank through the controls with nobody noticing.

Bigger the club bigger the holes.

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Replying to jon_griffey:
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By RM1974
02nd Jul 2020 20:33

It is an Ltd. Thanks for the tip.

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By Mr_awol
02nd Jul 2020 18:23

You say you represent the club but then go on to say ‘we’ can’t afford it which suggests you are a member. Then ‘we’ offered them an independent examination which suggests you are either a committee member or were going to do the IE through your firm.

For clarity, what is your position and/or connection?

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Replying to Mr_awol:
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By RM1974
02nd Jul 2020 20:30

I am the treasurer, who carries out a bookkeeping role. Not on the committee and I don't prepare the accounts, or the audit. It's all done independently.

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By thevaliant
02nd Jul 2020 18:26

Why is an audit required for >10% vote. That is a Companies Act rule.
Does the constitution follow the Companies Act rule on this one? Could it be that it needs 50%?

But other than that, I'd agree with lionofludesh. Committee resigns en masse stating why they believe the club is insolvent and walks away.

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By Tim Vane
03rd Jul 2020 03:17

For goodness sake. The remoaners and the lib dems had a salutory lesson a few months ago in what happens when you try to overrule a democratic vote with tricks and a daft "we know best" attitude. The membership have spoken; whether or not the committee agree with it, the one thing they cannot do is ignore it or avoid it. Sure they can resign, but then don't whinge when the other faction takes over the whole shebang. Find a way to make the audit happen. It's called leadership, and it's not the same as sticking your head in a bag and waiting for it all to go away.

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Replying to Tim Vane:
By ireallyshouldknowthisbut
03rd Jul 2020 09:17

Really? So just because an agent provocateur whipped up some unfounded hysteria, you have to trash a whole organisation against its own best interests, instead of calming pointing out the implications of what has just been (potentially very narrowly) voted for, and just checking everyone really does want that organisation trashed? In particular the people who were not much interested in the vote the first time around? That to me is good leadership.

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Replying to ireallyshouldknowthisbut:
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By Mr_awol
03rd Jul 2020 09:39

ireallyshouldknowthisbut wrote:

Really? So just because an agent provocateur whipped up some unfounded hysteria, you have to trash a whole organisation against its own best interests, instead of calming pointing out the implications of what has just been (potentially very narrowly) voted for, and just checking everyone really does want that organisation trashed? In particular the people who were not much interested in the vote the first time around? That to me is good leadership.

Are you still talking about the club here, or the other thing?

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Replying to ireallyshouldknowthisbut:
By Tim Vane
03rd Jul 2020 13:08

ireallyshouldknowthisbut wrote:

Really? So just because an agent provocateur whipped up some unfounded hysteria, you have to trash a whole organisation against its own best interests, instead of calming pointing out the implications of what has just been (potentially very narrowly) voted for, and just checking everyone really does want that organisation trashed?

You have to honour the result of the vote. Period. It's called democracy. It's not perfect, it's usually obtuse and it's often absurd. But it is definitely better than the alternatives, which are either despotism or anarchy. You have a club. It has a constitution. The members voted. Nothing further to discuss.

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Replying to Tim Vane:
Hallerud at Easter
By DJKL
03rd Jul 2020 10:40

The destructive outcome of that lesson on the club might be very similar to the one quite possibly heading down the track to reach us on 1st January 2021.

Tim, if you with to use what is in effect a derogatory term I am perfectly happy to start discussing certain cuts one gets from a pig.

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Replying to DJKL:
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By Mr_awol
03rd Jul 2020 12:11

DJKL wrote:

The destructive outcome of that lesson on the club might be very similar to the one quite possibly heading down the track to reach us on 1st January 2021.

Personally I think both situations will continue in parallel. The voted action will proceed, and after a period of time everyone will realise that it was a bit of a cock[***] up and go back to the old way. There may have been some costs in the meantime and some may continue forever as a result of the rabble-rousers.

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Replying to Tim Vane:
RLI
By lionofludesch
03rd Jul 2020 10:58

Quote:
Sure they can resign, but then don't whinge when the other faction takes over the whole shebang.

They won't, though, will they?

There's a lot of work involved in running a club. Few folk want it when push comes to shove. I'd advise any volunteer committee man to resign. Not worth the effort. Especially in today's Covid19 climate.

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By paulwakefield1
03rd Jul 2020 10:36

As Paul Crowley, I also wonder if this is for instance a Community Benefit Society (the old IPS) given that it is FCA regulated.

A CBS vote is required each year to disapply the audit requirement (if the rules allow). i.e. the default position is an audit and the vote is to not have an audit. Such a vote is valid as long as at least 80% of the votes are in favour AND no more than 10% of ALL members entitled to vote (not just those present) vote against.

The snag is that the resolution has to be passed before the relevant year end.

If this is on the right track, how was the 10% calculated? If this was a vote on disapplying the audit and at least 80% of the votes were in favour, were the 10% against, 10% of all members?

Speculation I know but it may be worth exploring.

Edit to clarify: In other words, IF this was a CBS vote to disapply the audit requirement, is it absolutely certain it met the requirement to be defeated? It would not be the first time I have seen the calculation done incorrectly.

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By bernard michael
03rd Jul 2020 10:32

Have a word withe the incumbent auditor and intimate that it might be worth his while to ask for an upfront payment of his total fee

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