The Law Society has indicated that they plan to conduct more frequent monitoring visits of solicitor practices with the aim that each firm will be reviewed at least every 3-4 years. This may be in part due to the increased instances of heavy losses incurred by the law Society due to practice closures where the subsequent investigation found that compliance controls in place were inadequate.
Crowe Horwath has assisted many solicitor practices in planning for inspections, helping firms put in place the necessary controls and procedures that will be expected by the investigating accountant. Also, should any issues arise that require a follow up, we can also guide the solicitor firm in the appropriate response to the Law Society
In advance of the inspection the solicitor firm should:
- Confirm with the Law Society that the proposed date is acceptable
- Ensure all key staff will be available to meet the investigating accountant on the day of the inspection
- Put their own accountant on notice of the impending inspection by the Law Society and consider engaging them to undertake a preliminary inspection of the records in advance of the inspection
- Ensure both client and office accounts are fully written up to date and a balancing statement prepared
On the day of the inspection the firm should have the following to hand:
- A list of all staff – their details, roles and responsibilities
- Details of the signatories on the office / client accounts
- A schedule of all bank accounts maintained by the practice together with details of any overdraft facility in place
- Copy of professional indemnity cover and details of any claims made
- Copy of practice certificates
- Confirmation of status of PAYE / VAT (ROS printouts)
The key matters which will be examined during the inspection are as follows:
- That the solicitor is personally solvent and their tax affairs are up to date
- The books and records of the firm should be written up weekly by experienced personnel, regular client balancing statements should be completed and the system closed off on a monthly basis. The solicitor firm should have an appropriate Law Society approved accounting package with regular back up procedures in place and appropriate up to date anti-virus and firewall security
- All tax returns (PAYE & VAT) should be submitted on a timely basis and be promptly discharged
- No personal transactions should appear in the client account
- If any credit balances arose in the year on the office side of the ledger, or if any debit balances arose, how did they arise and were they cleared promptly?
- Does the firm hold dormant accounts where funds or fees remain in the client account, for an excessively long period of time? An aged list report will easily identify such inactive accounts
- No ledger to ledger transactions should occur
- A register of undertakings should be maintained in addition to a register of deeds
- Does the firm hold any unstamped / unregistered documents?
- Does the solicitor hold any power of attorneys?
- Is the firm familiar with deposit interest obligations?
- Is the client name on the cheque / draft drawn on the bank?
- How well does the firm comply with Section 68 and with Anti-Money Laundering (AML)?
Whilst the above might appear onerous for some firms with limited resources, it is the minimum that would be expected on a monitoring visit. But by acting now, any future visit should go smoothly with minimal disruption encountered.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.