You may recall from my July 2015 blog that changes to the Solicitors Regulation Authority (SRA) Accounts Rules and reporting accountant's requirements had been announced subject to Legal Services Board approval.
That approval has now been granted meaning that the proposed changes will take effect for accounting periods ending on or after 1 November 2015.
In summary, gone is the prescriptive Rule 39, which mandated certain tests and procedures, to be replaced by a new Rule 38 allowing / requiring the accountant to exercise his or her professional judgement in determining the work required in order to assess risks to client money.
Will this have a significant impact on the work reporting accountants undertake?
It depends on how much judgement / risk assessment is already applied when deciding where to focus work (perhaps in terms of systems' assessments and client file reviews) and how much work to do (sample sizes) but it will certainly bring a much needed flexibility when deciding what to report! Gone is the concept of a 'trivial breach' and qualified reports will only be required where, in the accountant's judgement, there are material breaches in the rules and/or significant weaknesses in systems and controls.
At the same time a further group of 'low risk' firms of solicitors - namely those with an average client account balance of not more than £10,000 and a maximum balance of not more than £250,000 will be exempt from the requirement to have an external accountant's report. The SRA estimate this will affect some 13% of law firms that currently hold client money. Such firms may, however, find that obtaining some form of reassurance continues to remain a valuable exercise.
Help with SRA accounts work for reporting accountants
If you act for solicitors in respect of the SRA's Accounts Rules requirements, Mercia has a Specialist Assignment Manual that provides you with all of the work programmes needed to undertake this work.