The Solicitors Regulation Authority requires many law firms in England and Wales to obtain an annual accountant’s report to confirm full compliance with the Solicitors Accounts Rules. For most solicitors, this SRA audit is often viewed merely as a compliance exercise, a necessary check to ensure client money has been handled correctly in accordance with regulatory requirements. However, the findings can do much more than highlight breaches or issues. When leveraged correctly, they provide valuable insight into your law firm’s operations, systems, processes, and overall financial discipline. This article explains how to use your audit findings as a strategic tool for improvement, turning compliance into a competitive advantage rather than treating it as a regulatory burden.
Why audit findings matter beyond compliance
An SRA audit covers critical areas such as client account reconciliations, residual balances, the application of interest, breach management, and more. The reporting accountant’s report confirms whether your firm meets the SRA Accounts Rules, demonstrating adherence to legal and regulatory requirements. Beyond this, the audit process independently assesses your firm’s financial controls and procedures. Findings often highlight where processes are unclear, controls are weak, or staff are not consistently following policies. Addressing these issues strengthens compliance, improves efficiency, reduces risks, and frees up time for fee earners and finance teams. Instead of waiting for the regulator to identify problems, the audit provides an opportunity to manage risk and enhance your firm’s financial performance proactively.
Identifying process gaps
Auditors frequently discover that firms have documented policies but lack consistent routines in practice. For instance, reconciliations may be completed but not independently reviewed, residual balances reports might be generated but not actioned, or interest policies may exist but are not applied uniformly across all matters. Use audit findings as a prompt to map your actual processes against the SRA Accounts Rules. Ask yourself: Is every step occurring on time? Is it properly documented? By closing these gaps, you strengthen compliance and reduce wasted effort, aligning your firm with best practices.
Improving record keeping
Incomplete or inconsistent record keeping is a common audit finding. Client ledgers may lack clear narrative descriptions, transfer documentation, or breach logs may not be fully updated. These shortcomings slow down the audit process and risk attracting regulatory scrutiny if repeated. Use audit feedback to introduce simple but effective improvements, such as standardised ledger narratives, a digital folder structure for reconciliations and logs, and a clear file naming convention. These changes facilitate smoother audits and provide faster access to information for partners and the Compliance Officer for Finance and Administration (COFA) throughout the accounting period.
Enhancing financial control
Audit findings often reveal areas where financial controls require strengthening. For example, repeated aged reconciling items may indicate inadequate follow-up, or persistent residual balances could suggest weaknesses in the matter close-down process. Addressing these issues improves compliance and the accuracy and integrity of your financial data. This, in turn, supports better cash flow forecasting, fee earner reporting, and management decision-making. In this way, the SRA audit process contributes directly to your firm’s overall financial health and sustainability.
Strengthening staff awareness
Some findings stem from misunderstandings among staff regarding the SRA Accounts Rules. For example, fee earners may be unclear about the distinction between client funds and office money, or accounts staff may be unsure how to apply the interest policy correctly. If your auditor highlights inconsistent application, treat this as a signal to refresh training. Short, practical sessions tied to real examples from your firm are typically more effective than generic seminars. Audit feedback provides the real-world context that makes training relevant and impactful.
Supporting the COFA
The Compliance Officer for Finance and Administration holds responsibility for ensuring the firm’s adherence to the Accounts Rules. Audit findings offer valuable support to the COFA by demonstrating active monitoring, identifying where systems need strengthening, and helping to prioritise corrective actions. A COFA who uses audit feedback to brief partners and update internal routines demonstrates leadership and reduces personal stress. This external insight can be especially beneficial for firms where the COFA is also a partner or fee earner.
Creating an action plan
Rather than filing the audit report away once signed off, create a concise action plan. List the findings, assess their impact on your firm’s risk profile, assign responsibility to specific owners, and set realistic target dates for resolution. Review progress regularly at COFA meetings and update partners quarterly. This approach transforms the audit from a once-a-year compliance test into a continuous improvement project. Maintaining an action plan also provides evidence to the Solicitors Regulation Authority (SRA) that your firm is proactive in ensuring compliance.
Benchmarking your firm
As a firm experienced in working with numerous legal firms nationwide, Cottons observes recurring patterns in SRA audit findings. Common issues include late reconciliations, poor documentation of client money transfers, and residual balances not being cleared promptly. Comparing your audit findings with these benchmarks helps determine whether your firm is experiencing isolated incidents or systemic weaknesses. Firms that treat the audit as a benchmarking exercise better understand their standing relative to peers, enabling more targeted improvements.
Using findings to improve client service
Audit findings can have a direct impact on client service. For example, failure to return residual balances promptly can cause reputational damage if clients notice their funds are held longer than necessary. Similarly, weaknesses in record-keeping can delay providing financial information to clients. By addressing these findings, your firm enhances trust and transparency, foundational to building and maintaining long-term client relationships.
Linking to wider assurance
While the SRA audit focuses on client money and compliance with the Accounts Rules, its findings often overlap with broader financial control issues. Weak reconciliations, unclear authorisations, and inconsistent documentation affect the finance function. Extending the lessons learned from SRA audit findings into your wider audit and assurance work creates stronger systems across your firm. This is particularly valuable for practices planning mergers, seeking funding, or expanding into new areas of legal services.
Turning compliance into advantage
Firms that embrace their SRA audit findings as opportunities for improvement gain far more than mere compliance. They achieve cleaner records, faster and more accurate financial reporting, and reduced risk exposure. Moreover, they instil confidence among partners that financial controls are robust and client funds are safeguarded. In competitive legal markets, demonstrating that your firm has reliable systems and full compliance can be a key differentiator when attracting prospective clients and lenders. Done well, compliance becomes a vital part of your firm’s reputation and business strategy.
How Cottons helps
At Cottons, we view SRA audits as more than a regulatory requirement. We assist law firms in interpreting their audit findings, creating practical and tailored action plans, and strengthening systems to support compliance and operational efficiency. Our solicitors sector specialists deeply understand the Solicitors Regulation Authority’s expectations and the specific needs of legal firms. Whether refining reconciliations, clearing residual balances, or improving breach logging, we provide clear, sector-specific professional advice. If you want to leverage your SRA audit findings to improve your firm and turn compliance into an advantage, contact us today, and we will be happy to help.