If you’re new to working with an accountant, it can feel a bit off-putting to have to answer so many business year end questions. However, without asking all these questions, your accountant can’t do their job properly and in compliance with industry standards.
Frustrations around answering questions can be eliminated by understanding why your accountant is asking these questions. Once you understand why your accountant is asking all these questions, you will also be more prepared for meetings.
Below, we discuss some of the questions your accountant may ask you and why.
Just like when you meet anyone for the first time, the first meeting with your accountant will involve a lot of questions. The accountant will want to get to know you and your business, and you’ll want to find out if the accountant is a good fit for the services you’re looking for.
An initial consultation often starts with you explaining your situation. Either you are new in business and you are looking for an accountant to help you, or you’re interested in finding a new accountant. Most often an accountant will ask follow up questions after you’ve explained your business or personal tax situation.
The questions asked during initial consult meetings will be along the lines of:
- Are you incorporated?
- Have you chosen a year end?
- Did you register to collect GST or provincial sales tax?
- Do you have a bookkeeper?
- Have you worked with an accountant in the past?
Year End Questions
The purpose of questions asked during the preparation of your year-end ensure your accountant is preparing your financial statements so they meet standards set out by the Chartered Professional Accountants’ Organization of Canada.
Your accountant will need to confirm certain account balances in your general ledger. By doing this, they can “sign off” on your financial statements. Signing off on financial statements means the accountant is comfortable the statements are representative of your business’s true financial position.
Lots of year end questions revolve around missing information. For example, if you do your own bookkeeping and you haven’t sent your accountant copies of your bank, credit card, and loan statements, your accountant will ask for these. This is so they have documentation of the balances from a third party. Accountants like to keep copies of these in their client files.
Not only do accountants have to follow CPA Canada checklists while preparing your financial statements, many firms also have in-house checklists they send to clients at year end time. This makes it easier for clients to gather the information their accountants need to complete the financial statements.
Accountants like to know if your accounts receivable and accounts payable balances are accurate, so they will ask:
- Are all accounts receivable collectible?
- Should any accounts receivable be allocated to bad debt expense?
- Do you have any outstanding invoices (to customers or from suppliers) that haven’t been recorded in your records?
Part of checking that your financial statements are representative of your business’s actual financial position is scanning accounts for unusual transactions. Unusual typically means large amounts or amounts that seem out of place with other transactions in the account. Questions asked to get to the bottom of unusual transactions include:
- Why is the insurance expense account so high this year?
- Did you purchase any equipment or other capital assets during the year?
Some accountants will go through your accounts and make a list of all the transactions they need more information for. In that case you will get a list of transactions with dates and dollar values as well as what account they were posted to.
The purpose of questions about your tax situation is to make sure you are claiming all the credits and deductions you are eligible for. This goes for both personal and corporate tax. Your accountant may have a checklist or intake form that asks a lot of these questions, and they will have you complete it before you bring your tax information in for processing.
Sometimes it’s impossible to know what might come up during the time your accountant is working on your tax return. You may think you’ve been thorough with providing all the information your accountant will need, but there may be a new deduction your accountant needs to find out if you can claim.
For example, maybe you or your spouse has decided to go back to work after years of staying at home with your children and you forget to mention this to your accountant when you drop off your tax information. Then, as your accountant is working on your tax return, they notice both you and your spouse have T4s this year. They’ll likely want to know if you paid for any outside childcare while you were both working so they can claim that on your tax return.
This certainly is not an exhaustive list of the kinds of questions your accountant might ask while working with you. You just never know what might come up. Your situation and previous conversations with your accountant will determine what you will be asked. Hopefully this helps understand why you’re being asked these things.
Your Turn to Ask Questions
The activity of asking questions during accounting or tax meetings should not be one-sided. It’s important for you to ask anything that comes to mind. By asking questions, you are taking a proactive role in your business and your tax situation. Your accountant should be more than happy to answer your questions. If this isn’t the case, it may be time to find a new accountant.
Here at Virtual Heights Accounting, we’re always happy to answer your questions. If this article has brought some questions to mind, please get in touch.