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Why choosing the right accountant counts for legal professionals

Date:15 NOV 2018
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Auditing for solicitors and legal professionals is a specialist area requiring expert knowledge of complex regulations. Declan McCusker, an expert in statutory audits at Perrys Chartered Accountants, explains why internal audits shouldn’t be ignored.

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http://sentpressrelease.com/pressrelease/image/60514/84370/V2h5IGNob29zaW5nIHRoZSByaWdodCBhY2NvdW50YW50IGNvdW50cyBmb3IgbGVnYWwgcHJvZmVzc2lvbmFscy5qcGc=Internal audits are incrediblyimportant for any legal business, ensuring that they provide efficient,compliant and secure services for their clients. Carrying out these audits is a complex and specialist job that requiresexpertise and a thorough understanding of the sector, so it’s important tochoose a chartered accountant with an in-depth knowledge of the area. 

There are several importantguarantees that every legal firm and individual lawyer must offer - and they’rethe reason that internal audits cannot be ignored by any lawyer in the UK.

Transparency matters

Law practice auditors are ofteninvited to audit a lawyer or legal office when a complaint has been made. Thismight be from a fellow professional, a client or someone else connected to thebusiness. Often a complaint is related to financial mismanagement. This couldinvolve fraud, such as when clients believe they’ve been overcharged, forexample, or when legal professionals’ expense claims are being questioned.

It makes sense then to implementan auditing programme so that any irregularities are spotted before problemsarise. This financial transparency not only avoids the risk of costly claimsand legal action, but also provides businesses with a trustworthy profile topresent to existing and potential clients.

Identify weaknesses

Audits for law firms should be undertaken on a regular basis inorder to identify any areas of weakness or protocols that are failing to meetthe required standards. Objective reviews of working practices, policies andprocedures can help to highlight areas that require additional input. These caninclude general risk prevention, and ensuring that all staff are meetingcompliance requirements at all times. Audits can highlight issues such asbilling fraud, inefficiencies, and poor case management. Identifying andresolving these weaknesses with regular audit checks ensures businesses arecompliant and that reputations are maintained.

SRA Handbook and compliance

Every year, solicitors arerequired to report to the Solicitors Regulation Authority (SRA) about moniespassing through client accounts, and ensure they adhere to the rules outlinedin the SRA Handbook.

Last year, following extensiveconsultation, the SRA announced the first phase of changes to its Handbook,acknowledging that the current rules were too complex, onerous and costly toapply and that there was broad support for simplifying it.

As a result, the first phase ofrevisions to the SRA Handbook created shorter and clearer principles and codes,as well as much simpler Accounts Rules. The revisions mean accountants shouldbe able to produce shorter, faster and more accurate risk-focused audits forsolicitors in less time.

The SRA Code of Conduct requiresthat firms must:

  • Have appropriate systems     and controls in place to achieve and comply with all principles, rules,     outcomes and other requirements of the handbook. 
  • Identify, monitor and     manage risks to the achievement of all outcomes, rules, principles and     other requirement of the handbook and take steps to address issues     identified. 
  • Ensure compliance with     all reporting and notification requirements. 

Auditing assists indemonstrating compliance with these standards.

Audit results can also form partof the COLP (Compliance Officers for Legal Practice) annual declaration, andgive them an understanding of the firm’s risk profile. Professional IndemnityInsurers (PII) will welcome firms that use auditing as part of their overallrisk management strategy.

Lexcel, the Law SocietyConveyancing Quality Scheme and the Wills & Inheritance Quality Scheme,meanwhile, all include file audit review requirements.

Delivering solutions

As well as reviewing the basicsof a business’s services – such as billing and collection policies; closing andarchiving cases; and initial risk assessments – a professional audit can reviewthe quality of a firm’s technical performance, and look at proactivity,cost-effectiveness or time recording in more detail. More sophisticated scoringand reporting mechanisms can also be introduced, and reports created toidentify trends, both good and bad.

Of course, no business – legalor otherwise – looks forward to the auditing process, but the benefits ofincreased productivity and streamlined services mean it should be regarded as apositive experience.

Choosing an accountant with thedepth of experience to interpret ever-changing rules and regulations in theindustry is crucial. Look for an accredited firm with a detailed knowledge ofrequirements specific to the legal profession, and check for recommendationsand testimonials from other clients within the legal sector.

Perrys is a firm of chartered accountants based in London and Kent with 7 branches located in City, Mayfair, Orpington, Medway, Tunbridge Wells, West Malling and Wrotham. They provide a range of accountancy and tax planning services to clients ranging from start-up businesses and soletraders to large companies.