How Does an Accountant Help With an SRA Audit

At Towerstone Accountants we provide specialist accountancy services for solicitors and law firms operating under SRA regulation. This article has been written to explain How does an accountant help with an SRA audit in clear practical terms so you understand how the rules apply in day to day practice. Our aim is to help you stay compliant protect client money and make informed financial decisions.

An SRA audit can feel daunting for any law firm regardless of size. Even well run practices can feel under pressure when an external regulator starts asking detailed questions about systems records and controls. In my experience the difference between a stressful audit and a controlled one often comes down to how involved the accountant is before during and after the process.

An audit carried out or overseen by the Solicitors Regulation Authority is not just about ticking boxes. It is about demonstrating that the firm understands its obligations and can evidence compliance in real terms. That is where an accountant becomes invaluable. My role is not simply to provide numbers. It is to translate regulatory expectations into financial systems processes and evidence that stand up to scrutiny.

In this article I will explain how an accountant helps at every stage of an SRA audit. I will focus on practical support rather than theory and I will highlight the areas where accountant involvement most often prevents issues escalating.

Understanding what an SRA audit is really testing

Before looking at the accountant’s role it is important to understand what the audit is actually testing.

An SRA audit typically focuses on whether the firm

• Protects client money at all times

• Maintains proper accounting records

• Identifies and manages financial risk

• Complies with the Accounts Rules

• Has effective oversight and controls

Although the audit may include interviews and policy reviews the backbone of the process is financial evidence. That is why accountants sit at the centre of audit readiness.

Helping the firm prepare well in advance

One of the most important ways an accountant helps is by preparing the firm long before an audit begins.

In practice this means

• Reviewing client and office account structures

• Ensuring accounting software is configured correctly

• Making sure client money never passes through business accounts

• Confirming records are complete and up to date

• Addressing weaknesses as part of normal operations

Firms that involve their accountant early rarely need to panic when an audit is announced because the groundwork has already been done.

Interpreting the SRA Accounts Rules in practice

The Accounts Rules are principles based rather than prescriptive. That gives firms flexibility but also creates uncertainty.

An accountant helps by

• Interpreting how the rules apply to the firm’s structure

• Translating principles into practical accounting procedures

• Advising on grey areas before they become breaches

• Ensuring interpretations are consistent and defensible

This interpretation role is crucial because many breaches arise from misunderstanding rather than intent.

Reviewing and strengthening client account controls

Client money is always a central audit focus.

An accountant will typically review

• How client money is received recorded and held

• Whether designated client accounts are used correctly

• How payments are authorised and documented

• How transfers to office accounts are controlled

• How interest and residual balances are treated

Where weaknesses are found the accountant helps design controls that are workable not theoretical. Controls that staff actually follow are far more effective than complex rules that exist only on paper.

Performing and reviewing client account reconciliations

Reconciliations are often the single most important piece of evidence in an SRA audit.

An accountant helps by

• Designing reconciliation formats that meet SRA expectations

• Performing or independently reviewing reconciliations

• Ensuring they are completed at the correct frequency

• Investigating differences promptly

• Documenting explanations and resolutions clearly

Inspectors are rarely concerned by the fact that differences arise. They are concerned when differences are unexplained unresolved or repeated.

Identifying shortages and surpluses early

Client account shortages and surpluses are serious matters.

An accountant helps the firm

• Identify shortages as soon as they occur

• Quantify the exact amount and cause

• Advise on immediate corrective action

• Assess whether regulatory notification is required

• Put measures in place to prevent recurrence

Without this support firms sometimes delay action which increases regulatory risk significantly.

Supporting compliant billing and fee transfers

Billing and fee transfers are high risk audit areas because they sit at the boundary between client and office money.

An accountant helps ensure that

• Fees are billed promptly and accurately

• Only billed fees are transferred

• VAT is applied correctly

• Transfers are properly authorised

• Clear audit trails exist between bills and bank movements

During an audit being able to show a clear logical trail from work done to bill raised to transfer made provides strong reassurance.

Reviewing ledger integrity and audit trails

Inspectors often examine accounting ledgers in detail.

An accountant will review

• Client ledger balances by matter

• Suspense or control accounts

• Manual journals and adjustments

• Historical postings

• Access permissions within the accounting system

This review often highlights issues such as informal workarounds or inconsistent postings which can be corrected before they attract attention.

Ensuring client money is not treated as income

One of the most fundamental requirements is that client money is never treated as firm income.

An accountant helps by

• Ensuring client balances do not appear in profit and loss accounts

• Confirming revenue recognition is correct

• Aligning accounting treatment with regulatory treatment

• Ensuring tax reporting reflects the correct position

This alignment also reduces risk with bodies such as HMRC where inconsistencies can raise questions.

Supporting documentation and evidence preparation

An SRA audit involves a large volume of documentation.

An accountant helps organise and prepare

• Reconciliations and supporting schedules

• Client account summaries

• Bank statements and confirmations

• Policies linked to financial controls

• Evidence of reviews and approvals

Well organised documentation shortens audits and reduces follow up queries. Disorganised records invite deeper inspection.

Acting as a point of contact during the audit

During the audit itself an accountant often acts as a key point of contact.

This includes

• Answering technical accounting questions

• Explaining reconciliations and controls

• Providing additional schedules quickly

• Clarifying how systems operate in practice

• Supporting the COLP and COFA during discussions

Having an accountant present reduces the risk of misunderstandings and ensures responses are accurate and consistent.

Helping staff respond confidently and accurately

Auditors may speak to finance staff and sometimes fee earners.

An accountant helps by

• Preparing staff on what to expect

• Explaining common audit questions

• Ensuring staff understand their processes

• Reducing anxiety through clarity

Staff who understand why controls exist are far more confident in explaining them.

Identifying and addressing issues constructively

No firm is perfect and most audits identify some issues.

An accountant helps by

• Assessing the seriousness of findings

• Distinguishing between technical breaches and systemic issues

• Advising on corrective actions

• Helping implement changes quickly

• Documenting improvements clearly

Inspectors respond far more positively to firms that identify and correct issues proactively.

Supporting regulatory reporting where needed

If issues need to be reported to the SRA an accountant provides crucial support.

This includes

• Quantifying financial impact accurately

• Preparing supporting calculations

• Ensuring disclosures are complete and factual

• Avoiding speculation or understatement

Accurate reporting protects both the firm and its principals.

Post audit follow up and improvement

The accountant’s role does not end when the audit finishes.

After the audit they often help

• Implement recommended improvements

• Update processes and controls

• Train staff where gaps were identified

• Strengthen documentation

• Monitor ongoing compliance

This turns the audit into a catalyst for improvement rather than a one off event.

Reducing future audit risk

Long term accountant involvement reduces audit risk significantly.

This is achieved by

• Regular internal reviews

• Ongoing reconciliation oversight

• Early identification of emerging risks

• Supporting better financial governance

Firms that treat their accountant as a strategic adviser rather than a compliance afterthought are consistently better prepared.

Common gaps accountants often uncover

There are recurring issues that accountants frequently identify during audit preparation.

• Late or incomplete reconciliations

• Long standing residual balances

• Informal fee transfers

• Over reliance on individuals rather than systems

• Weak documentation of reviews

Addressing these early prevents them becoming formal findings.

Final thoughts

An SRA audit is fundamentally about trust. The regulator wants confidence that client money is protected and that the firm understands and manages financial risk properly.

An accountant plays a central role in providing that confidence. From designing compliant systems and performing reconciliations to supporting audits and implementing improvements an accountant turns regulatory principles into practical reality.

In my experience firms that involve their accountant closely in SRA compliance do not just pass audits more smoothly. They run stronger more resilient practices overall.

You may also find our guidance on How do law firms prepare for an SRA inspection and What should solicitors do if they receive an SRA audit notice useful when reviewing related SRA and accounting obligations. For a broader overview of solicitor accounting and compliance topics you can visit our solicitors accounts rules hub which brings all related guidance together.