Please could I ask for advice on my current bookkeeping problem......
My client runs a removals business and so a significant number of his receipts are for fuel. However, he makes a lot of buisness purchases on his personal debit and credit cards. I have set up the double entry to:
Dr Expense
Cr Owners Loan Account (in Reserves)
but I am nervous that some of this expenditure particuarly the fuel amounts may relate to his personal use. Do I have to take the owners word for it that it is business related? How do you cover yourselves that everything you have input is correct?
in your engagement letter you emphasise in the client responsibilities section that the responsibility for preparing the financial statements belongs with the client management.
You are responsible for three things :
What you knew
What you ought to have known
What you ought to have done about it.
If the client is adamant about their expenses and you have no reasonable reason to suspect that the are trying to defraud then any fraud that later comes to light is the responsibiloity of the client, not yourself.
Always ensure that your engagement letter makes this clear and also emphasise this to your client.
HTH,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thank you for your reply. I just needed reassurance.
My engagement letter (ACCA) is comprehensive about this and I intend to emphasise this again (making specific reference to the use of the personal cards) to my client in writing.
Client's sometimes need protecting from themselves. I'm sure you've thought about some or all of the following but maybe there'll be something helpful in amongst.
Are there any fuel purchases from those personal accounts that he says are not for business?
Can you draw any conclusions if the fuel type varies and from which account they are paid?
Is the amount always less in the personal accounts and much higher to fill up the lorry or van?
Can you estimate both total miles travelled from the sales invoices and using mpg? Say sample check a month.
If these type of questions don't actually prove anything one way or the other, they can be handy in how you question the client.
You could ask him to start keeping a mileage record and obtain or make a form for the purpose. If he starts now then in a month you could extrapolate a year to give credence to the year you're doing before filing with the Revenue. I tend to be slightly prudent in the profit computation, in the absence of a good mileage record.
Is he a sole trader or a ltd company ? If he's a sole trader then you could put it all as motor expenses and then discuss a reasonable element to add back for personal use
