Hi,
We have spotted some unusual invoices betweeen two trading companies (closely linked but not with the same management/ownership structure).
The business is complex and makes transfers back and to between the companies which have proved impossible to reconcile. It looks on the surface like wheeling and dealing but is just questionable enough to worry me. I have spoken to the NCA and HMRC who are as much use as a chocolate tea pot and have reached the conclusion that our course of action should be to:
1. Inform them of the shortfalls in their trading practices
2. Give them a quarter to rectify them
3. If not rectified, make an SAR to the NCA
Thoughts.....
KFK
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Replies (10)
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Yes, both of them. The complexity in part is because they invoice and then settle over several days in smaller amounts. Both ways (although not at the same time).
Are you auditing them or just accounts prep?
I'm not in practice but do you have to take certain steps to assure yourself that you have an good understanding of your client's business operates?
One never knows - it does make rec extremely difficult short of full audit/forensics. Ineptitude and hiding stuff deliberately look surprisingly similar!
How are there vat return discrepancies?
Re small amounts/parts of invoices being paid ,have you asked your client why this is the case?
I think I would want a clearer understanding why the two business entities operate as they do before I jumped to conclusions, nothing in your post really explains the issue.
The discrepancies are a small VAT reclaim on the main trading business each quarter with a smaller liability than we would expect on the second business. This is explained by the transfers between the companies of both sales and costs.
The client has a former Director who still does the invoices/books and apparently this is the way he works (we can't easily speak to the guy although we do have a conversation booked in for tomorrow evening to explore this further).
I agree - it is difficult to get to the bottom of the situation even when working with the clients (I am not being deliberately vague although the accountant working directly with the client could probably give more clarification).
You seem to be suggesting that each company's accounts in the other's bought and sales ledgers do not match. If so, this is then that is poor bookkeeping, at first sight.
you said that 'Ineptitude and hiding stuff deliberately look surprisingly similar', so why have do you suspect the latter over the former? At the moment, as you haven't said anything more, it seems to me that you are speculating before you have had the clients' explanations.