Annually, all solicitors and law firms in England and Wales are subject to a Solicitors Regulation Authority (SRA) audit, whereby auditors issue reports outlining that the solicitors have acted appropriately in terms of money held on behalf of clients. This audit is intended to build up trust between potential and existing clients, and the public in general.
The auditors perform very detailed tests on samples of transactions, to ensure that law firms have adhered to all the rules. These tests invariably take up valuable and significant employee time. Like any solicitor will tell you, the lesser time the auditors spend in the office, the better! Also, the more time the auditors spend in the office, the higher the cost of the audit.
On the other hand, to be fair to the auditors, the SRA rules are onerous and complicated, hence why it takes copious amounts of time for the auditors to verify.
Obviously, no solicitor deliberately breaches rules, but they do place a lot of trust on the legal cashiers to ensure that the transactions comply with all of the guidelines. Nevertheless people are human and mistakes are inevitable. From an auditor’s perspective, discussing a breach with a cashier is a somewhat ‘delicate’ task for a few reasons. Firstly, this goes against one of the most fundamental concepts of accountancy – materiality. Secondly, the mistake may be simple and honest, but the potential for an auditor’s scrutiny to sound targeted and critical is high. In fact, in my experience, most auditors are reticent to hold such conversations.
Interestingly, auditors place a lot of value on the systems employed by the law firms, and so the more robust the system, the lower the risk of a breach in their eyes. This in turn means that due to the reporting and audit trails provided by good business management systems, less time (and therefore cost) is incurred to complete audits.
Our enterprise resource planning solution for legal services providers, LexisOne™, is a case in point. Processes can be automated and configured in such a way that transactions based on SRA guidelines become par for the cause, substantially minimising risks pertaining to the way client monies are handled. The best thing of all is that annual contact with auditors is minimal, allowing the solicitors to concentrate on their core area of legal service delivery. That has to be a good thing!