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What are the implications of the SRA Accounts Rules Review (Consultation June 2016)

The SRA has recently published details of the next phase of their regulatory reform programme which includes a review of the Accounts Rules. This is the third and final phase of proposed changes to the Accounts Rules.

Background of the regulatory reform programme

Phase 1 – Minor changes to the Accountants Report Form, exemptions for firms where 100% of their work is Legal Aid Agency funded and the removal of the requirement to submit reports to the SRA where they are not qualified – implemented October 2014

Phase 2 – Removal of detailed testing and a move to the Reporting Accountant applying a risk based approach to their work with a focus on the risks to client money, further exemptions from the requirement to obtain Accountants Reports for firms handling small amounts of client money – implemented November 2015

Phase 3 – looking more widely at the existing Accounts Rules and making proposals for a broader change – Consultation closes 21 September 2016 – implementation date TBC, but not expected before 2017.

Reasons for the changes

  • The main drivers for the proposed changes are as follows:
  • The current accounts rules have not changed significantly for many years;
  • They are prescriptive and restrictive, and focus on ensuring all firms handle money in the same way;
  • Many firms find themselves in technical breach of the Accounts Rules in circumstances where there are no real risks to client money.

This suggests that the Accounts Rules are now outdated and are not focused on the key risks to client money.

You can view our full summary of the main proposals here: http://www.macintyrehudson.co.uk/blog-post/sra-accounts-rules-review-consultation-june-2016

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