Money is held on behalf of clients by a wide range of professional firms, creating a duty to safeguard those assets and to adhere to principles based on transparency and accountability. To assist practices in complying with these principles, many regulated firms are required to engage accountants to undertake an annual client account audit.
Our partners and staff have a wealth of experience in undertaking client account audits and submitting Accountant’s Reports. In addition, Knox Cropper also helps firms comply with best practice via voluntary review engagements.
As well as completing Accountant’s Reports and providing assurance engagements, Knox Cropper assists professional practices in enhancing their systems, improving efficiency and complying with regulations. We can also provide training to fee earners on updates to the rules governing their handling of client money, and liaise with the firm’s principals on upcoming developments.
The comprehensive range of client account audit work undertaken by our professional practices team is as follows:
SRA Accounts Rules
The SRA requires most firms of solicitors handling client money to obtain an annual Accountant’s Report within 6 months of the year end to demonstrate compliance with the SRA Accounts Rules. Exceptions to this are if your average client balance is less than £10,000 a year, and the maximum account balance does not exceed £250,000.
There has been a gradual move away from a prescriptive set of rules by the SRA to an outcome-focused regulation. Knox Cropper’s experience in client account audits has enabled us to adopt effective risk-based approaches to the audit of client money for solicitor clients, targeting areas most susceptible to rule breaches, and providing value where it counts. This is of particular relevance now, as a much simpler set of Accounts Rules within the new Standards of Regulation came into effect in November 2019, which for the first time give firms, managers and sole practitioners considerable flexibility on how they go about complying and dealing with client money.
Knox Cropper is happy to handle the SRA audit process from start to finish, ensuring that all relevant reports and documentation are in place so that deadlines can be met. In addition, our solicitor clients benefit from suggested improvements to internal controls and the firm’s senior management liaising with the COFA on matters for future consideration.
The Financial Conduct Authority’s Client Assets Sourcebook (CASS) provides rules for firms to follow whenever that firm holds or controls client money or safe custody assets. As a firm, Knox Cropper has particular experience in respect of the CASS 5 rules governing insurance intermediaries and can provide advice to firms on compliance with the relevant rules as well undertaking CASS 5 audits.
Chartered Surveyors (RICS)
Historically there were a number of set rules as to how client money held by RICS members should be treated. These included the requirement to have a suitably qualified accountant conduct tests to check compliance with the rules and then report accordingly.
Following a move to a principles-based approach, the current rules pertaining to client money are very much briefer and, in particular, there is no formal requirement to have an independent accountant conduct tests and report on compliance, as RICS monitor client money compliance in-house.
However, Knox Cropper is able to provide client money review engagements, advise on areas highlighted by RICS as requiring improvement, and assist firms in enhancing their systems for compliance with best practice.
Licensed Conveyancers (CLC)
Much like firms of solicitors, The Council for Licensed Conveyancers (CLC) regulates its members in an outcomes focused regulatory regime based upon flexible higher-level principles, rather than detailed prescriptive requirements.
Annually, every licensed conveyancer, who has held client money during their accounting period, is required to deliver to the CLC a report from an accountant, certifying that they have complied with the Accounts Code. Accordingly, Knox Cropper designs its approach to conduct tests which demonstrate that client money has been protected, and that proper governance, management, supervision and controls are in place, alongside financial and risk management procedures.
Estate and Letting Agents
Knox Cropper produces audit reports for estate and letting agents, whether they hold client money under the Estate Agents Act 1979, or under the Propertymark Conduct and Membership rules (previously NAEA and ARLA members respectively).
The purpose of both the Estate Agents Act legislation and Propertymark regulations is to ensure that agents act in the best interests of their clients and that both buyers and sellers, or landlords and tenants, are treated honestly and fairly. The overriding sentiment for estate and letting agents handling client money is transparency and integrity, and to demonstrate this, both the Act and Propertymark require agents to obtain an audit report certifying compliance with the regulations, within six months of the year end.
Estate agents have a duty to protect clients’ money against creditors’ claims in the event that an estate agent becomes bankrupt. Knox Cropper can work with you to ensure that not only is this obligation met, but that you go the extra step to provide clients with peace of mind.
Please contact our Client Account audit team to find out how we can assist with your regulatory compliance, and add value to the way your firm handles client money.