Management company -how often do directors check the books?

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8till8

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Question for anyone who is director of an owners management company where the managing agent prepares the annual accounts -- do you ever check the invoices/bank statements that go to make up the annual accounts?

Most people I've asked never check the bookkeeping, they just review the draft annual accounts, ask questions etc but they've never gone to the managing agents offices to check "the books"
 
Presumably there is an auditor's report included in the accounts?
 
An audit is predicated on the assumption that the directors are doing their job in ensuring that the company is keeping proper books of account. Although audits may well uncover instances of false accounting, fraud or malpractice, they are usually undertaken on the explicit understanding that they are not designed for that purpose and should not be relied upon as such
 
T McGibney said:
An audit is predicated on the assumption that the directors are doing their job in ensuring that the company is keeping proper books of account. Although audits may well uncover instances of false accounting, fraud or malpractice, they are usually undertaken on the explicit understanding that they are not designed for that purpose and should not be relied upon as such
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So if the directors are checking the books, then is there any need for an audit? I'm only thinking here of small straightforward developments so quite straightforward accounts.

Further question; is a member of a management company who's not a director entitled to view the books?
 
8till8 said:
So if the directors are checking the books, then is there any need for an audit? I'm only thinking here of small straightforward developments so quite straightforward accounts.

Further question; is a member of a management company who's not a director entitled to view the books?
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Why not just put yourself forward as a director. As to your query I don't believe there is a right but I could be wrong on that. From the web

Concerns about your OMC financial accounts​

Q&A​

Most Owners' Management Companies in Ireland are incorporated as a Company Limited by Guarantee, a CLG. The shareholders or members of these companies do not hold shares but guanratee the company debts for a specific sum usually €1. As a member of a CLG company you have rights under Company Law. One such Right is the right to have the company audited. This means that the company will appoint an independent person - an accountant - who will review all of the financial information of the company and prepare a Report for the members of the company which will be provided at the AGM.
The use of Auditors is a key governance protection in company management. It provides a check and balance on company directors and managers.
Section 334 and 1218 of the Companies Act 2014 addresses the Notice provided to the company to request an Audit. While Section 338 of the Companies Act, 2014, confirms the required content of an Auditor's Report. The main issues which the OMC Auditor is required to include:

(a) give a true and fair view— of the assets, liabilities and financial position of the company as at the end of the financial year,

(b) The statutory auditors’ report shall also state—
- whether they have obtained all the information and explanations which, to the best of their knowledge and belief, are necessary for the purposes of their audit,
- whether, in their opinion, the accounting records of the company were sufficient to permit the financial statements to be readily and properly audited,
- whether, in their opinion, information and returns adequate for their audit have been received from branches of the company not visited by them,
(c) state whether, in their opinion, based on the work undertaken in the course of the audit—
- the information given in the directors’ report for the financial year for which statutory financial statements are prepared is consistent with the company’s statutory financial statements in respect of the financial year concerned, and
- the directors’ report has been prepared in accordance with applicable legal requirements, and
- state whether, based on their knowledge and understanding of the company and its environment obtained in the course of the audit, they have identified material misstatements in the directors’ report and, where they have so identified such misstatements, give an indication of the nature of each of such misstatements.
(d) The statutory auditors’ report shall provide a statement on any material uncertainty relating to events or conditions that may cast significant doubt about the entity’s ability to continue as a going concern.
 
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T McGibney said:
An audit is predicated on the assumption that the directors are doing their job in ensuring that the company is keeping proper books of account. Although audits may well uncover instances of false accounting, fraud or malpractice, they are usually undertaken on the explicit understanding that they are not designed for that purpose and should not be relied upon as such
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To be fair that's just auditors limiting their liability, in the scenario outlined you will have a very simple set of accounts with two bank accounts and money in and payments out, it's essentially a bank rec, if you are paying for an audit you can be fairly sure that everything is in order if they report no issues.
 
Blackrock1 said:
To be fair that's just auditors limiting their liability, in the scenario outlined you will have a very simple set of accounts with two bank accounts and money in and payments out, it's essentially a bank rec, if you are paying for an audit you can be fairly sure that everything is in order if they report no issues.
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Auditors don't work for free, so if you commission an audit of course you'll be paying for it. If you fail to read properly the sections of the auditors report detailing the respective responsibilities on one hand, of the directors and on the other, of the auditor, that's your problem.

The various annual reports of the ODCE (now the CEA) include long lists of wiseguys who thought they could outsource onto their auditors, legal and financial accountability for their own malpractice as directors.

They thought wrong.
 
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The audit is just to ascertain/confirm that the accounts represent a true and fair view and are free from material misstatement.

If the management agent is scamming the company and the expenses are inflated or bogus, the audit won’t show that up.

The Directors need to take control of signing-off on expenses and sense-checking them. Otherwise, it’s ‘garbage in, garbage out’ in terms of the accounts.

The management agent scam is clear and was rife. Use connected companies to bill way more for simple stuff. I was a Director of one once and we switched things to three quotes and gave the agents the bullet.

That’s a bigger issue.
 
Gordon Gekko said:
The audit is just to ascertain/confirm that the accounts represent a true and fair view and are free from material misstatement.

If the management agent is scamming the company and the expenses are inflated or bogus, the audit won’t show that up.

The Directors need to take control of signing-off on expenses and sense-checking them. Otherwise, it’s ‘garbage in, garbage out’ in terms of the accounts.

The management agent scam is clear and was rife. Use connected companies to bill way more for simple stuff. I was a Director of one once and we switched things to three quotes and gave the agents the bullet.

That’s a bigger issue.
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Fair point, if one party has control of approving invoices and paying them then fraud becomes quite easy.

But if the op wants to review bank statements and invoices that won't necessarily be apparent you'd need to know what work was actually done and have a reasonable idea of what it should cost.
 
In my development, only the directors can sign off and authorise payments out of the company's accounts. Certainly the agents could do the book keeping, chase debtors, prepare a monthly report and setup the payments on the portal for the directors to sign off but I think it is always a directors job to ultimately control flows of money out of the company accounts. We would never let the agent's employees have the power to sign off payments. We also adopted a four eyes principal which meant two directors had to sign off the payments. Quite simple really.
 
I am director of an OMC. We get an invoice listing every month and process all payments. The agent only has viewing rights to the company bank account. We were badly burned in the past by an agent over spending monies paid by owners so we scrutinise every payment now. It takes about an hour a month to do this, but is very worthwhile work and ensures we can sign off on the end of year accounts with a completely clear conscience. The agent says that we are unusual in doing this, but I am happy to put in the voluntary work to ensure best value for all the owners here.
 
Blackrock1 said:
Why not just put yourself forward as a director.
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Two reasons, the OMC memo & articles are out of date and it doesn't have written protection for directors like law society '16 version has. Secondly, I'm already a director of my own business so not putting that at risk -- I'd happily service on sub-committee but not an OMC director

Thanks for all the replies -- very useful
 
NoRegretsCoyote said:
I presume accounts are audited and that's generally sufficient assurance for most people.
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I wouldn't have too much faith in that. What is stopping the OMC or Agent from employing a builder to do "extensive" work and just having entries in the accounts such as "building work - Joe Bloggs Builders -35k" every few months. It seems the auditor is pretty ok with this level of detail, and so are the OMC and Agent, but ordinary members are just sounded out when they ask questions.
 
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