Member Since: 21st Nov 2011
25th Jul 2019
Accountants need consider:
1. How do you transfer all your historic data/systems should a vendor go bust OR how much will it cost to retain access to the historic systems and data should you wish to transfer to a new provider.
2. The more fully integrated your accounting/tax and compliance systems, the greater dependency the accountant will have on the software house, and in turn the easier it will be for software companies to leverage charges and fees.
3. At what point do the software houses become accountants and tax advisers and dispense with the original introducers?
24th Jun 2019
Investors in stocks and shares cannot claim interest relief should they gear their portfolio, so removing the interest relief on buy to let investment restores parity. A nice tax break while it lasted, be grateful and now move on.
14th Feb 2019
Back in the 1980's when working for a what is now top 4 firm I transferred to their integrated services department. The small businesses came in on the back of an acquisition. It was quickly apparent that the internal compliance procedures were to expensive to be absorbed by small clients. Good staff were too expensive to use on demanding, often administratively incontinent small clients. The skill set of our staff was too limited to be efficient, and it was too expensive to use the tax services, company secretarial departments. The major issue was risk to professional reputation. The risk reward did not equate. Major audits enjoyed fee discounting by some times as much as 50% but in ISD client's were charged at full scale rates. As a manager it was impossible to be successful.
The new models assume that clients will input all the information and be aware of all the issues. The provider through detailed letters of engagement will not be responsible for errors and omissions. Amex tried it, the banks have tried it, KPMG have first hand experience. Accounting in bulk to a diverse and sometimes less than competent/honest clientele usually ends in tears.
The idea of top four firms providing virtual finance directors is another experiment doomed to fail. The idea that a staff member that has completed his ACA/ACCA training, never worked in industry, probably only bought and sold a second hand car and submitted expense claims can be a business adviser is ambitious.
We have seen that the partners struggle with basic accounts and audits.
10th Oct 2018
May I suggest that the conflict of interest concern, which is principally focused on consultancy work is only one factor. There are more deep rooted issues.
1. The outdated model of recruitment/retention and training of audit staff. Generally, firms still operate on the basis of bright young classics graduate, promise of a chartered accountant title, salary in exchange for three years ticking and then moving them on to another service. It was apparent to the banks and now subsequently the general public, that the bank auditors did not understand what they were auditing. The model worked in the 1980's, no longer today with complex globalisation and information systems. Sadly, with the exception of financial services, where auditors have always been observers rather than inquisitors, most errors still relate to basic revenue recognition errors.
2. The accountancy institutes are in a battle for membership numbers. Each new accountant represents a life time of subscriptions. The major firms are an important source of income to the Institutes, with the potential to exert an unhealthy influence.The Institutes have a conflict of interest.
3. The various political parties are closely aligned to the major audit firms. Embedded tax advisors, sponsorship of party presentations etc. A further conflict of interest.
4. The failure of the FRC/Institutes/ Government to act promptly with meaningful sanctions and remedial action after the catastrophic failure of the audits of the banks. It is not surprising that the general public perceive major accounting firms (to big to fail) as untouchable. The fact that the FRC did not name and shame the banks and auditors that performed so poorly when subject to external review, emphasises the weakness of the regulatory bodies and the secretive and unhealthy reliance on a small band of influential but apparently less than satisfactory audit players. It also demonstrates the failure of the directors of the audited entities to engage and receive an appropriate service.
5. The initial responsibility for the information provided to auditors rest with the accounting function within the company. With large global companies, misfeasance will be known to a group of employees. Staff below director should share the responsibility. How many bank directors were fined, barred or sanctioned by a professional body? Clearly the audit committees of the various banks could be considered to have failed in their duties?
6. LLP status. I would suggest that there is a degree of recklessness introduced with the introduction of limited liability partnerships, without an adequate compensating capital adequacy/ indemnity insurance requirement. The 'to big to fail attitude' to certain audit firms is partly due to the lack of capitalisation and indemnity insurance that characterises the audit firms of today.
I am not convinced that breaking up the large firms would have the desired effect of improving audit reporting. Ethics is now quite clearly an outdated concept within the audit profession. What is understood is fines and penalties.
I would suggest:
a. Significantly higher fines and penalties to geared to turnover.
b. A review of the capital/professional indemnity threshold of audit firms to be undertaken.
c. Enhanced whistle blower protection and compensation (say geared to two years annual salary as fear of unemployment is a major deterrent).
d. Review of the audit business model. To encourage long term retention of experienced staff.
e. Regulate the association/ lobbying between audit firms and political parties.
d. Audit committees to be appointed and responsible to shareholders with separate legal status. Auditors to be appointed by the audit committee and not the directors. This will separate the audit from other services. The directors will appoint consultants.
Just some thoughts.
4th Aug 2015
Investors do not get an interest deduction against dividend income, so the buy to let position does distort investment decisions. I am sympathetic to your client's concerns. Having been enticed/ encouraged to invest in rental properties, a long term investment with considerable entrance/exit charges, the politicians change the rules on a whim.
I suggest that Mr Osborne is trying to improve his leadership/election chances by encouraging directors of small companies that are higher rate tax payers to declare significant dividends this tax year, generating significant tax receipts. He is selling off RBS shares at a loss, all funding a reduction in the deficit and prefunding a give away budget prior to an election.
9th Jul 2015
In the future, when the corporation tax rates drop from 20% to 18% this will result in a reduction in the effective dividend investment surcharge from 7.5% to 5.5%" ignoring the £5,000 allowance.
In recent years shareholders in large companies( previously taxed at the higher rates of corporation tax) should of received a significant bonus through higher dividend distributions. The cost of the reduced corporation tax receipts are being clawed back from individual UK tax payers through the surcharge.
8th Mar 2013
Pleased they have annoucned the date for the strike, otherwise we would probably never have noticed. Given it takes HMRC a month to answer correspondence the full effect will not be felt until the 20th April.
5th Dec 2012
Were Delotte the auditors of RBS when it crashed?
27th Jul 2012
Just think if auditors still requested returned paid cheques it might have been discovered earlier
22nd Feb 2012
Limited liability comes with a responsibility, to provide clear financial information to those that would advance credit. The complexities of operating any business in the UK large or micro, with the governments current obsession with regulation and penalties is contrary to the argument that small business should be absolved from maintaining meaningful books and records and filing public information. If the cost is too great, then do not form a limited company and enjoy the protection afforded.
From experience generally competent successful businesses maintain accounting records and the cost of converting thes records into financial statements and tax returns at period end is small, incomparision to the fines and penalties for errors and omissions. The clients that complain, do not retain records, are usually struggling with cashflow and probably should not be allowed to run a business.
The suggestion the micro businesses should be taxed on a cashbook basis is embarrassing. Removing the concept of matching income to expenditure and being subject to tax dependent on your credit or payment policy would be conceptually flawed.
Uk taxation has become overly complex. A proprietor of a small business would not have been capable of preparing a tax return in the past and is certainly not capable of preparing one now.By reference to the MPs expense scandal, it is obvious that even well educated members of society are easily confused by even the most rudimentry rules as to what is or is not allowable. The only glimmer of hope is that they were able to understand how to flip properties for CGT purposes.
It has become clear over the years that the responsibility and cost of tax revenue compliance, computation and collection has been forced down onto the general public and business. Not only this but maternity pay, student loans, visa status, and in the future pension administration has been dumped on the employer.Once allied to excessive fines and penalties the uninformed (due to the complexity and inconsistency in tax legislation) have been forced to engage the services of accountants. As a economy this is inefficient and expensive. HMRC can now force costs onto the taxpayer, rather like IBRXL, at a whim for some economist to play with some figures until the next fad. The problem is not the cost of the annual accounts but the forced adoption of HMRC's and other govermental responsibilites.
As an accountant the risk, due to the complexity of legislation and potential penalties is fast approaching the point where reward is no longer commensurate. As a body it is time to excert some resistance. HMRC is now dependent on the goodwill and compliance of accountants, may be we should consider reminding HMRC. What would be the impact of all accountants with holding the filing web submissions (with their clients consent) until 30 days before the deadline?
A radical solution may be to have a flat rate turnover tax for micro businesses. This is the approach adopted in Brazil. It removes capital allowance computations, questions of allowable non allowable items.The only business records would merely be a sales day book.This would then be allied to large fines and penalties for unrecorded sales bourne by supplier and customer alike.