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Views on solicitors accounting rule changes

Views on solicitors accounting rule changes

We've just received a press notice about the Solicitors Regulation Authority’s announcement that law firms holding client funds will no longer have to submit an annual accountant’s report.

Under the new regime a firm’s compliance officer will have to sign a declaration stating they are satisfied that client accounts are being managed according to SRA regulations.

There have been some previous conversations about the specialist reports required by the SRA, which lawyers view as a burden on smaller firms. According to Peter Noyce, head of professional services at Menzies LLP, around 9,000 law firms hold client funds, so the SRA’s move could save the legal profession £30m a year.

The SRA reportedly expects to save £200,000 a year through reduced processing of accountant’s reports. But Noyce admitted that the regulator may incur extra costs if it has to resolve a greater number of client account problems.

Noyce sees ”the removal of this compliance burden as an opportunity to invest in better practice management advice", something the profession clearly needs. But what will that mean for accountants? Is it yet another case of accountants being scapegoated as a profession bound up in red tape that poses a burden to poor, struggling businesses such as law firms?

I'd be curious how many AccountingWEB member firms might be affected, and whether this would be a significant loss of business. Or are there opportunities here to advise law firms on practice management and growth to equip them for self-regulation?

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09th May 2014 13:17

Don't be silly!!!

 Is it yet another case of accountants being scapegoated as a profession bound up in red tape that poses a burden to poor, struggling businesses such as law firms?

No - of course not. How do you make that one out?

The SRA made the rules and we complied. Now the SRA have scrapped the rules. Good job too. I for one will be able to give up my audit registration - hooray!!!!

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09th May 2014 14:49

SRA

We have only one SRA report that we do so not a major impact on us, in fact in reality one less hassle.

I would think though that there is a danger that it is going to put clients money more at risk, unless the SRA are going to increase monitoring visits. The unscrupulous will know that they have a bigger window not to be discovered if they are that way inclined.

I imagine some firms will be hit hard by this as big fees were charged by some according to the Solicitors I have spoken to.

 

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09th May 2014 15:06

I think this is a crazy idea. The SRA and FCA client money rules are complicated - but they are complicated for very good reasons due to the strange interaction of many different items of legislation and common law. Very few people - including those managing client money - understand the rules fully. This is going to put the public's money at risk, and quite possibly at amounts that are significant to the individuals concerned (e.g. house purchases).

 

If the SRA want to save money they should focus on developing better systems or move to an exception basis for receiving reports.

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09th May 2014 15:20

Bit like auditing really

There are those who believe it should never have been scrapped for any companies, no matter how small, because it "might prevent fraud and give assurance".

It would interesting to know the statistics on the numbers of qualified reports given to the SRA that have actually prevented any loss of clients' monies. (If any!!)

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09th May 2014 15:31

Different to small company audits

In that this is people holding, often quite large balances, of other peoples money.

I agree that the audit reports probably rarely found the frauds, but I suppose that this just makes it easier if you were going to be unscrupulous and may make more feel that they can get away with "borrowing" for a short while.

Obviously you could make the same case for accountants client accounts, but I suppose they would, typically, have less in them.

 

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09th May 2014 18:10

Strange move

This is an astonishing U turn by the SRA.  Their longstanding stance is that only a registered auditor is considered sufficiently competent to undertake this heavily prescriptive work and that the slightest breach has to be reported, with no consideration of materiality - and reporting accountants who fall short risking being blacklisted.  We now have the admission that it is all a complete waste of time.

Although we have had ongoing audit deregulation, there is ever increasing regulation of financial services, mortgages, money laundering and generally anything involving handling other people’s money so this seems a strange move.  If this goes through then expect the Licenced Conveyancers, Notaries (who have only recently started a regime having accountants reports) to follow.

This seems to me a panic measure to help shore-up high street solicitors who are facing increasingly stiff competition from all angles.

This will indeed come as a major shock to firms/departments that specialise in this sort of work.  Although I suspect that most firms who lose a few client money assignments will not be sorry to see the back of this mind-numbing work.

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