The importance of regular audits for law firms
As a solicitor, we know how busy things get, but your firm should be finding the time to complete regular audits to ensure your firm is functioning effectively and meeting all regulations.
While you may not have to legally complete an audit, they are great tools, allowing you to analyse all aspects of your firm and ensure you are not only meeting your legal obligations but also spot opportunities to make your firm function even better.
There are different audits you can complete, but they all share the same objective of helping you build a better picture of how efficient and effective your firm is.
What are audit thresholds in the UK?
The Government recently updated its statutory audit threshold in the aim of reducing the regulatory burden on firms and exempting more companies.
While you may not legally have to complete an audit, you may be missing out on a potential opportunity to save or grow your business.
The criteria for a statutory audit are annual turnover of more than £15 million, a balance sheet total of £7.5 million and more than 50 employees on average. If companies or organisations meet two of the three stated criteria, they will need to complete a statutory audit.
There are key differences between statutory and voluntary audits. It is your legal obligation to complete a statutory audit annually to comply with the different regulatory bodies, hire an external auditor and complete an audit report.
Whereas voluntary audits offer flexibility, can be completed at any time, don’t and don’t have to follow set regulations unless you are operating under a certain governing body.
However, these factors do not diminish the importance of a voluntary because they give you the opportunity to assess the overall performance of your firm, assess your internal processes and provide assurances to staff and senior management.
They also give you the opportunity to build a clear picture of your firm’s finances and see where you can save, invest or even expand your firm. They allow your firm to function at top efficiency
What types of audits should solicitors complete?
Solicitors across England and Wales will know that the Solicitors Regulation Authority (SRA) is keen to ensure its regulations are followed by all firms.
Firms registered with the SRA must complete an annual SRA audit to meet its account rules.
An SRA audit focuses on how client money is handled and if it is being done in line with their guidelines. It must be completed by an external auditor who will clarify if your processes are meeting the standards in place.
In addition to this, you should also be completing anti-money laundering (AML) audits. AML is a constant challenge for law firms, especially when needing to verify financial data like the source of funds and the source of wealth.
AML audits allow you to check your risk assessment and due diligence procedures and to ensure you are following the regulatory guidelines set by the SRA.
They also help you ensure your record-keeping processes are up to standard and that you are following the correct procedures when reporting any concerns within the financial data.
Another important audit to complete is a file audit. These are reviews of your client files and case work to see if the work being done by your team is following the internal policies and risk management procedures in place.
These are a great way of checking the effectiveness of your policies and if your team fully understands what is expected of them. From here, you can implement changes where you see fit, such as more training for your team or changes to your procedures.
Why are audits so important?
Audits ensure you are meeting your regulatory and compliance obligations and avoid the risk of possible fines and sanctions.
They also help you assess your risk management strategies, highlighting any concerns in your firm’s processes and systems. Having this information means you can quickly implement change.
Regularly auditing your processes ensures clients have confidence. They will feel comfortable working with you and trust you will look after them and their money.
How we can help your firm
If you want clarity on the functionality of your law firm, our expert team of auditors can help. We specialise in completing audits for law firms, so we can help you assess your processes.
We will assess your law firm’s finances and its protocols, clarify if your processes are meeting the regulatory guidelines and give you insight into your firm and give you fresh ideas from a different perspective that could make a difference.