SRA Audit

We specialise in SRA audits for SME law firms 

What is an SRA Audit?

The SRA Audit refers to Solicitors Accounts Rules Audits, a regulatory requirement for law firms in the UK that hold or deal with client money. The Solicitors Regulation Authority (SRA) governs this process to ensure client funds are managed properly, safeguarding against misuse, fraud, or errors. Here's an overview of SRA audits and key considerations:

What are the key objectives of an SRA Audit?

  • Compliance: Ensure compliance with the SRA Accounts Rules under the Solicitors Regulation Authority (SRA) Handbook

  • Protection of Client Money: Verify that client funds are managed separately and appropriately to prevent any misuse

  • Accuracy of Records: Assess whether accounting records are complete, accurate, and reflect client balances

  • Internal Controls: Evaluate internal controls to identify weaknesses that may lead to errors or fraud

Who needs an SRA audit?

  • Law firms in England and Wales that hold client money (client accounts) are generally required to undergo an annual SRA audit.

  • Exemptions apply to firms holding small sums of client money that meet specific conditions under the SRA Accounts Rules.

What are the key SRA Audit requirements?

  • Client Account Compliance: Separate client account to hold client money. Ensure no client funds are used for office expenses.

  • Bank Reconciliations: Regular reconciliations of client accounts (at least every 5 weeks).

  • Client Ledgers: Maintain client ledgers for each individual client. Verify the absence of overdrawn client balances.

  • Transfers and Withdrawals: Ensure all withdrawals from the client account are made only for legitimate purposes. Proper authorization and documentation are required.

  • Surplus Balances: Investigate and return unclaimed client funds in line with SRA guidance.

  • Timely Payments: Prompt allocation of receipts to client account

What is the Auditor’s role?

Auditors appointed for SRA audits must be qualified accountants (e.g., ICAEW registered auditors) with expertise in SRA Accounts Rules.

Conduct a review of systems and client money records to identify breaches.

Issue an Accountants' Report (SRA AR1), signed off and submitted to the SRA if material breaches are identified.

What reports are delivered to the SRA?

  • Qualified Report: Issued if breaches are material or indicate systemic issues (e.g., commingling funds, delayed reconciliations, overdrawn client accounts).

  • Unqualified Report: Issued when no significant breaches are found.

  • The report must be filed within 6 months of the accounting year-end.

What is the SRA audit process?

  1. Review client account reconciliations.

  2. Verify client money segregation.

  3. Confirm timeliness of postings and payments.

  4. Inspect ledgers and supporting documents.

  5. Identify long-standing balances and ensure follow-up.

  6. Assess internal controls and processes for compliance.

‘The SRA Audit ensures law firms uphold integrity and transparency in handling client money. As auditors, your role is to evaluate compliance under the SRA Accounts Rules and ensure any material breaches are reported promptly’

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