Case Study Number Four
D & K Accounting Services have been contacted by a potential client's accountants as the in house bookkeeper has found the role has become too difficult for her and she is moving out of finance based work into a totally different field.
This is what we found:
The Business appeared, at first impression, to be well looked after by the in house bookkeeper, she was present at the initial meeting and explained her part in the various roles she assisted in whilst onsite. Upon looking through the accounts records during that meeting, we found that there appeared to be several discrepancies within the data presented.
- Upon analysis the information recorded did not agree to the information presented to the accountant at the year end.
- Historical information had been altered after closure of the financial year and accounts forwarded through to the accountants. The Trial Balance report they were working from had very little similarity to the onsite one.
- The bookkeeper had taken a copy of the data home to work on a personal laptop to finalise the accounts due to the looming year end deadline and had completed and adjusted the accounts from there. She did not restore the data back from her laptop to the onsite computer and continued entry work from there, thereby splitting the data and fatally corrupting the accounts information.
- There was no knowledge of the vat codes and how they should be used, the 'exempt' Sage vat code was included within the vat return giving false recordings to HMRC which would later result in a vat investigation by them.
- The various bank balances were unreasonably inaccurate and many double entries had occurred.
- There were numerous bank accounts held by the company but they were not all shown within the accounts and the outgoing bookkeeper advised she did not know how to reconcile.
- The Debtors and Creditors reports were erroneous. A number of customers had made payment which hadn't been recorded or had been overwritten, a number of suppliers were chasing payments which had never been shown.
- There was no adequate filing system in place, documents were held in 11 over-flowing in-trays in various parts of the office and a number of documents were filed out of sight, potentially 'hidden' from view.
- There were pockets full of papers in piles across the desk. The Managing Director had asked for these to be resolved and balanced a number of times but the bookkeeper had not been able to do so and paid little attention to them, leaving them for another day.
- The data check on the accounts showed the aged debtors and creditors to be many thousands of pounds apart from the control accounts.
- The accountants had forwarded over a daily and weekly "Completion Sheet" of tasks to be done but this had not been followed and numerous tasks had been left incomplete, leaving the accounts in quite serious trouble.
The Result:
D & K Accounting Services spent some initial time in analysis of the accounts information onscreen. We liased with the accountant to try to confirm how the discrepancies between the Trial Balances had occurred and how best to rectify these. We had a meeting with the Management team and advised them of the problems found, problems of which they were totally unaware, and how best to resolve them. It was suggested by us that the accounts were of too low quality and accuracy to be corrected and that the costs involved to try and correct them would be better spent on a full re-construction of the data for the entire year. A meeting was held between the client, the accountants and D & K Accounting Services and we commenced a full rebuild upon everyone's agreement.
We set in place a simple filing system, we went through all the paperwork and reset the computer systems. We commenced work re-entering the vast amounts of data and confirmed and reconciled all the bank accounts. We agreed the debtors and creditors positions and managed to associate underpaid amounts and resolve them and worked our way through the information onsite to produce a Trial Balance and full Profit and Loss and Balance sheet account reports. These reports were forwarded to the accountants and meetings and communication with them enabled the year end to be completed on time and with no excess charge to the client. The full rebuild ensured a correct base for moving forwards and after two months of working on the historical data, alongside the updating of the current information we enabled the client to have a true idea of the correct financial position of the company.
We are still looking after this company's finances and following on from the correction of their accounts we were able to offer the same services to another of the previous bookkeeper's clients upon their recommendation and, although this company also required detailed correction of their accounts, we still assist the second company. Our work on this particular set of accounts has gained us a substantial reputation with a number of clients and accountants and we still receive recommendation from them some years later.
