SRA Accounts Rules compliance: Internal Reviews

I was interviewed recently by Law Firm Ambition about my views on the most common questions I come across in respect to mergers/accounts rules. To read my thoughts on the first five questions, find the article here. Questions 5 - 10 focused on breaches and cyber security which can be found here. Below I answer questions around internal reviews and compliance checks. 

11. What compliance checks should the COFA undertake?

The role of COFA should not be treated as a one-off tick box exercise – it is a continuous, ongoing process of compliance. Every COFA should have systems in place to monitor that compliance.

Regular file reviews and health checks should be undertaken. This ensures that processes and procedures are being followed. It also encourages a culture of accountability and openness with fee-earners, which will allow effective supervision.

12. How often should the COFA undertake internal reviews for Accounts Rules compliance?

Ideally, as a minimum, the COFA should review at least one file from every fee-earner over the course of a year. So the frequency will depend on the size of the practice.

That is not to say that a practice with two fee-earners should only have a review twice a year. Our suggestion would be monthly or at least quarterly reviews.

13. How should the COFA select which files they should review for Accounts Rules compliance?

How the sample is selected will be driven to some extent by the size and make up of your firm. As a minimum, a file from each department should be included in each review where possible.

When starting to implement the reviews, a good starting point for file selection would be any departments or fee-earners who regularly appear on your breach register.

14. If the law firm COFA is absent for any reason, what should the law firm do?

As with any role, there will be times when the COFA is absent for short periods, such as annual leave or short-term illness. As part of the COFA’s role, the ongoing compliance processes of the practice should be designed to be capable of continuing whilst the COFA is absent. This includes ensuring that any issues that arise are still identified and can be rectified without the COFA.

Occasionally, there will be circumstances where the COFA is unable to fulfil the role for a longer period of time, perhaps through long-term illness, or even on a more permanent basis such as dismissal. In these cases, you should immediately – and certainly within seven days – notify the SRA of the absence, select another suitable individual to undertake the role and apply for temporary emergency approval. As part of the temporary approval process, you must include the reason why temporary approval is required.

15. What responsibility does the COFA have if they suspect the law firm is in financial difficulty?

In addition to the COFA’s role relating to the SRA’s Accounts Rules, the COFA also has responsibilities to report the practice should it be in serious financial difficulties.

If you hold the role of COFA, you need to ensure that you have access to all information on the practice’s overall financial position in order to recognise if the practice is in difficulty.

The areas that should be focused on with regard to good financial management are the working capital and credit control procedures of the firm.

The next set of questions looks at accountant's reports and how a COFA can protect themselves.