What Should an Annual Accounting Relationship Cover?

You receive annual accounts and tax returns, pay an accounting fee and contact your accountant when questions arise. But are both sides clear about what that arrangement covers?

An annual accounting relationship should establish the work agreed, who is responsible and when information or decisions are needed.

There is no universal package covering everything a business might require. The services an accountant can provide are not necessarily the services included in your engagement.

Establish the annual foundations and who is covered

Financial statements and income tax returns may form the foundation of the engagement. Clarify the documents to be prepared, the relevant periods and which clients are included.

An arrangement for a trading company does not automatically include a related trust, a property holding entity or the individual returns of every owner.

Even where the same accountant works across the group, identifying the entities and individuals covered helps avoid gaps and misunderstandings.

Also discuss the information needed before work can begin and who will answer questions about the records.

Allocate recurring responsibilities explicitly

Annual accounts sit alongside work that happens throughout the year, including BAS, bookkeeping, payroll and company administration.

Responsibility for each should be expressly agreed. The accountant may handle some work, the business may retain other tasks and another provider may perform the rest.

For example, preparing annual accounts does not establish who reconciles the bookkeeping, runs payroll or responds to company administration notices.

Where responsibilities are shared, discuss how information passes between the people involved. Clarify who prepares, reviews, authorises and lodges relevant documents, and who arranges payments.

The useful outcome is an understood division of work, not simply a list of services appearing on an accountant’s website.

Understand what happens beyond document preparation

Discuss how the completed work will be explained.

An owner should understand the results being presented, significant balances and relevant matters identified through the agreed work. Questions might concern an owner loan account, an unexpected change in profit or information needed to complete a return.

That does not mean every engagement includes a detailed business performance review.

Preparing financial statements is also not, by itself, an audit or assurance engagement. It should not be understood as independent verification of every transaction or continuous monitoring of the business.

The accountant still has professional obligations to make appropriate enquiries and address relevant issues. A limited engagement is not permission to ignore those obligations.

Clarify support during the year

Ask how tax planning, periodic meetings and questions between annual reporting dates are handled.

Are they included, available when requested or subject to a separate agreement? Does a proposed meeting cover completed accounts, upcoming tax matters or a wider review of business performance?

Also clarify who to contact, what information to provide and how an urgent decision should be raised. Do not assume that an ongoing relationship includes unlimited advice or a particular response time.

Access to accounting software does not necessarily mean the accountant is reviewing it continuously. If you want regular reporting or monitoring, discuss the work and frequency expressly.

Monthly payments describe the billing arrangement, not necessarily the frequency of reporting, meetings or advice. Check what those payments actually cover.

Recognise what remains your responsibility

The business needs to maintain complete records, provide information in time and respond to reasonable questions.

Review documents before approving them. Raise anything that does not reflect your understanding of the business, including missing information or unexplained balances.

Tell your accountant about significant changes rather than assuming they will become apparent through the bookkeeping. This includes changes in ownership, borrowing, business activities and proposed transactions.

Appointing an accountant does not transfer every business obligation to them. For company directors, delegating accounting tasks does not remove the responsibility to understand the company’s financial position and oversee its obligations.

Both parties need a clear understanding of what the other will do.

Revisit the scope when the business needs more

A restructure, property transaction or business sale may require a separate engagement. So may historical record corrections, more regular forecasting or preparing financial information for finance.

These matters can involve different records, analysis and coordination from routine annual work.

Raise a significant business change early, while there is time to identify the work required and involve other advisers where appropriate.

Agree on the additional scope, responsibilities, timing and fee basis before assuming it is covered. If the extent of the work is initially uncertain, ask how that uncertainty and any changes will be communicated.

The existing arrangement also deserves review as the business grows or its activities change. A scope that was suitable several years ago may no longer match what either party expects.

What to bring to a scope discussion

Bring:

• The existing engagement letter and any later variations.
• Current entity and ownership details.
• A summary of who handles accounting, BAS, payroll and company administration.
• Known outstanding matters.
• Upcoming decisions and the support you expect to need.

The aim is a shared understanding of the work, not an assumption that everything is included.

Speak with Jaha about the business’s current responsibilities and the accounting support you need, so the proposed scope can be discussed and agreed.