Hazlewoods are pleased to the final instalment to their six-part series on current topics of financial business interest, entitled Legal Focus.
Many readers will be aware that, following a somewhat unusual consultation, the SRA have now backtracked on their planned intention to remove the need for independent accountants to report on their compliance with the SRA accounts rules. The need for accountant’s reports will remain in place for all practices apart from those who:
a) receive all of their fee income from the Legal Services Commission; and/or b) can claim exemption as the amount of money passing through their client accounts is below the deminimis limits.
Item b) above is the same exemption that existed previously, so the only change is a).
In addition, practices who receive an unqualified report from their accountants will no longer need to file them with the SRA.
Whilst we understand that the SRA have a desire to reduce their own administration burden, the move to only requiring qualified reports to be filed with them is somewhat surprising, as the SRA are only too well aware of the fact that far more Reports ought to be qualified than presently are. In fact, out of the 10,000 or so reports filed with the SRA each year, only about half are qualified.
If you ask any reporting accountant that does a lot of this kind of work, non-qualified reports are very much the exception (only about 3% of ours are), so it could be said that many non-qualified Reports are in some ways the ones the SRA should be focusing on.
So what is coming next?
First of all, the SRA are planning on issuing a modified form of the accountant’s report itself during the first quarter of 2015. This is going to take a risk based approach, with less in the way of prescriptive tick boxes compared to the current report format. It also may require the reporting accountant to sign an ‘opinion’ at the end. There is going to be a consultation process shortly.
Secondly, the SRA are going to issue revised SRA accounts rules during 2016, which again are likely to be less prescriptive and more risk based.
“The SRA have clearly taken the many responses to their initial consultation seriously, and in particular listened to comments about not only the strength and importance of the independent reporting process but also about modernising the Accounts Rules, and trying not to place yet more burden on those filling the position of COFA in practices.“
This release has been prepared as a guide to topics of current financial business interests. Hazlewoods strongly recommend you take professional advice before making decisions on matters discussed here. No responsibility for any loss to any person acting as a result of the material can be accepted by Hazlewoods.