ECSH52675 - Bookkeeping - What would you expect to see

ECSH52675 Bookkeeping - compliance visit overview

A bookkeeper will be engaged by customers to maintain their primary business records.  These will include:  

  • Records of all amounts received by or paid by the business, generally via the businesses bank account; 
  • if relevant, the cash account recording the cash transactions of the business;  
  • where required, a sales ledger recording all the invoices issued by the business; and   
  • where required, a purchase ledger recording all invoices received by the business.

By keeping the business records up to date, a bookkeeper helps a customer monitor their business’s cash-flow so that any potential issues are quickly brought to the customer’s attention.

The records maintained by the bookkeeper form the basis from which the accounts and tax computations are prepared by an accountant. Such records may be accepted without further scrutiny. Therefore, it is essential bookkeepers are vigilant given their wide scope to identify suspicious activity through access to records of a business’s day to day financial operations, their knowledge of the business and the way it operates, and their frequent contact with customers at trade premises.

Typically, a bookkeeper will be in contact with a customer frequently because their services are needed on a regular basis. This is likely to involve visits to the trading premises of a customer to collect or view records. Bookkeepers tend to operate from their home addresses as they do not typically require an office if bookkeeping is their only activity.

The majority of a bookkeeper’s customers are likely to either live, or have their business, reasonably local to where the bookkeeper operates from.

Where bookkeeping is the only service offered by the Accountancy Service Provider (ASP) or the only service provided to one of their customers, the ASP will have a limited picture of the customer’s financial and business affairs.

At a compliance visit, an officer should seek to understand all ASP services (relevant activity) conducted by the ASP, how the ASP has risk assessed each service alone and in combination, and how it manages and mitigates those risks.

Record testing should span all of the ASP services provided. For example, where an ASP provides bookkeeping and payroll services, records should be selected where bookkeeping services have been provided, where payroll services have been provided, and where both services have been provided together.

Where the ASP also carries out relevant activity in another supervised sector, an officer should seek to understand the business’s compliance with the MLR 2017 in respect of that additional sector(s). Record testing should span all sectors of relevant services provided by the business, including where provided in combination.

It is not unusual for an ASP to provide an ancillary service which would fall within the definition of services provided by a Trust or Company Service Provider (TCSP). In such cases the business is acting as both an ASP and a TCSP and its Anti-Money Laundering (AML) registration must reflect this, as must its compliance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer)  Regulations 2017 (MLR 2017) – including the requirement for being fit and proper tested to delivering those services. Providing TCSP services before an application for registration has been determined, which includes being fit and proper tested is a criminal offence.

For such cases, you should refer to ECSH52775 and the TCSP sections of the Handbook at ECSH52000 for more information.

General money laundering, terrorist financing and proliferation financing risks for ASPs can be found at ECSH52625.  At a compliance visit, ASPs should be expected to provide an explanation for any departure from published guidance.