More than 1,000 firms are to be freed from the requirement to submit accountants’ reports to the Solicitors Regulation Authority.
The SRA Board today agreed new criteria for submission of accounts to lift the burden on smaller firms regarded as less of a risk.
Firms dealing exclusively with legal aid are already exempt from the requirement, and the SRA will expand that exemption to include all firms with an average account balance of less than £10,000 over a year and a maximum account balance of £250,000.
The changes are thought to affect around 1,000 law firms in England and Wales.
As well as lowering the burden on firms, the SRA will also seek to reduce its own workload by removing the requirement to submit so many accounts. More than 9,000 reports are submitted every year, of which around half are qualified by accountants for a perceived breach.
However, just 200 of these submissions lead to any referral or further investigation.
The reforms will also encourage accountants to use their professional judgment to assess reports they prepare and remove the need to qualify accounts for trivial breaches of accounting rules.
’Some firms may find that obtaining reports is very expensive because of their size and structure, so it makes sense to use accountants’ expert views in this way to ensure value for money,’ said Crispin Passmore, executive director for policy.
'Where firms hold smaller amounts of client money and are relatively low risk, relaxing the current arrangement is sensible.’
The SRA floated the idea last year of removing reporting requirements altogether, but it was felt that this would pose too great a risk for clients.
The current proposal went for consultation in November 2014 and received 42 responses.
SRA board chair Enid Rowlands (pictured) said the new policy is a sign of the organisation’s new emphasis on ‘proportionate’ measures which are more effective.
‘There are other ways of finding information which analyse risk which work better than adding this layer of bureaucracy,’ she added.