SRA accounts rules

Introduction

This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members to identify appropriate sources of guidance and support when undertaking the role of Reporting Accountant under the Solicitor’s Regulation Authority’s (SRA) Accounts Rules.

Members may also wish to refer to the following related guidance:

• 01/21 AAF Solicitors Regulation Authority (SRA) Accounts Rules: Guidance for Reporting Accountants Following the 2019 Changes

Overview

Solicitors regulated by the SRA are required to adhere to the SRA Accounts Rules. From 25 November 2019, the SRA Accounts Rules 2011 were replaced with the new SRA Accounts Rules which are shorter, less prescriptive and more flexible.

The Accounts Rules seek to support the aim of protecting client money. More than 7,000 law firms in England and Wales hold client money and the protection of it is important to uphold the reputation of solicitors. The SRA has identified protecting client money as a risk in its Risk Outlook.

Most firms regulated by the SRA, which hold client money, are required to appoint a reporting accountant to prepare an accountant’s report which, if qualified, must be sent to the SRA (qualified reports are submitted via mySRA details of which are available on the Accountant’s reports page of the SRA website). The rules require that the accountant’s report is prepared and signed by an accountant who is a member of one of the chartered accountancy bodies (ICAEW, ICAS, ACCA or ICAI) and who is, or works for, a registered auditor.

Despite the technical nature of the Accounts Rules, significant professional judgement is required by the Reporting Accountant in determining the work they undertake in their engagement to complete the Accountant’s Report and in assessing whether a breach or breaches and/or significant weaknesses in the firm’s systems and controls which put client money at risk should result in qualification.

SRA guidance

The SRA has published a range of guidance materials for use by firms and reporting accountants. The complete resources are available from its Standards and Regulations page and some the more relevant guidance materials are explored below.

Accountant’s report and the exemption to obtain one

The Ethics guidance – Accountant’s report and the exemption to obtain one is designed to help users understand when the exemption to the requirement to obtain an accountant’s report will apply under the new SRA Accounts Rules and provides guidance on how to assess whether those criteria have been met.

Helping you keep accurate client accounting records

The Ethics guidance – Helping you keep accurate client accounting records offers practical suggestions on ways firms can comply with their record keeping obligations under the new SRA Accounts Rules and provides best practice guidance too.

Planning for and completing an accountant’s report

The Ethics guidance – Planning for and completing an accountant’s report helps reporting accountant’s prepare for, and complete, the accountant’s reports as required by the new SRA Accounts Rules, including consideration as to when reports should be qualified.

The prescribed circumstances in which you can withdraw client money from client account to pay to a charity of your choice

The Ethics guidance – The prescribed circumstances in which you can withdraw client money from client account to pay to a charity of your choice offers guidance on how to deal with residual balances in client accounts and suggests a range of possible ways in which to trace clients.

Statement of our position regarding firms operating a client’s own account

The Ethics guidance – Statement of our position regarding firms operating a client’s own account helps firms understand their obligations where they operate a client’s own account and provides guidance on how to comply with those obligations.

SRA warning notices

The SRA has issued a number of warning notices identifying key areas of concern with regard to client accounts. Solicitors and reporting accountants are expected to be familiar with these.

Banking facility

The SRA is particularly concerned with client accounts being used as a banking facility and has issued a Warning notice – Improper use of a client account as a banking facility which explains the issue and includes a wide range of case studies covering common situations and whether the SRA would consider such arrangements to constitute a breach of the SRA Accounts Rules.

Investment schemes

The SRA is also concerned with the use of client accounts for investment schemes to give an impression of credibility or security. The Warning notice – Investment schemes (including conveyancing) highlights that an honest or safe investment scheme does not need to involve a solicitor to give it credibility and that using a client account in this way may well breach the Accounts Rules as the client account is being used as a banking facility.

Other resources and guidance

There are a wide range of resources and guidance available to support those involved with the SRA Accounts Rules work, as selection of which are highlighted below.

ICAEW TECH 01/21 AAF

ICAEW TECH 01/21 AAF Solicitors Regulation Authority (SRA) Accounts Rules: Guidance for Reporting Accountants Following the 2019 Changes offers detailed guidance on the role of a reporting accountant, guidance on determining whether a breach is material and whether a qualification in the accountant’s report is required.

Other ICAEW guidance

ICAEW offers a wide range of resources to assist those involved in SRA Accounts Rules assignments, either as a COFA or as a Reporting Accountant. These resources are available from the Solicitors’ Accounts Rules hub for members of the Solicitors Community.

The ICAEW Library and Information Service is able to provide access to a range of external resources to support accountants dealing with the SRA Accounts Rules including example work programmes for Reporting Accountants. Members may email library@icaew.com or call +44 (0)20 7920 8620 with their request.

SRA Professional ethics helpline

The SRA’s Professional ethics helpline can be contacted on +44 (0)370 606 2577 and is available to reporting accountants as well as solicitors and those working in regulated firms. The advisors are able to assist with interpretation and understanding of the SRA Accounts Rules, (although are not accountants themselves) as well offering guidance on the wider roles and responsibilities of COFAs and the requirements of the SRA Standards and Regulations.

Members are reminded of their duty of confidentiality, so when speaking to the SRA’s Professional ethics helpline, members should not identify the client without getting their consent.

If in doubt seek advice

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.