On 15 July 2015 the Solicitors Regulation Authority (SRA) Board announced that the existing 'rigid' requirements on the submission of accountant's reports are to be relaxed. If approved by the Legal Services Board, these changes would form part of version 15 of the SRA Handbook which goes live on 1 November 2015 and will apply to firms whose accounting period ends on or after that date.
The planned headline changes are:
- accountants will no longer need to qualify reports for trivial breaches of the rules but will instead be able to focus on risks to client money
- that a further tier of low risk firms will be exempt from the requirement to obtain an accountant's report
To enable the first of these changes, the SRA Accounts Rules will be amended to remove the current, very prescriptive Rule 39 and replace it with wording to the effect that the accountant should exercise professional judgement in adopting a suitable work programme to cover the tests and checks they consider appropriate.
To assist accountants with this, the SRA has issued draft guidance for reporting accountants on planning and completing their accountant's report. The proposed wording for the new accountant's report is also available on the SRA's website.
The second change, exempting low risk firms from the requirement to have a report, will apply to firms with an average client balance of less than £10,000 and a maximum account balance of £250,000 during the relevant accounting year.
The SRA is seeking views on the impact of these changes.
Looking further ahead
The SRA has also confirmed that phase three of the planned reforms, designed to ensure regulation is proportionate and targeted, will commence in autumn 2015 and will involve a wider review of the Accounts Rules as a whole.
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.
Subject to approval of the rule changes discussed above by the Legal Services Board, we will update our manual in the autumn, once the changes have been finalised. Subscribers will be automatically notified once the updated manual is available.