Error on previous company accounts - Director Loan account in credit but should not be?

DavidC said:

Hi,

I am in the process of putting some accounts together for a friend who is ill and it is not my usual field - I am a management accountant - I am doing a year end and filing but I have been informed by the client that the Directors loan account which is stating money owed to the director, is incorrect and should,be less or nothing at all?

How would I deal with this in the accounts?

Please let me know if you need any information and thanks for any help

Kind Regards

David

David, There are work ethics to be followed here.

1. There is a disagreement between the other accountant and the client on the treatment and disclosure of an accounting transaction/(s) - You might be able to find out why this is so despite the client being your friend - the procedures are there. Also use professional scepticism in your decision - an area currently being discussed by the international ethics board.
2. Possible shortfall in your skills as you said you are a management accountant and financial reporting is not your usual field - You can just up-skill.(CPD)
3. Placing reliance on information from the client - you should be able to get the transactions to support your treatment from the bookkeeping and accounting records. In addition, get a letter of representation from management and/or director to support the disclosures and treatment.
4. Once you are sure on 1-3 above, submit an amended accounts to reflect the changes.

Despite you making changes/amendments for your friend, you are also providing a services as member of a regulated profession which could be put to test by third parties.

Hope that helps

First thing to do is to action the above regarding engagement. I would also be looking for the reason your friend wants to move over to you.

From the accounts perspective it would appear that some investigation and analysis work is required, with your role as a MA you would investigate variances on the accounts especially within MFG.

I think that you need to go back to the book-keeping and gain your own view of the accounts, review the DLA which you've analysed and make your own conclusions from the figures. Then go back to your friend with the hard figures for an explanation.

Your thread reads like your friend is trying to transfer the risk of incorrect accounts away from himself.