Every SRA-regulated law firm that holds client money must submit an accountant's report to the SRA within six months of the accounting reference date. The report confirms that the firm has complied with the SRA Accounts Rules during the period. If your firm holds client money, this is not optional. The deadline is fixed. Missing it can trigger a compliance review or referral to the SRA's enforcement team.

This guide explains how to prepare for the SRA accountant's report. It covers the reconciliation checklist, the evidence your reporting accountant will need (SAR evidence), and the common issues that delay sign-off. The process is manageable if you approach it systematically throughout the year, rather than scrambling in the final weeks.

Who Needs an SRA Accountant's Report?

Any SRA-regulated solicitor or law firm that holds client money must submit an accountant's report. The only exemption is the de minimis rule: your firm held no more than £10,000 of client money at any time during the accounting period, and the average client money balance did not exceed £250. Most conveyancing firms, litigation practices, and private client departments will not qualify for this exemption.

The report must be completed by a registered SRA reporting accountant. This is typically a chartered accountant or certified accountant who is registered with the SRA for this purpose. The accountant reviews your client account records, tests a sample of transactions, and confirms whether the firm has complied with the Accounts Rules.

The Reconciliation Checklist: Your First Line of Defence

The reconciliation checklist is the core of the SRA accountant's report preparation. The reporting accountant will check that reconciliations have been performed correctly and at the required intervals. Rule 8.3 of the SRA Accounts Rules requires that client account reconciliations be carried out at least every five weeks. Most firms do this monthly, which is good practice.

Your reconciliation checklist should cover three areas:

  • Client ledger balances to client account bank statements. Each client's ledger balance must match the total held for that client in the bank account. Discrepancies must be investigated and resolved before the reporting period ends.
  • Client account bank balance to the total of all client ledger balances. The overall client account bank balance must equal the sum of all individual client ledger balances. This is the most common point of failure in SRA accountant's reports.
  • Business account bank balance to the firm's accounting records. While the SRA focuses on client money, the reporting accountant will also check that business money is properly segregated.

For each reconciliation, you need to document the date performed, the person who performed it, and the person who reviewed it. The SRA expects a clear audit trail. If you use practice management software, the system should generate reconciliation reports automatically. If you use spreadsheets, keep a signed and dated copy of each reconciliation.

Common Reconciliation Errors

The most frequent errors we see in SRA report preparation include:

  • Uncleared cheques or BACS payments that have not been matched to the correct client ledger.
  • Client money held in the business account (or vice versa). This is a breach of Rule 2.1.
  • Interest on client money not paid or credited correctly. Rule 7.1 requires that client money earns interest when it is fair to do so.
  • Residual balances on closed client matters that have not been dealt with.

If you identify any of these issues during the year, resolve them before the reporting period ends. The reporting accountant will test a sample of transactions, and unresolved errors will appear in the report.

Gathering SAR Evidence: What the Reporting Accountant Needs

The SRA accountant's report (SAR) evidence is the documentation that supports the accountant's opinion. The reporting accountant will request a standard set of documents. Having these ready in advance saves time and reduces the risk of a qualified report.

Your SAR evidence pack should include:

  • Client account bank statements for the entire period.
  • Business account bank statements (the accountant will check for any client money breaches).
  • Client ledger reports showing all transactions for the period.
  • Reconciliation reports for each month (or five-week period).
  • A list of all client accounts open at the period end, with balances.
  • Details of any transfers from client to business account (Rule 4.3 compliance).
  • Copies of bills and receipts for a sample of matters.
  • The firm's COFA compliance file, including risk assessments and policies.

The accountant will also want to see your COFA's annual review of the firm's compliance with the Accounts Rules. This is not a legal requirement, but it is best practice and the SRA expects it. If you have not conducted a formal review, do so before the accountant visits.

Sample Testing: What the Accountant Checks

The reporting accountant will select a sample of client matters to test. The sample size depends on the volume of transactions and the firm's risk profile. Typically, the accountant tests between 10 and 30 matters. For each matter, they will check:

  • That client money was paid into the client account promptly (Rule 3.1).
  • That money was only withdrawn from the client account when properly due (Rule 5.1).
  • That bills were delivered before transfers from client to business account (Rule 4.3).
  • That residual balances were dealt with correctly.

If the accountant finds errors in the sample, they may extend the testing. If the errors are systemic, the report will be qualified. A qualified report means the SRA will review the firm's compliance and may impose conditions or sanctions.

Timing: When to Start Preparing

Do not wait until the accountant arrives. Start preparing at least three months before the accounting reference date. This gives you time to resolve any issues that emerge during the reconciliation process.

A practical timeline looks like this:

  • Three months before year end. Review all open client matters. Identify any residual balances or stale transactions. Contact clients about unclaimed funds.
  • Two months before year end. Run a full reconciliation of all client accounts. Investigate and resolve any discrepancies.
  • One month before year end. Prepare the SAR evidence pack. Review the COFA compliance file. Conduct a mock audit of a sample of matters.
  • After year end. Complete the final reconciliation. Send the evidence pack to the reporting accountant.

The accountant's report must be submitted to the SRA within six months of the accounting reference date. If your year end is 30 April, the report is due by 31 October. Late submission is a breach of Rule 12.3 and can result in a referral to the SRA's enforcement team.

Common Pitfalls in SRA Report Preparation

Even experienced COFAs make mistakes. Here are the most common pitfalls we see:

Pitfall 1: Incomplete reconciliations. Some firms reconcile the client account bank balance to the total of client ledger balances but do not check individual client balances against the bank statements. The SRA expects both levels of reconciliation.

Pitfall 2: Missing or incorrect interest calculations. Rule 7.1 requires that client money earns interest when it is fair to do so. Many firms have a policy of not paying interest on small balances or short holding periods. This is acceptable, but the policy must be documented and consistently applied.

Pitfall 3: Client money in the business account. This is a common error in conveyancing firms where a client pays a deposit by bank transfer and the payment lands in the business account by mistake. Rule 2.1 requires that client money is held in a client account. If this happens, transfer the money to the client account immediately and document the error.

Pitfall 4: Failure to deal with residual balances. When a matter closes, any residual client money must be returned to the client or dealt with in accordance with the SRA's guidance on residual balances. Leaving small balances on closed matters for years is a common compliance issue.

Pitfall 5: Inadequate COFA oversight. The COFA must take reasonable steps to ensure the firm complies with the Accounts Rules. If the COFA cannot demonstrate active oversight during the period, the accountant may qualify the report.

What Happens If the Report Is Qualified?

A qualified report means the accountant has identified a material breach of the SRA Accounts Rules. The SRA will review the report and may take regulatory action. The action depends on the severity of the breach. Minor breaches may result in a warning or a requirement to implement corrective measures. Serious or repeated breaches can lead to a referral to the Solicitors Disciplinary Tribunal, a fine, or conditions on the firm's practising certificate.

If you know there is a breach, do not try to hide it from the reporting accountant. The accountant has a duty to report material breaches to the SRA, regardless of what the firm says. It is better to be transparent and demonstrate that you have taken corrective action.

How a Specialist Solicitor Accountant Can Help

Preparing for the SRA accountant's report is a specialised task. A general practice accountant may not understand the specific requirements of the SRA Accounts Rules. A solicitor accountant who works regularly with law firms will know exactly what the reporting accountant looks for and can help you prepare the evidence pack efficiently.

We also offer COFA compliance support for firms that want ongoing guidance throughout the year, not just at year end. Regular compliance reviews reduce the risk of surprises when the reporting accountant arrives.

If you are preparing for your first SRA accountant's report as a new firm or a new COFA, our SRA Accounts Rules essentials guide covers the fundamentals. For firms with complex client account structures, we recommend a pre-audit review before the formal report preparation begins.

Final Checklist for SRA Report Preparation

Use this checklist in the weeks before your reporting accountant's visit:

  • Complete all client account reconciliations for the period.
  • Resolve any discrepancies identified in the reconciliations.
  • Review all open client matters for residual balances.
  • Confirm that interest on client money has been correctly calculated and paid.
  • Prepare the SAR evidence pack (bank statements, ledgers, reconciliations, bills).
  • Review the COFA compliance file and risk assessments.
  • Conduct a mock audit of a sample of client matters.
  • Confirm the reporting accountant's visit date and provide access to records.

The SRA accountant's report is a regulatory requirement, but it is also a useful health check for your firm. A clean report confirms that your systems and controls are working. A qualified report identifies weaknesses that need attention. Either way, the process is manageable if you prepare properly.

If you need assistance with your SRA accountant's report preparation, contact our team of specialist solicitor accountants. We work with law firms across the UK and can help you navigate the process efficiently.