RSS feedsQ: I prepare the accounts for a number of clients in the construction industry. Many are still chasing amounts due from customers several months ago. I am trying to finalise a set of accounts. It has a 31 March 2008 year end and the company in question has an amount due from a contractor of £520,000 relating to work performed on a completed contact. The net assets of the company are only £77,000. It is highly unlikely the business could survive a write-off of the amount in question. What do you advise in relation to the accounts?
A: It is the directors who are responsible for the company’s accounts providing a true and fair view. They should satisfy themselves that the debt is still recoverable before signing off the accounts.
Although no assurance is provided by an accountant’s report you do not want to be associated with accounts that are misleading, so proactive steps need to be taken to reduce the level of uncertainty that exists. Discuss with your client as to whether there are any other reasons why payment has not been made, such as a dispute over the quality of the work. It might possibly be that the customer is only disputing a small amount of the total debt due. Directors need to assess whether there are significant doubts about the entity’s ability to continue as a going concern and any material uncertainties of which they are aware need to be disclosed. Approving accounts which they know do not comply with the Companies Act are liable to a fine.
James Barbour is director of technical policy at ICAS
