Partnership accounts - Audit????

anniem

OK; this may seem like one of those daft questions, but I've inherited a situation that I would like to resolve with absolute clarity.

Farm partnership - no limited company/or LLP involvement.

Accountants who do the books come in and 'audit' for 8 man days. (2 staff for 4 days). This also involved aforementioned staff staying in nearby accommodation for a few nights. I wonder if this is a bit of a 'training jolly' which has become entrenched after 10 plus years, with the partners not realising. Obviously the bill is not insubstantial!

I'm quite certain that this is just a little bit OTT and is not necessary for the reporting of partnership accounts. 3 partners are all members of the same family.

Is there something I'm missing here?????

Monsoon

What's the turnover of the business?

Sounds like a jolly at the client's expense to me!

T.C.

Sounds like an excuse to charge them a fortune to me!

anniem

Mmm, that's what I thought! Jenni, I've pm'd you.

I've suggested to the partners that I think they're having their 'leg lifted' on this one and wonder whether it might be prudent to get 2 or 3 comparable quotes - as you would with renewing an insurance policy!

Will wait and see what they say.

PGM

We have a £4m turnover and there not here much longer, but farms can be big!

AK002

Depends TBH.

They could have literally no systems at all, there's not enough information with what you have provided to say whether it's not right.

Also, the location of the practice will determine where the staff should stay and again, you've not mentioned this.

It could also be as you say, a 'training' jolly, however not a jolly.. just that a junior member of staff is attending to learn accountancy, how can you be sure this amount is recharged to the client?

Could be the firm suffering the cost to train a member of staff.

anniem

I'm the Farm Secretary doing the accounts, have been there 7 months and, no, the accounts are not immensley complex!

I'm also a qualified MIP, which is why I'm quite sure that this auditing situation unjustifiable.

wildgoose1uk

The main things to find out are:

1. Is there any contractual obligation for an audit to be carried out, eg it may have been a conditional obligation to get some funding;

2. Is it really necessary for them to stay in a hotel?

3. Has the appointment ever been reviewed. It is good practice to review the appointment of auditors at least every 3 - 5 years.

deanshepherd

Sounds like one of those mysterious limited assurance engagements to me!

anniem

Dean - what is a limited assurance engagement? I thought it was more to do with reporting on accounts for mortgages etc?

deanshepherd

Statutory audit engagement = mandatory
Limited assurance engagement = voluntary

I think auditors have been desperate since the threshold went up to £1m turnover (many moons ago) to flog 'mini-audits' to small companies and extol their benefits. I am sure there are also more genuine reasons for having one!

burg

deanshepherd wrote: »

I am sure there are also more genuine reasons for having one!

Such as more income for the accountancy practice for example?!

Certainly sounds wrong to me. The firm I worked for dealt with around 1500 farming clients and not one of those had an 'audit' although fees did range from a few hundred to a few thousand pounds as did client turnover and profitability depending on the type of farming.

anniem

For instance, if you had two farming partnerships:

1 has circa five/six transactions a month and the accountancy bill was approx £1,900; what would you think?

Say the other partnershp had a turnover of £1 - £1.5 million annually, would you consider that an audit invoice in excess of £7,500 was acceptable?

burg

I would think 'Ouch'!

Based on my experience for the south west depending on other factors:-

5-6 transactions say £500

£1 - 1.5m should be around £3,500 no audit!

Income for farmers has it most cases dropped over the past 10-20 years and accountancy firms in general have not reviewed their fees in light of this. I recently took on a farmer with £100k t/o around 10k profit accountancy bill was over £2k last year even though all bookkeeping done well to TB with reconciled bank accounts.

deanshepherd

burg wrote: »

Income for farmers has it most cases dropped over the past 10-20 years and accountancy firms in general have not reviewed their fees in light of this.

Why should they?

You either provide a valuable service or your don't. We are not here to prop up ailing industries by reducing our fees for them and not others.

burg

Yes I agree with the value of the service but if the workload has reduced by 50% then fees should be reduced to reflect this surely?

deanshepherd

Playing devil's advocate for a moment..

I would be pretty surprised if a reduction in income from one year to the next results in 50% less work for the accountant.

I sell knowledge and the knowledge required to help a declining business is probably far more valuable than the knowledge required to help a growing business.

Therefore I would increase my prices!!

burg

See your point Dean.

One example I saw however was a farm that was doing £200k t/o and then was wound down when the husband died. The wife then simply just claimed the Single Farm Payment of around £15k per year plus a small amount of other income say c£5k. Profit was then around 10k. Accountancy fees remained at c£2500.

Not really reflective.

I'm sure there can be examples for your devils advocate role above?!

anniem

Actually, I don't think that income has anything to do with it either.

What I would mention is that computerisation has come to farming in a much bigger way. If records are all in ledgers then obviously it's going to take much longer to properly check the records.

Farmers have (my opinion only - before someone starts getting critical!) been slower and more disorganised at getting their records onto computerised systems.

I have transferred two businesses from hand written ledgers in the last six months!!!

So, if the accounts are now kept on a computerised system, and there isn't the 'work' involved in correlating the hand written records, then yes, perhaps the price should have been reduced accordingly.