SRA seeks further ways to cut burden of 5,000 qualified accountants’ reports

Print This Post

20 November 2014


SRA

SRA: Firms would need to “substantively comply” with rules

The Solicitors Regulation Authority (SRA) is proposing to cut further the number of law firms required to submit annual accountants’ reports.

From the end of last month, law firms only need to send reports to the SRA which have been qualified by their accountants. However, the regulator said last week that this would still mean half of all firms, around 5,000, sending them in.

Under the plans launched yesterday, the SRA would introduce a revised set of criteria for accountants to decide whether reports should be qualified.

The SRA said: “Although the accounts rules provide that the accountant does not need to report on trivial breaches, our experience to date is that the qualified reports we receive often do not reveal any significant risk to client monies.

Error, group does not exist! Check your syntax! (ID: 14)

“This is partly due to the level of detail prescribed in the accounts rules and in the test procedures, which means that accountants are not able to exercise their professional judgement only to notify us of significant areas of concern.”

The regulator said it wanted to ensure that reports were “fit for purpose” and placed “proportionate burdens” and cost on firms.

“We are also responding to the view expressed to us by accountants that we should rely more on their professional judgement in being able to identify significant risks to client money.

“The underlying purpose of the requirement to obtain an accountant’s report is to ensure that client money is being properly safeguarded and, if it is not, then the firm’s managers and the SRA, is made aware of that fact.”

The SRA said revisions to the criteria would ask reporting accountants to “carry out work on a sample basis” to find out whether the firm had maintained “an effective client money accounting system”, enabling it to “substantively comply” with the accounts rules.

Among other things, accountants would be asked to consider whether firms had ensured segregation of client and office monies, a “robust system” of controls and checks to ensure accuracy and protect against fraud, “effective oversight” by management and “appropriate authorisation” of transfers from client account.

Annette Lovell, director of regulatory policy at the SRA, added that the organisation was also seeking views on whether to widen the exemption from obtaining reports, currently enjoyed by firms which obtain 100% of their income from legal aid.

In a separate development, the SRA has launched a consultation on whether to stop regulating around 120 solicitors who act as insolvency practitioners.

The regulator said these solicitors would “have the option” of being regulated by other organisations, such as the Institute of Chartered Accountants in England and Wales (ICAEW) or the Insolvency Practitioners Association.

 

 

Tags: , , ,



Leave a comment

* Denotes required field

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

Legal Futures Blog

Know your client checks – A lesson from BHS

Paul-Bennett for Legal Futures

As you will be aware, it is a legal requirement for advisory firms to carry out ‘know your client’ checks. The purpose of doing so is to confirm your client’s identity and to seek to provide protection in respect of anti-money laundering (AML) and terrorist financing laws. The BHS experience before the House of Commons’ work and pensions committee and business, innovation and skills committee shows that firms need to think beyond AML obligations.

September 29th, 2016