Ownership Of Books And Records

Client's Audit or Accountant's Working Papers Files

There is debate on the ownership of the client’s working papers file created by chartered accountant whether it should be the property of the client or the accountant. The leading case on this ownership matter is Chantrey Martin & Co versus Martin 1953.

The general rules are:

Where the relationship is that of client and professional accountant, then all documents are the property of the accountant. The only exceptions are original documents, such as statements, invoices etc., which remain the property of the client

Where the relationship is that of principal or agent. This relationship will exist in situations like dealing with the inland revenue, negotiating loans, and arranging I sale or purchase of a business or other property; In these cases all the papers , likely to be the property of the client.

The ownership of working papers may not seem important, but it may be relevant in situations such as changes in professional appointments, legal proceedings for recovery of documents, negligence actions etc,

Accountant's lien

Accountant's are considered to have a particular lien over any books of account, files and papers which their clients have delivered to them and also over any documents have come into their possession in the course of their ordinary professional work. A particular lien gives the possessor the right to retain goods until a debt arising in connection with those services are paid. Reference can be made to the case law Woodworth v Conroy 1976.

Retention of working paper

It is a general principle that working papers should be retained for as long a period as possible. The precise period is dependent on a number of factors including the following:

• Prospectus requirements are for accounts for the preceding six years.
• Tax assessments can be made up to six years after the end of the chargeable period but in fraud cases, can be made at any time. 
• Actions based on contract or tort such as professional negligence must be brought within six years.

Concise Accountancy – The law in dealing with professionals