USA How to correct if client adds transactions after financial is prepared

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We took the Quickbooks file for one of our clients who we prepare financials for. We noticed A/R was different and discovered that the client added some transactions after we had issued the report for that year.

The client is a homeowners association, and some monthly assessment fees were added post report.

An additional problem is that some of the fees which were added were to owners who are no longer there, and thus their accounts were made inactive. Quickbooks doesn't allow reactivating a client and posting to it.

As a partial workaround, we created a fictitious customer (called 'cpa') and added the transactions to that "customer". The problem is now there is a sizable balance in the A/R aging summary for a customer who doesn't actually exist.

We need to adjust A/R to reflect what was issued on our report. How do we go about making these corrections?
 
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What software are you using to prepare their financial statements?

Just take their new trial balance that includes the transactions they posted. Print off all the entries you made in your software then re-enter the entries again in the new quickbooks file the client gave you.
 
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We are using Quickbooks also. We prepare statements manually using Microsoft Excel.

The problem is if we enter their transactions it changes the trial balance we used for our report.

For example, our Dec 31, 2014 TB had 20,000 for AR. But afterwards the client added 3,200 of additional transactions. If we add those in our Dec 31, 2014 TB will have AR at 23,200 instead of the 20,000 we used for our report.

How can we account for these additional transactions without changing the AR we used for our report?
 

kirby

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Questions to Brian Roberts:
Were the post closing entries few in number - that is - can the client reverse and post to next year without huge effort?
Were the post closing entries such that they would materially affect the financial statements?
Once we know this we know how to proceed.
 
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We can't ask the client to make the corrections. They know nothing about accounting so it'd be more trouble than it's worth.

Ultimately the post closing entries aren't very big in number. They would not be considered material.

However, the CPA I work for wants to match the TB from last year, so we are left with an issue of where to put these transactions. In the past I had created a fake customer and put the collective total to that account, but that then leaves a fake customer with sometimes a sizable balance lingering in the AR aging summary report.

Is there a way to post these transactions without having to resort to that method?
 
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Are you dealing with the client's most current year end or a few years back?
 
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We are doing their report/return for the 2015 calendar year. But first we want to adjust last year's (Dec 31, 2014) trial balance to match the 2014 report/return so we are starting in the same place.
 

kirby

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I'm getting lost cause;
The client was certainly skilled enough to post the entry but "know nothing about accounting" to reverse the entry
and
the entries would "not be considered material" but that leaves a "sizable balance"
Anyway, I hope you are keeping the CPA informed of and getting approval for this "fake customer" method.
 
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They make entries through invoices. They don't even know what a journal entry is.

We are doing a compilation. Ultimately we could simply make an adjustment and leave it at that. The CPA I work for doesn't want to go that route. Obviously he is informed of this considering trying to rectify the "fake customer" is the entire reason why I am asking this question in the first place.

No offense, but not only did you not even attempt to provide an answer, but you're just splitting hairs with my post and not providing any help.
 

kirby

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Brian

I am concerned for your firm because rather than just "making the adjustment", your firm's process right now implicates you as issuing a compilation that involves being complicit with a method involving a "fake customer" that YOU guys added and moreover the account has a "sizable balance." I'm trying to point out that you guys are begging for trouble. I say just make the adjustment and do not go down this "fake customer" path. My second question was to point out that you guys are placing yourselves in an position that would be hard to support in court.
 
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My dearest Kirby,

Christ, where to begin, where to begin. Obviously you don't do accounting for a living, because you are talking out of your ass at this point. Let me clarify since you are so tenaciously lost. A compilation only means taking numbers a client gives you and presenting them in financial statement form. There is no expectation to adjust or fix any potential issues.

We are going a step beyond what we've been asked because we wish to; so this whole issue I have mentioned here isn't really an issue given the circumstance. If you used Quickbooks you'd know that you can't post to a receivable or payable account without including a customer or vendor. In the past the balances were barely off, and making a small adjustment wasn't material, especially given the amounts in question.

The only way we could make adjustments to AR was to include a customer; since there was none we created one to use as a "drop off" place.

Fastforward to the present situation. We went to make adjustments to AR, but now the balance is too big to use this method. Hence the whole reason why I have come here to ask the question. Rather than simply tell me you know nothing about accounting, and, even worse, had apparently no intentions of attempting to help me out, you've been obnoxiously dinging me with your tired sanctimonious scolding.

Being taken to court over a mere compilation would be like being taken to court because someone thought you hammered a "vote for so and so politician" sign on their front lawn the wrong way. It's astounding and highly embarrassing that you are considered a VIP member here, as apparently the only criteria one needs to fulfill is graduating from the Elmer Fudd University of Douchebags.

Have a great day trolling this site with your lamebrained surrogate parenting. :p
 

kirby

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Hi Brian,
You are correct. I read into "compilation" as "compilation and review." Sorry for the error.
 

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@Brian Roberts I appreciate that you are frustrated by the situation here, but please do not resort to name-calling and being rude to other members. Members are free to criticise opinions, but please don't make it personal.
 
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If you are doing the accounting then you should be guiding the client to change the TB back to what it was supposed to be. It's a simple matter of figuring out what the client added and changing the dates of those transactions to this year. Also any accountant knows (or should know) to lock the prior year file with a password unknown to the client to prevent any prior year being changed. Since it's a matter of just changing dates have the client send you an accountants copy and make the changes and send them the change file. Or remote into their PC and do the changes yourself - whatever works.
I also don't quite understand why the need for a "fake" customer if the client made changes to AR then they had to have done the transactions to a specific customer.
(and PS - I have been doing accounting for 37 years, degreed and certified and had my own business for 8 years so I have had to take over messes from fired bookkeepers all the time and before I ever send a file back to a client it's always always locked and if they ask me for the password they're not getting it ...)
 

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