Schedule H - Faulty opening balances

[Lori Friedman]

I'm working on Form 5500 for a new client. The previous accountant had made a mess of things, and the Beginning of Year balances on Schedule H are wrong...by some very material amounts.

I know that I can't change the opening balances, and that my options are to:

1. Amend last year's return (don't want to do that), or

2. Make an adjustment to net assets on this year's return (sounds good).

But, where do you plug the adjustment on this year's Schedule H? Good ol' Form 990 provides a very convenient Line 20 for making adjustments to net assets. There's no similar line on Schedule H. How do you plug the difference?

Believe it or not, I've never encountered this situation until now.

[Archimage]

The general procedure I use is amend the 5500 for major material changes and net it out through gain/loss if it is minor/immaterial.

[wmyer]

Is this plan going to have an audit from an independent accountant? Will the financial statements match the Schedule H? Will the accountant give a clean opinion on the financial statements?

[Lori Friedman]

wmyer -- Yes, the plan is audited, and the opinion is unqualified.

I'm leaning to Archimage's advice. The changes are too substantial to plug as income/expense, so I guess I should amend last year's Schedule H and start this year with clean balances.

[Guest b2kates]

Lori,

remember also that Schedule C would need to disclose the termination of the prior accountant.

Who is going to restate the audit?

[Lori Friedman]

Who is going to restate the audit?

My colleagues in our Audit Department have restated the prior year and issued an unqualified opinion for the current year. I'm the one, however, who has the unenviable job of cleaning up Form 5500.

[TPApril]

on the same theme (almost 10 years later to the date), cpa has made minor changes to prior year categorization of assets, but no change in grand total. So opening listing of investments does not fully match closing listing from prior 5500, but matches the financial statements report. Any reason to amend prior 5500 as well?