Limits of Accountants role as a Director

Is an Accountant being a Director of a company that trades with their clients Company legal

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Hi I am very new to accounting, studying an AAT level 4, treat me kindly I am but a fledgling accountant, seeking knowledge from my superiors in the field.

I am at a new role in a Social Housing/Care Company with 160+ staff and a very small head office head count, my concern centres around the lead financial controller of this company, of which I am a direct report and assitant bookkeeper to.    

More specifically, if we take the Social Housing/Care Company to be called X, this financial controller is employed as a freelance accountant, and is invoiced to a company lets call Y, charged monthly for her role, simply a ltd company that provides bookkeeping services, this is for their role as financial controller.

HOWEVER, this is where I THINK it gets interesting.

This same Accountant, acting as the Accountant/Financial Controller for Company X, is also the DIRECTOR OF ANOTHER COMPANY (LETS SAY, Z). Now Company Z DIRECTLY TRADES WITH AND PROVIDES SERVICES (CLEANING SERVICES FOR COMPANY X'S HOUSES) TO COMPANY X, and is invoiced for these services monthly.

Also receipts from Company X's expenses for cleaning, such as bleach, sprays wipes etc etc are charged to an Account Company Z in Xero. Meaning within XERO they have both Companies as main accounts and Company Z is listed as an account in the Charter of Accounts, such as an Asset account or Expense Account.

In Xero part of my job is, I am being asked to manage both Accounts in Xero of both Company Z and X, doing the reconciliations for these expenses and the invoices to and from both comapanies.

 

Company Z does not have the same registered address as company X, HOWEVER the original address of Company X was the same as Company Z, Company X's registered address was changed in 2019 at the same time as the creation of Company Z. And the Address of Company X is now the same as the home address of one the previous directors of Company Z, and there are 3 or 4 of the same names that have acted in the past as directors of both companies, all have been terminated as Directors of Company Z, APART from this one Accountant.

Finally my question:

How is this not a conflict of interest, and how does the Accountant remain independant and uphold the ethical requirements of being impartial, independant and objective if they have direct involvement with these two companies, who are not only trading with each other, but are linked by expenses as well. 

Also the nature of the involvement means, as Company Z is providing chargeable services to X, they set the price of the services below market rates, and do all manner of transfer pricing and hiding of expenses from Company X TO Z through the system of charging expenses for cleaning the homes of Company X to Company Z.

Also it is very interesting to see the Account filings of the Accountants own Company, Company Y, it was making around 25-30,000 pounds a year for decades   before 2019, COINCIDENTLY THIS IS THE VERY YEAR THEY BECAME THE DIRECTOR OF COMPANY Z. Suddenly in 2021 and beyond, when the Company X began to make a lot of money around 300,000 profit per year, and does until present day, the profits of Company Y made profits every year since 2021 of 100,000 pounds and over, and has every year since.

Is this all above board or am I way off in my assesment.

What has caused concern is, I did a quick check on the Accountant who claims to me to be a chartered Accountant through ICAEW, however on inspection there are 0 people with her surname, and 0 firms with the name of her firm that are listed as Chartered Accountants in the U.K.

Many thanks,

Danny

Replies (46)

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By David Ex
10th Dec 2023 17:42

THEHappyaAccountant wrote:

Is an Accountant being a Director of a company that trades with their clients Company legal

Yes.

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Replying to David Ex:
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By WhichTyler
10th Dec 2023 18:12

Yes but...

They should declare the conflict of interest to the relevant person in the client org (your employer)

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Replying to WhichTyler:
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By David Ex
10th Dec 2023 18:24

WhichTyler wrote:

Yes but...

They should declare the conflict of interest to the relevant person in the client org (your employer)

Strictly "yes and". I decided to just answer the specific point.

I'm more concerned by the apparently contradictory fact that the financial controller "is employed as a freelance accountant".

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Replying to WhichTyler:
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By THEHappyaAccountant
10th Dec 2023 18:42

Maybe I should clarify further, they are working very closely, they set up both Company X and Z together.

Company X has all the former directors that were terminated from Company Z.

It is very likely the owner of Company X made her the director of Company Z
in 2019.

How is not a conflict if there is this closeness how is the Accountant independent when she is acting as the Accountant of Company X and is the Director of company Z, who has such a close connection with Company X.

How

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Replying to THEHappyaAccountant:
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By Yossarian
10th Dec 2023 19:45

THEHappyaAccountant wrote:

How is not a conflict if there is this closeness how is the Accountant independent when she is acting as the Accountant of Company X and is the Director of company Z, who has such a close connection with Company X.

How

Why would they need to be independent? Are you not confusing the requirements of an auditor with those of an accountant?

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Replying to WhichTyler:
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By Leywood
10th Dec 2023 18:57

Perhaps they did, but just haven’t told the junior staff.

OP be very careful making what could be false claims on a public forum. Especially given you have no clue if your boss is on here or not.

If you don’t trust your boss, get another job.

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Replying to Leywood:
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By THEHappyaAccountant
10th Dec 2023 19:23

I already have, I was on a 32 hour a week contract with a work load that i was stretched to do in this time, then they tried to make me sign a new 24 hour a week contract, with hours "topped up when busy", with only 28 hours- 30 hours guaranteed, with no discussion on reducing my workload.

Essentially making me do 32 hours work on a 24 hour contract with only 28 hours guaranteed paid hours.

If you add this to the fact that they claimed to be a chartered accountant, but are not anywhere on all of the regulatory bodies a chartered accountant, clearly have not paid their fees annually at least this year or done their obligatory CPD for I don't know how many years.

Would you trust them, would you not be asking questions about everything else.

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Replying to THEHappyaAccountant:
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By Yossarian
10th Dec 2023 19:51

THEHappyaAccountant wrote:

If you add this to the fact that they claimed to be a chartered accountant, but are not anywhere on all of the regulatory bodies a chartered accountant, clearly have not paid their fees annually at least this year or done their obligatory CPD for I don't know how many years.

Not strictly correct to do so, but not particularly unusual with accountants in industry to let the membership of their professional body lapse in my experience.

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Replying to Yossarian:
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By THEHappyaAccountant
10th Dec 2023 20:01

But you missed the contract hour switch and the over working, WHICH IS THE CONTEXT, and that they were telling me i would be learning from them to be an Accountant. How can i learn if they may not even do CPD every year, they could be years out of date regarding this alone.

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Replying to THEHappyaAccountant:
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By Yossarian
10th Dec 2023 20:09

THEHappyaAccountant wrote:

But you missed the contract hour switch and the over working, WHICH IS THE CONTEXT, and that they were telling me i would be learning from them to be an Accountant. How can i learn if they may not even do CPD every year, they could be years out of date regarding this alone.

In my first accountancy role I was trained by accountants who had no formal accountancy qualifications whatsoever. It didn't prevent me from learning a lot from them.

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Replying to Yossarian:
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By THEHappyaAccountant
10th Dec 2023 20:15

BUT YOU HAVE STILL MISSED AGAIN THE CONTEXT OF THE CONTRACT SWITCH AND PAYING FEWER HOURS THAN I AM PHYSICALLY WORKING AND TRYING TO DECEIVE ME VIA THE SWITCH.

WHY WOULD I TRUST SOMEONE LIKE THIS.

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Replying to THEHappyaAccountant:
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By Leywood
10th Dec 2023 20:18

No need to shout!

You didn’t mention the contract change in your original OP.

Maybe they think you weren’t working quickly enough.

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Replying to Leywood:
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By THEHappyaAccountant
10th Dec 2023 20:26

Or maybe they are making me do 32 hours in a 24 hour contract.

You have leapt to the defence of the Accountant, with no facts, of which I know.
Where I was working and getting good reviews fro months then suddenly a change of contract down to 24 hours with only 28 hours guaranteed. I was working through a couple of days a week of my lunches and working some hours at home as well, I am a university graduate and know how to work hard.

They were pushing and pushing and pushing for more and more work load, and then cut the hours with a new contract.

I am trying to build a picture of the trustworthiness of the Accountant, the picture of the chartered lie, then the hours cut, this lead me to be suspicious about the nature of the directors role at Company Z.

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Replying to THEHappyaAccountant:
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By Yossarian
10th Dec 2023 20:33

Where are you hoping to go with this? You are clearly unhappy with the way you have been treated so find another job.

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Replying to THEHappyaAccountant:
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By Leywood
10th Dec 2023 20:37

THEHappyaAccountant wrote:

You have leapt to the defence of the Accountant, with no facts, of which I know.
.

There you go making assumptions/accusations again. I have not leapt to anyone’s defence, how can I with only one side to the story. I simply made a suggestion.

You should speak to ACAS.

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Replying to Leywood:
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By THEHappyaAccountant
10th Dec 2023 20:44

Maybe they think you weren’t working quickly enough.

[/quote]

Is a defence of the Accountants position, and not me the employee, I the employee am not working quickly enough. Zero context on if the work load is excessive for the hours contracted to do it in, WHICH IS MY WHOLE POINT ABOUT THE CHANGE OF HOURS OF THE CONTRACT.

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Replying to THEHappyaAccountant:
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By Leywood
10th Dec 2023 20:50

Gawd.

I didn’t say ‘they probably think’.

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Replying to Leywood:
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By THEHappyaAccountant
10th Dec 2023 20:55

neither did I, I quoted directly your own words in the first line of the reply.

Its absolute garbage, your misquoting what YOU said back to me.

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Replying to THEHappyaAccountant:
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By Yossarian
10th Dec 2023 20:20

THEHappyaAccountant wrote:

BUT YOU HAVE STILL MISSED AGAIN THE CONTEXT OF THE CONTRACT SWITCH AND PAYING FEWER HOURS THAN I AM PHYSICALLY WORKING AND TRYING TO DECEIVE ME VIA THE SWITCH.

WHY WOULD I TRUST SOMEONE LIKE THIS.

That is really an employment law question, not an accountancy question. If you don't trust them, find another job and move on.

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Replying to THEHappyaAccountant:
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By Leywood
10th Dec 2023 19:51

Just to clarify, you are now saying you have moved on?

Remember questions should have a question mark, precision is key in Accountancy.

As I indicated earlier, I certainly wouldn’t be putting such accusatory comments on an open forum.

Have to ask, if you’ve moved on why are you not just drawing a line in the sand, what is your end game?

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Replying to Leywood:
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By THEHappyaAccountant
10th Dec 2023 20:05

My end game is gaining knowledge about how Accounting is done in the Business environment in the real world.

No I asked initially is this legal, not that it was illegal as a statement, as you say pedantic accuracy is the name of the accountants game. Also, I was not accusing anyone and qualified it with, am I in the wrong here, and asking how I am in the wrong.

As the director of a company you have to do the books of the Company again in an impartial manner to represent the Company free from outside control, if these Companies are so close and are sharing receipts, how can the director of Company Z remain impartial from the influence of Company X.

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By Yossarian
10th Dec 2023 21:26

This seems to have turned into one of those "I didn't get the answer I was hoping for, so I'm going to argue the toss with those who responded" type threads which AW is so famous for...

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Replying to Yossarian:
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By THEHappyaAccountant
10th Dec 2023 21:46

NO ITS A I DID'NT GET ANY USEFUL INFORMATION I DID'NT ALREADY KNOW PROBLEM.

I did this post after doing much research and know the areas i need advice in , i just don't know the specifics of the areas i need advice in, NO ONE IS PROVIDING ANY SPECIFICS ON ANY OF THE AREAS OF COMPANY LAW, THE ROLE OF DIRECTORS IN COMPANIES AND THE CONFLICTS OF INTEREST.

And almost EVERY SINGLE REPLY TOOK MY POST OUT OF CONTEXT, MISREPRESENTED MY REPLIES AND THE CONTENT OF MY REPLIES, AND CHERRY PICKED CERTAIN PHRASES TO MAKE ME TRY AND APPEAR WRONG TO MAKE THEMSELVES FEEL SUPERIOR.

Absolutely no useful information on Company Law, no information on conflicts of interest no detail negating what I said specifically about how the two Company's are operating together and trade together and the role of the Accountant at Company X and how it ISN'T A CONFLICT OF INTEREST WITH COMPANY Z.

Somehow just accepting someone is lying about being a Chartered Accountant and accepting this because because it happens a lot in the industry, so WHY HAVE CPD AT ALL THEN FOR ICAEW, WHATS THE POINT IF a person claiming to be chartered doesn't do it AND ALSO IS ACCEPTED FOR NOT DOING IT EVERY YEAR.

Its low effort, self interested no empathy garbage.

The quality of the replies is what I have a problem with.
information on the code of ethics and the role of Directors and the role an

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Replying to THEHappyaAccountant:
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By Yossarian
10th Dec 2023 22:03

I'm not sure how you expect anyone to prove a negative? You asked if that particular scenario with the director is legal and received the correct reply that it does appear to be. Why do you think it isn't? The law tends to concern itself with defining those actions which are illegal, not listing every possible scenario which IS legal.

Your replies then seemed to descend into a general rant about your employer and the changes to your contract, none of which was mentioned in the original question.

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Replying to Yossarian:
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By THEHappyaAccountant
10th Dec 2023 22:20

WITHOOOOOOOOOOOUT MENTIONING ANY OF THE MANY OHER POINTS I MADE

Absolutely no useful information on Company Law, no information on conflicts of interest no detail negating what I said specifically about how the two Company's are operating together and trade together and the role of the Accountant at Company X and how it ISN'T A CONFLICT OF INTEREST WITH COMPANY Z.

Somehow just accepting someone is lying about being a Chartered Accountant and accepting this because because it happens a lot in the industry, so WHY HAVE CPD AT ALL THEN FOR ICAEW, WHATS THE POINT IF a person claiming to be chartered doesn't do it AND ALSO IS ACCEPTED FOR NOT DOING IT EVERY YEAR.

WITH NO QUALIFICATIONS AS TO WHY IT IS LEGAL GIVING ANY CONTEXT TO WHY IT IS LEGAL AND WHAT WOULD BE ILLEGAL, AND THE DIFFERENCE.

ANYONE CAN JUST SAY ITS JEEEEEEEEZ LEGAL MATE ITS JEEEEEEZ LEGAL, WITH ABSOLUTELY NO DEFINITION AS TO WHY THEY THINK IT NOT ILLEGAL AND WHAT GROUNDS IT PASSES THE THRESHOLD TO BE LEGAL.

SIMPLY PUT WHY DO I HAVE TO BELIEVE THAT PEOPLE WHO ARE MAKING BASELESS CLAIMS, WITH HARDLY ANY EVIDENCE OR SOURCES BACKING IT UP, AREN'T SIMPLY GUESSING OR MAKING IT UP.

ITS LOW IQ RUBBISH

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Replying to THEHappyaAccountant:
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By FactChecker
10th Dec 2023 22:30

Are you a fan of the original Mission Impossible ... this tape will self-destruct in ten seconds!

By the way ... "WHY DO I HAVE TO BELIEVE THAT .."
You don't (have to believe anything on here)!
It's entirely your prerogative to choose to go away and forget you ever visited here.

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Replying to THEHappyaAccountant:
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By David Ex
11th Dec 2023 00:52

THEHappyaAccountant wrote:

IN THE CONTEXT FREE ZONE AGAIN.

ABSOLUTE GARBAGE.

YOU WORK FOR THE DAILY MAIL.

CAPS LOCK ON

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Replying to THEHappyaAccountant:
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By Yossarian
10th Dec 2023 22:37

You have shown yourself to be entitled, rude and obnoxious and I will not be responding any further

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Replying to Yossarian:
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By THEHappyaAccountant
10th Dec 2023 22:42

While exhibiting EVERY CHARGE YOU CLAIM OF ME, YOURSELF.

AND ALSO AGAIN NOT ADDRESSING THE BULK OF MY POINTS

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By Tax Dragon
10th Dec 2023 22:43

My comment probably auto-modded because I use the L-word twice. Third and last time of asking:

If you want to sue for constructive dismissal or whatever, you definitely need a paid lawyer, not a free accountancy forum.

If you want to achieve some other objective, I suspect you probably need a paid lawyer, not a free accountancy forum.

Full disclosure: I've skimmed through and skipped over much of this thread (including your OP). If I missed your desired outcome somewhere as a result, I apologise.

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Replying to Tax Dragon:
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By THEHappyaAccountant
10th Dec 2023 23:03

Thank you, finally a response with some form of valuable information within it.

Where the person responding isn't getting more out of the reply than the poster of the question.

It is valuable in the trouble about the conduct of my employer and i have several elements of my treatment that line up with constructive dismissal, having to take no lunch a few times a week due to sheer volume of work imposed. Coupled with the strange change of contract back to 24 hours from 32, WITH THE SAME WORK VOLUME . However, I have not been in the job long enough to go to tribunal as the minimum is 2 years service.

Thanks again

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Replying to THEHappyaAccountant:
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By Tax Dragon
10th Dec 2023 23:16

So what is your objective?

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Replying to Tax Dragon:
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By THEHappyaAccountant
10th Dec 2023 23:27

Nothing on the personal front regrading my employement I know its a dead end, I will simply have to move on as I have not been employed long enough.

I was actually mainly concerned with the lying about being the Accountants chartered status to me, and actually how many other clients have they lied to, I was sold at interview they where Chartered and would mentor me to be an Accountant, which i know now was a lie.

Also I am really interested in how Companies work and the law regarding Accountants and their responsibilities to a Company and a Directors role and limits to their involvement in other companies and the possible conflicts of interest.

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By David Ex
10th Dec 2023 22:49

Well, that escalated quickly.

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Replying to David Ex:
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By FactChecker
10th Dec 2023 22:55

Never been a fan of cookery programmes .. but feel I now understand the common instruction:
"Bring to the boil and simmer"
... although not convinced it achieves much.

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Replying to FactChecker:
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By THEHappyaAccountant
10th Dec 2023 22:57

No I am just going to troll you straight back.

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Replying to David Ex:
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By THEHappyaAccountant
10th Dec 2023 22:57

Because your escalating it.

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By Matrix
10th Dec 2023 23:08

Well, I think it sounds dodgy. I would call the AAT for advice.

I can’t comment on the legal aspects as I am not a lawyer.

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Replying to Matrix:
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By THEHappyaAccountant
10th Dec 2023 23:15

ok, thanks for the reply

Can you elaborate on what you feel makes it dodgy.

Is it the closeness of the two Companies or the previous directors being at both Company X and Z, or the role of the accountant working for Company X and being the Director of company Z. Possibly influencing Company X's decisions around cleaning contracts to hire and invoice only Company Z.

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Replying to THEHappyaAccountant:
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By Matrix
10th Dec 2023 23:28

The bookings (possible fraud with the expenses?) and maybe the reason you are getting so angry is that you feel that you are being taken for a mug. But someone would need much more info rather than guessing and I wouldn’t waste your energy if it is upsetting you. You are doing the right thing by moving on. But call the AAT for a chat.

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Replying to Matrix:
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By THEHappyaAccountant
10th Dec 2023 23:45

Ok, so it is incorrect or looks fraudulent if a Company is running its expenses or some of them through another Company, can you give a reasoning as to why for my edification, as i want to learn the ins and outs of Company Law and WHY it is in contravention of the law or the regulations and which regulations.

Very interesting thanks for the information

Yes the part about me being mugged off is correct, but is a separate issue to the operation of the two Companies in question.

I also hate liars, and the first line of the ethics of being an accountant is being trustworthy and objective, I just can't trust someone who has lied like that from the interview and the objectivity also is hugely called into question for me due to the nature of the two Businesses and the role in both.

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Replying to THEHappyaAccountant:
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By Matrix
11th Dec 2023 00:01

I have already said that I am not going to comment on the legal aspects. This is an accounting forum.

You seem to have a hunch that something wasn’t right and you were being made to do unethical bookings, that is all I was going on. There are probably tax issues but who is to know if they have been addressed or not.

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Replying to Matrix:
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By THEHappyaAccountant
11th Dec 2023 00:26

Ok I just thought there was a cross over of Accounting regulations and Company Law, as the operation of an Accountant in a Company is, well, Accounting and their actions are still Accounting. The ramifications are Law yes, but only the particularities of the Laws they have contravened, I am looking at more guidance from an ethical perspective of an Accountants behaviour within a Company and acting as a Director.

Regarding these ethical bookings, do you mean the bookings of expenses from one company to another, eg Company X to Company Z, and the Company Z being used as a chart of accounts account to put the expenses through.

I also found it strange that I had access to the Accounts in Xero of Company Z, meaning I could see the Bank account, post invoices and Bills to its account see every accounting function I could for Company X, even though I was employed only in Company X and not for Company Z.

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Replying to THEHappyaAccountant:
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By Matrix
11th Dec 2023 00:51

You haven’t said who owns Company X.

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Replying to Matrix:
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By THEHappyaAccountant
11th Dec 2023 08:52

Sorry I thought it was enough to say that it was a separate entity,the owner of Company X or the person with significant control, is another person who was once a former Director of company Z, a non professional a former care worker.

They are part of the group of people I previously mentioned about being former directors of Company Z, while they were still directors of Company X.

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Tom Herbert
By Tom Herbert
11th Dec 2023 10:20

This is an employment law question and the thread seems to have run its course.

All the best,

Tom

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