A. Fixed Asset
1) Obtain a copy of the fixed asset register which shows:
- a) Cost/valuation (including finance lease/hire purchase)
- b) Amount written off to date
- c) Net book value (English description against each main net book value item)
2) Physically inspect the assets with significant Net Book Values and mark as inspected on the copy of the register which is included in your report. Also ensure that big items of plant on the factory are on the plant register.
3) Find out whether any assets are leased and if so make a note of the net book values, the remaining value of lease payments to be made and the expiry date of the lease.
4) To inspect the lease in order to find out the length of the lease and if the depreciation of its cost is in accordance with the lease term.
5) Ask the directors whether there are any fixed assets which are being used by the company leased from the other entity.
1) Obtain a copy of the latest stock valuation with English translation to go in the report.
2) For major items of raw materials verify unit cost back to purchase invoice.
3) Record the total value of plaster within the stock valuation. Find out whether any of the plaster is more than 3 months old.
4) Record the value of slow moving / obsolete stock provision and ask the Directors whether in their opinion the provision made is adequate.
5) Work out the number of times that stock is turned over each year.
C. Debtors and receivables
1) Document the company’s standard terms of trade including payment terms.
2) Obtain the latest aged debtors list and look at any major debts over 60 days old and find out from the directors why the debt is not paid. Pay special attention to amounts owed by (Client) and by (client) as these companies are owned by the Directors.
3) For advance payments made to suppliers please provide a balance owed by supplier. For any major items here, find out when the advance payment was made and for any payments that are very old ask why the stock is not already received. Again for any large advance payment balances, find out what legal protection the company has in the event that the supplier goes bankrupt.
4) Obtain a schedule of total debtors and for any major balances not covered by items 2) and 3) above, or the corporation tax testing below, then immediately email the balances to firstname.lastname@example.org for further guidance.
5) Ask the directors whether there are any current customer concern that may require credits not already raised and record the details
6) Identify the credit cover available for various credit sales and their respective credit limits.
7) Obtain a schedule of all inter company debtors and include them in the report.
D. Cash and Bank Balances
1) Verify the cash book recorded position back to the bank statement as adjusted by not presented items.
2) If the petty cash balance is high, then assess whether the balance is made up of cash or amounts owed by directors or employees.
E. Creditors and accruals
1) Obtain a breakdown of the total creditors.
2) For any amounts payable in a foreign currency, ensure that the liability is properly recorded at the relevant month end exchange rate.
3) Identify all inter-company creditors and include them in the report.
4) Inquire if there is any pending litigation with any of the creditors and include in the report.
5) Examine the monthly gross margin for each of the last 4 months and assess whether movements in the gross margin percentage month to month may indicate that the reserve accounting system (accounting for late purchase invoices) may be unreliable.
6) Identify the company’s major trade suppliers (materials and transport) and verify completeness of liabilities by verifying the trade creditor balance to the supplier statement balance.
7) Look at the bonus agreements for the staff and ensure liabilities are fairly reflected in the accounts.
8) Look at any distributor / agent agreements and ensure any commission due is fairly reflected.
9) For VAT & employment taxes, examine the last returns and prove that they have been paid. Confirm with the directors that all VAT and employment taxes are paid up to date. Find out whether any government audits have taken place on VAT and employment tax and put the response in the report.
10) Find out whether there are any company pension commitments in place and report the details and whether the payments are up to date.
F. Corporation Tax
1) Find out which tax years are still open for investigation by the Government.
2) For the last 2 tax returns Dec __ and Dec __ ensure that the liabilities are paid. Obtain copies of the returns and verify all line items back to the source records.
3) Review correspondence from the tax authority on open years and assess whether there is a likelihood of additional tax having to be paid before the tax year is closed.
4) Look at the payment made on account for the current year _____ and assess in relation to the full year profit whether the payment on account is reasonable.
5) Meet with the company’s accountant to discuss any reservation or observation on the corporation and deferred tax provision.
1) Find out whether the company has a retained legal practice. If so, enquire from the legal practice as to any outstanding actions – either against or in favor of the company. List all details on a report.
2) If there is no legal practices engaged by the company then inquire on the Directors as to whether there are any outstanding legal actions either for or against the company. List all details on a report.
For the 12 months to 31st Dec __ verify the annual sales figure to the 4 quarterly VAT returns. In other words ensure the annual sales in the annual accounts reflect what has been entered in the sales boxes on the VAT return.
I. Accounting System
1) Obtain details of the accounting software package in use and whether they have a sales and purchase ledger which automatically updates the nominal ledger. Is the stock ledger integrated or are the stock levels adjusted by month end journals? Please describe the accounting system in your report as well as the names of the people who operate it.
2) Is the accounting system appropriate and robust for the size of the business?
3) Verify if the latest profit as shown in the management accounts agrees to the profit as reported in the accounts package.
J. Share Capital
1) Verify the share capital issued back to the share certificates.
2) Find out from the Public Record who is registered as the owners of the share capital.
3) Find out from the Public record whether the company has filed all its required returns and within the date.
4) Find out from the Public record whether any court judgements exist against the company.