Recently a debate has been raging as to whether Solicitors Regulation Authority (SRA) Audits via its Solicitors Accounts Rules (SARs) should be compulsory.
This consultation contains two proposals:
Removal of mandatory requirement for firms to submit an annual accountant’s report to the SRA.
Requiring COFAs (Compliance Officers for Finance and Administration) to sign a declaration they are satisfied that the firm is managing client accounts in accordance with the SRA Accounts Rules.
What does that mean? Director of Goringe Auditors Ltd., Jacqui Waring, gives her take on the topic:
What is SRA?
The Solicitors Regulation Authority (SRA) regulates solicitors in England and Wales. It requires all solicitors with client money accounts to submit an annual accountants report. Goringe Auditors* specialises in delivering these reports.
Why are these audits considered important?
The audits are in the public interest; solicitors might hold client money for a number of reasons—for example, probate, conveyancing or to fund court cases—so it’s critical that there are regular and stringent checks in place to ensure these funds aren’t misappropriated.
What are your thoughts on the proposed changes?
I understand that the Solicitors Regulation Authority wants to cut costs and adopt a risk-based approach, but I strongly believe they’re underestimating the deterring effect of the current Solicitors Accounts Rules.
If an individual is getting into a bit of trouble and feels even slightly inclined to ‘borrow’ funds from client accounts, the hovering spectre of an annual audit carried out by an external professional would be enough to deter all but the most foolhardy. This deterrent will be lost if these proposals are implemented.
How might this impact a typical solicitors practice?
With the current system, the audits that we carry out are a great comfort to the named COFA in each practice; they have an external stamp of approval that they’re adhering to the Solicitors Accounts Rules and are above reproach. I’m not sure what support the SRA will offer to help them meet their increased obligations under the proposed changes—it will require a change in their skillset and procedures to be put in place.
I also think the new Solicitors Accounts Rules will rob the industry of vital sharing of best practice. Because accountants visit many different solicitors’ practices, we see a whole range of approaches, systems and processes. With each completed audit, we deliver a letter of recommendation, sharing our expertise and highlighting ways to improve. If there is no audit, there’s no objective review of how they’re doing and how they could improve their systems. I think it’s a shame.
When will we hear from the Solicitors Regulation Authority about the outcome of the consultation process?
The consultation period ended 18th June. They’re currently considering responses, we’ll hear the results over the summer and—if the changes are approved—the new Solicitors Accounts Rules will come into effect at the end of October.
*Sister company, Goringe Accountants Ltd. can provide a full service to solicitors to supplement the audit, including management accounts, profitability advice, statutory accounts and tax advice.