sole trader accounts

lgarside

Can someone clarify for me do sole trader and partnerships have to have a profit and loss and balance sheet produced or is this just compulsory for companies? If you do book keeping for a company as a bit of work on the side can you also produce their financial statments?

Thanks

bryan100

There is no statutory requiurement for a non incorporated business to produce accounts, other than that required to fill in the proprietors tax return.
They often like them for the information they provide and accountants like to do them to provide evidence of work done.
There is nothing to stop you producing the F/S of a company, legally they are produced by the directors so you can act as their agent. If the company is big enough to require an audit, you can still prepare the F/S, but a registered auditor must carry out the audit.
One thing to be careful of concerns the required disclosures and the version of FRSEE you claim to be using, if you don't work for a firm of accountants it would be a good idea to get hold of a similar companies accounts for reference. Try Companies House web site.

peugeot

I would agree with bryan100 in that if you are considering doing small Ltd Co work then you would be advised to ensure you are familiar with the FRSSE requirements (FRSSE 2007 effective from 1 Jan 2007 - this can be adopted earlier due to the changes in the Companies Acts) before you undertake any ltd Co work. These days disclosures in Ltd Co accounts are becoming increasingly technical and in my experience through dealing with external reviewers, disclosures (and non-disclosures) are given more prominence than the P&L and Balance Sheet.

Over the years I have been appalled at the standard of disclosures made in Company's accounts that either are omitted or included when needn't be.

One particular (quite small manufacturing firm) produced, and published on the public record, a full set of full accounts plus the detailed P&L account. The accounts concerned were prepared by an unqualified accountant who did not even know what "FRSSE" stood for!!!! I'm not saying those doing accounts "on the side" or those that are unqualified do not know the basics, what I am saying is that it is important that you are aware of the correct disclosure requirements .

Those undertaking accounts preparation work for small ltd co's DO need to ensure they are familiar with what needs (and what does not need) to be disclosed as the disclosure requirements frequently change.

best wishes
Steve

bryan100

I was interested in your comments about the standard of filed accounts. A few years ago it was rumoured that the DTI, or whatever has replaced it, were going to examine published accounts on a test basis. Until then I had assumed that someone read them to check, I hadn't thought it through! I suspect no one ever reads them and, so long as all the pages are there, regardless of content, no one cares. Is that cynical? As a manager, I made myself very unpopular by insisting on exactness in the numbers and the legal format, probably to no avail. Did I waste my time, almost certainly. The only people who read these accounts are the IR and they only care if the tax is right.

Bluewednesday

I can only agree with what you say.

We recently had a case of a client submitting his own accounts using our accountants certificate. Peugeot and I went through them and found over 11 errors on a set of abbreviated accounts which didn't even balance.

I spoke to Companies House who can only remove the accounts with a court order and weren't particularly interested until I complained that they didn't even balance. Does nobody even check that anymore when accounts are filed?

Unfortunately it seems that the ex client is unlikely to change the accounts as he is leaving the country (without filing cessation accounts) so these shabby set of accounts have our name on them and we can't do a thing about it without spending a lot of money!

peugeot

The Financial Reporting Review Panel inspects approximately 97 sets of accounts a year - though these are invariably medium to large sized companies.

The various Institutes have been known (and still do) go through accounts, on a sampling basis, via Companies House website. I, personally, do not see that inspecting these "abbreviated" accounts achieves very much. However, in some circumstances, I can see why they do it. The case Bluewednesday cites was just unbelievable and goes to prove that there are individuals out there who will go to great lengths to cut costs - at their peril.

I very recently had a cold file review done on one of my audit clients. The file did pass the inspection but the reviewer mentioned to me that (quite worryingly) most of the firms she inspects are lucky if they scrape through. Granted, audit files are subject to much more rigorous inspections, but the inspector agreed with me that overall most firms fall down in their accounts preparation work because of lack of disclosure knowledge. One common failing is not disclosing the way stock is valued in a Ltd Co (e.g. FIFO, LIFO, weighted average etc). Most firms just simply assume the note generated by their software is adequate.

I, too, am quite unpopular at work when it comes to disclosures as I absolutely insist they are done correctly. This usually involves the staff having to do a little more work as sometimes they do rely too much on the software - but the software will only produce the skeleton!!

Best regards
Steve