Accountant required: must be registered auditor also?

[BusinessRookie]

Hello,

The trials and tribulations of business start up :)

I thought I'd found a great accountant through these forums but unfortunately I found out that the accountant needs to be a registered auditor in order to comply with ARLA rules - Association of residential letting agents.
Does anybody have any advice when it comes to appointing an accountant to do accounts, tax returns and completing an accountants report for a ltd company, sub £50k turnover in year 1, 1 director? The accountant has to be a registered auditor according to ARLA byelaws. By the way: most accounts/book keeping with be produced electronically via property software and a full audit trail would exist.

Any advice, quotes, or PM's greatly received as I look to appoint an accountant to serve me here. Thanks everybody

[David Griffiths]

Check the ARLA byelaws.

Byelaw 3.23 (http://www.arla.co.uk/uploads/general/2009Bye-Law%203%20Client%20Accounts.pdf)sets out the qualifications for accountants eligible for signing your reports, and it is not a requirement that they be registered auditors.

[elainec100@cheapaccounting]

Check the ARLA byelaws.

Byelaw 3.23 (http://www.arla.co.uk/uploads/general/2009Bye-Law%203%20Client%20Accounts.pdf)sets out the qualifications for accountants eligible for signing your reports, and it is not a requirement that they be registered auditors.


DAvid

Can you clarify as my reading is:

And also,
I. An individual who is a registered auditor within the terms of Section 35(1)(a) of the
Companies Act 1989; or

An employee of such an individual; or
III. A partner in or employee of a partnership that is a registered auditor within the terms of
Section 35(1)(a) of the Companies Act 1989; or
IV. A director or employee of a company which is a registered auditor within the terms of
Section 35(1)(a) of the Companies Act 1989; or
V. A member or employee of a limited liability partnership under the Limited Liability
Partnership Act 2000 which is a registered auditor within the terms of Section 35(1)(a)
of the Companies Act 1989.

Now I am confused :|:|

[MyAccountantOnline]

David I have always understood a registered auditor is required to report for ARLA clients and have just re-read the ARLA guidelines and it does seem to be that an auditor is required.

[elainec100@cheapaccounting]

I wanted to check as that is what we advised the OP based on our reading of the rules. Thanks Nicola

[MyAccountantOnline]

I wanted to check as that is what we advised the OP based on our reading of the rules. Thanks Nicola

It seems a ridiculous situation to me.

I was in a similar posistion a few months ago - super client, tiny turnover, but due to ARLA membership they had to appoint a registered auditor - madness:mad:

[elainec100@cheapaccounting]

It seems a ridiculous situation to me.

I was in a similar posistion a few months ago - super client, tiny turnover, but due to ARLA membership they had to appoint a registered auditor - madness:mad:

agreed - I bet the idiot at ARLA that wrote the rules has no clue what that means and how much it will cost :rolleyes::rolleyes::rolleyes:

[MyAccountantOnline]

agreed - I bet the idiot at ARLA that wrote the rules has no clue what that means and how much it will cost :rolleyes::rolleyes::rolleyes:

Very doubtful few do....

[Zeno]

What exactly would be the point if this rule if they do not require that the financial statements are audited?

Edit: What am I saying? Since when did drivel like this ever need a point?

[MyAccountantOnline]

What exactly would be the point if this rule if they do not require that the financial statements are audited?

Edit: What am I saying? Since when did drivel like this ever need a point?

:) Its nearly Friday...but yes what is the point??? Over to ARLA me thinks

[Jaydee]

The reporting accountant needs to be a Registered Auditor because of the ARLA member holding client money - much the same requirement as the Law Society with solicitor's SRA annual returns.

[BusinessRookie]

The reporting accountant needs to be a Registered Auditor because of the ARLA member holding client money - much the same requirement as the Law Society with solicitor's SRA annual returns.

How would this change if the ARLA member used the custodial deposit holding scheme? I've contacted ARLA again. Thanks for the responses so far

[Jaydee]

I suspect that it would not change at all as, aside from the deposit, you are holding client money every time you receive a tenant's rent payment.

[Zeno]

I still do not see the point. The auditor for this engagement - accounts prep. & tax returns I assume, will do exactly the same work as an accountant.

The fact that he is a registered auditor is irrelevant as the appointment is not for an auditor but an accountant. The appointed "auditor" will not gain any the rights & powers of a statutory appointment or have any of the same responsibilities.

It's like using an electric toothbrush with no batteries.

[BusinessRookie]

I suspect that it would not change at all as, aside from the deposit, you are holding client money every time you receive a tenant's rent payment.
That's a good point again, thanks. I've asked ARLA to clarify this with a senior compliance officer and to change 3.23 if they don't require a registered auditor. Not likely though :D

[Zeno]

Again, I am assuming that there is a rational though process behind this. It is likely that ARLA would be amazed to find out that the majority of small companies are not required to be audited.

This further assumes that the people there even know the difference between an accountant's report & an auditor's report.

[elainec100@cheapaccounting]

I think this might go back to the days pre auditor registration.

[David Griffiths]

I read it that eligible people were either members of one of the bodies stated or were a registered auditor.

Looking at it again, it seems that it's a member AND a registered auditor

[Zeno]

The eligible members according to ARLA are:-

A. ACCA
B. ICAEW
C. ICAS
D. ICAI
E. AIA
F. CIPFA
G. AAPA

Interesting given that only the first four can be appointed as auditors so what is the point of listing E-G as being eligible & qualified if they are not actually able to do it?

[elainec100@cheapaccounting]

The eligible members according to ARLA are:-

A. ACCA
B. ICAEW
C. ICAS
D. ICAI
E. AIA
F. CIPFA
G. AAPA

Interesting given that only the first four can be appointed as auditors so what is the point of listing E-G as being eligible & qualified if they are not actually able to do it?


Just shows what a bunch a plonkers set such rules :rolleyes::rolleyes:

[David Griffiths]

The eligible members according to ARLA are:-

A. ACCA
B. ICAEW
C. ICAS
D. ICAI
E. AIA
F. CIPFA
G. AAPA

Interesting given that only the first four can be appointed as auditors so what is the point of listing E-G as being eligible & qualified if they are not actually able to do it?

But they could do it if they are employed by a firm of registered auditors? Even if it was a job "on the side"?

[Jaydee]

With apologies to the other accountants on here for being the dissenting view....but I do not see what the problem with this is?

The ARLA member is receiving client money. A Registered Auditor has the appropriate qualifications to ensure that the public's money is not jeopardised due to malpractice by the member.

The requirement is not that a RA files the member's accounts and tax return, it is that a RA files the ARLA report.

The analogy is identical to a solicitor's SRA report - a law firm does not require a RA to complete its accounts and tax - just it's SRA report.

So the OP has a choice - use the firm that they first selected to deal with their "normal" compliance and then an RA to do the ARLA report - or else find a RA firm to do the lot.

[elainec100@cheapaccounting]

For someone starting a business this need may be over kill.

The guy may be handling a very small amount of client money - especially given the deposit scheme.

The fee for this work will be quite large and given this is a start up may prevent him getting off the ground.

Solicitors are likely to handle much larger amounts e.g. house sales, probate etc

Is that really comparing apples with apples.

Are the ARLA requirements fair?

Is there a middle ground?

[Zeno]

But they could do it if they are employed by a firm of registered auditors? Even if it was a job "on the side"?

I am not sure now. It is the firm that is appointed, not the individual?

[Zeno]

With apologies to the other accountants on here for being the dissenting view....but I do not see what the problem with this is?

The ARLA member is receiving client money. A Registered Auditor has the appropriate qualifications to ensure that the public's money is not jeopardised due to malpractice by the member.

The requirement is not that a RA files the member's accounts and tax return, it is that a RA files the ARLA report.

The analogy is identical to a solicitor's SRA report - a law firm does not require a RA to complete its accounts and tax - just it's SRA report.

So the OP has a choice - use the firm that they first selected to deal with their "normal" compliance and then an RA to do the ARLA report - or else find a RA firm to do the lot.

I was not aware that there was such a report and this certainly puts things into perespective however I am not sure that it requires someone with an audit background to complete one?

Surely membership of a CCAB body should suffice given that at no point is an opinion being expressed?

[Jaydee]

Is that really comparing apples with apples.

Yes, I think it is.

Reckoning that an ARLA member may charge, say, 10%-15% of rent collections as a management fee - then think of the amount of client money that they must therefore receive in a year to survive.

Conversely, I do an RA report for a semi-retired solicitor that just wants to keep going through his latter years to "remain sane" and only collects a maximum of £1,500 of client money in a whole year - he still needs a report.

[Jaydee]

I was not aware that there was such a report and this certainly puts things into perespective however I am not sure that it requires someone with an audit background to complete one?

Surely membership of a CCAB body should suffice given that at no point is an opinion being expressed?

I am not so sure, as while you are not expressing an audit opinion per se, there are a number of tests that will be common for an auditor and may not be for another practicing accountant - such as sampling of the client's landlords' files to test the client money transfers in and out.

But rules are rules - and surely if the OP wants membership, they simply comply. The cost of the ARLA report is unlikely to be a significant barrier to entry.

[Zeno]

But rules are rules - and surely if the OP wants membership, they simply comply. The cost of the ARLA report is unlikely to be a significant barrier to entry.

Yes, I suppose you are right here but it is more the issue that ARLA probably don't really understand the difference and resulting cost implications for their members.

[Jaydee]

Yes, I suppose you are right here but it is more the issue that ARLA probably don't really understand the difference and resulting cost implications for their members.

Only if you take the stance that a RA would charge more for an ARLA report than a non-RA would (if they were allowed to complete one).

[BusinessRookie]

I'm glad that this has caused some debate (very interesting viewpoints from all sides here).
I agree with what Jaydee is saying about an RA to do the report and the original firm for other compliance.

I've just received this response from the compliance team at ARLA:

I appreciate that the rule still states that a registered auditor is required, however, this will be changing in the near future so for now if you sign the report as a suitably qualified accountant and state that you are not a registered auditor that will satisfy ourselves and your governing association.They seem to think that I am an accountant? but still they are removing the need for an RA to do accounts as they must have come across this problem before.

Now all I need is a reasonably priced accountant to take this standpoint too and I'm on my way. Thanks everybody :)

[Williams lester]

Your only problem now is.....what is their definition of a suitably qualified accountant!!

[Jaydee]

I've just received this response from the compliance team at ARLA

I am a little disappointed that they are taking this stance. In fact, it may be a little irrelevant as you may find that a non-RA will be outside of their comfort-zone (or PI insurance paramaters) by accepting the assignment and so you may be left with an RA anyway!

I am sure that the correct compromise would be to use your selected firm for day-to-day and find a Chester audit practice to do the ARLA report. You will be unlikely to be able to find a remote-assistance practice able to do the report anyway as it will require access to your paper files and is probably most-efficiently dealt with at your premises.

Without knowledge of Chester prices, I suspect that you may need to budget for about £500.

[Zeno]

Only if you take the stance that a RA would charge more for an ARLA report than a non-RA would (if they were allowed to complete one).

I was actually taking the view that not many clients would actually go to the bother of having separate accountants so I would expect that the firm that can provide the certificate will end up doing the lot.

It still seems that there is a distinct lack of understanding regarding the audit process (or indeed lack of) for the SME.

I see similiar issues to this where the terms of bank borrowing stipulate audited accounts. If you query it, they will most often say not to worry about it and so long as they are signed by a CA (or any qualified - no argument please) then they are fine but never in writing. Could they then use this an an excuse to call the overdraft? The black & white terms imply so.

The funders of charities often require audited accounts in the paperwork but will usually allow independent examinations. This is also most often done by the phonecall to someone who seems reluctant to commit this opinion to paper.

[BusinessRookie]

I am a little disappointed that they are taking this stance. In fact, it may be a little irrelevant as you may find that a non-RA will be outside of their comfort-zone (or PI insurance paramaters) by accepting the assignment and so you may be left with an RA anyway!

I am sure that the correct compromise would be to use your selected firm for day-to-day and find a Chester audit practice to do the ARLA report. You will be unlikely to be able to find a remote-assistance practice able to do the report anyway as it will require access to your paper files and is probably most-efficiently dealt with at your premises.

Without knowledge of Chester prices, I suspect that you may need to budget for about £500.
Thanks for this. I'm a bit disappointed at the stance as well so it seems like I'm a little stuck here in some ways until I find the right accountant.

I am not sure how well all accountants understand the lettings process? I won't have an office initially but an auditor is welcome to come and sit in my house :)
Paper files are mostly a thing of the past. Property management software is so automated these days that you barely need to write anything down, it produces a full audit trail and forecasts and pretty much everything else you can think of.

I'll keep on trucking

Thanks again

[Zeno]

Property management software is so automated these days that you barely need to write anything down, it produces a full audit trail and forecasts and pretty much everything else you can think of.

Sounds awfully like famous last words to me...

[BusinessRookie]

Sounds awfully like famous last words to me...

Most of the information is computerised and backed up remotely so that access is available 24 hours a day. It is best practice as this is the method adopted by the largest of chains who are regularly audited and scrutinised. Just like internet banking etc

[Zeno]

Most of the information is computerised and backed up remotely so that access is available 24 hours a day. It is best practice as this is the method adopted by the largest of chains who are regularly audited and scrutinised. Just like internet banking etc

You have to excuse my cynicism. I seem to spend my life listening to "wait until you see my new all singing, all dancing system" which invariably neither sings nor dances and they have already chucked out the paper records.

[BusinessRookie]

You have to excuse my cynicism. I seem to spend my life listening to "wait until you see my new all singing, all dancing system" which invariably neither sings nor dances and they have already chucked out the paper records.
Hey that's ok. I'm grateful of your taking an interest in what I'm doing and for giving me a few pointers. I hear you loud and clear :)

[hgc services]

I can recommend a good accountant who deals with a number of letting agencies and estate agents. He is a Chartered Accountant and Audit Registered.

If your interested PM and I can give you the details.

[Wild Goose]

ARLA updated their code of practice earlier this year (2009). The previous C.O.P. was published in 2004 and read differently: I read it as more either (qualified accountant as per their list) / or (registered auditor).

I know, I know, you'd be hard put to find a registered auditor who doesn't belong to one or other of the bodies listed at a to g in ARLA's C.O.P. But there used to be anomalies such as firms of auditors who were accorded auditor status under the 1948 Companies Act by virtue of their function prior to that Act, and although they've largely disappeared I'd imagined one or two might still have existed in 2004. Alarmingly, ARLA appear to be allowing under their current regs employees of registered auditors to sign off reports, as well as non-qualled business partners of registered auditors. :| I'm sure ARLA didn't intend that and should perhaps correct those loopholes while they're in edit mode.

We've signed ARLA reports for some years, although not registered auditors. They've just badly drafted their current 2009 C.O.P.

The reports themselves are downloadable at http://www.arla.co.uk/infosheets/list.aspx?id=10
OP, you probably only need the "Interim Accountant's Report" in Year 1, which is just one sheet to confirm that you have an accounts system in place to cater for your client account. Yr 2 onwards you can see the "Accountant's Checklist" and "Accountant's Report" for yourself on the above link. The work has to be properly carried out because ARLA follow up with compliance visits - don't be tempted into shortcuts. Tip: Because (last time I looked) ARLA charge you £250 + VAT for a compliance visit then your accountant can easily be embarrassed into charging less for completing the full report. The interim report should take hardly any time at all. ;)