How Does an Accountant Help With an SRA Audit

For solicitors, the annual SRA Accountant’s Report can feel like one of the most stressful parts of running a legal practice. The rules around client money, reconciliations, interest, systems and controls are detailed, technical and regularly updated. In my opinion many law firms underestimate how much work sits behind maintaining compliance until the deadline approaches and the accountant starts requesting information. An SRA audit is not just a box-ticking exercise. It is a detailed review of how a firm protects client money and whether its internal systems meet the standards expected by the Solicitors Regulation Authority.

A good accountant plays a far bigger role than simply reviewing the numbers. Their job is to guide you through the regulations, identify weaknesses, prevent breaches, support your internal processes and ultimately confirm to the SRA that your firm is following the rules set out in the Accounts Rules. The best accountants act almost like a safety net, spotting risks before they turn into reportable issues.

Understanding What an SRA Audit Actually Involves

Accountants who carry out SRA audits are assessing whether a law firm is complying with the SRA Accounts Rules. These rules focus entirely on client money, so the accountant’s attention is on how you are handling funds that do not belong to the firm. The review covers client account transactions, office account transactions, reconciliations, interest calculations, residual balances, suspense accounts, transfers between clients, and any movement of money that could put client funds at risk.

Many firms assume an audit is just a quick check of the bank statements although it goes much deeper. The accountant will review systems, controls, workflows and internal processes. They look at whether the firm understands the rules, whether staff are trained properly, whether reconciliations are done on time and whether any breaches are being recorded and corrected appropriately.

How an Accountant Supports You Before the Audit Begins

One of the most valuable things an accountant does is help you prepare long before the formal audit starts. They check that your books are up to date, your client ledgers are accurate and your reconciliations have been completed monthly without delay. They will often review three-way reconciliations to confirm that the client ledger balance, the cashbook balance and the bank statement balance all match.

A good accountant will also point out patterns that lead to breaches, such as delays in paying disbursements, clients left with unreturned balances after completion or unexplained movements between the office and client accounts. Catching issues early can prevent them becoming reportable matters. In my experience firms that work closely with their accountant throughout the year usually experience smooth audits with minimal stress.

The Role of the Accountant During the Audit

During the audit the accountant reviews a sample of transactions and tests them against the SRA rules. For example, they may trace client funds from receipt to payment to ensure they have not passed through the office account incorrectly or been held longer than required. They also review whether client money has ever been used to settle office liabilities which is one of the most serious breaches.

The accountant will look at client-to-client transfers, transactions involving third parties, deposits paid to landlords, legal aid receipts, family law client funds and any scenario where client money flows through the firm. They examine whether interest has been allocated fairly and whether the firm has a clear policy for deciding how interest is calculated and when it should be paid. They also check whether the firm has proper approval processes for withdrawals from the client account and whether fee earners understand the difference between disbursements and client money the firm is holding for its own use.

Although the accountant is required to follow SRA auditing standards they also use their professional judgement. They assess whether the firm’s systems are robust enough to prevent misuse of client money rather than simply checking individual lines on the client ledger.

How an Accountant Helps You Fix Errors or Weaknesses

Most firms experience minor breaches at some point. These can include delays in banking client money, small ledger discrepancies, incomplete reconciliations, or old client balances that have not been returned. An accountant’s role here is to help you correct the issue and strengthen your controls so the breach does not repeat.

A skilled accountant will explain why the error happened and which internal process needs improving. They may recommend changes to your case management software, adjustments to how fee earners record disbursements, better segregation of duties in the accounts department or clearer policies for handling residual client balances. Where appropriate they will prepare a written management letter highlighting weaknesses in the system and recommending actions the firm should take.

In my experience firms value this part of the audit the most because it gives them a practical roadmap for how to reduce the risk of future problems.

How the Accountant Decides Whether a Report to the SRA Is Needed

Not every issue found during an audit must be reported to the SRA. The accountant must decide whether a breach is material, whether it has been corrected promptly and whether the firm has appropriate systems to prevent recurrence. If the breach is minor and has been fixed with no risk of client harm the accountant may conclude that the firm does not require a qualified report.

If the breach is serious or repeated the accountant will need to file a qualified report to the SRA. This does not mean the firm is in trouble automatically although it does indicate that the SRA may want to investigate further or request additional information. An accountant helps guide the firm through what this means and what steps to take next.

Supporting the Firm After the Audit

After the audit is complete the accountant usually provides a summary of findings, recommendations and any actions required. This may include changes to the timing of reconciliations, improvements to staff training, updates to written procedures or the implementation of new approval processes.

A good accountant will also review the firm’s risk register, help document any breaches that occurred during the year and assist the compliance officer for finance and administration (COFA) with their reporting duties. In my opinion this ongoing support is where accountants add the most value because it strengthens the firm’s long term compliance.

Why Having the Right Accountant Matters

An SRA audit is not something that should be handled by a generalist accountant. It requires specific knowledge of the SRA Accounts Rules and a clear understanding of how law firms operate. A specialist accountant can spot issues that a standard accountant might not recognise and can help the firm avoid expensive errors.

The right accountant acts like a partner to the COFA, providing advice throughout the year rather than only at audit time. They understand how small mistakes can become serious breaches if left unmanaged and they help firms build better systems that protect client money.

Conclusion

An accountant’s role in an SRA audit goes far beyond checking ledgers and bank statements. They analyse how your firm handles client money, assess whether your systems are strong enough to prevent breaches, guide you through the SRA rules, correct weaknesses, support the COFA and ensure you are confident about your compliance. With the right accountant the audit becomes an opportunity to strengthen the firm rather than something to fear.

In my opinion every law firm benefits from working with an accountant who understands the sector and can act as a long-term adviser rather than just a one-off auditor.