SRA (Solicitors Regulation Authority) audits are mandatory for all law firms and individuals the SRA regulates. The audit is designed to ensure that firms and individuals comply with the regulatory requirements and that they operate within the rules set out by the organisation.
Not many understand that SRA audits are not the same as statutory accounts audits, which can be performed by auditors registered with a recognised body. Also, it is essential for law firms and solicitors holding client assets to have these accounts audited by a qualified external accountant.
The following information provides a complete guide to understanding this concept better.
What is it?
It is a process conducted by an independent auditor approved by the SRA to assess a law firm’s compliance with the SRA’s regulations. The auditor will review various documents and records to determine whether the firm is operating within the rules set out by the authority.
Is it necessary?
In short, yes, the audit is necessary to ensure that law firms and individuals comply with the authority’s regulations. The regulatory body has a range of rules and requirements that firms must adhere to, and the inspection is designed to ensure these rules are being followed. Also, it assures the public that regulated law agencies are operating to the highest standards.
What is the process?
The process can vary depending on the size of the organisation and the nature of its activities. Generally, the auditor will request various documents and records from the organisation, such as client files, financial records, and compliance policies.
The individual will then review these documents to assess the firm’s compliance with the SRA’s regulations. They may also conduct interviews with staff members to gain a better understanding of the firm’s operations.
They may find specific common issues during the process that qualify as breaches. These include:
- Violations of the SRA’s Code of Conduct
- Inadequate record-keeping
- Lack of compliance policies and procedures
- Failure to comply with anti-money laundering regulations
- Insufficient client care procedures
- Inadequate financial controls
- Unauthorised withdrawals from client accounts
After the investigation, the auditor will produce a report that outlines their findings. The report will identify any areas of non-compliance and provide recommendations for improvement. The firm will then have a set period to address the issues identified in the report.
What are the consequences of failing an SRA audit?
The consequences can vary depending on the severity of the issues identified. Sometimes, the authority may warn the organisation or require them to undertake additional training. In more severe cases, the authority may impose fines or take regulatory action against the firm. This could include setting conditions on the organisation’s practice or revoking their licence to practise.
Chartered Accountancy Firms with Registered Auditors
Registered auditors at chartered accountancy firms are qualified to conduct audits of financial statements and internal controls, which can be a valuable asset during SRA audits. They can perform the audit themselves, understanding a firm’s financial statements to ensure they comply with the SRA. This can help ensure that the firm’s financial statements are accurate and reliable, essential for demonstrating compliance with the regulations.
Furthermore, a chartered accountancy firm with registered auditors can provide valuable insights and recommendations for improving financial controls and accounting practices to enhance compliance and mitigate risks. Therefore, hiring such firms can benefit law firms, ensuring their audits are fair and accurate.