- 2015 Federal Election
Banka: Understanding accountant’s role
Accountants offer many different services.
In my office, we offer accounting, assurance and tax services.
Many people get accounting services confused with bookkeeping services.
Accounting services is usually represented by the compiling of the financial statements from client information.
There is no guarantee to the accuracy of the information in the various general ledger accounts because the bookkeeping that was performed by a bookkeeper or the client has not been audited by the accountant.
This engagement is called a Compilation or a Notice to Reader because the letter from the accountant included with the statements is considered a warning to the users of this financial statement informing them that the information has not been audited and may not be appropriate for their use.
The reason for this letter is that most people attach some credibility to the numbers in the statements because an accountant has attached their name to them.
On the other hand, as a Certified General Accountant, I should not knowingly associate my name with incomplete, false or misleading information.
So it is my practice to make sure that the statements comply with generally accepted accounting standards and that the bank accounts are reconciled and that the amounts showing due to the Receiver General are accurate.
Bookkeeping is the normal day to day data entry of the source documents into a logical form which hopefully utilized generally accepted accounting standards.
There is no current requirement for published unaudited financial statements to adhere to generally accepted accounting standards, but it certainly would be beneficial for all the users of financial statements if this requirement existed.
When we talk about assurance services, we are talking about review and audit engagements.
In a review engagement, the accountant is giving negative assurance that there is nothing materially wrong with the financial statements and that the financial statements comply with generally accepted accounting principles.
By negative assurance we mean that although we haven’t really checked the numbers as we would in an audit, we don’t believe that there is anything wrong with their content or presentation.
The procedure for the accountant is to verify the numbers represented in the client’s financial statements by using the tools of enquiry, observation, analysis and discussion.
An audit engagement requires that generally accepted auditing standards are used by an independent auditor to form an opinion as to the accuracy of the financial statements.
The financial statements need to be prepared in accordance with generally accepted accounting principles.
The auditor will usually perform tests on a sample of the transactions using inspection, observation, enquiry, confirmation, computation and analysis.
The auditor also checks the company’s system of internal control and the company’s ability to guard against fraud.
The purpose of an audit is to determine whether the financial statements present a fair picture of the company’s financial position and its activities during the period being audited.
In all cases, the financial statements are the responsibility of management and the accountant is hired to provide some credibility to the numbers contained within the statements.
The B.C. Company Act requires that every incorporated company have an audit, unless the shareholders have resolved in the annual general meeting that an audit is not required.
Minutes of the annual general meetings of the shareholders and of the directors should be filed in the minute book each year.
With the ability to simply pay your annual report fees on-line, many times the requirement for these minutes are missed.
Other items to be filed in your minute book are the resolutions to approve a bonus or dividends for the shareholders or directors.
Tax services may be items such as personal tax filing, personal tax planning, estate planning for the individual, corporate tax filing, or succession planning for the corporation.
Even though the taxes payable for a corporation are different and separate from those paid personally, sometimes an accountant is needed to marry the two taxes so that the least tax can be paid overall.
It makes no sense to incorporate and pay the lower taxes if you will be paying the higher taxes personally because of the money that you have removed from the corporation.
An accountant can help you to plan how to achieve the best cash flow both personally and professionally.
There are some people who only use an accountant when it is absolutely necessary and prefer to handle the accounting duties on their own.
Others realize that an accountant can be a valuable business partner and if given complete information can help the individual or business owner plan to manage their future wealth and avoid future tax implications.
Accountants help individuals and businesses meet their statutory obligations.