A thousand more law firms will no longer be required to submit accountants’ reports, the board of the Solicitors Regulation Authority (SRA) decided yesterday.
The exemption will apply to firms with an average client account balance of £10,000 or less, and a maximum balance of no more than £250,000. Firms which obtain all their income from legal aid are already exempt.
Crispin Passmore, executive director of policy at the SRA, told journalists that accountants were currently qualifying the reports of around half the 9,000 firms that handled client money, for minor breaches of the accounts rules.
He said the regulator’s “best estimate” was that around 1,000 firms would no longer have to submit reports.
Mr Passmore went on: “It’s not about lowering standards, it’s about getting rid of checks that cost quite a lot of money and are not very good at identifying what goes wrong.”
He described as “after the event” the problems identified through submission of accountants’ reports to the SRA.
Should the change be approved by the Legal Services Board, it will come into force on 1 November 2015, and apply to firms with accounting periods ending on or after that date.
A new format for the reports and new guidance will also be produced, aiming to remove the need for accountants to qualify reports for trivial breaches.
The SRA launched a consultation on the issue in November last year, including proposals for a wider reform of the rules on accountants’ reports. However, the regulator’s board decided earlier this year to think again and delay introduction of the changes from April to November 2015.
Enid Rowlands, chair of the SRA, described the “low risk” the firms that will no longer have to submit reports. “This is about taking a risk-based approach and being proportionate.
“We put forward proposals, but the whole point was to listen to the views we got back. We regulate by taking people with us. We listen to responses and are prepared to change our minds.”
Meanwhile, the board also proposed that practising fees be unchanged for the coming practising year. If adopted by the Law Society Council and approved by the Legal Services Board, the individual fee would remain at £320, with compensation fund contributions at £548 for firms, and £32 for individuals.
SRA chief executive Paul Philip said: “We are committed to making it easier for firms to do business, and keeping SRA costs down can only help. Maintaining practising fees and compensation fund contributions at the current level is, in real terms, a reduction.”