Professional Clearance lacking detail

Gillian Registered Posts: 17 Dedicated contributor 🦉
Hi there

We have recently had a funny experience when getting prof clearance for a new client and although my colleagues handled this with professionalsim, the response received was to me a bit strange and I wanted to check with others their experiences in such circumstances.

My firm took over a client and wrote a Prof Clearance Letter to the former accountant asking for the usual items such as:-

1) A copy of the last financial statements available.
2) A copy of the TB
3) schedules/breakdpwns giving details of Debtors/Creditors, Prepayments/Accurals
Bank reconciliations and fixed assets

4) A copy of the last corporation tax return.
5) Copies of the last taxation computations.
6) A note of the tax district and reference numbers.
7) A copy of the latest P35 and PAYE to date figures.
8) A note of the Companies House authentication code.
9) Any other information
plus items relating to the director...

Company is a small Limited company. I think these items are fairly reasonable to ask for and in fact is what we supply.

We received only a copy of the accounts, CT600 and the TB, nothing else, no bank recs, breakdowns or tax comps.

In preparation for the new set of accounts the client provided us with various information
including and importantly
Copy of the business bank statements
Copy of expenses - this was in the form of an excel spreadsheet

Upon going through the "bookkeeping" to create the accounts I noticed several discrepancies between the closing balances and what was in the accounts, which working backwards I was unable to calculate - one of these was the closing bank balance, the accurals and debtors were also different.

So my firm went back to the accountant and asked for the breakdown of the figures in particular the bank reconciliation.

After several months of chasing we finally got a response in the form of a stroppy letter declaring that we should not be asking for this, that we should be able to work it out from the accounts and see that there were no further details required, and it should all be obvious. That in order to create the accounts they used the clients expense sheets and didn't use the business bank statements so no bank rec was done and that any difference in the bank should be treated as a Directors Loan and should be obvious to anyone.

My colleagues are handling this but I personally wouldn't make assumptions about a set of accounts for a limited company or prepare without the business bank statements.

Is it reasonable to go back to the accountant and ask for such breakdowns of items in the accounts? or is what he says correct?


  • jamesm96
    jamesm96 Registered Posts: 523
    Gillian wrote: »
    Is it reasonable to go back to the accountant and ask for such breakdowns of items in the accounts? or is what he says correct?

    Yes, quite reasonable! It sounds to me like they're a sloppy firm of 'accountants' who made lots of guesses, and they don't want you to realise that's what they've done!

    The fact that they've said to you that 'any difference in the bank should be treated as a Directors Loan' rather suggests that that's exactly what they did when they were preparing last year's accounts.
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
    I completely agree with Mike.

    Actually I am handling a number of tax enquiries at the moment where the previous accountants never did a bank rec and just inserted whatever figure into cash at bank that made the accounts balance. HMRC believe that doing so is covering up overdrawn loan accounts (they are very probably right) and will be assessing S.455 tax.

    This firm's standard clearance letter states "as the client did not request an audit we did not reconcile the bank".

  • Gillian
    Gillian Registered Posts: 17 Dedicated contributor 🦉
    Thanks guys

    thought I was right and always doing a bank rec.
    In fact the accountant who quoted Fellow of the AAT and chartered status actually had the bank accounts from the client, and made some massive assumptions about the accounts in so doing mistated VAT, Debtors, and other balances.
  • Newbie
    Newbie Registered Posts: 229 Dedicated contributor 🦉
    Totally agree, if you are having trouble getting the backup schedules bank rec's etc its because they dont have any, I believe they are obliged to reply appropriately otherwise you could report them to their institute/association but first of all I would sent back a suitable response to the accountants
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