PROVISION OF AN ACCOUNTANT’S REPORT OF FACTUAL FINDINGS ON SERVICE CHARGE ACCOUNTS
The purpose of this schedule to our engagement letter is to set out the basis on which we are to provide a report of factual findings on the service charge accounts for the agreed properties, as required by the lease (if applicable) and the respective responsibilities of the reporting accountants and the landlord or managing agent who has engaged us.
1. As landlord of or managing agent for the agreed properties, you consider that the lease does not require or is construed as not requiring an audit.
2. YOUR RESPONSIBILITIES AS LANDLORD OR MANAGING AGENT
2.1. Where agreed, you are responsible for the preparation of service charge accounts that comply with the provisions of the lease.
2.2You have undertaken to make available to us, as and when required, all of the accounting records and related financial information, including minutes of management meetings where relevant, necessary to carry out our work. You will provide us with all the information and explanations relevant to the preparation of our report of factual findings on the service charge accounts for the period in question and you will disclose to us all relevant information in full.
2.3You will approve and sign the service charge accounts in the form required by the lease to acknowledge your responsibility for the accounts.
2.4 You are responsible for ensuring that the property is maintained in accordance with the terms of the lease and that service charge monies are safeguarded as held on trust for the leaseholders in accordance with section 42 of the Landlord and Tenant Act 1987.
3. OUR RESPONSIBILITIES AS REPORTING ACCOUNTANTS
3.1You have asked us to undertake procedures, and provide a report of our factual findings to you, on the service charge accounts.
3.2We shall conduct our work in accordance with the guidance for a report of factual findings on service charge accounts contained in ‘Residential Service Charge Accounts’ published jointly by the professional accountancy bodies and the Association of Residential Managing Agents (ARMA) and the Royal Institution of Chartered Surveyors (RICS).
In order to provide our report, in summary, we shall:
•check whether the figures in the service charge accounts have been extracted correctly from the accounting records maintained by the landlord or managing agent;
• check that a sample of entries in the accounting records are supported by receipts, other documentation or evidence that we have inspected;
• check that the balance of service charge monies for the agreed properties, shown in the service charge accounts, agrees or reconciles to the bank statement for the account(s) in which the funds are held.
• any other agreed procedures (if any) as applicable.
3.3Our work will not be an audit of the service charge accounts conducted in accordance with International Standards on Auditing (UK). Consequently, our work will not provide any assurance that the accounting records or the service charge accounts are free from material misstatement, whether caused by fraud, other irregularities or error and cannot be relied on to identify weaknesses in internal controls. We will, however, advise you on whether your records are adequate for the preparation of the service charge accounts and recommend improvements.
3.4We will perform the agreed procedures with reasonable skill and care and will report any misstatement, frauds or errors that are revealed by the enquiries we undertake within the scope of the engagement. Our work should not, however, be relied upon to disclose all misstatements, frauds or errors that might exist.
3.5We accept that, whether or not you meet the applicable obligations under the lease, we remain under an obligation to perform our work with reasonable care. Failure by you to meet your obligations under the lease or to provide such assistance as we require may cause us to be unable to provide our report in the agreed terms. In circumstances where we are unable to provide a report we may withdraw from the engagement.
3.6 We also have a professional responsibility not to allow our name to be associated with financial information which we believe may be misleading. Therefore, although we are not required to search for such matters, should we become aware, for any reason, that the service charge accounts may be misleading, we will discuss the matter with you with a view to agreeing appropriate adjustments and/or disclosures in the accounts. In circumstances where adjustments and/or disclosures that we consider appropriate are not made or where we are not provided with appropriate information, and as a result we consider that the accounts are misleading, we will withdraw from the engagement.
3.7As part of our normal procedures, we may request you to provide written confirmation of any information or explanations given by you orally during the course of our work.
4. FORM OF OUR REPORT
4.We shall report to you our factual findings from the procedures undertaken in accordance with our engagement terms. The report should not be used for any purpose other than as set out in this engagement letter. To the fullest extent permitted by law we do not accept or assume responsibility to anyone other than the addressee of the report, for our work or for our report.
Updated June 2015