15 July 2015
Changes to the format of accountants' reports for solicitors' practices - and the criteria for qualifying accounts and submitting them - should further improve their value and reduce the burden on firms, the Solicitors Regulation Authority has said.
Following a decision by the SRA Board at its meeting today, Wednesday 15 July, existing, rigid requirements on the submission of accountants' reports are set to be relaxed. Accountants will be able to use their professional judgement in future to assess if the reports they prepare for solicitors' practices comply with SRA account rules. Accountants will no longer need to qualify accounts for trivial breaches of the rules, but instead can focus on risks to client money.
Crispin Passmore, Executive Director, Policy said: "These changes give accountants more scope to use their expertise and advise firms on potential risks. Some firms may find that obtaining reports is very expensive because of their size and structure, so it makes sense to use accountants' expert views in this way to ensure value for money.
"At the other end of the scale, where firms hold smaller amounts of client money and are relatively low-risk, relaxing the current arrangement is sensible. This second phase of changes is part of our drive to reduce bureaucracy and be proportionate."
The SRA changes are subject to approval by the Legal Services Board. If approved, the amendments would be part of the Version 15 of the SRA Handbook that goes live on 1 November 2015. Revised accountants' report forms will be available for use after 1 November 2015 and will apply to all firms whose accounting period ends on or after November.
Guidance on the new approach has been developed through an external working group of key stakeholders and will be available on the SRA's website well in advance of implementation. The exemption from the requirement for lower-risk firms to obtain an accountant's report will be extended to include firms with an average client balance of less than £10,000 a year and a maximum account balance of £250,000.
Amending accountants' reports was one of the first strands of work in the regulatory reform programme launched in May 2014 aimed at reducing the burdens on firms without reducing the protections for consumers of legal services. The first phase of the project saw removal of the need for firms to deliver unqualified reports (ie those where no breaches of the rules were identified) to the SRA and of the need for those firms that receive all of their fees from legal aid to obtain reports in the first place.
A third phase, currently being developed, will begin in the autumn and will look at simplifying the Accounts Rules themselves.