SRA – Changes to Reporting Accountant Requirements

In May a consultation was released by the Solicitors Regulation Authority (SRA) which announced the proposed removal of the annual accountants report for solicitors holding or receiving client money.

What is the current requirement?

Currently if a solicitor holds or receives client money at any time during a financial period an accountant’s report must be delivered to the SRA within six months of the end of the accounting period. This report must be prepared and signed by an accountant that meets specific criteria listed in the SRA Accounts Rules 2011.

What is the proposal?

This consultation contains two proposals:

  1. Removal of mandatory requirement that firms must submit an annual accountant’s report to the SRA;
  2. Requiring COFAs to sign a declaration they are satisfied that the firm is managing client account in accordance with the SRA Account Rules.

The significant point of the above proposals is that no accountant’s report will be required though the SRA have stated that they will introduce a requirement for imposing an accountant’s report where necessary. The effectiveness of how the SRA propose to determine the “higher risk” incidents without the assistance of an independent review will be an area that I would be interested in hearing more about.

I appreciate that there can be potential cost savings for the firms, though I cannot help but feel that the SRA’s drive is fuelled by the cost savings that the they will make, especially as the proposal states that the current system costs the SRA as much as £200,000 a year.

I think that a change to the accountants report is well overdue as is considering the approach taken, which should be more risk driven, and welcome the recognition and consideration of this. Although the removal of any form of independent review of the client accounts could lead to a higher risk of incidents that the SRA accounts rules were introduced to combat occurring.

The consultation has now closed and I will wait with interest to see the responses and outcome of this consultation.

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