Does Your Law Firm Need an SRA Audit?

Every law firm that handles client money must complete an annual, independent review of its accounts under the Solicitors Regulation Authority (SRA) Accounts Rules.

Handling client money brings risks and regulatory mistakes can be costly.

Did you know even minor breaches in account handling can trigger SRA intervention? It’s one of the regulator’s most serious enforcement powers. In certain cases, such as suspected dishonesty or breaches of the Accounts Rules, an intervention can lead to suspension of a practising certificate and effectively bring a solicitor’s practice to an end.

That’s a risk no firm can afford to take. An SRA audit is a critical process that demands meticulous preparation and robust financial management – it’s something we help many solicitor firm manage with confidence every year.

 

What’s an SRA audit and what does it cover?

An SRA audit provides assurance that your clients’ money’s safeguarded, accurately accounted for, and that effective internal controls are in place to prevent misuse or error.

Under the current SRA Accounts Rules, firms that hold or receive client money (or operate joint accounts or act as signatory on clients’ own accounts) must obtain an independent Accountant’s Report (AR1) within six months of the accounting period end.

Need-to-knows:

• The report, often referred to as the ‘SRA audit’, ‘SRA Accounts Rules audit’ or ‘Solicitor accounts audit’, is distinct from a statutory audit.
• It must be prepared by a qualified accountant (e.g. member of ICAEW, ACCA) who’s also a registered auditor, or works for a registered audit practice.
• If the accountant identifies material breaches or circumstances that place client money at risk, the report is deemed ‘qualified’ and must be submitted to the SRA.
• The AR1 form is the standard form to record the findings. If qualified, it must be attached and submitted via the SRA’s online portal.

 

Common problem areas in SRA audits

We frequently hear from law firms who encounter these challenges during the audit – issues that lead to regulatory concern:

• Incomplete financial records or missing documentation
• Inadequate transaction detail
• Delayed reconciliation processes
• Insufficient audit trails and traceability
• Late or irregular reconciliations (missing the ‘every five weeks’ rule)
• Overdrawn or misrecorded client accounts
• Unresolved or unclaimed residual balances
• Commingling of client and office funds
• Weak internal controls or insufficient oversight
• Reactive compliance only at audit time rather than ongoing monitoring
• Failure to correctly identify and report material breaches

Being proactive and maintaining strong internal processes significantly reduces the risk of qualification or SRA scrutiny. But you don’t have to handle it alone.

 

TC Group can support your firm with SRA Audits

Our specialist Audit & Assurance teams provide a comprehensive SRA Audit and AR1 submission service, giving you total confidence that your firm remains compliant.

Our friendly and experienced team works with busy legal services firms across the UK to prepare for audits, strengthen internal controls, and ensure smooth submission of the annual AR1.

We’ll:

• Assess your current systems, client accounts, reconciliations, and internal controls
• Perform audit tests, sample file reviews, ledger checks
• Prepare and file the AR1 with the SRA if needed
• Provide a clear report with recommendations and an action plan
• Complete most audits within 3-4 days, depending on complexity, with minimal disruption

Get in touch

 

FAQs on SRA Audits

Who needs an SRA Audit?

Any law firm that handles client money is required to have an annual, independent review of its accounts under the Solicitors Regulation Authority (SRA) Accounts Rules.

This requirement applies to firms that:

• Hold or receive client money
• Operate joint accounts with clients
• Act as a signatory on a client’s own bank account

Under the current SRA Accounts Rules, these firms must obtain an independent Accountant’s Report (AR1) each year. The report must be completed within six months of the firm’s accounting period end.

The Accountant’s Report must be prepared by a qualified accountant, such as a member of ICAEW or ACCA, who is also a registered auditor or works for a registered audit practice.

How often do you need an SRA Audit?

An SRA accountant’s report (audit) is generally required annually, within six months of the accounting period end.

Who is required to be involved in an SRA Audit?

The key people usually involved will be the external reporting accountant, COFA (Compliance Officer for Finance and Administration), the law firm’s legal cashier/accounts team, and the firm’s partners and directors.

There may be queries on the files that can only be answered by the solicitor running the case or their secretary, so it is important that they are on hand to assist as required.