When engaged for T2 service other than the following do you have taxpayer sign anything else?
Engagement letter
Review completed T2 with taxpayer and have T183 signed
Taxpayer signs off on year-end adjusting journal entries
Another item I was considering having taxpayer sign-off on are financial statements (PNL and BS) exported from bookkeeping software which include year-end adjusting journal entries and grouping of accounts.
Is that necessary? (S100 and S125 will be reviewed with client during T2 review.)
Preparation of financial statements is an accouning function, (not a bookkeeping one.)
The liability of who should be sued for issues in the contents thereof therefore needs its own documentation to be signed off on.
The professional requirements/procedures mandated for professional accountants to follow in Canada are covered in CPA courses, and are governed by CPA Canada, through the provincial CPA bodies and legislation.
That opens up an interesting debate. Bookkeeping is not a very well defined occupation, someone who has taken a course on how to use a program like QuickBooks or Sage often calls themselves a bookkeeper, or they could be trained and experienced and certified CPB’s. Then there are non-designated accountants who may have taken 3 or 4 years of a recognized accounting program but not completed, they may have experience or not, they may have taken additional tax training or not. I’ve seen bookkeepers who understand a business well enough, are smart enough and experienced enough to produce a credible set of financials for management use; and of course many more who don’t have a good grasp of what all those numbers are on the Balance Sheet, so!
In any event, I don’t know of any law related to our industry that prohibits a person from doing work they are not competent in.
One of my clients decided to help a local gal by hiring her as a bookkeeper, a skill set she professed to have. She was struggling with reconciling the operating account (in QuickBooks) as she didn’t know how to enter the comings and goings from the line of credit.
At the start of the engagement, I get them to sign an engagment letter and, if they have no minutes from their latest AGM, or a resolution prepared by their lawyer, I have them sign a simple audit waiver. (wouldn’t be needed if you are doing an audit)
At the conclusion of the engagement, I have them sign a management representation letter (which includes a paragraph saying they accept my adjusting entries), as well any other applicable documents, including the T183 and T5 summary.
Jazzit (https://jazzit.com/ ) provides this audit waiver template for use in Caseware, and has been doing so for decades. The founder himself is a CPA. They have designed their product to be compliant with CPA standards. I doubt they would be providing it if it would get CPAs in trouble, let alone the rest of us that use their product.
That said, I realize preparing shareholder resolutions is generally in the realm of lawyer’s work, and we accountants don’t want to step on their toes. But, clients need to know that the Canada Business Corporations Act requires all corporations to have an audit done unless the shareholders vote otherwise. Even if a client doesn’t use “my” audit waiver, it reminds or informs them that they need to DO something to comply with that law. And, in my records, I want SOMETHING to show that they have decided NOT to have an audit done.
I suppose you could just as easily be sued for “practicing law without a license” if you take minutes at a shareholders meeting, or explaining to someone that a red traffic light means “stop”?
I don’t have anyone incorporated by the CBCA. Once had a client who did it himself using the Staples guide. Thankfully, they found a cheaper accountant. In Nova Scotia, when incorporating, you can have the waiver embedded in the articles of incorporation. For those incorporated without it, I’m assuming it’s not a big deal to have your lawyer make the change. Or, at least have an enduring resolution permanently waiving the requirement. Unless you engage a national firm, there are few practitioners performing reviews these days, and even fewer doing audits.
Doesn’t the CBCA override the provincial statutes? I seem to recall from Business Law classes that the default requirement for an audit is universal across Canada.
Interesting option re: embedding the waiver in the articles of incorp. I’ve never seen that myself, but I’ll have to ask some of my lawyer friends if there is any reason it can’t be. Thanks for the idea!
@joe.justjoe1 you might want to review Rule 204.4 (if you’re in BC - but I would assume the same is in all CPA bodies) as it reads that if any person who is not a lawyer (in wordier terms, of course) then the service is not considered a legal service.
Since anyone can maintain their own Minute Book, with the exception of shareholder resolutions that affect the financial status of the company (can’t do the declaration of dividends, for example), therefore a CPA (or anyone else) can do the waiver of audit.
I was called on this in a firm review and won without any hassle at all.
It’s not a letter I charge for, it’s included in year end services. And I’ve been through many audits by the LSBC, and again, have never had an issue with it. As long as they don’t prepare documents that change the structure or financial affairs, its okay. Even my lawyer clients have said its okay
