Practice Assurance and Money Laundering Update 2016 Presented by John Selwood
Highlights Preparing for a visit Data Protection and Client Money AML refresher and new examples Accountant’s reports Feedback on FRS 102 implementation QAD Audit visits
Preparing for a practice assurance visit
• 8 year review cycle • Desktop reviews • Phone visits • AML, Client Money, Overview Probate and Investment Business are stil a focus • Quality of financial statements will be an issue
• Prepare all the required information • Common problems: Before • Letterhead the • Data protection contracts • Subcontractor visit agreemenst • Staff appraisals • Compliance reviews
• Opening meeting • The review: • a sample of client files; • a sample of fee notes, The commission statements, office and client bank account records; • your professional indemnity visit insurance policy • other matters which might have arisen during the opening meeting • Closing meeting
• icaew.com/cpd • icaew.com/consumercredit • icaew.com/dpbinvestmentbusiness • icaew.com/faculties • icaew.com/helpsheets • icaew.com/moneylaundering Support • icaew.com/pii information • icaew.com/practice • icaew.com/practiceassurance • icaew.com/probate • icaew.com/regulations • icaew.com/sigs • icaew.com/support
• 2000 reviews in 2014 2015 • Data protection QAD • Client money feedback • Anti-money laundering
Data protection – the next big thing for Practice Assurance
• data storage – use of external media such QAD as USB drives and external hard drives; • passwords and encryption of laptops and advice other devices such as USB drives and external hard drives; • use of internet and social media (e.g. when, sites excluded, purpose and 1. Review monitoring); • email use (e.g. when, recipients excluded, policies purpose, content and monitoring); and • use of own devices (bring your own device – BYOD) such as tablets (are they secure, procedures password protected and able to be remotely wiped); and regularly • data loss.
• make sure client data is 2. physically secure; • make data transfers as secure Make as possible (this can be done with encryption, passwords or sure client portals); • don’t put more than one set of data is data on a USB; and • protect data with up-to-date secure security, back it up and then test back-ups regularly.
• Third parties and subcontractors • If the firm uses the cloud for storing client data or is considering it: 3. Use of • make sure your clients understand and agree to the arrangement; third • check the third party has parties appropriate security in place to comply with the DPA; and and cloud • check if the data is going to be computing stored outside the EEA. If so you may need additional contractual confirmation that their security is adequate.
• Staff and 4. Make sure your principals! staff • Sole understand the firm’s practitioners – policies can alternates and procedures access data?
Client money
• Make sure you have done money laundering checks for clients who you hold money for • If you take fees from your clients’ Reminders money account, you must have from QAD consent or 30 days must have passed since you gave them an on client invoice money • If you hold more than £10,000 for one client for more than 30 days, you must open a separate designated account
• In general, you will have to pass any interest to your client • The clients’ money account should not incur bank charges Reminders • Pay mixed monies into the client from QAD account first • You must reconcile the individual client on client ledgers to the bank reconciliation at least every five weeks money • You must do an annual compliance review • You must know where your bank trust letter is
Anti-Money Laundering refresher and update
• Evidence of the existence of the entity (company etc) • A full list of the principals - Customer management due • On a risk basis , verify the identity of a sample of principals diligence • A full list of any individuals who refresher are beneficial owners, being: those who own or control (directly or indirectly) more than 25% of the entity
the nature of the client the service the being jurisdictions provided of operation Risk based approach
High Medium Low
Electronic client identification Multiple sources? Checked across a period? Regularly tested? Supplementary information
• Updating the risk assessment • Checking to ensure that new owners/principals/etc have On-going been properly identified • Updating evidence of address monitoring etc includes: • Checking that all other customer due diligence information is still current and up to date
Relevant information In the Legal course of privilege business Knowledge Suspicious or Overseas? activity reports suspicion
Whilst preparing year end financial statements you notice that a whole quarter’s input VAT has been reclaimed twice. Is that reportable?
When finalising the self assessment ITR for 2015/16, the client let’s slip, in conversation, that they are having trouble evicting a tenant in one of their investment properties. There is no reported income in the tax returns. Is this reportable?
You ask the question about the investment properties alluded to above. After some perseverance on your part the client admits many years of undisclosed income on a number of properties. They refuse to declare the income in previous years and begrudgingly agree to declare income in future. What do you do?
You have a long standing owner managed corporate client where you also act as tax agent for the shareholder/directors. These individuals have been introducing very substantial sums into the company and you cannot see that their personal financial resources could support this. You challenge this and are told that they won the money on a horse. Is this reportable?
When preparing year end financial statements you notice several large commission payments to overseas agents. These agents do not appear to do anything in particular other than assisting with contract negotiations. You suspect that these are bribes. Is this reportable?
Accountant’s reports
• TECH07/16AAF – Chartered Accountants’ reports on the Compilation of Financial Information of Incorporated Entities ; and ICAEW • TECH08/16AAF – Chartered Accountants’ reports on the guidance Compilation of historical Financial Information of Unincorporated Entities. • ACCA has a similar factsheet • ICAS has its Accounting Framework
• Integrity • Objectivity • Professional ICAEW Competence Framework • Confidentiality • Professional Behaviour
Compilation engagements (accounts preparation) • Could you own shares in a client? • Could you be a director of the company? Questions • Could your business partner be a director? • Could your brother be a director?
FRC Ethical • A firm , its partners and any covered person , and persons Standard closely associated with them, shall not solicit or accept for pecuniary and non- pecuniary Auditors gifts or favours, including hospitality, from an entity relevant to the engagement , or any other Gifts and entity related to that entity, unless an objective, reasonable and hospitality informed third party would consider the value thereof as Para trivial or inconsequential. 4.61D
• Up to date templates • Review Quality • Disclosure control checklists • Training
Engagement letters
Engagement letters • Limitation of liabilitity?
If the accounts are not True and Fair The No directors accountants cannot sign report? them!
• select suitable accounting policies The and then apply them consistently; directors • make judgements and estimates that are reasonable and prudent; of a • state whether applicable UK accounting standards have been company followed, subject to any material departures disclosed and explain in are the financial statements; and • prepare financial statements on a required going concern basis unless it is inappropriate to presume that the to: company will continue in business.
Feedback on FRS 102 Implementation
• The increase in audit exemptions thresholds • Independence, ethics and 2015 quality control • The impact of FRS 102 QAD • Audit judgements, Report understanding and testing complex revenue models, and substantive analytical review • Future challenges
Software? Accounting policy note Judgments and uncertainty
Recommend
More recommend
