Dear Mr Sir,
Good day to you and wish you are well there.
You have given us some samples of your accounting reports via your previous email and you seek our confirmation whether those are acceptable in term of audit perspective and point of view.
We would like to share with you on our past experience dealing with a client who had requested the same from us:
Based on the accounting reports generated by our client (balance sheet, profit & loss account and trial balance), we have generally advised that the reports were looked ok as the presentation were in order (since the reports were generated from an accounting software).
As such, the client had subsequently forwarded us the full set accounts for audit purposes.
However, during the audit process, we had noted the accounts were prepared incorrectly and were indeed incomplete due to the following:
- Lack of accounting knowledge and experience by the person who prepared the accounts (that was director).
- A big number of expenses or transactions were wrongly taken up and posted in the accounts.
- Accounts were prepared based on payment basis. Some expenses or costs incurred during the accounting period but paid in subsequent year were not accrued or captured in the accounts.
- Provisions such as depreciation of fixed assets, hire purchase interest, impairment losses, etc were not recognized in the books.
- Fixed assets listing, hire purchase schedule, term loans table were not prepared as required by the general acceptable accounting standards.
- Bank reconciliation statements were not available even though there were differences between the bank statements and the bank accounts in the books.
- Some payments and receipts were totally omitted from the books or accounts.
- The descriptions of the expenses were not written accurately or not in the general acceptable accounting terms.
We have then highlighted all the above issues to our client for we were unable to complete the audit assignment as scheduled and have raised the matters via management letter to the client to rectify the accounting matters. Please take note that the preparation of management letter will cause the increase of audit fee due to additional works from auditors.
The client had indeed accused us for we had given him a green light to finalise the accounts in accordance with the general advices given by the auditors.
We wish to advise that we have noted same issues as stated in the above in your accounts which were prepared by you earlier (of which have been highlighted by our Audit Personel).
We strongly advise you to engage a professional accounting consultant (partime/full time/outsource) in assisting you to prepare the complete full set accounts of your company for audit purposes.
It is important to know the differences between general advices, consultancy services and audit services.
General advices – General guidelines and advices given and provided based on the general knowledge and review. This is merely an obligation and value added services provided to clients with the purpose and intention of enhancing the clients relationship with NBC Group.
Consultancy services – A service with a charge provided to client with objective to rectify the situations or issues noted and found in the accounts. The consultancy services will normally be performed by the accounting department.
Audit services – The main function of the auditors is to give opinion based on the audit findings and testing process towards the accounts. The auditors are not allowed to provide consultancy services to any of its clients. By providing any consultancy services to any audit clients will jeopardize the independence status of an auditor and this will result with the auditors possible be reprimanded by the Association or worse still with his audit license be terminated by the Ministry. (Think of Enron Case in US).
Hope the above are acceptable to you and we wish to discuss with you in details how we can assist you in the matters.
Please feel free to contact me anytime at our office mobile 019-2207018 or office number at 03-7729 7018.
Tony Ng BC
NBC Group of Companies