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Unprofessional conduct?

An accountant favours one director over another

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An MAAT accountant has refused to give a director of a company any financial information because "the other director is my main contact so I don't have to". The company was set up as two directors with equal shareholding. This company has now ceased trading.

The accountant concerned is now engaged by the other director in a new venture. 

Have tried to complain to AAT but they insist on proof. The accountant has not put anything in writing and now ignores all written requests.

Before going down the legal route any suggestions what else can be done to get this accountant to co-operate? 

Replies (25)

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By bernard michael
05th Feb 2018 15:27

Just to clarify.
Did the unfavoured director receive and or sign the annual accounts?
As the company has now ceased trading what information does he want
What does the letter of engagement say regarding provision of information- what and to whom

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Replying to bernard michael:
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By jaffe123
05th Feb 2018 15:38

1. No, did not sign accounts but did receive copies
2. Wants to know why accounts (P&L) are materially different to what has actually gone through the bank. Sales reported in accounts nearly half of bank receipts. For the absence of doubt - all bank receipts are sales receipts
3. There is no letter of engagement

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Replying to jaffe123:
Hallerud at Easter
By DJKL
05th Feb 2018 16:50

Well if vat registered a third of the reduction could be be re the output vat, if a lot of Robert Maxwells through the books that could take out a chunk more (we used to have a tenant where it took about 5 presentations before the rent bit)

If the company has ceased trading who is offering to pay the incumbent accountant for his time answering questions, is your client offering?

There is nothing to stop your client appointing his own accountants to go through the books and records, as a director he has a right of access to same.

If the issue is gaining access that is more a legal issue rather than an accounting issue.

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Replying to DJKL:
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By jaffe123
05th Feb 2018 17:33

"There is nothing to stop your client appointing his own accountants to go through the books and records, as a director he has a right of access to same."

This is my whole point, the director is being denied access to all company records.

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By ireallyshouldknowthisbut
05th Feb 2018 15:35

my engagement letters say who is my point of contact.

if a director or a director's accountant was being an [***] ache over something I might well enforce it.

Suggest they go after the other director, not the bean counter.

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Replying to ireallyshouldknowthisbut:
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By jaffe123
05th Feb 2018 17:37

But if a director suspects the other director of not being honest who do they turn to if not their "trustworthy" accountant?
Surely we should treat each director the same? after all they are legally responsible for what goes on in their companies.

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Replying to jaffe123:
Hallerud at Easter
By DJKL
05th Feb 2018 19:08

If company has ceased trading who is offering to pay past accountant for providing required analysis?

Has past accountant been paid by company for work to date?

What records does your client have, if any, what can he reconstruct-copy bank stats/ copy vat returns?

Where are books that belong to the company (its own accounting records)?

What is other director/shareholder saying, if anything?

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Replying to DJKL:
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By jaffe123
05th Feb 2018 19:42

The accountant has been paid in full for all work done. An analysis is not required, the director just wants the company's accounts backup or paperwork.

The accountant has everything but is refusing to release anything stating only the other director can have them.

The other director is in the background keeping the accountant in check somehow. This accountant is also working with the other director on another business so probably that's why he won't release.

All very messy and just going round in circles. Starting to suspect that maybe they have something to hide considering some of the comments from the other director.

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Replying to jaffe123:
Hallerud at Easter
By DJKL
05th Feb 2018 19:59

So, solicitor's letter to both other director and to accountants is all that is left.

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Replying to jaffe123:
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By Matrix
05th Feb 2018 20:15

Agree with above.

If the Director believes the accounts to be incorrect then he could contact the accountant's professional body.

Is there an accountant's report in the accounts? Can any numbers be tied up? Could there be an adjustment for deferred income? We all know that the net cashflow does not equal the accounting profit.

What is your role in all this?

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Replying to Matrix:
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By jaffe123
05th Feb 2018 21:59

There is no deferred income.
Tried solicitor route - letters ignored.

Tried the professional body but they are nor interested until we get proof of any wrongdoing which is difficult if we can't get all the paperwork.

There is no accountants report but we know they prepared them.

A few numbers tie up to what is expected, most don't and I have been employed by the director to look over what paperwork is available along with the accounts from companies house. They just don't add up but without the rest of the paperwork I can't prove it 100%.

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ALISK
By atleastisoundknowledgable...
05th Feb 2018 22:27

I presume that the company has not yet been dissolved... to what purpose has the director engaged you? What is he hoping to achieve?

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By thestudyman
05th Feb 2018 23:47

With equal shareholding the director can demand for the accounts to be audited, as long as it's delivered to it's registered office at least 1 month before the year end.

Practically this might be difficult as the company is ceased trading but your client could make it very difficult for the other director.

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Replying to thestudyman:
Flag of the Soviet Union
By thevaliant
09th Feb 2018 11:37

I don't think this suggest would work at all.

Presumably it's information in the past years which is needed (which has now gone) and hoping to upset the apple cart by forcing an audit of the current (ceased trading) year is likely to either be useless or simply ignored.

Yes, it's a breach of the Companies Act - I'm sure the rozzers will be screaming round the second they hear about it.

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By bernard michael
06th Feb 2018 08:43

Tell your solicitors to stop faffing about and apply to the court for an order for the production of the paperwork. They ignore that at their peril

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Replying to bernard michael:
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By Matrix
06th Feb 2018 09:06

The OP is an accountant so should advise what additional information is required and the client should pass the request to their solicitor (after the fees have been settled). The OP shouldn't spend much more time on this.

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By Balancing
09th Feb 2018 11:35

Very little in my experience. The accountant I complained about (who refused us information, telling us falsely that we had no legal right) was so arrogant he did not even reply to our MP. He too had a conflict of interest being employed by other parties to the matter that would no doubt benefit from him denying us information) The ICAEW protected him on every count. There is a massive issue here in regard to accountability and 'self regulation' When the regulatory bodies are paid by those they are supposed to be regulating I guess that it all depends on the 'power'/position of the complainer and perhaps the 'subs' value of the firm. They seem to feel above regulatory scope, and the law if they have more money than the other party.

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By tedbuck
09th Feb 2018 11:40

Not much point in expecting help from the Accountancy bodies. I had a case some years ago where an accountant was, Director, shareholder and Auditor of a Company. Was his accounting body interested? Not at all - they couldn't help. (He had been a member of a committee of the relevant body which might be indicative of why they were disinterested.)

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By dmmarler
09th Feb 2018 13:00

AAT expects Members in Practice to have a letter of engagement for all work. I would have thought AAT would be interested if this accountant had not had one for this work. Further, I would have thought they would be interested if the Board (ie both directors) had not approved the final accounts for submission to Companies House as this text implies.

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By Vaughan Blake1
13th Feb 2018 09:28

Maybe a question that you can't answer, but how much money do you think is at stake here, and what is the likelihood of actually recovering it from somewhere?

I have seen many cases over the years of people suing to rectify a wrong that go on for years of stress and grief, result in huge solicitor's bills, loads of wasted time and end with very little (if anything) to show for it.

A businessman should set aside his or her personal feelings/bitterness and look on this as a business project. The time cost and effort maybe better spent pursuing a new profitable project.

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Replying to Vaughan Blake1:
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By jaffe123
13th Feb 2018 10:20

Around £220k. Recovery possible but too many complications so client still deciding what to do but has reported accountant for false accounting.

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By bernard michael
13th Feb 2018 10:43

Am I misinterpreting the situation somewhat?
The nice director is of the opinion that the accounts are wrong . This is based on his memory of transactions as the accountants won't give him any information to the contrary.
Could it be that he is wrong and the accounts are right ? Also that the accountant has subsidiary issues with him that you are not aware of, which is why he won't release the information.
Otherwise a court order for release of the information will bring everything to light particularly if the accountant defends the order

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Replying to bernard michael:
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By jaffe123
13th Feb 2018 11:18

Things have moved on a bit and we have some paperwork (but by no means all) which clearly shows some false accounting. Nice director was correct with that gut instinct.

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By pauljohnston
13th Feb 2018 15:30

Ask bank for copy statements?

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By 356B
13th Feb 2018 16:55

"There is no accountants report but we know they prepared them."

These accounts have little or no relevance to anything. They might as well be doodles on a fag packet.

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