SRA Accountants Report: What Every Law Firm Needs to Know

The SRA accountants report is the annual independent check on how a law firm in England and Wales handles client money. Any SRA-regulated firm that has held client money during its accounting period needs to engage with it, and getting it wrong can lead to regulatory scrutiny and, in serious cases, disciplinary action.

This page is the overview. It sets out what the report is, who needs one, what it covers, when it is due, and what a qualified report means. For the detail on each point, follow the linked guides as you go.

What the SRA Accountants Report Is

The report is required by the SRA Accounts Rules 2019. Under Rule 12.1, a firm that has at any time during an accounting period held or received client money (or operated a client's own account as signatory) must obtain an accountant's report for that period. The report is the SRA's mechanism for getting an independent view on whether the firm is keeping client money safe and complying with the rules.

Client money is money the firm holds or receives that belongs to a client or a third party: funds on account of costs, completion monies, settlement sums, and similar. It is never the firm's own money, and it must be kept in a separate client account. The accountants report tests how well the firm has respected that separation.

Who Needs One, and Who Is Exempt

The starting point is simple: if you held or received client money in the period, Rule 12.1 applies. The exemption in Rule 12.2 then removes the requirement in two defined situations.

A firm is exempt if either:

• all the client money it held or received during the period came only from the Legal Aid Agency; or
• the balance of client money it held did not exceed an average of £10,000 and a maximum of £250,000 across the period (or the equivalent in foreign currency).

Note that the balance limb is a combined test. You must stay within both the average of £10,000 and the maximum of £250,000. Breaching either one removes the exemption. A common misreading swaps these figures around or treats a small average as enough on its own, which is wrong. For worked examples and what your COFA should monitor month to month, see the exemption thresholds guide.

If you are not sure whether a particular pattern of receipts and balances tips you into the requirement, our guide on when a report is required walks through the trigger logic in detail.

What the Report Covers and Who Prepares It

The reporting accountant reviews the firm's client money handling against the SRA Accounts Rules: that client and office money are kept separate, that reconciliations are carried out and signed off, that withdrawals from client account relate to the delivery of regulated services, and that client money is returned promptly when there is no longer a reason to hold it.

The accountant must be independent and a member of a chartered accountancy body recognised by the SRA, and must be, or work for, a registered auditor. Independence matters: the accountant cannot be the person who maintains the firm's books. Many general practice accountants do not carry the specialist knowledge of the SRA Accounts Rules that the engagement needs, so it is worth working with an accountant who deals with law firms regularly.

The Deadline

The report must be obtained within six months of the end of the accounting period. If your period ends on 31 March, the report is due by 30 September. There is no routine extension, so the work should be planned in advance rather than left to the final weeks. Reporting accountants are busiest in the run-up to the common period ends, and a firm with tidy records makes the engagement quicker and cheaper to complete.

The groundwork you do before the accountant arrives has a direct effect on the outcome. Our step-by-step preparation guide sets out the reconciliation checklist and the evidence to have ready.

Qualified vs Unqualified Reports

The headline distinction in any accountants report is whether it is qualified.

Unqualified Reports

An unqualified report means the reporting accountant found no breaches of the SRA Accounts Rules serious enough to put client money at risk. Minor administrative points may be noted without the report being qualified. An unqualified report is obtained and retained by the firm; it does not have to be sent to the SRA.

Qualified Reports

A qualified report flags breaches the accountant considers material, the kind of failing that places, or risks placing, client or third party money at risk. Common reasons include:

• shortfalls on the client account that were not promptly replaced
• reconciliations not carried out, or not signed off, at the required intervals
• office and client money mixed, or client account used to provide banking facilities
• client money held without a proper reason, or not returned when due

A qualified report must be delivered to the SRA within the six month window. It can prompt further questions, conditions on the practice, or a wider investigation, so the priority is to identify and fix breaches early rather than have the accountant discover them.

How the Pieces Fit Together

The accountants report does not sit in isolation. It is the annual audit point for a set of obligations that run all year: holding client money in a properly named client account, reconciling it at least every five weeks with sign-off by the COFA or a manager, accounting to clients for a fair sum of interest, and never using the client account to provide banking facilities. Strong day-to-day systems are what produce a clean report.

To go deeper on any part of the report, follow the specialised guides:

• SRA accountants report exemption thresholds: the average £10,000 and maximum £250,000 test, worked examples, and the Legal Aid Agency exemption.
• When is an SRA accountants report required: the trigger logic, the de minimis position, and what counts as holding client money.
• How to prepare for an SRA accountants report: the reconciliation checklist, the evidence to gather, and the pitfalls that delay sign-off.