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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Examining accounts: records examination - planning: who to see at the business premises

One advantage of examining records on the business premises EM2925 is that you should be able to find out how the accounting system works from the people who actually use it. If the system is relatively undemanding of time this may be the proprietor or director. You will have to strike a balance between getting the information you need and not being drawn into conducting a full meeting. That is not the purpose of your visit and you are unlikely to be prepared for it, especially on the private side.

You should tell the proprietor why you are examining the books, after all it is not a routine occurrence. Explain that to complete your enquiry involves an understanding of the accounting system etc. You are involved in a fact finding exercise.

If the proprietor or director does not keep the books it is important to arrange your visit for a time when the person who does is available. You will need to find out

  • how a sale passes through the system
  • how a purchase passes through the system
  • how expenses are dealt with
  • how cash receipts and payments are handled
  • which areas the proprietor/directors are personally involved with
  • which areas the proprietor/directors wholly retain to themselves
  • if proprietor’s/director’s spouse, civil partner or domestic partner or other family member is involved, what they do.

When talking to an employee you must be careful to strike a balance between discovering information about the business and how it functions, and seeming to test their loyalty.

You must always give the agent, accountant or auditor the opportunity to be present during the records examination. Their presence can be useful to explain how adjustments were made to the recorded figures to build up the accounts. They should be asked to bring all working-papers and any books which they hold.