How Do Law Firms Prepare for an SRA Inspection

An inspection by the Solicitors Regulation Authority (SRA) is one of the most important compliance checks a law firm can face. These visits ensure that solicitors are following professional standards, protecting client money, and maintaining ethical conduct. While an inspection can seem daunting, with the right preparation and internal controls, it can run smoothly and demonstrate your firm’s commitment to compliance. This article explains how law firms can prepare for an SRA inspection, what inspectors review, and how to avoid common pitfalls.

Why the SRA Conducts Inspections

The SRA carries out inspections, also known as compliance visits, to make sure law firms and solicitors are following the SRA Standards and Regulations, including the SRA Accounts Rules.

An inspection may be scheduled as part of a routine compliance programme or triggered by specific events such as:

  • Complaints or reports of misconduct.

  • Issues identified in an accountant’s report.

  • Concerns about client money handling.

  • Changes in ownership, management, or structure of a firm.

The main goal of an inspection is to protect clients and uphold public confidence in the legal profession.

What to Expect from an SRA Inspection

An SRA inspection usually begins with advance notice, although in urgent cases it may be unannounced. The SRA will inform the firm of:

  • The purpose of the visit.

  • The expected duration (typically one to three days).

  • The documents and information required in advance.

  • The officers or departments to be interviewed.

The SRA’s inspection team may include investigators, accountants, and legal compliance officers. During the inspection, they will review your firm’s procedures, systems, and records to ensure compliance with the SRA Code of Conduct and Accounts Rules.

Step 1: Review Your Compliance Framework

The first step in preparing for an SRA inspection is to assess your firm’s overall compliance framework. Ensure that:

  • Your firm’s compliance officer for legal practice (COLP) and compliance officer for finance and administration (COFA) understand their responsibilities.

  • Written compliance policies are up to date and accessible to all staff.

  • Risk management procedures, including anti-money laundering (AML) and data protection, are properly documented.

  • Training records show that all staff have completed relevant compliance training.

A robust compliance framework demonstrates to inspectors that your firm takes its regulatory duties seriously.

Step 2: Check Your Client Account Procedures

The SRA pays close attention to how firms handle client money. To prepare, make sure that:

  • Client and office accounts are clearly separated.

  • Funds are transferred only with proper authorisation.

  • Client ledger reconciliations are completed monthly and reviewed by management.

  • Any residual balances are managed and returned appropriately.

  • Breaches are recorded and reported to the SRA when required.

If you use accounting software, ensure it is SRA-compliant and that reports are readily available for review. An accountant experienced in solicitor accounts can help confirm that your systems align with the SRA Accounts Rules.

Step 3: Review Anti-Money Laundering (AML) Procedures

AML compliance is a major focus of SRA inspections. The regulator expects firms to have effective systems to identify and prevent money laundering. Review your procedures to ensure that:

  • You have a documented Firm-Wide Risk Assessment (FWRA).

  • Customer due diligence (CDD) and enhanced due diligence (EDD) are carried out consistently.

  • Source-of-funds and source-of-wealth checks are recorded.

  • Suspicious activity reports (SARs) are filed promptly when required.

  • Staff are trained regularly on AML policies.

The SRA may ask to see your FWRA and samples of client due diligence files, so keep them organised and up to date.

Step 4: Prepare Financial and Accounting Records

Inspectors will expect full visibility of your financial position and accounting processes. Gather:

  • Annual accounts and management reports.

  • Bank statements for client and office accounts.

  • Copies of the latest accountant’s report.

  • Records of any identified breaches and how they were remedied.

Ensure your accountant has reviewed your records recently. A professional familiar with SRA regulations can identify and correct potential weaknesses before the inspection.

Step 5: Check Your File Management and Record Keeping

The SRA will review a selection of client files to assess compliance with professional standards. Files should demonstrate:

  • Clear records of instructions and client communication.

  • Evidence of conflict checks and client identification.

  • Proper authorisation for transactions and disbursements.

  • Up-to-date correspondence and billing documentation.

Inconsistent or incomplete file management is one of the most common issues identified during inspections. Regular internal file reviews can help you identify and fix problems early.

Step 6: Ensure Your COLP and COFA Are Ready

Your firm’s COLP and COFA are central figures during an SRA inspection. They should be prepared to:

  • Explain how compliance systems work in practice.

  • Provide records of breaches and how they were handled.

  • Show evidence of ongoing monitoring and reporting.

  • Demonstrate how risks are managed and escalated.

Inspectors often focus on how effectively the COLP and COFA monitor compliance and take corrective action. They should be ready to discuss these processes confidently and transparently.

Step 7: Conduct an Internal Compliance Audit

Before the inspection, consider running an internal compliance audit or mock review. This helps identify and address any weaknesses before the SRA arrives.

An independent accountant or compliance consultant can:

  • Test your client money procedures.

  • Review your AML documentation and staff training records.

  • Assess your reporting and breach management systems.

  • Highlight areas that may attract SRA scrutiny.

Carrying out a pre-inspection review shows that your firm is proactive about compliance and reduces the risk of last-minute surprises.

Step 8: Communicate with Staff

All staff members should understand their role during the inspection. Provide a short briefing to explain:

  • Why the SRA is visiting.

  • What inspectors may ask about.

  • How to direct questions or document requests to the appropriate person.

Ensure that everyone knows where to find policies, procedures, and key records. Calm and cooperative staff make a positive impression during the inspection.

Step 9: Organise Documentation for Easy Access

Having well-organised records will make the inspection run smoothly. Prepare digital or physical folders containing:

  • Compliance policies and risk assessments.

  • AML and client due diligence records.

  • Client and office account reconciliations.

  • Breach registers and internal audit reports.

  • Insurance certificates and professional indemnity documentation.

Organised records reflect good governance and help inspectors complete their review efficiently.

Step 10: After the Inspection

Once the inspection is complete, the SRA will issue a report summarising their findings. This may include recommendations or requirements for improvement.

If no significant issues are found, the matter is closed. If weaknesses are identified, your firm will be given a timeframe to implement corrective measures and provide evidence of compliance.

Take any feedback seriously and use it as an opportunity to strengthen your firm’s procedures.

How an Accountant Can Support SRA Inspection Preparation

An accountant who specialises in law firms plays an important role in preparing for an SRA inspection. They can:

  • Review your financial controls and client account compliance.

  • Ensure your records meet SRA Accounts Rules.

  • Prepare reconciliations and management reports.

  • Conduct internal audits and flag any potential breaches.

  • Liaise with the SRA during inspections involving financial matters.

Having a trusted accountant helps demonstrate that your firm maintains robust financial oversight and takes regulatory compliance seriously.

Summary

Preparing for an SRA inspection involves reviewing your compliance framework, financial systems, AML procedures, and client file management. Ensuring your COLP and COFA are well-prepared, conducting internal reviews, and keeping records organised will make the process smoother and less stressful.

With the support of an experienced accountant and compliance advisor, your firm can face an SRA inspection confidently, knowing that your financial management and client care standards meet the regulator’s expectations.