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GAZETTE
Ar e Your Books in Order???
by Jim Dobson
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:-
Client Accounts
• Clients money, held or received,
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
exceptions to the general
requirement prescribed by
Regulation 4.
• Money may be withdrawn from a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
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.
Books of Account
• 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.