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HMRC internal manual

Enquiry Manual

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HM Revenue & Customs
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Examining Accounts: Records Examination - Planning: Work Programme

Before deciding what to see and do, find out about the business and the accounting system. With a straightforward retail shop, a visit to the premises will help understand the nature of the business. When you correspond with the agent you can find out about the accounting system. Where the business is large and complex, it may well have been necessary to be escorted round the premises by the proprietor or director and to have done some personal research. A full understanding of the accounting system may require the co-operation of both accountant and bookkeeper.

Without an understanding of the accounting system, you will not know what there is to see, but without an understanding of the business you will not know what you ought to see. Consideration of the type of business and how it is run should focus on what opportunities there might be for evasion. There is no point looking into areas where there is little chance of finding anything. Conversely, there may be pointers to particular sorts of evasion you wish to keep in mind.

Certain types of income may seem likely to arise, and you will need to check whether there is a record of such income in the books, (for example, scrap, tips, rents etc EM2740+).

On the Intervention plan, EM2906, you should set out what tests you need to perform to address each risk. A business test bank presents a common core of tests that will help you plan and focus your record examination.

The Intervention plan/work programme template should state what books, invoices, and non-financial records you need to see, and what tests and cross-checks you intend to apply including the use of software such as IDEA. Completion of the work outlined will enable you to make up your mind on the questions which required you to examine the records in the first place: whether the books do reflect all transactions, and whether there is evidence to support your grounds for dissatisfaction.

It will often be desirable to see not just the books and records for the period under review but also for the following three to six months. This will allow you to look for indications of non-extractive fraud, especially post-dating. You would need to be able to show that the records for the later period are reasonably required to check the liability of the enquiry year. Important as a plan is, it must be stressed that it should not become a straightjacket. If it becomes clear quickly that a particular line is not worth pursuit, it should be dropped. If some new aspect emerges, as it probably will, it should be followed up. Thorough as any initial review of the business and accounting system may have been, inevitably it cannot be comprehensive.