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Changes for the reporting accountant

Lindsey Shepherd looks at how the work of the reporting accountant has changed under the new regime one year on.

On 1 November 2015 the SRA published version 15 of the SRA Accounts Rules 2011. The changes contained within this version came into effect for accounting periods ending on or after 1 November 2015. This version of the rules saw the withdrawal of Rule 39 which detailed specific procedures to be undertaken by the Reporting Accountant. The guidance to reporting accountants is now contained within Rule 43A.1, which states:

The basic principles we, as reporting accountants, have to adopt are detailed in the guidelines to Rule 43.1A, which states:

So, what are we doing differently?

We have had a year acting as reporting accountants under this new regime, so what impact has it had on our work? What are we doing/should we be doing differently?

  • More partner and manager time should be given at the planning stage of the assignment.
  • Completing more thorough risk assessments and tailoring work programmes to more specifically address the risk areas identified within the solicitor practice.
  • Completing a more detailed system review, which is likely to be undertaken by a senior member of the team who is more aware of the risk areas within the solicitor practice.
  • Documenting and testing controls the solicitor practice has in place, and then concluding as to whether these are adequate.
  • Reviewing the client account reconciliations throughout the year and not just at two specific dates, together with a review of how differences are dealt with and rectified.
  • More consideration and detailed testing of the office account transactions and reconciliations.
  • Combining testing to improve efficiencies.
  • Full documentation of our thought process and conclusions reached regarding risks and possible qualifications.
  • Reduced detailed testing on bills.

The changes to the Rules and the new style AR1 have resulted in a reduction in the number of qualified reports being submitted to the SRA. The main areas around which breaches are still being reported are:

  • Client account reconciliation problems
  • Provision of banking facilities (Rule 14.5)
  • Ongoing residual balances not being dealt with within an appropriate time frame
  • Office credit balances.

The final issue to consider is how are we to report breaches to the SRA when we have identified an issue. What information does the SRA want to know from us?

  • Narrative surrounding the breach and the Rule breached
  • Amounts involved
  • How the breach arose
  • Length of time that the breach has been outstanding and whether it should have been identified and/or rectified by the systems and controls put in place by the solicitor practice
  • Whether or not the breach is still ongoing
  • What action the solicitor practice has taken to ensure that further breaches of this nature are avoided.

Further guidance for reporting accountants has been issued by the ICAEW and SRA.

Lindsey Shepherd ACA, Senior Manager, CLB Coopers

Solicitors Group, April 2017