End of the annual accountant’s report is nigh

Print This Post

8 May 2014


Accountant’s report: historic information, says SRA

The Solicitors Regulation Authority (SRA) has unveiled plans to remove the requirement that firms have their client accounts reviewed by an independent accountant and submit an annual accountant’s report.

Instead, the compliance officer for finance and administration (COFA) will be given the power to certify – at practising certificate renewal stage – that they are satisfied the firm is managing its client in accordance with the SRA Account Rules.

In a consultation published yesterday, the SRA said: “It is our view that the cost to firms of engaging a reporting accountant, followed by the cost to the SRA in processing all annual accounts, can no longer be justified by the risks identified through this exercise.

“These policy proposals will reduce the unnecessary regulatory burden of a compulsory report and will give firms the flexibility to decide the best methods to satisfy themselves that the SRA requirements of good financial management and protection of client money are met.

“In turn, the changes will enable the SRA to release resources and focus them on targeted regulation where we have concerns over a firm’s management of client money. This will include the SRA imposing a requirement for an accountant’s report where necessary either on an annual basis or as part of supervisory, investigative, or enforcement activity.”

It estimated that among the 9,000 firms holding client money, small firms might have to pay £800 for an accountant’s report and larger firms “several thousand”.

More than half every year are qualified, usually for minor breaches, with just 200 referred for further examination. Of these, usually only about 10 result in a fuller investigation.

Storage alone of the last six years’ of reports and destroying them securely cost the SRA as much as £200,000 a year.

The SRA said a further problem is that the reports are historic in nature, and while reporting accountants are required “immediately” to report evidence of fraud or theft or other material issues, there is a potential duplication with the duties of compliance officers.

The SRA admitted the account rules “may not satisfactorily or optimally… manage risks appropriately” and said they would be reviewed.

The reporting reform, which would represent a significant enhancement of the COFA role, was said to be “appropriate and proportionate” to the risk presented to clients’ money. The current requirement to submit annual reports “is neither sufficiently targeted nor proportionate”.

Tags: , , , ,



Leave a comment

* Denotes required field

All comments will be moderated before posting. Please see our Terms and Conditions

Legal Futures Blog

The security of certainty

Michael Wildy Allianz

What are our considerations when looking to buy home or car cover? I would imagine price would certainly be amongst the considerations, but I’m confident that we would each weigh up whether or not our chosen insurer could meet any claims we might bring, and perhaps as importantly, whether they’d provide us with a hassle-free claims process were the worst to happen. Legal expenses insurance should be no different.

December 6th, 2016