Why is it important for law firms to have regular audits?

We understand that being a solicitor in a busy law firm means that oftentimes essential practices, such as audits, get pushed to one side.

Even though an audit is not a legal necessity, it offers a space for firms to learn how to improve their business practices. Additionally, it allows firms to see if they are doing anything wrong.

However, in some cases, an audit is a legal necessity for firms. If your firm holds client money, you will need to undertake and submit an SAR audit within six months of the end of an accounting period.

Additionally, you must undertake an anti-money laundering audit biannually for most firms and annually for high-risk firms.

While not every audit is the same, they all have one objective: to ensure that you can make your firm as efficient as it can be.

What audit processes do solicitors need to undertake?

For solicitors, compliance is something that needs to be kept on top of throughout the year.

Regular audits and reviews can help firms spot problems early and make sure their processes are still doing what they should.

If a firm holds or receives client money, it may need to have an accountant’s report under the SRA Accounts Rules. There are some exemptions, so this will depend on the firm’s circumstances.

Where a report is required, it must normally be obtained within six months of the end of the accounting period.

AML checks are another area firms should review regularly. This includes looking at whether client due diligence, risk assessments, source of funds checks and record keeping are being carried out properly.

The SRA has highlighted source of funds and source of wealth checks as an area where some firms need to improve, so this is well worth including in any internal compliance review.

It is also useful to carry out regular file audits. Looking through a sample of files can show whether staff are following the firm’s procedures and can highlight any gaps in documentation or areas where further training may be needed.

Regular audits allow firms to identify weaknesses, improve their internal controls and make sure their day-to-day processes continue to meet the standards expected by the SRA.

Why are audits so important?

Completing an audit is crucial as it ensures financial accuracy and builds trust with stakeholders.

Audits ensure that you are meeting all of your regulatory requirements, which minimises the risk of any possible fines or sanctions.

They also provide vital evidence that firm-wide legal policies, such as AML, are being upheld.

Additionally, an audit helps firms identify issues and provides constructive ways to resolve them, allowing them to take corrective action before an issue snowballs.

Embedding audits into your yearly plan allows firm owners to understand how to optimise their business.

How can we help?

We understand that an annual audit can sometimes feel like a chore. However, it is a necessity to keep your firm running at optimal capacity while ensuring compliance.

The team at Moore Thompson can carry out an audit. In addition to keeping your firm compliant with statutory requirements, we also health-check your finances and broader firm functions.

Our team will work to discuss any findings in the report to ensure that savings are maximised and accounting systems are strengthened.

Want to learn more about our auditing services? Get in touch with the team.