Obstructive Accountant

[numbersrule]

If an Accountant is refusing access to the Accounting Software, what is the remedy?

 

[Ziggy2024]

If an Accountant is refusing access to the Accounting Software, what is the remedy?

What is the reason for the refusal? You may be able to go to the software supplier but it depends on a few factors whether they will help you.

 

[numbersrule]

The full reality is not currently entirely clear.
However, I suspect the software may be desk top version.

 

[Ziggy2024]

The full reality is not currently entirely clear.
However, I suspect the software may be desk top version.

Is this a professional clearance? Can the accountant provide reports instead?

 

[Newchodge]

Why should the Accountant allow you access to their accounting software?

 

[David Griffiths]

It seems a bit unrealistic to expect helpful responses when you do not have a clear idea of what is happening or even if the software in question is desktop or online.

That suggests to me that the software was provided and operated by the accountant in order to keep the client's records. Are you in fact complaining that the accountant will not provide a backup of the software?

They may well have an obligation to provide reports from the software as certain of the information might be the client's property. That would include any records which are the basis of tax filings for, e.g., VAT or PAYE and the company's statutory accounting records. However that does not normally extend to providing a copy of the software or a backup,

You need to be clear in your own mind what the position is, what is the issue in dispute and what you want.

The accountant's letter of engagement could also be important in setting out who agreed to do what and the ownership rights of any data

 

[Daybooks]

I would start by referring to the letter of engagement which should exist between the client and the accountant. If this is unclear then look at who is paying for the software.

The last resort may be may be in respect of s386 Companies Act. In general the accountant should be providing a service that enables the client to fulfill their duties under this section. Withholding that data to prevent the directors fulfilling those obligation may be considered quite serious. Then it may be referred to their professional body, if one exists.

If the software belongs to or is paid for by the accountant then as a minimum you should get copies of the accounting records (i.e. the books) in one format or another to be able to continue. Establish the reason for withholding access as it may simply relate to unpaid bills. Hopefully there is an easy resolution.

 

[numbersrule]

Thank you for all your replies David Griffiths and Daybooks and Newchodge and Ziggy2024.

You have given me plenty of food for thought and further enquiry.

Thanks!

 

[WaveJumper]

Plenty of good advice above your engagement letter in my opinion is your first port of call. Is this an ‘accountancy’ firm or a ‘single individual.’

Are you using any form of software or just supplying paper copies to accountant.

 

[Elliot Green]

The question is whose property is the subscription. You presumably need the data so you can export it to another system.

There are lots of legal arguments over this. The question is in what capacity has the data been created.

 

[GLAbusiness]

In my experience you give the accountant access to you records, not the other way round

 

[Elliot Green]

In my experience you give the accountant access to you records, not the other way round

What if the accountant is preparing the books?

 

[numbersrule]

What if the accountant is preparing the books?

The Client owns the data.

Or should I say, the Client should own the data.

Particularly when most bookkeeping and accountancy letters of engagement repeatedly refer to how all the financial information is the responsibikity of the Client.

 

[Ziggy2024]

The Client owns the data.

Or should I say, the Client should own the data.

Particularly when most bookkeeping and accountancy letters of engagement repeatedly refer to how all the financial information is the responsibikity of the Client.

That is the crux of the issue. Neither the client nor the accountant own the data. The software company does, it's in the terms and conditions of the licence.

The client should have access to the prime records, so in theory could recreate the accounts without the accounting software.

I've seen software companies transfer the subscription from an accountant to the client but that was cloud software. If it is desktop software then I would imagine it is an accountants version so may not be able to transfer to the client. The accountant should assist with any handover but as noted, there may be reasons they are refusing.

 

[Elliot Green]

The Client owns the data.

Or should I say, the Client should own the data.

Particularly when most bookkeeping and accountancy letters of engagement repeatedly refer to how all the financial information is the responsibikity of the Client.

Depends on what the engagement letter says. Stating it is the client's responsibility (which is a matter of statute) is not the same as contractually agreeing the data created is property of the client.

 

[Daybooks]

Depends on what the engagement letter says. Stating it is the client's responsibility (which is a matter of statute) is not the same as contractually agreeing the data created is property of the client.

This might be a case where the accountant is (knowingly) preventing the client from fulfilling their duties under that legislation. I know my professional body take a dim view on this. I believe software companies allow (whether mandatory regulated to do so or otherwise) users access beyond termination for a period to enable downloading of their records.

As a minimum the accountant should provide the ledgers – even in paper format if they want to remain somewhat unhelpful in a digital age. But at least they are not open to the claim of preventing someone for completing their legal duties (if there is such a law).

I would contend that the "output" is the property of the client; regardless of how it is created or with what medium (happy to be corrected – but it wouldn’t change my view) – it is the legal requirement the accountant is helping their client fulfill; if they are not providing the output then they (the accountant) have failed to provide that service.

Directors should perhaps consider whether they really are delegating their responsibilities as they might like to think they are.

 

[Newchodge]

All this is right, but the OP was complaining about not having access to the 'Accounting software' and has not elaborated on what the problem is. I don't think a client is entitled to the software, but is entitled to all information produced by it from their data.

 

[David Griffiths]

There is a fundamental difference between records kept on desktop software and a cloud based system. In the first instance the client would have no right to the software, but could of course could purchase a copy. In many cases the accountant could simply provide a backup of the data, but the letter of engagement might say that they won't do that but will provide printouts (probably in electronic form) of relevant reports within a set period.

A cloud software subscription can normally easily be transferred along with the data. But again the letter of engagement may say something different, along the lines that the subscription will not be transferred but relevant reports will.

Why would someone not simply hand over a backup or transfer a subscription? One reason could well be that the data would contain much more than just accounts data - it would show the names of the person making the posting, dates and times of entry and dates and times of any edits or amendments. They might not want the (now ex-) client to know who was doing what, or possible to harass a junior staff member about a perceived error. Or of course they might know that there were loads of errors and corrections and not want that known either!

For the record, my policy was always to simply transfer the subscription.

 

[Daybooks]

Plenty of good advice above your engagement letter in my opinion is your first port of call. Is this an ‘accountancy’ firm or a ‘single individual.’

Are you using any form of software or just supplying paper copies to accountant.

How would your advice change (not that you have given any) if this was an “accountancy” firm or a “single individual”?
Can you explain the relevance of using software or supplying paper copies, please, to the original question? Thank you.

 

[numbersrule]

All this is right, but the OP was complaining about not having access to the 'Accounting software' and has not elaborated on what the problem is. I don't think a client is entitled to the software, but is entitled to all information produced by it from their data.

Hi Newchodge
Apologies for the lack of elaboration which stems from not wishing this to be identifiable.
Thank you and to all posters as this thread has been revelatory for me, particularly David Griffiths' post.
The original situation remains unresolved but I can see now that I should really avoid getting drawn into Client - Accountant relations. The same lesson has been learnt in different scenarios with other Clients and in hindsight I should have known better than to press the Client to pursue the Accountant.
The next revision of my Letter of Engagement may well have some new clauses.

 

[MyAccountantOnline]

If an Accountant is refusing access to the Accounting Software, what is the remedy?

@numbersrule can you give us more information please? What is the software and who pays the subscription?

Also on what grounds is the accountant refusing access?

Edit - @numbersrule I've just read your last post on this thread and appreciate I may be a bit late responding on this one.

 

[numbersrule]

@numbersrule can you give us more information please? What is the software and who pays the subscription?

Also on what grounds is the accountant refusing access?

Edit - @numbersrule I've just read your last post on this thread and appreciate I may be a bit late responding on this one.

Hi MyAccountantOnline

My OP was intended as a general question with the aim of generating thoughts and opinions on the way accounting software of all kinds should be accessible to the participants in the bookkeeping and accounting and Client team.

I cannot be more specific than that because I do not expect the forum to be able to solve the specific situation.

As a result of the helpful posts above it seems to me that desk based software is not suitable for teamwork involving separate companies. However, online accounting software is much more amenable to such a team environment.

I have made enquiries with my professional body and I will provide an update in due course.

 

[MyAccountantOnline]

Hi MyAccountantOnline

My OP was intended as a general question with the aim of generating thoughts and opinions on the way accounting software of all kinds should be accessible to the participants in the bookkeeping and accounting and Client team.

I cannot be more specific than that because I do not expect the forum to be able to solve the specific situation.

As a result of the helpful posts above it seems to me that desk based software is not suitable for teamwork involving separate companies. However, online accounting software is much more amenable to such a team environment.

I have made enquiries with my professional body and I will provide an update in due course.

That makes sense I was a bit shocked to see you referring to an accountant refusing access to accounting software.

I suspect most accountants professional bodies (for those who are qualified and, or, still members) will be broadly the same, and the ACCA, my primary professional body, has detailed guidelines on rights of access to accounting records and accounting systems. If you are interested search on 'ACCA rules software ownership' in Google and you'll find the guidelines ACCA members follow.

I can't answer for other accountants although I suspect our set up is similar to many. We never take ownership of any clients accounting records - all clients are free to use whatever software they want for bookkeeping, their pay their own subscriptions and we will work from any software, although have two systems we use a lot - Accounts Portal and FreeAgent. If a client uses Accounts Portal or FreeAgent we have a dedicated accountants dashboard from which we can access clients records (with their permission) and this enables us to review records, add/correct transactions and download the reports we need for the annual accounts and tax returns.

 

[HFE Signs]

I've never heard of asking for access to their software before, shouldn't your accountant simply provide you with the reports you need? I'd rather trust them to look after the software and data entry as it is under their professional responsibility and they have to put their name to it.

 

[MyAccountantOnline]

I've never heard of asking for access to their software before, shouldn't your accountant simply provide you with the reports you need? I'd rather trust them to look after the software and data entry as it is under their professional responsibility and they have to put their name to it.

I dont think the OP meant the accountants software - I understood it to be the software the business is using for bookkeeping ie to maintain the accounting records for the business.

 

[Elliot Green]

I've never heard of asking for access to their software before, shouldn't your accountant simply provide you with the reports you need? I'd rather trust them to look after the software and data entry as it is under their professional responsibility and they have to put their name to it.

Sometimes a director needs far more than "the reports". They may need detailed breakdowns of the figures assembled in the reports, such as those commonly shown in a nominal ledger.

Imagine what can happen say if a company goes into liquidation and the liquidator asks the director for information about various transactions. What then?

How does a director sort out the details for themselves if they have left everything to a financial agent and do not have access to the raw data?

A problem might sprout for example if the financial agent is a creditor and they may look to exercise a lien over the information they have in their possession. Leaving Section 246 of the Insolvency Act 1986 lien arguments for another day/post, problems can arise. And it can happen when a client changes financial agent and or has a dispute with a financial agent and so on.

 

[HFE Signs]

Sometimes a director needs far more than "the reports". They may need detailed breakdowns of the figures assembled in the reports, such as those commonly shown in a nominal ledger.

Imagine what can happen say if a company goes into liquidation and the liquidator asks the director for information about various transactions. What then?

How does a director sort out the details for themselves if they have left everything to a financial agent and do not have access to the raw data?

A problem might sprout for example if the financial agent is a creditor and they may look to exercise a lien over the information they have in their possession. Leaving Section 246 of the Insolvency Act 1986 lien arguments for another day/post, problems can arise. And it can happen when a client changes financial agent and or has a dispute with a financial agent and so on.

I think the confusion here is:

Are we talking about an internal Accountant? Are we talking about bookkeeping software such as Sage
Or are we talking about an external accountants software where data is manipulated and formatted from the bookkeeping software?

 

[Newchodge]

Sometimes a director needs far more than "the reports". They may need detailed breakdowns of the figures assembled in the reports, such as those commonly shown in a nominal ledger.

Imagine what can happen say if a company goes into liquidation and the liquidator asks the director for information about various transactions. What then?

How does a director sort out the details for themselves if they have left everything to a financial agent and do not have access to the raw data?

A problem might sprout for example if the financial agent is a creditor and they may look to exercise a lien over the information they have in their possession. Leaving Section 246 of the Insolvency Act 1986 lien arguments for another day/post, problems can arise. And it can happen when a client changes financial agent and or has a dispute with a financial agent and so on.

That would be a problem. But the solution lay at the beginning of the relationship with the accountant/advisor, when sauch matters shoud have been agreed.

 

[Newchodge]

I think the confusion here is:

Are we talking about an internal Accountant? Are we talking about bookkeeping software such as Sage
Or are we talking about an external accountants software where data is manipulated and formatted from the bookkeeping software?

I get the impression that the OP is an accountant or similar and wanted heir client's old accountant to provide them with the software they owned a no cost. I could be wrong, though.

 

[GLAbusiness]

Let me use an example to identify some of the key issues here.

So, lets us say that I do my bookkeeping in FreeAgent and I give my accountant controlled access to my FreeAgent data.

My accountant then uses his internal system to "work his Magic" Let's say he uses Sage - could be in the cloud or on-premise.

Now I would not expect him to give me access to his Sage system. In fact, if he did I would be concerned that his cyber security arrangements were not fit for purpose, meaning that my data was not securely held.

Now if I wanted to move to a new accountant I would expect him to give me and/or the new accountant a copy of all the data he has in Sage. This could be a Sage back-up file or a CSV file etc. He should not let me or another accountant anywhere near his Sage software.

To me, the key issue is that I am entitled to all the data but not to the accountant's IT systems.

 

[numbersrule]

I think I can answer my original post now:

If an Accountant is refusing access to the Accounting Software, what is the remedy?

The remedy is a DIY recreation of the bookkeeping and accounting records from scratch / from primary sources, from the beginning of the financial year.

 

[Ziggy2024]

Let me use an example to identify some of the key issues here.

So, lets us say that I do my bookkeeping in FreeAgent and I give my accountant controlled access to my FreeAgent data.

My accountant then uses his internal system to "work his Magic" Let's say he uses Sage - could be in the cloud or on-premise.

Now I would not expect him to give me access to his Sage system. In fact, if he did I would be concerned that his cyber security arrangements were not fit for purpose, meaning that my data was not securely held.

Now if I wanted to move to a new accountant I would expect him to give me and/or the new accountant a copy of all the data he has in Sage. This could be a Sage back-up file or a CSV file etc. He should not let me or another accountant anywhere near his Sage software.

To me, the key issue is that I am entitled to all the data but not to the accountant's IT systems.

You wouldn't get nor are you entitled to a copy of the accountants data. Your accounting records are in freeagent and you should have a copy of the financial statements prepared from those records.

The accountants working papers (simply, how they amended the core data to the figures in the accounts) belong to the accountant. Professional etiquette would see the outgoing accountant inform the new accountant of these changes. This is, however, a courtesy that not all accountants adhere to.

As has already been noted, members of professional bodies are bound by the rules of their institute but not all accountants are affiliated with a PB.

 

[Daybooks]

You wouldn't get nor are you entitled to a copy of the accountants data. Your accounting records are in freeagent and you should have a copy of the financial statements prepared from those records.

The accountants working papers (simply, how they amended the core data to the figures in the accounts) belong to the accountant. Professional etiquette would see the outgoing accountant inform the new accountant of these changes. This is, however, a courtesy that not all accountants adhere to.

As has already been noted, members of professional bodies are bound by the rules of their institute but not all accountants are affiliated with a PB.

S386 Companies Act requires you to keep accounting records sufficient to show and explain the company’s transactions. Therefore, in my view, you must be either given access to or provided with those transactions to fulfill your duties. The financial statement are a by-product of the source records. I agree with @GLAbusiness - the medium in which they are given may vary but given they must be!

I agree that the working papers from how they get from the source ledger transactions to the financial statement are theirs (the accountants).

How do you propose that the directors fulfill their duties if access to their (and I mean their) records is prevented?

 

[Ziggy2024]

S386 Companies Act requires you to keep accounting records sufficient to show and explain the company’s transactions. Therefore, in my view, you must be either given access to or provided with those transactions to fulfill your duties. The financial statement are a by-product of the source records. I agree with @GLAbusiness - the medium in which they are given may vary but given they must be!

No they don't.

I agree that the working papers from how they get from the source ledger transactions to the financial statement are theirs (the accountants).

How do you propose that the directors fulfill their duties if access to their (and I mean their) records is prevented?

In the example GLA gave the client controls their own books in Freeagent. Where in that example is the director being prevented from accessing their records?

GLA then suggested that the accountant should provide a backup or report of their data. The accountants data (working papers & software) does not belong to the client and they are not entitled to it.

 

[Daybooks]

No they don't.

In the example GLA gave the client controls their own books in Freeagent. Where in that example is the director being prevented from accessing their records?

GLA then suggested that the accountant should provide a backup or report of their data. The accountants data (working papers & software) does not belong to the client and they are not entitled to it.

My overlook on @GLAbusiness keeping own accounts; therefore there is no issue to resolve - they already have them. I have already agreed on the "working papers".

S386 is categoric; not something I would argue with. In the wider context of the accountant withholding the data (as per the OP thread) - what is your view then please or do you disagree with my interpretation of s386?

 

[Ziggy2024]

My overlook on @GLAbusiness keeping own accounts; therefore there is no issue to resolve - they already have them. I have already agreed on the "working papers".

S386 is categoric; not something I would argue with. In the wider context of the accountant withholding the data (as per the OP thread) - what is your view then please or do you disagree with my interpretation of s386?

I gave my answer to the OP at the beginning of the thread.

Companies Act is notably silent on accounting software, it is out of date and it's been an area of contention for a long time. The directors have the responsibility to keep accounting records, they should have prime documents available for when delegation (as in the above case) fails.

I agree with my accountant online that, ideally, the client should be responsible for their own software and the accountant should not be in control of it. However, in reality this is not always the case. And sadly that is why these situations occur.

 

[GLAbusiness]

No they don't.

In the example GLA gave the client controls their own books in Freeagent. Where in that example is the director being prevented from accessing their records?

GLA then suggested that the accountant should provide a backup or report of their data. The accountants data (working papers & software) does not belong to the client and they are not entitled to it.

To clarify:

The accountant prepares accounts based on my FreeAgent records. He adds to the information in the data by using his expertise. As a result when the accounts have been completed the FreeAgent and Sage records are not in complete sync.
So the additional data the accountant has used is needed to bring FreeAgent back in step. So, the accountant must give me the changes. He does this by giving me a list of the journal entries I need to make in FreeAgent to restore the sync.

 

[Daybooks]

To clarify:

The accountant prepares accounts based on my FreeAgent records. He adds to the information in the data by using his expertise. As a result when the accounts have been completed the FreeAgent and Sage records are not in complete sync.
So the additional data the accountant has used is needed to bring FreeAgent back in step. So, the accountant must give me the changes. He does this by giving me a list of the journal entries I need to make in FreeAgent to restore the sync.

In your situation any new accountant would be able to reconstruct the final accounts from your source ledgers through to the final accounts. The outgoing accountant doesn’t need to provide their system or records from it for two reasons:

• It is unlikely to be a sync of your data. All they would have done is post your closing trial balances to their system. You already have the source data.
• Any changes they make to get a compliant set of accounts for you they would have already advised you by way of detailing the journals they have posted.

The incoming accountant would expect to receive data from the outgoing accountant in terms of a final trial balance and appropriate schedules that would enable an easy transition. This would not include their working papers. Nevertheless even without this, the incoming accountant is in the same position (more or less) as when you provided your final system for the now outgoing accountant.

Where applicable my letter of engagement offers to assist them with fulfilling their duties under s386 Companies Act. If I were the only source for their ledgers then my view is that it would be unprofessional to withhold that detail from them; my professional body I think would agree although never had cause to test it. I guess unpaid bills might incluence the medium it is provided in.

 

[Daybooks]

I gave my answer to the OP at the beginning of the thread.

Companies Act is notably silent on accounting software, it is out of date and it's been an area of contention for a long time. The directors have the responsibility to keep accounting records, they should have prime documents available for when delegation (as in the above case) fails.

I agree with my accountant online that, ideally, the client should be responsible for their own software and the accountant should not be in control of it. However, in reality this is not always the case. And sadly that is why these situations occur.

Personally I don’t think s386 is outdated or needs to be vocal on accounting software. The responsibilities remain with the directors regardless of whether they try to delegate them.

I don’t disagree with your sentiments. The best we can do is encourage them to take their responsibilities seriously before it’s too late.

 

[Elliot Green]

You wouldn't get nor are you entitled to a copy of the accountants data. Your accounting records are in freeagent and you should have a copy of the financial statements prepared from those records.

The accountants working papers (simply, how they amended the core data to the figures in the accounts) belong to the accountant. Professional etiquette would see the outgoing accountant inform the new accountant of these changes. This is, however, a courtesy that not all accountants adhere to.

As has already been noted, members of professional bodies are bound by the rules of their institute but not all accountants are affiliated with a PB.

"The accountants working papers (simply, how they amended the core data to the figures in the accounts) belong to the accountant".

Not necessarily. It depends on the engagement letter as to how the division of ownership of papers is determined. Sometimes an engagement letter can be silent on this point.

The other point is in what capacity is the financial agent acting ie. as principal or agent can have a bearing on the ownership of documents created.

An issue is if a financial agent is implementing changes to financial recording, such as journal adjustments, then the client really should be able to see that regardless of ownership. The client has to sign off the accounts as true and fair and companies act compliant in any event.

The fascinating feature of the ownership debate that can be overlooked sometimes is that the information created is data that the financial agent owes a duty of confidence to the client over.