SRA Accountants Audit Report Spot Checks – have you got all the answers?

2025 has begun with the SRA consultation on client monies being in full swing and the start of the SRA spot checks on law firms and their accountant's audit reports. The SRA first mentioned this at the Compliance Officer Conference in November 2024. Firms were informed in December if they had been chosen for a spot check with the window opening for the return of the questionnaire in January 2025.

So what did the questionnaire ask and how did we answer?

The first five questions were asking if you had an accountants report, was it qualified and could you please upload the report. Interestingly, questions six to twelve were all about your residual balances.

So, how many residual balances do you have in your firm? How long have you had them? What’s the value of them? How many current files have residual balances?

For many firms residual balances have been a problem in the past but if we are adhering to Rule 2.5 of the SRA Accounts Rules we should not be getting very many of them at all.

Also, are we keeping residual balances to keep up the amount of money in our client account to get more interest on that money?

Learning Objectives:

• The Accountants Audit Report Spotchecks – why are they now being undertaken
• What questions did the questionnaire ask?
• What does the SRA Accounts Rules say about residual balances
• Why are residual balances an issue in lots of firms?
• How should we deal with them
• What are the knock on effects of having these residual balances
• How do they fit into the big picture of the SRA consultation on client money