- Original Poster
- #1
Hello all,
Just a quick professional dilemma, I am currently going through and I thought best to check. Apologies for long message.
I am working as an accountant employee (no director/ shareholder etc) and recently completed the audit of a company I prepared the books of accounts for. Auditor is one of the top 6 audit firms. I am a qualified accountant member of an accounting body.
The company is a UK registered company with only UK directors but the shareholder is a large company based out of a EU country.
The company has almost no assets remaining and one director (who is also an appointed chairman) expressed his desire to make the company dormant (and subsequently liquidate ) a day before the accounts were due to be signed. He did this by circulating an email internally basically saying that let’s get this audit out of the way and then let’s make it dormant and subsequently liquidate.
As a part of the audit, the auditors make an assessment on the concept of the “going concern” which, I think, means that the company directors “intend” to run the company for at least 12 months from the date of signing the accounts.
When I got this notification, I realized that this was not copied to my manager so I just forwarded it to the manager who replied not to mention this to the auditors (it was the last day of actual filing the accounts to HMRC) as if we did disclose it, the auditors would want it to be treated as a “non going concern” and would want to insist whole raft of disclosure and clearly that would mean accounts to be delayed for filing.
The director, signed the rep letter, on the date of approval of accounts (which is also the date of audit opinion and also last date of filing) after approving the accounts on a going concern basis. The accounts were filed accordingly.
Must mention that the company is indeed very small and frankly quite immaterial.
I briefly confronted the manager and he said that “oh it was not formally agreed by the board of directors and approved by the shareholders so it wasn’t agreed and hence the accounts were correctly reported on a going concern basis”.
In the email by the chairman, he did mention that we cannot formally start the liquidation process as it needed a formal approval by the shareholders who are based in a EU country. However, subsequent actions of the directors were that all the cash has been sweeped and paid as dividend to the parent company. The bank account has now been closed. The current accounts now only show £1 as share capital and £1 of receivable and nothing else. I also believe that a formal request to approve the liquidation has also been made to the shareholders. A talk has already been started to give the company to one of the big 6 companies to liquidate which might take some months. The whole incident relates within last 2 months (so still very fresh).
My dilemmas are:
Apologies for a long message but I am seriously considering my position and potentially taking a legal advise on this one.
Thnx.
Just a quick professional dilemma, I am currently going through and I thought best to check. Apologies for long message.
I am working as an accountant employee (no director/ shareholder etc) and recently completed the audit of a company I prepared the books of accounts for. Auditor is one of the top 6 audit firms. I am a qualified accountant member of an accounting body.
The company is a UK registered company with only UK directors but the shareholder is a large company based out of a EU country.
The company has almost no assets remaining and one director (who is also an appointed chairman) expressed his desire to make the company dormant (and subsequently liquidate ) a day before the accounts were due to be signed. He did this by circulating an email internally basically saying that let’s get this audit out of the way and then let’s make it dormant and subsequently liquidate.
As a part of the audit, the auditors make an assessment on the concept of the “going concern” which, I think, means that the company directors “intend” to run the company for at least 12 months from the date of signing the accounts.
When I got this notification, I realized that this was not copied to my manager so I just forwarded it to the manager who replied not to mention this to the auditors (it was the last day of actual filing the accounts to HMRC) as if we did disclose it, the auditors would want it to be treated as a “non going concern” and would want to insist whole raft of disclosure and clearly that would mean accounts to be delayed for filing.
The director, signed the rep letter, on the date of approval of accounts (which is also the date of audit opinion and also last date of filing) after approving the accounts on a going concern basis. The accounts were filed accordingly.
Must mention that the company is indeed very small and frankly quite immaterial.
I briefly confronted the manager and he said that “oh it was not formally agreed by the board of directors and approved by the shareholders so it wasn’t agreed and hence the accounts were correctly reported on a going concern basis”.
In the email by the chairman, he did mention that we cannot formally start the liquidation process as it needed a formal approval by the shareholders who are based in a EU country. However, subsequent actions of the directors were that all the cash has been sweeped and paid as dividend to the parent company. The bank account has now been closed. The current accounts now only show £1 as share capital and £1 of receivable and nothing else. I also believe that a formal request to approve the liquidation has also been made to the shareholders. A talk has already been started to give the company to one of the big 6 companies to liquidate which might take some months. The whole incident relates within last 2 months (so still very fresh).
My dilemmas are:
- Does the fact that the directors have to have a formal approval from shareholders sufficient to maintain that the absence of this justified the directors on a going concern basis?
- Did my manager act in a responsible way?
- In remote chance of auditors coming to know about this, is my position protected? Am I under an obligation to further report this to authorities?
- I do not have an insight of a shareholders agreement, which might say that directors have no authority to take any action without their permission and hence the directors behavior is justified?
- Any experts on definition of going concern from a big 6 accounting firms confirm that it is indeed 12 months and if you were the auditor is that a material information one should have.
Apologies for a long message but I am seriously considering my position and potentially taking a legal advise on this one.
Thnx.
