Directors Blaming Accountants for their Failings

Following an increase in the number of limited companies becoming insolvent, accountants have been warned to be more aware of the financial health of their clients to avoid being blamed for the insolvencies. This follows a recent spate of limited companies facing insolvency and blaming their accountants for poor advice.

According to Wilkins Kennedy, most of the directors of the limited companies had taken illegal loans or dividends from the company, although almost all the directors blamed the advice of their accountants for doing so.

Keith Stevens, of Wilkins Kennedy said, “In almost every recent case, the director said ‘my accountant told me to do it’ or ‘I did it because my accountant told me to.’”

Stevens also confirmed that there was a real possibility of accountants having to face legal action, which has resulted in them wanting to meet and discuss the situation. Accountants should be aware of their clients’ activities and accounts to ensure they do not end up with legal claims as a result of giving bad advice.

Wilkins Kennedy has also stressed the importance of limited company directors and owners taking responsibility for their actions, and not heaping the blame on their accountants. Company owners and directors have a duty to show they acted in a responsible manner.

Insolvency practitioners have been approached by HM Revenue & Customs to investigate the problem of illegal dividends and loans because HMRC is concerned that companies are using this method to avoid payment of tax debts. An illegal dividend or loan is when the dividend is taken out of a company without sufficient profit to cover the amount. It is illegal to remove assets for yourself and leave creditors unpaid.

Posted at 03:43PM Aug 26, 2010 by Marc Stenton in Insolvency  |  Comments[0]