A prominent accountancy firm has warned that compliance officers will have to shoulder extra responsibility if the Solicitors Regulation Authority succeeds in scrapping compulsory accountants’ reports.
The regulator last week outlined plans to remove the need for solicitors firms to supply annual reports from an independent accountant.
George Bull (pictured), head of Baker Tilly’s professional practices group, conceded that accountancy firms are ‘not jumping for joy’ about the proposals – but he added that compliance officers for finance and administration (COFAs) will be unlikely to welcome the extra responsibility either.
‘Under the proposals, the COFA will have to make a declaration to the SRA that all is in order with their client accounts,’ said Bull. ‘For some, it may be an unwelcome pressure to know that their head is on the block.’
Since the launch of the COFA role last year COFAs have been required to report material breaches to the SRA as they occur.
Under proposed new rules, they would have to sign a declaration they are satisfied that the firm is managing client accounts in accordance with the SRA Account Rules.
Bull said the compliance officer will now have to be more proactive, putting systems in place to ensure that he or she is made aware of breaches as they arise.
‘It is fundamental that client money must be safeguarded,’ he added.
'This is part of the COFA’s role and so taking full responsibility for this and signing declarations to this effect is not unreasonable. If a COFA isn’t comfortable with this, then they shouldn’t take the job without changing the firm’s systems to meet SRA requirements.’
Bull said independent accountancy firms can still play a role in the legal profession even if the SRA goes ahead with the change.
He suggested auditors might in future look to work with the SRA to review and report on a firm’s system for producing reliable financial forecasts. This could help reduce the time spent with so-called ‘high-impact’ firms, as well as help the firm themselves.
The SRA has said it will retain the power to require firms that pose a higher risk to client money should have their accounts audited.
The consultation, which ends on 18 June, says the current cost burden of filing annual reports ‘cannot be justified’ and the practice has ‘only limited benefits by way of consumer protection and overall management of the risk to client money’.