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Strange request from client

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We have never had this request below and a little worried to be honest.

We prepared the accounts for a property business (Ltd) then they suddenly left owing us a few hundred pounds which we just wrote off. We provided the professional clearance and the client new accountant seemed happy with everything we had provided.

Suddenly we got a email from the client wanting our working papers which I believe belong to us not them. 

We never really carried out the book-keeping as such as we were never given the source records.  Engagement letter doensn't mention book-keeping. 

We basically produced the rental accounts from the bank statements which he had just written down some vague comments as he has never used a computer before in his life.

I spoke to a solicitor and they think the workng papers belong to us but he is insisting they belong to him.  I don't trust this guy and don't know why he needs them as I thought his accountant would have requested them not that we would be ready to release them anyway.  If working papers were so vital then I would have thought they would be part of every professional clearance

Replies (56)

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By ireallyshouldknowthisbut
23rd May 2022 16:22

What are you trying to achieve?

Are you trying to be awkward due to the unpaid bill?
Do you have something to hide due to poor work form your side?

Or are you trying to get this off your desk?

I must admit to being completely mystified by other accountants reluctance to 'show their workings'. If there is nothing wrong, there is nothing to hide, send it, move on. The strict legal basis seems irrelevant.

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Replying to ireallyshouldknowthisbut:
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By David Ex
23rd May 2022 16:25

ireallyshouldknowthisbut wrote:

What are you trying to achieve?

Are you trying to be awkward due to the unpaid bill?

The strict legal basis seems irrelevant.

Disagree. If there’s no legal obligation and the ex-client owes money I certainly would be giving them nothing.

What are the rules regarding working paper retention when a client moves?

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Replying to ireallyshouldknowthisbut:
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By SXGuy
23rd May 2022 17:38

Op says accounts produced from bank statements. If op just totted up totals from a statement and produced accounts, which working papers would they have to send?

Perhaps op should consider sending a copy of the bank statements. I would.

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Replying to ireallyshouldknowthisbut:
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By LondonAccountants
24th May 2022 10:24

Its not that but I know some clients will just keep asking questions or try to pinpoint errors even if they are immaterial and maybe just start causing trouble for no reason

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By Hometing
23rd May 2022 16:29

As far as I've ever believed, WPs belong to those that created them, not the client.

Would a freedom of info request give a need to hand these over though?

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Replying to Hometing:
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By 356B
23rd May 2022 16:39

FOI only applies to public bodies.

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Replying to Hometing:
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By WhichTyler
23rd May 2022 16:39

Hometing wrote:

As far as I've ever believed, WPs belong to those that created them, not the client.

Would a freedom of info request give a need to hand these over though?

I think you mean Subject Access Request (which only involves data relating to an individual person, not a company); FoI only applies to public bodies

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By Geoff56
23rd May 2022 16:38

Have you looked at any guidance issued by your professional body? The ICAEW has quite a bit to say on the subject (members-only access).

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Replying to Geoff56:
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By LondonAccountants
24th May 2022 10:22

Yes its not clear. Its a grey area and there is case law too.

If we did the book-keeping they belong to the client but its debatable if we did or not and what constitutes book-keeping.

The request just surprised me and wondered in future should I just send my excel spreadsheet as part of professional clearance.

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By Michael Beaver
23rd May 2022 16:40

Our engagement letter says all our workings remain our property until paid for. I agree that you shouldn't hand them over.

Whilst you may have full confidence in your own workings, you don't want to unwittingly give them a bat to hit you with, due to some kind of circumstance you aren't aware of.

It could be that the new accountant has been able to get hold of more information than you had access to, and found that there were fundamental errors in the assessment of tax for previous years. They may be looking for fodder to make a claim against your PI insurance.

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Replying to michaelbeaver:
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By LondonAccountants
24th May 2022 11:34

Exactly this is my concern, it wasn't exactly an amicable split.

There was no explanation why he wanted the working papers.

There seems to be a split on this forum on providing the working papers. Professional body does not seem be clear or even my solicitor. Its something I need to grasp in case this happens again and make amendments to like you say engagement letters and other processes.

If I have to give the working papers then fine but no accountant should have to give their own working papers unless there is something more definite written down stating the Working papers belong to the client.

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By Tax is always taxing
23rd May 2022 16:40

I'd reply and saying you have had a quick look but only so far found his unpaid bill, once he pays that you will have a more thorough look.

He must need them for something - get your money + admin fee!

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Replying to Tax is always taxing:
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By philaccountant
25th May 2022 11:30

Indeed, incredible levels of cheek to not pay for the work you did and then come back and ask for it.

Pay my bill, then you can have the product of my labour. Certainly not before then.

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By DKB-Sheffield
23rd May 2022 16:51

Personally, and regardless of the legal requirement, I'd be firing them over anyway. To me it's simply not worth the hassle over the few hundred pounds being owed. If it went 'legal', the time and money required to deal with it would be excess to the current loss.

However, and as a precautionary measure (in case you have concerns that the client is trying to 'pull a fast one', all WPs would be issued as a single secured/ protected PDF (not Excel/ Word etc.) with a suitable disclaimer.

Incidentally, you state you didn't provide a bookkeeping service. I'm not sure of the relevance of that point? Bookkeeping, or no bookkeeping, surely you prepared WPs? How did you prepare accounts and CT return without them? More importantly, doesn't your PB require (or even recommend) their preparation?

Finally, why is the client asking for them? Quite simple... the accountant has probably asked them to! I often find it more productive for clients to request information (in addition to my own request accompanying PC). Some accountants - rightly or wrongly - are more receptive to ex-client requests than the competitor who has taken on that client.

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Replying to DKB-Sheffield:
By ireallyshouldknowthisbut
23rd May 2022 17:37

I think its a question of how happy you are with your work. If you know its right, and you know all your queries have been fully documented you don't have an issue.

If you know some junior knocked them off without proper review I can understand the reluctance to be forthcoming.

The new accountants will also know this, which is again why I would send them out, confident that what I have prepared should be decent, and if its not and big enough to be an issue then well, that's what PI is for.

I currently have a client screaming at me about some accounts he wants for mortgage purposes, but he refuses to send something over to complete them. Its quite trivial, but I am standing my ground as it might not be..... Might lose the client, if so, so what.

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Replying to ireallyshouldknowthisbut:
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By DKB-Sheffield
23rd May 2022 18:30

I suppose it's me with my sole practitioner head on. Perhaps where a junior has prepared - unchecked - I would take a different stance.

Personally, if a client leaves for whatever reason (price, change of circumstances, finding an accountant able/ willing to prepare and file 100 sets of accounts betweem 20/12 and 31/12...), it's unfortunate. However, I'd rather send all relevant info (double-checked of course) than have the new 'accountant' (sometimes the loosest sense of the word) asking queries for the next 3 months!

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By Leywood
23rd May 2022 17:05

[quote=LondonAccountants] << Joined today.

'We have never had this request below and a little worried to be honest.'

Why?

'We prepared the accounts for a property business (Ltd) then they suddenly left owing us a few hundred pounds which we just wrote off.'

Why?

'We basically produced the rental accounts from the bank statements which he had just written down some vague comments as he has never used a computer before in his life.'

'vague comments' - so are you saying you did not have discussions/query any of these vague comments? Is this why you are worried? I have clients who have never used a computer in their life but who can produce a fabulous set of paper records. All just sounds a bit odd.

'I spoke to a solicitor and they think the workng papers belong to us but he is insisting they belong to him'. 

Why did you speak to a solicitor rather than your prof body? Is this not covered in your LoE?

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Replying to Leywood:
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By DKB-Sheffield
23rd May 2022 18:44

I'd perhaps add to the 'why'...

Why... is this a strange request?

Why... would a new accountant not ask for working papers?

I'm pretty certain the ex-client with their 'vague comments' would have no idea how to answers questions about FAR, Capital Allowances, asset/ liability schedules, DLA balances etc. I'd rather avoid reconstructing a set of prior year accounts- with a possible element of 'guesswork' - wherever possible!

It's a 'property business (Ltd)' doesn't help matters. Investment properties? Significant asset value? Tenancy deposits (non-custodial)? Possible CAs on embedded claims (non-res)?

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Replying to DKB-Sheffield:
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By Leywood
23rd May 2022 18:57

Agree with your earlier comment that all such information should have been sent to Acountant at the outset.

Just something is a bit off with some of the original comments. Sounds like OP is suggesting half a job was done in the first instance for some reason and its now coming back to bite. But no responses so far, so we have to guess.

IRSKT might have hit upon a reason, to meet a deadline/avoid fines. If a client cannot provide info when requested I wouldnt be bending over backwards to avoid penalties.

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Replying to DKB-Sheffield:
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By LondonAccountants
24th May 2022 10:34

The new accountant has had all the schedules a year back. If they have any questions then they should send a email or call me. Its not the accountant asking for the working papers but the client

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Replying to LondonAccountants:
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By Leywood
24th May 2022 10:46

Why not go back to client and tell him all your papers were sent to the new Accountant then.

Although it does sound like client has perhaps fallen out with the new Accountant.

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Replying to LondonAccountants:
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By DKB-Sheffield
24th May 2022 17:51

TBF your OP has significantly benefited from the additional information you supplied subsequently!

It would appear you have supplied information to the incoming accountants, the period between disengagement and now is 12 months, the incoming accountants would assumedly have had sufficient time to review that information. Other than copies of annotated bank statements (for which the client will hold the originals) you have no more information to give. If that had been stated in the OP, my answer may have been somewhat different!

My doubts are possibly more aligned with others. My suspicion is that...
- the client has disengaged, or been disengaged from/ by their new accountants
- they have either decided to DIY, or are in the market for a new adviser

In those circumstances, I'd perhaps respond to the client stating what has been provided (and *when*, and *to whom*), what information they have (personally), and why you feel this is perfectly sufficient for the work to be completed.

I'd probably still provide WPs (possibly removing anything of little, or no relevance) anyway but would be stating quite clearly that, as the pertinent information has been provided to the previous accountants, and as the information being provided is all you have (of relevance) on file, any future/ subsequent requests will come at a cost. I'd also be VERY CLEAR to confirm that the information you provided was relevant at [date of completion] and in relation to the year ending [ARD] and based on information provided by the client on [date/ dates] ONLY! Making clear your date of disengagement, the date you received PC request from the new accountants AND the date this was supplied (when you closed your file)!

Incidentally, have the accounts for the subsequent year been filed? Are they late? If filed... before sending any information, I'd be asking serious questions of the client as, in all honesty, any working papers you hold are outdated!

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By John R
23rd May 2022 17:33

I suggest you urgently ask your PI insurer for advice before you release your working papers.

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A Putey FACA
By Arthur Putey
23rd May 2022 18:10

Just tell him that for data security you do it all by mental arithmetic and it is all end to end encrypted.

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JCACE
By jcace
23rd May 2022 18:48

I wouldn't give general release of all my working papers and would explain clearly and politely why not. However, if the client or new accountant was simply needing a more detailed breakdown of Balance Sheet items, I would be happy to provide them.

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By 356B
23rd May 2022 19:31

A detailed TB should be more than enough.

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Replying to 356B:
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By Paul Crowley
25th May 2022 14:58

That is also the opinion of the ACCA
Fees can be charged for anything else

ICAEW tend to expect member to supply last three years, and anything else client asks for, all for free

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By JD
23rd May 2022 20:23

Does your former client understand what he is asking for.

If not already sent to new advisor, send him the normal handover info, trial balance, tax calculations etc plus a copy of his original bank statements and leave it at that.

He may however put forward the argument that the working papers are part of the companies records under companies act, which hopefully your letter of engagement hopefully provides you with some protection.

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Replying to JD:
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By LondonAccountants
24th May 2022 10:37

They have everything so hence I am surprised at the out of the blue email. I have never requested working papers from any accountant and we have not had this request either.

Its a grey area and not clear on my professional bodies guidelines.

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Replying to JD:
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By Paul Crowley
25th May 2022 15:00

agree
just copy client in with whatever went to middle advisor

The client that has 3 different advisors over such a short period are always trouble

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By Tosie
23rd May 2022 20:58

Ask him what points he needs clarification on and then respond. Your working papers belong to you but he has the right to ask how you arrived at figures in accounts.

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Replying to Tosie:
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By Calculatorboy
24th May 2022 07:46

No they don't its a Ltd co

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Replying to Calculatorboy:
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By C Graham
25th May 2022 11:11

exactly - the director signs off the accounts and takes that responsibility for checking and confirming that they are prepared properly.

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By lisa65
23rd May 2022 21:39

In the case of Chantrey Martin & Co v Martin [1953] 2 QB 286, it was held that where an accountant undertakes work for a client and the work is of a compliance nature, calculations and correspondence between the accountants and HMRC regarding a client’s accounts and tax computations belong to the client, since the accountants were acting as the client’s agent in negotiations with HMRC.

The principle to take away from this case is that “where the relationship between a client and an accountant is that of principal and agent, documents brought into being by the accountant pursuant to a retainer belong to the client.”

You have indicated that you “basically produced the rental accounts from the bank statements which he (your client) had just written down some vague comments”.

You “spoke to a solicitor and they think the working papers belong to your firm but the client is insisting they belong to him.”

I assume your firm prepared the working papers whilst undertaking work of a compliance nature. Therefore, your firm was acting in its capacity as “agent” and not as “principal”. If that is the case, the working papers (or accounting records) belong to the client. If any of the records prepared by your firm are required by law to be kept by the client in support of the figures in their Self Assessment return, they belong to the client.

If your firm has an agreement with the client relating to the ownership of documents produced by your firm, the agreement will override the principles referred to above.

You have also stated that your client “suddenly left owing your firm a few hundred pounds”.

Unless your firm has special provisions in the letter of engagement or agreement with the client regarding lien, your firm has no right to exercise a lien over documents belonging to your client.

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Replying to lisa65:
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By TASG
25th May 2022 10:51

Unwelcome news but well sourced. It is possible that the widespread misconception that working papers are proprietary arises from the days when all accounts were audited.

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Replying to lisa65:
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By C Graham
25th May 2022 10:53

Working papers are not the client's property.

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Replying to lisa65:
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By Calculatorboy
25th May 2022 21:04

That was a case regarding audit papers which obviously belong to the auditor ..not accounts preparation papers ...there is a big difference

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By Calculatorboy
24th May 2022 07:45

For Ltd co they belong to Ltd co, by law they have to be kept at reg office so you cannot exercise lien .
For sole and pships you can exercise lien.
In future engagement letter should state you retain all wp's.

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Replying to Calculatorboy:
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By DJKL
24th May 2022 09:00

That surely is the accounting records of the company not the working papers per se.

In this instance it appears that maybe the only accounting records are merged within the working papers prepared by the accountants, but it is not clear.

An analysis of bank transactions say into some semblance of a cashbook is likely , imho, to be the limited company's accounting records as would be any listing of prime entry transactions used as a daybook summary to post in total to the ETB (Which is likely he only company nominal ledger that exists)

Other analysis, notes of reconciliation etc would likely be WP.

Frankly if I was the accountant I would not be difficult, but then again I would never have prepared the accounts of any company without at least creating a cashbook.

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Replying to DJKL:
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By LondonAccountants
24th May 2022 10:42

I did speak to my accountancy body and they said the written comments on the bank statements would belong to the client but the fact I entered them on excel spreadsheet then produced the TB would mean these are my working papers. They referred me to the case Chantrey Martin & Co v Martin (1953) where they talked about analysis of bank accounts belonging to the accountant.

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Replying to LondonAccountants:
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By DJKL
24th May 2022 10:57

Was the case cited that of a limited company?

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By Calculatorboy
25th May 2022 20:57

No the trail from client Ltd co records to stat accounts belong to the client as accounting records .they are required by law to be kept at reg office .

However if an audit is also carried out the audit papers belong to the auditor in his capacity as principal in enabling him to form an opinion on the accounts ( which he might have just prepared).

Problems arise when certain wp's include both accounting and audit information . Each sheet needs to be assessed accordingly before it is released to the client .

This is the conundrum when an accountant is also the registered auditor and a dispute entails .

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By Mr_awol
24th May 2022 10:45

How long ago did they leave? You say they have "suddenly" come back asking for info which leads me to assume a decent amount of time has passed.

What is your data retention policy for ex clients? Have you (or should you have) destroyed much or any of this information?

TBH I'd probably just hand it over - having saved any Excel or similar docs to PDF, or supplying them in printed format. I dont give out my original documents generally. Similarly if youve put the through software to record the transactions I'd only hand over a report, not (even read-only) access to the system.

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Replying to Mr_awol:
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By LondonAccountants
24th May 2022 11:09

They left one year back. Everything is on excel. They already have all the schedules they had requested.

If the accountant wanted some info or queries then I would respond.

The ex-client should at least explain what the purpose is and if there is any specific information missing.

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By C Graham
25th May 2022 10:50

They left - you passed on the clearance and the new accountants seemed happy.

You wrote off the debt thereby ending the agreement and can destroy any related documents because working papers belong to you.
CIMA - Generally speaking, where the relationship is one of principal and principal (i.e. a member in practice acting as an accountant for a client), any documents created or brought into being by you solely for your own purpose as a principal, such as working papers, would belong to you.
The final product, i.e. the financial statements will
belong to the client whereas any working papers will
belong to you. Any drafts completed in the course of
undertaking the work, or correspondence with third
parties would also belong to you.

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Replying to C Graham:
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By LondonAccountants
25th May 2022 15:51

I agree with you but there also some others on this forum that disagree and have some valid points as well based on case law and other accountancy bodies opinions which seems to differ from CIMA.

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By petestar1969
25th May 2022 11:24

Client has clearly fallen out with and not paid his new accountant so decided to try and do the accounts himself.

His new accountant, having not been paid, has probably told him to Foxtrot Oscar when asked for the papers.

I suggest you (OP) do the same.

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By billgilcom
25th May 2022 11:35

Personally I would tell him that he never settled his full bill and until this is done you are not even going to consider his request. Then after he pays his bill I would tell him that your working papers belong to you and he got all that he paid for - namely the accounts he paid you ( finally) to prepare based on the information he provided at the time.
I would suspect that he may not have provided you with all relevant paperwork and if he perhaps has got caught out he’s going to blame you for alleged inadequate work. Or I could be wrong and he may have fallen out with his new accountant or not paid and is now looking to see if he can do it himself using your methodology.

Or alternatively you could just tell him to whistle from the start.

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By billgilcom
25th May 2022 11:41

There is of course the argument that as it is a LTD company and no records were maintained you were in fact creating the company’s Nominal Ledger accounts ( unintentionally of course) and the company would be entitled to get a copy ( of the nominal ledgers that is)

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Replying to billgilcom:
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By C Graham
25th May 2022 13:08

read the OP - asking for working papers only.

Nothing to do with ledgers or books etc which presumably the new accountants would have to have access to.
Working papers are the accountant's own labour - and not statutory records. The nominals and bookkeeping would be different.

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