Rogue Director - Question for Licensed Members

sjkrsjkr Feels At HomeMAAT, AAT Licensed Accountant Posts: 58
Hi all,

I am unsure of how I need to proceed as a problem has arisen with one of my clients. It is a small business, run by two Directors, the first is shareholder and Director, the second is employed as a Director only.
The problem is that the second Director has been misappropriating funds from the business to herself, and I have discovered that she has been falsifying invoices in order to cover up what she has been doing. In one instance, she ordered goods to her home, but changed the address on the invoice to that of the business. In another instance, she completely falsified a purchase invoice to cover an amount of money she had paid to her own account.

In another example, she misappropriated funds from a small gym club into her own account, then paid their invoice from the business. She then changed the address on the gym clubs invoice to the business address, and has raised a sales invoice to the gym club - but they have already paid the original invoice. Confusing, I know, but basically she took money from the gym club, then took money from the business to cover up what she had done, then falsified documents to cover up that she had taken money from the business.

I have made the shareholder/first Director aware of what she has been doing - however he does not seem to want to do anything about it at the moment. He sees her as his "sales arm" and wants to keep her services, so thinks he can sit on the information he has and use it later to dismiss her.

My question is, and I am sure I should - do I go to the police/HMRC with the evidence I have of fraud? What would you do?

Thanks for your time!


  • MickdundeeMickdundee LondonRegistered Posts: 388
    You’ve informed the director and majority shareholder, and they are happy to let it ride. If the owner is happy with the situation, then what crime has been committed.

    The problem that you do have is that there are invoices going through the business that should probably be disallowed for tax purposes. When the other director is being crafty, you cannot be certain that the corporation tax is being correctly computed – there are possibly VAT and P11d issues being overlooked too.

    You should mention to the owner the problem you have in preparing accurate accounts and tax returns, and that if they are happy with the arrangement of paying for the other directors’ living expenses, they should formalise the agreement so that everything can be correctly accounted for.

    If they do not correctly account for these funds, then you will have an obligation to file a Suspicious Activity Report under the MLR. You will also have to reconsider your position as their accountant.
  • sjkrsjkr Feels At Home MAAT, AAT Licensed Accountant Posts: 58
    Thanks for your reply, it is helpful to have another take on the situation. I would have thought that falsifying invoices was fraudulent, whether the first Director lets it ride, or not. I have at least three purchase invoices which are faked, and sales invoices which the so-called "clients" know nothing about. :s
  • MickdundeeMickdundee LondonRegistered Posts: 388

    Report the fraud to the police.
    Police ask owner for statement.
    Owner says everything is fine.
    Case closed.

    It's more of a MLR issue, which hopefully can be avoided by the owners cooperating with you.
  • sjkrsjkr Feels At Home MAAT, AAT Licensed Accountant Posts: 58
    Yes I see your point! That makes things a bit easier, thanks!

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