What should solicitors include in their accountants’ report to the SRA?
Learn what solicitors must include in their accountants’ report to the SRA. Understand reporting requirements, common issues, and how to stay compliant with the Solicitors Accounts Rules.
Every law firm that handles client money must comply with the Solicitors Regulation Authority (SRA) Accounts Rules. One of the key compliance obligations under these rules is the Accountant’s Report, which provides independent assurance that client funds have been handled correctly.
The report is a vital part of the SRA’s oversight process. It ensures that solicitors maintain accurate records, keep client and office money separate, and follow the rules designed to protect client interests.
This article explains what solicitors should include in their accountants’ report to the SRA, what the report covers, and how to ensure it is prepared correctly.
What is the SRA Accountant’s Report?
An Accountant’s Report is an independent review carried out by a qualified external accountant to confirm that a law firm’s financial systems comply with the SRA Accounts Rules.
It applies to any firm that:
Holds or receives client money.
Operates a client account.
Handles financial transactions on behalf of clients.
The report is usually prepared annually and submitted to the SRA if any material breaches are identified. If no such issues are found, the accountant’s report is retained by the firm but not sent to the regulator.
Purpose of the report
The main aim of the accountant’s report is to confirm that:
Client money has been properly safeguarded.
There are effective systems and controls to comply with the SRA Accounts Rules.
Any breaches have been identified, investigated, and corrected.
It helps the SRA monitor compliance across the legal sector and provides reassurance to clients that their funds are secure.
Key areas covered in the accountant’s report
A solicitor’s accountant’s report typically includes several sections that examine the handling of client funds, record keeping, and internal controls.
1. Firm details and authorisation
The report must clearly identify:
The name of the law firm and SRA number.
The accounting period covered.
The name and qualifications of the reporting accountant.
Confirmation that the accountant is independent and suitably qualified to carry out the review.
This establishes accountability and ensures transparency in the review process.
2. Review of client accounts and reconciliations
The accountant must review all client bank accounts, ensuring that:
Separate client accounts are maintained for different clients or matters where appropriate.
Monthly three-way reconciliations are completed (bank statement, client ledger, and cashbook).
Reconciliations are reviewed, signed, and dated by a senior person at the firm.
Any differences or errors are investigated promptly.
Accurate reconciliations are one of the strongest indicators that client money is being handled correctly.
3. Segregation of client and office money
One of the key checks in the report is that client money is kept separate from office money. The accountant will review transactions to confirm that:
Client funds are deposited only into client bank accounts.
Office expenses are paid solely from the office account.
Transfers between client and office accounts are supported by appropriate billing or written authority.
Improper transfers or the use of client money for office purposes would be reported as breaches.
4. Compliance with client money rules
The accountant must verify that the firm complies with specific SRA requirements, including:
Client money is returned promptly at the end of a matter.
Interest on client funds is calculated and paid where appropriate.
Withdrawals from client accounts are properly authorised.
The firm has clear written procedures for handling client funds.
These checks confirm that the firm follows both the letter and spirit of the SRA Accounts Rules.
5. Systems and internal controls
The report should evaluate the firm’s internal controls to ensure that financial risks are managed effectively. This includes assessing:
Segregation of duties between fee earners and finance staff.
Approval processes for payments and transfers.
Oversight by the Compliance Officer for Finance and Administration (COFA).
Whether any staff training on accounts compliance has been provided.
If the accountant identifies weaknesses in controls, they will recommend improvements to prevent future breaches.
6. Breaches and corrective actions
The accountant must record any breaches of the SRA Accounts Rules discovered during the review. These are classified as either:
Material breaches, which must be reported to the SRA immediately.
Non-material breaches, which should still be documented and corrected internally.
Examples of breaches that may be considered material include:
Using client money to pay office expenses.
Failing to perform regular reconciliations.
Holding unexplained balances in client accounts.
Delays in returning client funds after a matter has closed.
The accountant’s report must describe what steps have been taken to correct these issues and whether they have been resolved.
7. Confirmation and signature
At the end of the report, the accountant must:
Confirm whether the firm’s records comply with the SRA Accounts Rules.
State whether any material breaches were found.
Sign and date the report, confirming its accuracy.
The solicitor or COFA may also need to countersign the report to acknowledge the findings and confirm that any recommendations will be implemented.
When to submit the accountant’s report to the SRA
Law firms only need to submit the accountant’s report to the SRA if it contains material breaches. Reports with no material issues should still be completed and retained for at least six years in case of inspection.
The submission deadline is usually six months after the end of the accounting period. Late or incomplete reports can result in regulatory penalties or further investigation.
Common issues identified in accountants’ reports
Some of the most frequent findings in SRA accountant reports include:
Failure to reconcile client accounts monthly.
Misallocation of client funds to the wrong matter.
Retention of residual client balances.
Inadequate documentation for transfers between accounts.
Weak internal controls or lack of COFA oversight.
Addressing these issues promptly helps maintain compliance and prevents potential disciplinary action.
Best practice for preparing the accountant’s report
To ensure a smooth review process and an accurate accountant’s report, solicitors should:
Keep complete, up-to-date accounting records throughout the year.
Perform monthly reconciliations and resolve discrepancies quickly.
Ensure all staff handling money understand SRA requirements.
Provide the accountant with full access to ledgers, bank statements, and policies.
Address any identified issues before the review period ends.
A proactive approach not only simplifies the reporting process but also reduces the risk of material breaches.
How accountants assist solicitors with SRA reporting
Experienced accountants who specialise in legal sector finances play a vital role in ensuring compliance. They:
Review client and office accounts in line with SRA rules.
Identify potential breaches early.
Prepare and file accountant’s reports accurately and on time.
Advise on improving systems and processes.
Support the firm’s COFA in maintaining ongoing compliance.
Having a knowledgeable accountant helps solicitors manage risk, protect client money, and maintain the firm’s professional integrity.
The bottom line
An SRA accountant’s report is not just a regulatory formality—it is an essential safeguard for both law firms and their clients. It ensures that solicitors manage client money properly, maintain transparent records, and comply with the Solicitors Accounts Rules.
By including all relevant details—such as reconciliations, breaches, internal controls, and confirmation of compliance—solicitors can demonstrate to the SRA that their financial systems are robust and trustworthy.
Working with an experienced legal accountant ensures accuracy, reduces risk, and gives both the firm and its clients confidence in the firm’s financial integrity.