The accountant must examine the accounting records (including statements and passbooks), client and trust matter files selected by the accountant as and when appropriate, and other relevant documents of the solicitor, and make the following checks and tests:
- (a)
confirm that the accounting system in every office of the solicitor complies with:
- rule 32 - accounting records for client accounts, etc;
- rule 33 - accounting records for clients' own accounts;
and is so designed that:
- (i)
an appropriate client ledger account is kept for each client (or other person for whom client money is received, held or paid) or trust;
- (ii)
the client ledger accounts show separately from other information details of all client money received, held or paid on account of each client (or other person for whom client money is received, held or paid) or trust; and
- (iii)
transactions relating to client money and any other money dealt with through a client account are recorded in the accounting records in a way which distinguishes them from transactions relating to any other money received, held or paid by the solicitor;
- (b)
make test checks of postings to the client ledger accounts from records of receipts and payments of client money, and make test checks of the casts of these accounts and records;
- (c)
compare a sample of payments into and from the client accounts as shown in bank and building society statements or passbooks with the solicitor's records of receipts and payments of client money;
- (d)
test check the system of recording costs and of making transfers in respect of costs from the client accounts;
- (e)
make a test examination of a selection of documents requested from the solicitor in order to confirm:
- (f)
subject to paragraph (2) below, extract (or check extractions of) balances on the client ledger accounts during the accounting period under review at not fewer than two dates selected by the accountant (one of which may be the last day of the accounting period), and at each date:
- (i)
compare the total shown by the client ledger accounts of the liabilities to the clients (and other persons for whom client money is held and trusts with the cash account balance; and
- (ii)
reconcile that cash account balance with the balances held in the client accounts, and accounts which are not client accounts but in which client money is held, as confirmed direct to the accountant by the relevant banks, building societies and other financial institutions;
- (g)
confirm that reconciliation statements have been made and kept in accordance with rule 32(7) and (9)(a);
- (h)
make a test examination of the client ledger accounts to see whether payments from the client account have been made on any individual account in excess of money held on behalf of that client (or other person for whom client money is held) or trust;
- (i)
check the office ledgers, office cash accounts and the statements provided by the bank, building society or other financial institution for any office account maintained by the solicitor in connection with the practice, to see whether any client money has been improperly paid into an office account or, if properly paid into an office account under rule 19(1)(b) or rule 21(1), has been kept there in breach of the rules;
- (j)
check the accounting records kept under rule 32(9)(d) and (11) for client money held outside a client account to ascertain what transactions have been effected in respect of this money and to confirm that the client has given appropriate instructions under rule 16(1)(a);
- (k)
make a test examination of the client ledger accounts to see whether rule 32(6) (accounting records when acting for both lender and borrower) has been complied with;
- (l)
for liquidators, trustees in bankruptcy, Court of Protection deputies and trustees of occupational pension schemes, check that records are being kept in accordance with rule 32(8), (9)(c) and (12), and cross-check transactions with client or trust matter files when appropriate;
- (m)
check that statements and passbooks and/or duplicate statements and copies of passbook entries are being kept in accordance with rule 32(9)(b)(ii) and (13) (record-keeping requirements for joint accounts), and cross-check transactions with client matter files when appropriate;
- (n)
check that statements and passbooks and/or duplicate statements, copies of passbook entries and cheque details are being kept in accordance with rule 33 (record-keeping requirements for clients' own accounts), and cross-check transactions with client matter files when appropriate;
- (na)
for money withdrawn from client account under rule 22(1)(ga), check that records are being kept in accordance with rule 32(8A), (9)(a) and (13A), and cross-check with client or trust matter files when appropriate;
- (o)
check that interest earned on separate designated client accounts, and in accounts opened on clients' instructions under rule 16(1)(a), is credited in accordance with rule 24(1) and (6)(a), and note (i) to rule 24;
- (p)
in the case of private practice only, check that for the period which will be covered by the accountant’s report the practice was covered for the purposes of the Solicitors’ Indemnity Insurance Rules in respect of its offices in England and Wales by:
- certificates of qualifying insurance outside the assigned risks pool; or
- a policy issued by the assigned risks pool manager; or
- certificates of indemnity cover under the professional requirements of a registered European lawyer’s home jurisdiction in accordance with paragraph 1 of Appendix 3 to those Rules, together with the SRA's written grant of full exemption; or
- certificates of indemnity cover under the professional requirements of a registered European lawyer’s home jurisdiction plus certificates of a difference in conditions policy with a qualifying insurer under paragraph 2 of Appendix 3 to those Rules, together with the SRA's written grant of partial exemption; and
- (q)
ask for any information and explanations required as a result of making the above checks and tests.