Accounting

[TAX]

I did my client's P & L and Balance Sheet for 2004, 2005, & 2006 using Quick Books. I do not do compilation nor issue any letter. I just use Quick Books.

I gave client PDF report for each year. On the report I indicated that it is for management use only. Data not audited or Verified. Client forwarded these reports to Bank. Bank called me back and asked me why there was a loss of $60,000 in 2005 and Loss of $80,000 in 2006.

Client told me to go ahead and explain bank.

I do not feel comfortable doing this. I could be liable for the loan that client is seeking from bank. Yet I have to tell client to answer bank. How should I handle this.

I remember when I took one of the accounting seminars, person indicated that there was a relief for CPA who do not do TRUE compilation but just use Quick Books.

Any help will be appreciated.

Thanks!

[dsi]

I would have a conference with the client regarding the loses. Then I would have the client explain to the bank how/why the loses existed.

[ChEAr$]

Darn tootin'

I would have a conference with the client regarding the loses. Then I would have the client explain to the bank how/why the loses existed.

In NO way should you talk to the bank about client's books, for that could put you on the
cat bird's seat. You did right in marking the reports "managerial use only."

[geekgirldany]

Seems to me that the client should know why there was a loss and be able to tell the bank. They must have had a bad couple of years or something. You have to be careful. I would not explain to the bank let the customer do it.

[ChEAr$]

well said

Seems to me that the client should know why there was a loss and be able to tell the bank. They must have had a bad couple of years or something. You have to be careful. I would not explain to the bank let the customer do it.

dany. If you haven't already taken the EA exam section concerning circular 230, have
no fear; you'll max it! (grin)

[geekgirldany]

Haven't taken it yet but I hope I do. Doing Part 2 this Saturday.

[S T]

Part 2

Dany,

Good Luck to you on the Saturday Test. You will pass with flying colors!

Sandy

[KJ Judd]

TAX you should look at the definition of a compilation. If you just do journal entries in QuickBooks & the client prints off the financial statements, it's NOT a compilation. However if you print of the reports & give them to the client it does qualify as a compilation and you need to have the report page.

I know it's technical, but I try never do give the QB reports to my clients. I'll let them do that part.

[Gretel]

TAX you should look at the definition of a compilation. If you just do journal entries in QuickBooks & the client prints off the financial statements, it's NOT a compilation. However if you print of the reports & give them to the client it does qualify as a compilation and you need to have the report page.

I know it's technical, but I try never do give the QB reports to my clients. I'll let them do that part.

Is this true for CPA's only or also for EA's?

[taxxcpa]

CPAs only

Is this true for CPA's only or also for EA's?

According to the AICPA from which the State Boards get their marching orders, any kind of financial statement prepared by a CPA must be accompanied by a compilation letter.

On the other hand, if a non-CPA , including EAs, provides a compilation letter, he can be charged with practicing Public Accounting without a license.

Even if a CPA prepares a financial statement without "See Accountant's Compilation Letter' or 'for Management purposes only' he can get in trouble for not including the letter.

No such rule applies to tax returns, so banks can check tax returns without the accountant's report.

I think the rule should be changed. In some cases people want financial statements in a form other than in any kind of standard format and may just want them for management purposes or to enable preparation of income taxes.

[Zee]

According to the AICPA from which the State Boards get their marching orders, any kind of financial statement prepared by a CPA must be accompanied by a compilation letter.

On the other hand, if a non-CPA , including EAs, provides a compilation letter, he can be charged with practicing Public Accounting without a license.

Even if a CPA prepares a financial statement without "See Accountant's Compilation Letter' or 'for Management purposes only' he can get in trouble for not including the letter.

No such rule applies to tax returns, so banks can check tax returns without the accountant's report.

I think the rule should be changed. In some cases people want financial statements in a form other than in any kind of standard format and may just want them for management purposes or to enable preparation of income taxes.

Only licensed, CPA's can issue Management Use Only financial statements, and they do not generally include a compilation letter. Each page should be clearly marked "Management Use Only". The nature of the services, responsibilities, and use of the statements in disclosed in the Engagement Letter. Here's a link to an example (see Letter 3-8):

http://books.google.com/books?id=D8fwnq9kl0UC&pg=PT171&lpg=PT171&dq=is+a+compilation+letter+required+with+management+use+only+financial+statements&source=web&ots=FFidmPcPER&sig=PDTPTOZdPa1W4BF79kcDtlhvG4M#PPT171,M1