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New accountant requesting working papers.

New accountant requesing working papers for accounts not yet finalised.

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I have a strange request that I have not had before.  Client has changed accountants, we are currently preparing the accounts.  They are pretty much finalised and just awaiting final review.  Client wants new accountant to prepare these accounts even though they are nearly finished.

New accountant has requested a copy of the working papers for the year in question along with the trial balance, debtors, creditors and bank reconciliations.

The response to sending the working papers is going to be a definitate no, but should I be sending them the TB?  My concern is those figures are not finalised and have not been agreed with the client.  I am not sure why they need this information, surely they wouldn't just rely on our figures and will preparing the accounts themselves from scratch.

For infomration client uses Xero and any adjustments we have made are in Xero so all the information they need is there for them to access.

Would like to get other peoples opinion as to how they would respond to this request.

Replies (14)

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By bigmuggsy
21st Aug 2019 16:26

We'd provide the new accountant with the working papers if that's what they've requested, once the client has paid for our time spent on the preparation. If they want to carry on the work to finalise the accounts that's their issue - as long as you've been paid for your service I don't see the problem.

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Replying to bigmuggsy:
A Putey FACA
By Arthur Putey
21st Aug 2019 16:52

A firm's working papers are not part of a handover, so I agree with the OP's decision to withold them. They aren't shared with the client, so why share them with the new accountant, who ought not to rely on them. If the client doesn't want the outgoing accountant to finish a job which sounds 90% complete, they can't complain about paying twice for it. Especially if they have a good reason for not allowing the outgoing accountant to finish what they have started (the new accountant simply suggesting it isn't a good reason).

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Replying to bigmuggsy:
By Moonbeam
21st Aug 2019 17:03

And that's exactly what I did recently, when someone who had paid upfront told me he was moving accountants when he saw what I'd calculated for underdeclared VAT so far.
I also sent my working papers, even though not 100% complete, but then I explained that to the new accountant. It's my view client had paid for all this so new accountant was "entitled" to it.

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A Putey FACA
By Arthur Putey
21st Aug 2019 16:44

Your question is interesting in that it illustrates the ease by which the traditional final accounts process can be turned around. The old way is to take the TB from the clients accounts, make closing adjustments in your final accounts software, then provide them to the client so they can do the same in their system. Being on the cloud provides the temptation to make presentation adjustments prior to importing the data to the final accounts software, which by the sound of it is what you have done to some degree.

If that is the case I would suggest you void your adjustments on Xero and tell the new accountant to get their unadjusted TB from there. Which probably makes it cleaner for both of you as there won't be queries about adjustments you started making, and they will be able to fulfil their engagement to produce final accoounts .... starting from scratch.

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Replying to Arthur Putey:
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By Mr_awol
21st Aug 2019 17:10

Arthur Putey wrote:

If that is the case I would suggest you void your adjustments on Xero and tell the new accountant to get their unadjusted TB from there. Which probably makes it cleaner for both of you as there won't be queries about adjustments you started making, and they will be able to fulfil their engagement to produce final accoounts .... starting from scratch.

Presumably those journals are part of the '90% complete' job that the OP has carried out. If he destroys any of his work then surely he will no longer have any intention of requesting payment for it?

Not to mention that by making the adjustments IN the client's records they became part of the bookkeeping records which belong to the client and as such he has no right to sabotage them anyway?

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Replying to Mr_awol:
A Putey FACA
By Arthur Putey
22nd Aug 2019 09:59

If I were the incoming accountant I'd want to start from scratch, and having chosen not to have the outgoing accountant complete their work the client has to live with paying twice (or 190% at least) for it.

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Replying to Arthur Putey:
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By Mr_awol
22nd Aug 2019 17:00

I may or may not want to start from scratch. I'd want to assess what was there and work out what was best for the client. I also agree that the client has seemingly chosen to pay twice.

My point, however, was twofold:

1) By removing the entries the outgoing accountant is arguably losing the right to charge for (at least an element of) the work involved in calculating those adjustments. They've effectively withdrawn the product they had provided and charged for.
2) By making adjustments in the client's bookkeeping records, certainly for a Limited Company (and potentially for other clients) the adjustments become part of the records of the client. This may open up ownership of the supporting documents and it certainly means that you have no right to go changing them without authorisation.

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Replying to Mr_awol:
A Putey FACA
By Arthur Putey
24th Aug 2019 10:08

In the old world, one would make closing adjustments in the final accounts software, so this is the work the accountant has done. In the cloud world this, as suggested previously, can be turned on its head to a degree. But you are right that this could create issues, so I would stick to the old process and only mirror the adjustments in Xero a) once the accounts are signed off and b) if the firm is also engaged to do the bookkeeping.

There have been debates about cloud systems and data ownership, which some have argued depends on who owns the subscription and how the system is used. All things to make clear in engagement letters.

If you want to make it clear that you are providing a 3rd party system and that in the event of disengagement you will withdraw the service, this might be legally defensible, but the provider's T&Cs with the accountant may well say different. So unless you are providing a bureau service they might in such circumstances side with the client.

So issues like this can involve more than just working papers.

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By atleastisoundknowledgable...
21st Aug 2019 17:03

I wouldn’t provide the TB as it hasn’t been finalised, I would just direct them to Xero. I don’t think I’d go as far as deleting my jnls as Arthur suggests, as much as anything because it’s extra work that I’m not being paid for.

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By SXGuy
21st Aug 2019 17:14

It's quite common to ask for working papers. Most ask as part of their template letter. Just state its all there in xero send what you have to and move on.

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Jennifer Adams
By Jennifer Adams
21st Aug 2019 17:40

I was asked this question by the new accountant of a client who (thankfully!) finally left a couple of years ago.
I too had never received such a request in all my years.
So I rang my professional indemnity people for their advice and they said that legally working papers are your papers and were not to be given to or viewed by anyone outside of your office.
You give the Trial Balance, Creditors, Debtors listings, P&L, BSheet and anything such as Fixed assets schedule but definitely not your working papers.
They are yours and yours alone and not the clients.

I would respond with an email saying that you are preparing the accounts for the year and that when they have been finalised, agreed and submitted then and only then will you give the successor accountants the TB, P&L etc as listed above.
If you dont do this years accs in the end then send them last years TB, P&L etc but not the working papers.
And I would send in pdf files rather than hand over via Quickbooks.

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Replying to Jennifer Adams:
All Paul Accountants in Leeds
By paulinleeds
28th Aug 2019 21:38

Our working papers become part of the client's accounting records if they link the client's records (manual or cloud based) to the final accounts.

I suppose if there are no final accounts then they do not belong to the client, although they've paid you to prepare them so unless something is wrong with them pass them over!

I work with small companies. They either have half decent Excel or computerised records.

I make few journal entry adjustments. I may 'tidy' their Excel or computer records before starting final accounts work.

However, compared to 33 years ago when I started work we spend less time analysing and making 'workings and summaries of daybooks' and more 'updating and reviewing' Excel and computer records now. My working papers are now more a review of the main P&L accounts and a summary of the Balance Sheet accounts.

I've taken work from other accountants so that I can complete the draft accounts where the client has little confidence in the current accountant.

I see no issues in passing genuine 'workings' to a new advisor if the client pays me for my time to date. It should help the new advisor time and save the client money.

Why make the client pay twice!

The client has after all paid for me to prepare the working papers.

If any of my workings papers do not help to link the client's prime accounting records to the draft final accounts then they do not need to be passed over to the new advisor!

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By adam.arca
26th Aug 2019 08:35

Is there not also a PI aspect to all of this?

The job may well be 90% done but it is potentially the remaining 10% which turns a random collection of numbers into an end product you're prepared to put your name to.

Yet you then lose control of the process and run the risk of the new accountant seeking to rely on your incomplete work were you to give him the WPs and incomplete TB. That would be a big no from me.

The client has to be told that preparing accounts is a holistic process and not an A to Z progression which can be stopped at S and picked up by someone else.

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By Moonbeam
26th Aug 2019 09:31

As far as PI is concerned, I don't see how any accountant taking over incomplete working papers could rely on them without doing a bit of an audit.
If they chose to rely on that data, having been told it was incomplete then surely they would take on the PI risk.

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