The Gazette 1994

GAZETTE

Ar e Your Books in Order??? by Jim Dobson

the total of monies held in client (bank) accounts with the total of gross liabilities due to clients at a particular date, a deduction should not be made from the total of credit balances for debit balances reflected in other client ledger accounts. Neither is it permissible to reduce the balance of a client ledger account, as reflected in the ledger, by an amount stated to represent costs or fees due to the solicitor included in that balance but not transferred. • Every solicitor is required at all times to keep proper books of account in the prescribed manner to show all his dealings with - - client's money, received, held or paid by him and - any other money dealt with by him through a client account, (Regulations 10.(1) and 10.(2)). • Regulation 10.(2)(a)(i)(b) requires that a record of sums transferred from the ledger account of one client to that of another should be maintained. (This requirement may best be met by the maintenance of a journal. A narrative fully explaining such transfers should accompany the record of the transfer and adequate supporting documentary evidence should be available for inspection.) Regard should also be had to the provisions of Regulation 9 in relation to such transfers. In addition, all office account transactions must be recorded in a cast book ledger, (Regulation 10.(2)(6)). • Regulation 19 sets out the minimum books which a solicitor must keep in connection with his practice. The accounting system may be manual, mechanical or computerised. Books of Account

Failure to comply with the Solicitors Accounts Regulations can have serious consequences for both individual solicitors and the profession as a whole. In this article, Jim Dobson, Investigating Accountant, Law Society, describes the scope of the regulations, the role of the Compensation Fund Committee and what you need to do to ensure compliance. A Tradesman's books, like a Christian's conscience, should always be kept clean and clear; and he that is not careful of both will give but a sad account of himself either to God or man. (Daniel Defoe, The Complete English Tradesman, 2nd ed, 1727 vol. 1, letter XX.) A commonplace adage affirms that unpleasantness and disputes between neighbours may be obviated by good fences. Prudent solicitors will realise that it is imperative that a clear demarcation line should exist between clients money and/or trust money and the solicitor's own or office monies. The Solicitors Accounts Regulations establish a legislative framework for such a system of segregation. A comprehensive knowledge of, and adherence to, the provisions of the regulations is obligatory for solicitors engaged in practice. The regulations currently in force are embodied in the Solicitors Accounts Regulations No. 2 of 1984 (SI No 304, 1984). No solicitor, solicitor's bookkeeper or solicitor's accountant should be without a copy. The following are some of the salient provisions contained in the regulations:-

Jim Dobson

must be paid into a Client Account at an approved bank, or at any other financial institution authorised by the client in writing (Regulation 4). The account must be in the name of the solicitor and the word "client" must appear in the title of the account, (Regulation 2.(1)). The solicitor should, therefore, instruct the bank that the account is to be so described and ensure that the bank complies with this instruction. Regulation 6 specifies permitted • Money may be withdrawn from a client (bank) account only in the particular circumstances set out in Regulation 7 and 8. Debit balances are not permitted in respect of any individual client, (i.e. a client ledger account may not be overdrawn). • The aggregate of the balances in client (bank) accounts may exceed but should never be less than the total of gross liabilities due to clients as represented by the sum of credit balances due to all of the solicitor's clients as shown by his books and records. When comparing exceptions to the general requirement prescribed by Regulation 4.

Client Accounts

• Clients money, held or received,