The number of qualified accountants’ reports due to rule breaches has fallen by two-thirds since the rules were changed in 2015, but the amount then being investigated for possible rule breaches has tripled, it has emerged.
In 2015 the rules were altered to allow accountants to exercise greater professional judgement over risks to client money and take an ‘outcomes-based’ view of compliance, rather than have to submit qualified reports – which flag up problems – for any minor breach.
The figures were released after an impact report into regulatory reforms, commissioned by the Solicitors Regulation Authority (SRA), was published this week.
In the two years since the changes, the number of qualified reports submitted has fallen from 2,797 to 923. Over the same period 121 reports were investigated, up from 38 two years earlier.
In 2016, six of the cases investigated led to regulatory action, the SRA said.
The latest Handbook reforms – set to be implemented next year – will bring in new accounts rules with much of the prescriptive detail removed and instead a focus on “keeping client money safe”.
The SRA said it expected these changes to lead to a further reduction in the number of accountants’ reports being qualified.
Paul Philip, the regulator’s chief executive, claimed the reporting changes had allowed the regulator to target its resources more efficiently.
He said: “These findings are encouraging and show that this approach is meeting our expectations. We are ensuring a sharp focus on public protection, while reducing unnecessary bureaucracy for firms.
“As well as being easier to understand and providing a greater focus on genuine issues of risk, these changes should also reduce the regulatory burden for most firms associated with compiling their annual reports and maintaining public protections.”