At the end of last month, myself, together with Andrew Blatt of Murdochs Law presented a webinar on ‘How to avoid an SRA investigation...and what to do if you have one’. Andrew is senior director at Murdochs Law Ltd and a regulatory and disciplinary solicitor.
Although solicitors must understand their obligations to their SRA, the purpose of this webinar was to identify the role and responsibility of the Reporting Accountant (RA). It is important that RAs know their obligations under Rule 12.5 and that the report is completed and signed in the correct form – although the current version has no space allocated for the preparer to physically sign. It is worth remembering that it is the law firm’s obligation to complete the Accountants Report in the prescribed time, not the RA.
The guidance ‘Planning for and completing an accountants report’ is a key tool for helping RAs consider whether a report may be qualified or not. Of course, often this may be subjective and opinions may differ, and, dependent on the reasoning and documentation, may both be acceptable.
The guidance however does assist in planning what work might need to be undertaken and how to assure that client money is properly safeguarded. It also helps in assessing what factors might lead the accountant to decide that the report should be qualified and therefore submitted to the SRA for further consideration of the risks posed.
Such factors are split into serious and moderate factors to consider. For example, as far as the serious factors are concerned, the presence of one of more of these is likely to lead to a qualification. These include a significant and/or unreplaced shortfall as well as a failure to provide documentation requested by the RA.
One thing RAs have to be mindful of is that they are under a statutory duty as set out in Section 34 of the Solicitors Act 1974 and Section 5, Schedule 2 of the Administration of Justice Act 1985, to immediately report to the SRA:
- any evidence of theft or fraud in relation to money held by a solicitor or a law firm for a client or any other person or in a client account or an account operated by the solicitor
- if they have concerns about whether a solicitor or a law firm is fit and proper to hold money for clients or third parties or operate any such accounts
Although one can never legislate for dishonest solicitors or those who are reckless, negligent, or chaotic as to the rules, RAs can assist in providing good management advice, honest assessments on viability and advising on good systems and internal policies. An SRA Investigation can have wide reaching consequences for law firms and solicitors which can include consequences for professional indemnity insurance, fines and, in worst cases, intervention or individuals being struck off.
RAs can often be a target for those carrying out investigations on behalf of PI Insurance firms or even the SRA themselves. It is therefore important that RAs and their client law firms understand the causes and implications of an SRA investigation – prevention is always better than cure.
*The views expressed are the author's and not ICAEW’s.